Aug 18, 2017

Speech to Australasian Railway Association Rail Freight Conference – Intercontinental Hotel, Sydney

On 17 October, Australia will celebrate the centenary of the opening of the transcontinental railway.

This nation building project, the vision of Labor Prime Minister, Andrew Fisher, connected our east and west coasts in 1917 after five years of construction.

In many ways the completion of the line marked Australia’s coming of age.

It opened up new and previously uncontemplated opportunities for travel, trade and economic development.

As Fisher said in Port Augusta when construction commenced, the best thing the Parliament could do for posterity in those early years of nationhood was to open up Australia by building railways and ports.

He said: “Of that Parliament, the people who live afterwards would say that it made easier the road and lighter the load, and enabled them to progress by honest industry.”

Andrew Fisher was right.

Over the past 150 years, rail has done more to promote economic development and commerce than any other technology.

In 2017, when we can fly to the other side of the world in a day, it would be tempting to write off rail as a quaint relic of the past.

But that would be a mistake.

Today, right around the globe, rail’s influence is growing, not declining.

It continues to underpin industrial growth, particularly in the developing nations of the Asian and African continents.

It is a central component of China’s multi-billion dollar Belt and Road initiative, which will link a huge economic zone connecting Asia, Europe and Africa.

In America, new lines are under construction in California and Texas.

And across Europe, Asia and North America, governments are investing billions of dollars in High Speed Rail lines as a genuine alternative to air and road travel.

Rail also maintains its importance in Australia, handling half of the domestic freight task.

That task grew by 50 per cent in the decade to 2016 and is forecast to grow by another 26 per cent by 2026.

Likewise, passenger rail stands as a potent weapon in the battle against traffic congestion in our cities, which is eroding our quality of life and acting as a hand brake on national productivity and economic growth.

Rail also offers huge opportunities in terms of regional development, both through freight projects like Inland Rail and the most visionary project of all – High Speed Rail down Australia’s eastern coast.

My message is that the future of rail is bright …,

…. as long as we make the necessary investment to maintain and expand our rail systems.

BUDGET

To set the scene, let me offer a brief overview of this year’s Federal Budget.

Pre-Budget posturing about the difference between good and bad debt raised hopes within the sector that the Budget would include an increase in infrastructure investment.

It did not.

The Government cut $1.6 billion from the infrastructure budget in the year to June 30 this year.

And over the Forward Estimates investment will decline every year from $7.6 billion in 2016-17 to $4.2 billion by 2020-21.

Analysis of long-term trends by the independent Parliamentary Budget Office shows that over the next decade, Commonwealth investment in transport infrastructure, expressed as a proportion of GDP, will fall from 0.4 per cent to 0.2 per cent.

That’s cutting it in half.

At a time when the investment stage of the mining boom is winding down, our government should be building national capacity.

Instead, it is cutting investment.

In its Budget response, the infrastructure sector’s peak representative body, Infrastructure Partnerships Australia, warned that the Budget would take real, budgeted capital funding of infrastructure to its lowest level in more than a decade.

The organisation also accused the Government of trying to hide its cuts with a mixture of “underspending, re-profiling and narrative’’.

That was a polite way of saying the Government is making things up.

IFU

The decline in funding can be traced to a major policy shift away from provision of federal infrastructure grants to the states.

Instead, the Government proposes to seek more private investment for public projects using what it describes as innovative financing arrangements like value capture and availability payments.

To that end, it has created an Infrastructure Financing Agency within the Department of Prime Minister and Cabinet.

It ought to be noted here that value capture, equity funding and availability payments are not new.

As you know, they’ve been around for decades.

They were used by the former Federal Labor Government on a range of projects, including Northconnex in Sydney, the Moorebank Intermodal Terminal, Legacy Way in Brisbane and the Gold Coast Light Rail project.

Such innovative mechanisms were also included in the former Labor Government’s 2013 agreements with the Victorian and Queensland Governments to deliver the Melbourne Metro and Brisbane’s Cross River Rail.

The Coalition scrapped both when it came to office.

The IFU is not needed.

It is a solution looking for a problem that does not exist.

It will duplicate the existing role of Infrastructure Australia, which already has the legislative mandate to advise on financing arrangements.

Infrastructure Australia’s job is to assess business cases of projects.

If they stack up, it has the capacity to work with states or private sector proponents on financing options. That’s happened before and it can happen again.

Creation of the IFU also downplays the considerable financing expertise that exists in state governments, which have traditionally handled such matters.

Prior to the Budget, Infrastructure Partnerships Australia told the Government not to create the IFU.

Instead, it called on the government to stop cutting infrastructure grants to the states.

A Labor Government will abolish the IFU.

We’ll direct its funding back to Infrastructure Australia, including re-establishing the Major Cities Unit to drive policy aimed at improving the productivity, sustainability and liveability of the nation’s cities.

VALUE CAPTURE

In recent months the Prime Minister has said many times that he wants state government proposals for public transport projects to incorporate value capture.

However, using the Senate Budget Estimates process, the Opposition has confirmed that, despite this requirement, Infrastructure Australia has not considered value capture in any of its assessments of projects on its Infrastructure Priority List.

So we have a situation where the Prime Minister is publicly rejecting projects like Brisbane’s Cross River Rail because he wants value capture, when Infrastructure Australia’s assessment processes don’t even examine value capture.

I am also aware that despite that fact, Infrastructure Australia wrote to the Queensland Government on May 19 this year complaining that the business case it produced for the Cross River Rail project address issues of value capture.

It’s hard to see why they would be asking for information on value capture if it is not relevant to their assessment of the project’s business case.

This makes me wonder whether all of the Government’s talk about value capture is just a smokescreen from a government that is not prepared to invest in public transport projects.

DISTORTION

Another concern about the new approach toward less public investment and more private investment is the effect it will have upon what gets built in this country.

It will distort the infrastructure market towards toll roads and away from urban passenger rail.
This is because toll roads generate commercial rates of return.

Public transport is a more difficult proposition for the private sector because it does not produce immediate commercial rates of return.

When weighing up roads against rail, we need to consider the full range of public benefits provided by rail including public benefits that are not relevant to private investors.

Rail helps tackle traffic congestion and thereby lifts productivity.

Trains, whether they carry freight or people, take trucks off the road and reduce overall carbon emissions.

He is a real-life example of the outcomes of this policy distortion.

Fairfax Media has established that the NSW Coalition Government ordered its bureaucrats to ignore rail as an option when considering ways to tackle traffic congestion and improving commuting times between Sydney and Wollongong.

This instruction left the bureaucrats with one option – constructing the F6 Motorway and putting a toll on it.

But documents obtained by Fairfax included a Transport Department paper headed “Failure in Critical Options Analysis’’ which attacked the toll road idea on the basis that a rail option would be cheaper.

It said completing the Maldon to Dombarton freight line would remove coal trains from the existing Illawarra line, freeing up space for passenger trains.

This, combined with construction of the Thirroul Rail tunnel between Waterfall and Wollongong, would reduce travelling time from Wollongong to Central Station by a third to 60 minutes.

Yet the NSW Government deliberately shut off the rail option.

This is absurd.

The Bureau of Infrastructure, Transport and Regional Economics tells us that traffic congestion is costing the nation $16 billion a year in lost productivity.

We won’t tackle this problem simply by building more toll roads.

We could get cars off the roads by investing in public transport, particularly in new suburbs not currently served by trains.

We could get even more trucks off the road by proceeding with freight rail projects like the Port Botany Freight Line duplication between Mascot and the Port.

INLAND RAIL

Labor supports the proposed Inland Rail Link between Brisbane and Melbourne.

In Government, we invested $600 million upgrading parts of the existing rail network that will form part of the Inland Rail route.

And in the 2013 Budget, we allocated $300 million to complete the detailed planning and get the project under way.

But in 2017, I am concerned the Government is jeopardising Inland Rail by refusing to commit the necessary grant funding to make it a reality.

When it took office in 2013, the Coalition appointed former Deputy Prime Minister John Anderson to prepare an implementation study.

The resulting report noted that even over 50 years of operation of Inland Rail, revenues will not be sufficient to cover its construction costs.

Mr Anderson wrote: “Hence, a substantial public funding contribution is required to deliver Inland Rail.’’

But the Government ignored Mr Anderson.

Its proposal to fund this project is based entirely on an equity injection into the Australian Rail Track Corporation, with no grant funding.

For equity funding arrangements to work, a project must be able to stand on its own and generate a return to the Budget.

However media organisation Crikey recently reported that when it asked the Government how Inland Rail could make a return to the Budget, it was told the existence of such a return was not based on Inland Rail as a discrete entity, but on “returns for equity for ARTC as a whole rather than for the Inland Rail project’’.

This was a critical admission.

It tells us the Government is cooking the books to make Inland Rail stack up.

Unwilling to provide the required component of direct grant funding as per Mr Anderson’s advice; the Government is asking all users of the ARTC’s freight rail system to subsidise Inland Rail.

That is a fiddle.

My other concern is the fact that on current planning, Inland Rail will stop 38km from the Port of Brisbane, at Acacia Ridge.

CORRIDOR PROTECTION

Getting the planning right on rail requires us to think well ahead.

That includes taking steps to prevent future rail corridors being built out by urban sprawl.

I found myself nodding in agreement recently when I read Infrastructure Australia’s report urging governments to act now to protect corridors for seven projects on Infrastructure Australia’s priority list.

Those projects included High Speed Rail down the east coast, the Outer Sydney Orbital, Outer Melbourne Ring, Western Sydney Airport Rail Line, Western Sydney Freight Line, Hunter Valley Freight Line, and Port of Brisbane Freight Line.

Infrastructure Australia said that if these corridors were protected now, we could save taxpayers up to $11 billion by avoiding cost overruns, delays and community disruption when projects are being delivered.

The report said:

If we protect infrastructure corridors we will reduce project costs and especially minimise the need for underground tunnelling, where the cost to government and therefore taxpayers can be up to ten times higher than it would have been.

Infrastructure Australia’s report represents common sense.

The former Labor Government tried to preserve the corridor for the proposed High Speed Rail Line between Brisbane and Melbourne via Sydney and Canberra.

In 2013, having established via a feasibility study that the project would return $2.50 for every dollar invested, we appointed an independent expert panel to recommend the best way to proceed.

That panel included the Business Council of Australia’s Jennifer Westacott, former Deputy Prime Minister Tom Fischer and the late Bryan Nye from the ARA.

The panel recommended we move quickly to protect the corridor.

Accordingly, we allocated $54 million in the 2013 Budget to create a High Speed Authority to preserve the corridor and progress the project.

Unfortunately, the incoming Coalition Government scrapped that plan.

This was incredibly short-sighted.

Infrastructure planning requires that governments think in the long-term.

It’s not just about cutting ribbons at opening ceremonies for new projects. Part of the job includes putting in the detailed work today to make tomorrow’s projects possible.

If we fail to act on securing the High Speed Rail corridor, the project will, over time, become unviable.

If we fail to secure corridors for freight rail projects, we risk increasing the future cost of delivery to the point where these important projects become unviable.

We should establish a High Speed Rail Authority to secure the corridor and advance planning. We should also invite expressions of interest from international companies with relevant expertise in building and operating High Speed Rail.

More broadly, we should take Infrastructure Australia’s advice and consider corridor preservation for all projects in the Infrastructure Australia Priority List.

We should do this in a spirit of bipartisanship.

LABOR’S RECORD

For those who wonder what approach a Labor Government would take on freight rail, I simply point our record in Government between 2007 and 2013.

We rebuilt over a third of the network – 3,800 kilometres of existing track – and laid 235 kilometres of new track.

Our work cut travel times along the Melbourne to Brisbane corridor by six hours, and between Perth and the east coast by nine hours.

We separated freight and passenger rail lines by delivering the Southern Sydney Freight Line – a dedicated freight line between Macarthur and Chullora that provides access for up to five freight trains per hour in each direction and, for the first time, 24-hour access to Port Botany through southern Sydney.

Likewise we invested $840 million towards the $1.1 billion Northern Sydney Freight Corridor project, delivering a dedicated line between North Strathfield and Gosford, which will take up to 200,000 trucks off the roads a year.

We upgraded the Port Botany Rail Line increasing the number of containers that can be transported along the line from 700,000 to around 1 million a year.

With Port Botany freight expected to grow at 7 per cent per annum, we put in place the Moorebank Intermodal project, which will generate more than $11 billion in economic benefits.

The former Labor Government also reformed transport regulation.

We replaced 23 separate state, territory and Federal agencies that previously regulated heavy vehicles, rail safety and maritime safety, along with their costly and confusing array of regulations, with just three national regulators each administering one set of modern, nationwide laws.

That reform will boost national income by up to $30 billion over the next 20 years.

A logical next step in micro-economic reform is to streamline procurement of rolling stock to boost the domestic rail manufacturing and maintenance industry, which employs almost 20,000 Australians and contributes $1.75 billion to the national economy annually.

Under current arrangements states are doing their own thing on procurement, with 36 different train models in our public transport fleet, many being purchased overseas.

For example, NSW recently placed a $1.7 billion order for new Waratah trains with a Chinese manufacturer, and their new $2.3 billion intercity trains are to be built in Korea.

Surely it would better to standardise the rolling stock platform used in this country instead of designing a new model each time a government decides to acquire new trains or trams.

With governments nationwide planning to spend more than $46 billion on new urban rail infrastructure and rolling stock, our goal must be to keep as much of that investment that we can here in Australia.

If we do that we can improve rail capacity while also boosting jobs growth.

The time has come for a serious examination of the merits of establishing a national public transport authority in which the Commonwealth partners with the states to maximise opportunities for local manufacturers and suppliers.

CONCLUSION

When things go off the rails in any undertaking, I’ve always found it is useful to return to first principles.

So let me offer an actual policy solution to the problem of attracting more private investment into public infrastructure projects.

Back in 2008, I had the great privilege of taking the legislation that created Infrastructure Australia through the House of Representatives.

In my second Reading speech on the legislation, I made a comment that is just as relevant today.

I said:

Infrastructure investment needs to be determined objectively and according to long-term need, not short-term political interests, thereby creating an environment conducive to greater private investment in public infrastructure.

So nation-building requires not only foresight, but a more national co-ordinated approach to infrastructure reform and investment – something the business community has long championed.

Businesses don’t want advice from politicians about how to finance major investments.

What they want is bipartisan commitment to a pipeline of projects that have been assessed and embraced on the basis of need, not politics.

They want a predictable roll out of projects on the basis of need so that a change of government in Canberra does not mean properly assessed projects are dumped and replaced with other projects for which there is no commercial case.

That was the whole idea behind the creation of Infrastructure Australia.

It’s disappointing that the current government has found itself unable to stick by such principles.

But the bottom line here is that we don’t need to reinvent the wheel.

We’ve already got a model for a better way to go about nation building.

We should just use it.

Contact Anthony

(02) 9564 3588 Electorate Office

Email: A.Albanese.MP@aph.gov.au

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