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It will be noted that the steam-engine mileage for the year ended 31st March, 1945, was less than that for 1939, and this was due to the severe restrictions imposed in January, 1944, as a result of the coal shortage. A certain amount of increase in the consumption of coal per engine-mile would naturally follow the increase in the average tractive capacity per locomotive and the average trailing load, but whereas one would expect the consumption of coal in relation to the amount of work done —i.e., pounds consumed per 1,000 gross ton miles—to decrease, or at least remain constant, the reverse has been the case. The foregoing table shows that there is a close correlation between the proportion of soft coal used and the consumption per 1,000 gross ton-miles, and there is no doubt that the increase in the proportion of soft coal used and a falling off in the quality of the coal have adversely affected efficient and economic working. Apart from the type and quality of coal used the shortage has itself tended to increase operating costs as the restricted services have adversely affected wagon turn round and coal has had to be transferred from depot to depot to maintain supplies. POST-WAR ACTIVITIES With the cessation of hostilities the problems of peacetime reconstruction must now be faced. A good deal of preliminary planning and investigation has already been done, and consideration of a number of major works, such as the Hutt Valley electrification, main-line duplications, grade easement works, &c., is well advanced. Plans have also been made for a capital programme designed to provide for renewals, replacements, improvements, and additions to rolling-stock, buildings, bridges, and plant. In addition to these matters, there are certain avenues for improvement in service and economies in working which it is intended to pursue. The express goods services between Auckland and Wellington and between Christchnrch and Dunedin have now been in operation for some time and have undoubtedly proved their worth. Between Auckland and Wellington there is, in fact, more traffic offering at the moment than it is possible to take. Provision is made in the rolling-stock programme for a greater number of bogie wagons so that the present express goods services can be extended and similar services instituted between other suitable points. In a number of cases it has been possible, by co-ordinating rail and road services, to eliminate mixed trains. The elimination of mixed trains enables economies in working to be effected and improves the service to the public, both from the passenger and goods sides, and it is intended to pursue this policy as far as possible. The introduction of rail cars has proved popular with the public, so much so that the accommodation on the single-car units has been found to be too limited. Consequently it is not proposed to extend the single-unit rail car services, but to concentrate on the provision of three-car Diesel electric sets, both articulated and non-articulated. Inquiries have been made with various British manufacturers, and tenders are expected in the very near future for eleven of the former type sets which will seat 120 passengers and for fifteen of the latter type sets which will seat 156 passengers. This latter type will be capable of running in combinations of three-car, six-car, nine-car, &c., sets. A matter which has given the Department a great deal of concern is the housing of its employees, and I am pleased to say that arrangements have been made for the Department of Housing Construction to build a certain number of State houses each year for the Railways Department. In New Zealand, as in many other countries, the paramount importance of an efficient railway system capable of rapid expansion to meet a national emergency has been amply demonstrated during the war years. Railways must remain an indispensable means of transport, both in peace and in war, and it is therefore essential that they should bo maintained in a sound and healthy condition. CONCLUSION In conclusion, I desire to place on record my sincere appreciation of the loyal co-operation of the staff, whose efficiency enabled the Department to handle an exceptionally heavy volume of traffic under very trying conditions. General Manager.

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