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THE inland rail route from Melbourne to Brisbane is a bad idea whose time may have come.
With $20 billion burning a hole in his pocket, Infrastructure Minister Anthony Albanese has signalled that the link is close to the top of his list of priorities for his new statutory authority, Infrastructure Australia.
Leading transport economists employed by the Government fear it will be the death knell for rail in Australia. Not only will traffic fail to meet the ambitious projections they expect to be made for it, but it will also destroy what is left of the marginal viability of the Melbourne-Sydney and Brisbane-Sydney rail links.
If the Alice to Darwin rail link somehow encapsulated the Howard government's preparedness to spend a dollar in pursuit of a vote, regardless of the economic cost, the Melbourne-Brisbane rail route exposes the folly of treating infrastructure as an end in itself.
With the exception of the bulk ore lines, the rail industry as a whole is in a parlous financial state. The dismal performance of the leading rail operator, Asciano, which has dropped 60 per cent in value since listing in June last year, is symptomatic of the industry's problems.
It is senseless for the public to be funding massive expansion projects for it until the industry's structural problems have been tackled. However, this falls well beyond the brief of Infrastructure Australia, which is cast as judge in a beauty pageant of grand visions. After more than 11 years of talk, promises and press releases from the Howard government and its various National Party transport ministers, the Rudd Government had taken just a little over 100 days to push the inland rail proposal to the next critical stage, Albanese said when committing $15 million to the feasibility study in March.
It is the biggest project which the Government has resolved to advance, and fits the nation-building ambitions outlined in its first budget.
The idea has indeed been around for a long time and is borne of the frustration of business getting goods through Sydney.
Former transport minister and National Party leader John Anderson commissioned a study led by Ernst & Young.
It found that trains travelling north from Melbourne were on time 60 per cent of the time by the time they hit the outskirts of Sydney.
But this dropped to 40 per cent reliability by the time they reached their Sydney terminal.
Travelling south from Brisbane, 80 per cent of trains were on time at the outskirts of Sydney but only 30 per cent got to the centre of town on schedule. For traffic trying to get from Melbourne to Brisbane and vice-versa, only 40 per cent of trains make it on time.
The problem is that commuter trains have priority, there are limited passing bays and there are curfews during peak commuter periods. A 10-minute delay that puts a train into the curfew zone can easily make it three hours late.
The rail industry has often argued that the reason it is steadily losing market share to road on routes where there is competition is because of its belief that road is unfairly subsidised.
However, the Productivity Commission's study says that on the trunk routes where road and rail are most competitive, there is no demonstrable subsidy. Rail's loss of market share has rather been a result of its inability to get goods to their destination on time.
The advocates of the Melbourne-Brisbane route also argue that it is on the long hauls that rail is most competitive. Certainly, it is the case that the Melbourne-Perth route is the most profitable, carrying about 70 per cent of freight between the cities.
So the idea is to bypass Sydney altogether. The cheapest route is deep inland, through Parkes in NSW. This would allow trains that are 1.8km long and double-stacked, which is deemed the ideal for long hauls, and was costed in the study at $3.1-3.6 billion.
It is a basic principle that the value of a network is proportional to the square of the number of nodes. Stripping Sydney from the route between Melbourne and Brisbane destroys value.
Based on Ernst & Young's numbers, there are about 3.05 million tonnes of rail freight on the Melbourne-Sydney-Brisbane route a year, of which 1.35 million tonnes is travelling all the way. On the Melbourne to Sydney leg, traffic to Brisbane makes up 60 per cent of the volume. On the Brisbane to Sydney leg, traffic to Melbourne is 64 per cent of the volume.
Economies of scale in the Melbourne-Sydney and Sydney-Brisbane routes will be lost, while it is doubtful that the Melbourne-Brisbane route alone would have the traffic to warrant a new line.
Of course, the feasibility study being conducted by the Australian Rail Track Corp may come to that conclusion, although it would appear to be an interested party.
Rail networks are challenged worldwide by the technological advances in trucking. However, both Canada and the US have profitable rail networks. In the US, this is the case for the first time since the 1920s.
Part of the problem in Australia is the fragmented ownership, with the track generally owned by state government bodies, while privatised operators of rolling stock have struggled in what remain largely state-based franchises. The US-controlled Westrail failed to make a go of it in Western Australia and sold to Queensland Rail. Asciano is under fire because of doubts about its profitability under the weight of more than $3 billion in debt. It is doubtful that profitability on existing routes would be sufficient to warrant renewal of rolling stock.
Whereas in the US and Canada, the operators own the track and will run a train if it covers the marginal cost, in Australia the operators generally have to pay an average cost to the track owners.
The Government's priority should be to identify the barriers to profitable rail operation in Australia and, to the extent these fall within the province of state and federal authorities, facilitate consolidation. There should be investment to make passage of rail freight through Sydney easier, but trying to build rail routes with the objective of taking market share from the roads, which carry 80 per cent of freight between the east coast capitals, is not a sensible use of public funds.
Unfortunately, however, the Melbourne-Brisbane link is a bad idea with bipartisan support. Labor likes rail because it is a unionised industry, the Greens like it because they believe it to be less polluting than road, and the National Party likes it because it goes through their electorates.
Nationals leader Warren Truss claims Labor's support for the project is a case of policy theft.
"I have to admit I was initially shocked by the minister's bare-faced cheek and plagiarism, and I likened him to infamous great train robber Ronald Biggs," he said, after Albanese announced the feasibility study.
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