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The railway at the Taieri is still liable to serious damage and suspension of traffic from floods r which it is desirable to take steps to avert. Careful attention has been given by the local officers to economy in every department, and the gradual improvement of the works and appliances in former years has admitted of saving. An increased expense must be expected in permanent-way repairs and on structures, and in general repairs for locomotives and rolling-stock in the future. An agreement has been entered into with the Wellington and Manawatu Eailway Company for' interchange of traffic with the Government lines. The opening of this line, while it has in some respects diminished the traffic on the Wanganui Section, has on the whole given it a stimulus; and it has also benefited the Napier passenger traffic probably to a greater degree than it has injured the Wellington traffic. Apart from the great public convenience to the districts concerned, thisrailway therefore brings direct advantages in the shape of revenue to the Government lines. There seems every prospect that the coming year will show a greater traffic than any preceding year, while there is no reason to expect any large or sudden increase in expenses, provided no serious casualties occur. With the largely-reduced rates and fares now in operation, and the extension of the lines in many parts into unsettled districts, it must be anticipated that the proportion of the expenses to the revenue will not bo so low on the average as it has been in former years,. but an improvement on the results of the past year may be expected. The alterations in rates made timing the year are shown in Beturn No. 31. They are almost entirely in the direction of facilitating traffic in local products, and have been made to meet demands from various quarters. The work of adding to the stations and appliances lias been carried on to meet local needs as rapidly as the funds at disposal have permitted. Many improvements have been made for facilitating traffic and for public convenience. Extensive grade improvements have been made on the Kaipara line and between Mercer and Huntly. The station-yard improvement scheme has been continued in Auckland, and concluded for the present. Frankton Junction has been adapted to the altered train arrangements consequent on opening the lines to Te Aroha and Liclifield. The shops arrangements have been improved at Newmarket, Napier, Wanganui, Wellington, Addington, and Hillside. Station, siding, and signal improvements have been made at Farndon, Whakatu, Pukehou, Ngahauranga, Kaitoke,Cross Creek, Summit, Wellington, Normanby, Addington, Timaru, Dunback, Port Chalmers, Dunedin, Mosgiel, and numerous other smaller improvements, such as cattle- and sheep-yards, waterservices, loading-banks, &c, have been carried out in various parts of the colony. During the year 14 carriages and 356 trucks have been added to the stock ; these have been manufactured almost exclusively in the colony. Fourteen, locomotives have also been added. The locomotive-building contract under execution in Christchurch is not yet completed; it is expected to be during the current year. The Eailway Department is now performing postal and telegraph duties at 136 stations, under the supervision of the Post and Telegraph Department, the latter contributing to the expense. It is as well to note the strain put on the department to restrict expenses in many ways, while at the same time it is required to give reasonable accommodation and convenience to the public. The expenditure exceeds that of three years since by only £9,046, while in the meantime noless than fifty-three new stations and 250 miles of railway have been added to the system. The public criticism on the railway-working is sometimes very severe, but allowance is seldom made for the difficulty of satisfying all demands without exceeding the means available. There are two forces always at work : the one, operating directly on the department, through public demands upon it which tend almost exclusively either to increase expenses or to curtail revenue ; the other, operating through other channels, requiring that the strictest economy should be exercised, and that the largest possible revenue should be realized. During the past two yearsit has been necessary to curtail expenses by reducing train-mileage relatively, and to carry on an increased traffic upon a largely-extended mileage of railway without practically increasing the cost,. in order to keep the expenditure down to some extent in the proportion to the diminished revenue. While the public has acquiesced in these economies, they have necessarily been attended with a certain amount of dissatisfaction, which seems to some extent inevitable. Letters sometimes appear in the Press in strong terms complaining of traffic or accounting errors. In such a large business as the railways do, entailing from four- to five-million transactions with the public yearly, many personal errors must occur, though they are few relatively to the work. Business men, as a whole, are most tolerant of such errors. A certain proportion of persons are found in every community who prefer to write to the public Press about thteir private business,, instead of to the local district officers, whose business it is to deal with them. Similar complaints of private companies would not be written to the Press as a rule. Such complaints give erroneousimpressions to the general public. Another class of complaint arises from people wanting personal rates or other private favour at the public expense, which cannot equitably be granted, and which no private railway company,. working under the usual legal restrictions imposed on companies in most countries, would allow. Such complaints are often very misleading to the public, and there are always sure to be plenty of this nature; but it should not therefore be inferred that the Eailway Department is to blame. As increased outlay in renewals of the lines and stock, due to increased age, must certainly be expected, stringent economy is obviously necessary wherever possible ; and, as increased facilities have been afforded by reduced rates and fares, a reasonable allowance should be made for the absence of luxuries, which are or. y obtainable by increased expense. I have, &c, ,T. P. Maxwell, M. Inst. C.E., 14th May, 1887. General Manager, New Zealand Railways.

IV