Speech to Australian Logistics Council Forum 2018: Towards a National Freight and Supply Chain Strategy – ‘Getting the National Freight and Supply Strategy right’ – Royal Randwick Ballroom, Sydney
Today I want to open with a quote from a politician I’m not usually taken to quoting: Margaret Thatcher.
In 1985 the then British Prime Minister made the following observation:
You might have heard a lot lately about ‘infrastructure’ – the new ‘in’ word. Some of you might even ask exactly what it is. You and I come by road or rail. But economists travel on infrastructure.
What a difference 30 years makes.
Today, the meaning and importance of infrastructure is understood well beyond the economics profession. Indeed, to paraphrase another Prime Minister of yesteryear, Paul Keating: I’ll guarantee if you walk into any pet shop in Australia, the resident galah will be talking about infrastructure policy.
That is a good thing.
The fact is, in the highly competitive, globalised world of the 21st century, the prices consumers pay, the profits businesses make, the quality of life people enjoy and the export income Australia earns will more than ever depend on the adequacy and quality of our roads, railways, sea and air ports, electricity grids, and telecommunication networks.
Or to put it another way, investing in good infrastructure generates long term economic and jobs growth, lifts productivity, creates inclusive communities, builds a low carbon future, enables businesses to grow, and gives our exporters a competitive edge.
The provision of infrastructure can no longer be considered a second order public policy priority. In 2018, an effective infrastructure policy is fundamental to an effective economic policy, an effective housing affordability policy and an effective environmental policy.
But the key word here is ‘effective’.
If we are to maximise its economic, social and environmental dividends, infrastructure policy has to be got right – and that starts with a genuine commitment to a long term strategy based on an objective, evidence-based assessment of the nation’s infrastructure needs.
Towards another National Freight and Supply Chain Strategy
That brings me to the purpose of today’s gathering, namely to identify the key policy reforms and investment decisions that should be reflected in the final version of the Government’s 20 year National Freight and Supply Chain Strategy.
Without a doubt, the freight and logistics sector is the lifeblood of the Australian economy and I welcome the Government’s commitment to looking at how it can better support the vital job you do, including through improvements to the infrastructure you rely upon.
However, I would also note that the current Government was fortunate enough to inherit a long term comprehensive plan that would have achieved precisely that.
Developed by Infrastructure Australia with input from the National Transport Commission, industry, as well as state and territory authorities, the National Land Freight Strategy, which I released as Infrastructure and Transport Minister in 2012, was a blueprint for a streamlined, integrated and multimodal transport system capable of moving goods quickly, reliably and at lowest cost.
It complemented the National Ports Strategy published that same year.
The work had been done.
All the current Government had to do was pick it up and implement it.
Instead at first they chose to do nothing. Then in November 2016 – more than three years after coming to office – the then Infrastructure and Transport Minister Darren Chester had a eureka moment. He finally saw merit in national leadership and long term planning.
To be blunt, the process we are now going through is little more than an exercise in reinventing the wheel and slapping a slightly different name on it. Worse still, by the time the Government finally releases its strategy, which is not expected until the end of this year, we will have wasted more than five years.
So let’s turn to the future and what Federal Labor believes an effective National Freight and Supply Chain Strategy should contain – of course, building on the work we did when last in government.
Our starting point is that Australia’s existing freight and logistic network is struggling to cope with the demands already being placed on it, let alone the added demands expected in the years ahead.
For one thing, Australia’s population is expected to grow by 400,000 people a year. As former Treasury Secretary Ken Henry has pointed out, that is equivalent to “building a new city the size of Sydney every decade; or building a new city the size of Newcastle or Canberra every year.”
That’s a lot of extra consumers who will expect the shelves of their favourite shops and local supermarkets to be filled with the products and brands they need and enjoy.
Then of course there will be the growing demand from industry to supply the raw material and capital equipment required to make those consumer goods in the first place. Meanwhile, our exporters will continue to expect their products be quickly and reliably transported to customers around the globe.
Simply put, the national freight task is set to become even greater and more complex.
And that fact is borne out by the statistics.
For example, according to Infrastructure Australia container movements across the nation’s wharves will increase 165 per cent between now and 2031. Over that same period, non-containerised trade is projected to grow by 138 per cent.
But it’s not just our ports that are getting busier; so too are our roads and rail lines.
The volume of freight needing to be transported around the country on the back of trucks and trains will almost double over the next two decades.
And we should not forget the increasing role our airports are playing in the distribution of freight both domestically and internationally. Indeed, Sydney Airport already rivals Port Botany in terms of the value of trade flowing through it, with much of the outbound freight being Australia’s highly sought after agricultural products such as meat, vegetables, fruit and seafood.
Our challenge is to meet this growing freight task head on; to build and maintain a modern, well-planned, efficient and safe freight and logistics network which supports rather than hinders Australia’s future economic development.
That will require an investment by the nation’s freight and logistic operators in emerging technologies and new, innovative ways of servicing the customer.
The role of government, on the other hand, is to not only establish the regulatory framework that will unlock that private sector ingenuity, but to also identify, plan and invest in the long term, system wide solutions that will support the growth of the freight and logistics sector as a whole.
And the national government has a particularly unique role to play in this endeavour.
Traditionally, infrastructure policy has been segmented by mode – road, rail, aviation and shipping – as well as by jurisdiction. But it is a tradition that has failed to adequately serve the national interest, often pitting modes and states against each other in a zero sum game.
One national, integrated network
Accordingly, the first prerequisite of an effective National Freight and Supply Chain Strategy is to remedy the limitations of our Federated structure of government. That means ignoring state and territory borders, and identifying the existing and yet-to-be built roads, rail lines, intermodals, ports and airports which together would form a truly national and integrated freight network.
Importantly, this prioritisation process would protect current and future transport corridors and other strategic pieces of land from urban encroachment. Ports, airports, intermodal, highways and rail hubs would then be able to expand when required – and do so at a lower cost and with minimal impact on the community.
What’s more, the backbone of any national freight network of the future must be rail. Just as rail needs to be at the heart of moving people around our big cities, it also needs to take on an even greater role in the movement of freight around our country.
That is not to diminish the indispensable role of road transport.
Indeed, when last in government Federal Labor doubled the roads budget. In just six years we built and upgraded 7,500 kilometres of road nationwide, including completing the duplication of the Hume Highway, accelerating the upgrade of the Pacific Highway to dual carriageway, and improving the safety and flood immunity of hundreds of kilometres of the Bruce.
But when it comes to moving large volumes of freight over long distances, rail has significant advantages. It can do the job at a lower cost and more safely. And it is the most energy-efficient mode of land transport, meaning less pollution and a smaller carbon footprint.
In fact, rail produces three times less harmful carbon emissions than road.
The more freight carried by rail also translates into lower highway maintenance costs, less congested urban arteries and fewer road accidents. Just one 1,800 metre train can replace as many as 100 trucks.
It was for all these reasons that the former Federal Labor Government delivered the biggest investment in Australia’s freight rail infrastructure in more than a century.
First and foremost, we rebuilt a third of the Interstate Network – or some 3,800 kilometres of track. This work included re-railing, installing new passing loops and extending existing ones, and replacing the ageing timber sleepers with 3.4 million Australian-made concrete sleepers which don’t buckle on hot days.
In addition, we addressed a number of major bottlenecks in the network.
This included the biggest bottleneck of them all: Sydney.
For decades freight trains endured frustrating delays getting into and out of this sprawling city due to limited tracks and the priority given to passenger trains, particularly during peak periods. The solution was to build a new 36 kilometre dedicated line between Macarthur and Chullora, thereby separating freight from passenger trains.
This $1 billion piece of infrastructure tripled the capacity of this vital rail corridor.
What’s more, this new line in Sydney’s south was complemented by a $1.1 billion upgrade to the rail corridor through the City’s northern suburbs to Newcastle as well as the duplication of the line to Port Botany, Australia’s second largest container port.
To further support the growth and smooth operation of Port Botany – and reduce traffic congestion – we also established the Moorebank Logistics Park under the leadership of Kerry Schott.
Located next to the Southern Sydney Freight Line in the City’s South West, this facility will comprise:
- An import-export terminal with a capacity to handle up to 1.05 million containers annually;
- An interstate terminal with a capacity to handle up to 500,000 containers annually; and
- Up to 850,000 sqm of warehousing where containers can be unpacked before delivery of their contents to their final destinations.
When completed, this new intermodal, which is being delivered as public-private partnership, will take up to 3,000 trucks a day off Sydney’s road network, create around 6,800 jobs and produce more than $11 billion in economic, social and environmental benefits.
But our investment in rail didn’t stop there.
In Victoria we upgraded the rail connection to Geelong Port. In South Australia we untangled the passenger and freight lines near Adelaide’s CBD. In Western Australia we improved rail access to Esperance Port, and restored and upgraded the State’s Grain Rail Network. In Tasmania we initiated the Freight Rail Revitalisation Program, which is replacing 290 kilometres of ageing track.
And we connected Queensland to the Interstate Network for the first time.
As a result of this extensive capital works program travel times from Perth to the east coast were cut by nine hours and by seven hours between Melbourne and Brisbane. This in turn has led many businesses to re-evaluate the benefits of rail. For example, a couple of years ago Woolworths made the decision to transfer 34,000 tonnes of dry goods from road to rail.
Today, around half of the domestic freight task is performed by rail.
However, while Federal Labor did do much during our previous six years in office to reverse decades of neglect, I am also the first to acknowledge that there is still much more to be done.
The modernisation of the nation’s rail freight infrastructure must continue.
I now want to quickly turn to another safe, environmentally sustainable mode of transport that could be doing more of the heavy lifting when it comes to the national freight task – and that is coastal shipping.
As a vast island continent with ports around our coastline, it defies logic that in
2018 this industry is no bigger than it was 40 years ago. In fact, in recent years it has been in decline, with just 17 per cent of the domestic freight task now being carried in the hull of ships.
Worse still, our proud Australian flagged merchant fleet, as well as the skilled workforce it trains and employs, is fast disappearing. Today, much of the freight that does go by sea is being transported by ships that are foreign flagged and foreign-crewed.
Preventing the demise of this industry was a priority of the former Federal Labor Government. Motivated by sound economic, environmental and national security reasons we put in place a package of reforms designed to level the playing field between Australian shippers and their international competitors.
This package included a zero tax rate, more generous accelerated depreciation arrangements, rollover relief for selected capital assets and new tax incentives to employ local seafarers. We also created an International Shipping Register which allows operators of Australian flagged vessels to employ mixed Australian and foreign crews on internationally agreed rates and conditions.
These measures were based on the extensive reform programs that had already been successfully implemented by other maritime nations such as the United Kingdom, Japan, China and Denmark.
However, for Labor’s suite of reforms to work, they needed time.
Unfortunately, even before our reforms took effect the Coalition was undermining them with attacks calculated to create uncertainty and sow doubt in the minds of those considering investing in the Australian industry. But not satisfied with white-anting Labor’s reforms in Opposition, once elected the Coalition moved quickly to scrap them altogether and dismantle what remains of the domestic industry.
All of us want to reduce the cost of doing business in Australia – but not at any cost, particularly if that cost is the destruction of a strategically-significant industry and the loss of a highly-skilled workforce.
The Coalition’s 2015 legislation put ideology ahead of the national interest, and was rightly rejected by the Senate.
Nonetheless, the Coalition’s antagonism towards maritime in general, and our domestic shipping industry in particular, continues to this day. And there is no better example of this than the fact that the “National Key Freight Routes Map” which appears on the Department of Infrastructure’s website does not have one shipping route on it.
The bottom line is: there is a very real difference between the two sides of politics when it comes to shipping. The Coalition doesn’t believe Australia needs a viable, competitive and growing domestic industry. Federal Labor does – and we will be taking a set of policies to the next election that will help rebuild the Australian industry.
Simply put, we want to see more Australian seafarers crewing more Australian flagged ships carrying more Australian goods around the Australian coastline.
Better use of our existing infrastructure
The second prerequisite of an effective strategy is recognition that it is often far smarter and cheaper to get the most out of our existing infrastructure than to always build anew.
In practice this means fitting new technology to improve traffic flows along major motorways, using higher productivity vehicles, creating dedicated freight routes and separating passenger trains from freight trains.
Technology, in particular, has the greatest potential to unlock significant efficiency gains.
That’s why, for example, we invested in the Managed Motorways Program, which sought to incorporate intelligent transport solutions into urban motorway networks. These included entry ramp signalling, variable speed limit signs, CCTVs and digital message signs that provide motorists with live updates on traffic conditions and delays.
In Victoria we committed $9.9 million in our last Budget to upgrade the Intelligent Transport System along a 4.1 kilometre section of the Monash Freeway. While in the scheme of things that was a relatively small amount of funding, it would have generated an extraordinary $11.50 of benefits for every $1 invested, according to Infrastructure Australia.
Unfortunately, this was one of those worthy projects cancelled by the incoming Coalition Government.
Fewer, smarter regulations
The third prerequisite of an effective national strategy is a commitment to a seamless national economy, with the aim of enhancing long term productivity growth and freeing up the movement of interstate trade. Primarily, this will involve further reforms to the way your sector is regulated.
In government, we made significant progress in this endeavour.
Indeed, we replaced the 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.
And let me tell you, that was no easy feat. It involved many rounds of negotiations between myself and state and territory ministers, in many cases against determined resistance from their bureaucracies that were more interested in protecting their fiefdoms than advancing the national interest.
Unfortunately, that reform agenda has stalled. It needs to be restarted.
Lastly, a strategy without real dollars attached is simply a statement of good intentions.
Building and maintaining a freight and logistics network fit for purpose requires consistent investment and while the private sector does have a role to play in closing the infrastructure funding gap, governments cannot avoid their responsibility to invest in projects which benefit the economy as a whole.
But at a time when the Federal Government should be lifting its investment in the nation’s infrastructure, it is actually planning to cut it. According to their own Budget Papers, grant funding will almost halve from $8 billion this financial year to $4.2 billion in 2020-21.
What’s more, last year’s Budget committed grant funding to just one new project nationwide – and it was $13.8 million for the Far North Collector Road near the NSW town of Nowra in the marginal seat of Gilmore. It was a project most people had never heard of until Budget night.
Little wonder then that the pipeline of Federally-funded projects is fast drying up.
With few exceptions, the major Federally-funded road and rail projects now under construction around the country were first identified and then funded by the former Federal Labor Government.
According to the independent Parliamentary Budget Office, Federal investment in road and rail projects, expressed as a proportion of GDP, is projected to drop from 0.4 per cent to 0.2 per cent over the coming decade.
That’s a 50 per cent cut.
The fact is Federal grant funding is vital – and less of it will mean less infrastructure.
But while the quantity of available investment is important, so too is ensuring that the taxpayer gets value for money. It is imperative that funding go to projects that will fix an identified problem; projects where the planning has been done; projects offering the highest economic, social and environmental returns.
Simply put, the more zeros on a project’s price tag does not automatically mean the project is a better solution than a cheaper alternative. As I mentioned earlier, equipping an existing motorway with intelligent transport systems can achieve a similar outcome sooner and at a fraction of the cost of building a whole new motorway.
However too often politicians are bedazzled by mega-projects and commit billions in the absence of a rigorously, independent assessment and before the planning work is done.
And just a few kilometres from here is a perfect example of what I am talking about.
I give it to the NSW Government; with Westconnex they have certainly come up with the most expensive road project in the nation’s history, a project where they literally started digging the tunnels before they knew where those tunnels would come up. It’s a project that has taken on a life of its own.
Even now the detailed planning remains a work in progress.
But here’s the kicker, despite having bulldozed hundreds of houses and creating anxiety among just about everyone in the local community that their home, school or park will be next, this $17 billion (at a minimum) mega-project will not actually achieve what it was meant to, namely easing congestion around and improving access to Sydney Airport and Port Botany.
It stops well short of both.
It will now take yet another multi-billion project to finish the job.
In the years to come Westconnex will be studied by academics, engineers and planners for how not to deliver a major project.
Another mega-project that could well go the same way as Westconnex is Inland Rail.
As I have already said, Federal Labor is a strong advocate of freight rail and we support the Inland Rail project. After all, it was the former Federal Labor Government that committed $900 million to upgrade the existing track that will eventually form part of the line and to progress the project to the construction stage.
However, in their desperation to find pre-election photo opportunities, the Government is saying there will be a sod turning later this year to mark the start of work on the Parkes to Narromine section. It appears the delivery of this project is now being driven more by the electoral cycle than what is required to ensure its ultimate success.
The fact is the final route alignment has still not been finalised; environmental approvals have still not been sought, let alone approved; hundreds of land resumptions have still not occurred; and details of the public private partnership that will deliver the most challenging part of the project – the section through the Great Dividing Range in South East Queensland – have still not been released.
What’s more, a significant proportion of the ARTC’s revenue is generated on track leased to it by the NSW and Victorian governments, including the profitable Hunter Valley Coal Network. To provide the company with the long term financial certainty it needs before proceeding with the project, it is seeking to have those leases extended until the end of the century.
Those negotiations are still ongoing.
Most significantly, there are still serious questions over how this project can be fully funded via an ‘off budget’ $8.4 billion equity injection into the ARTC, given the Government’s own 2015 Implementation Study chaired by John Anderson concluded that “the expected operating revenue over 50 years will not cover the initial capital investment required to build the railway”.
This fact was reaffirmed only a couple weeks ago by the CEO of the ARTC, the company tasked with building the line. Appearing before the Joint Committee of Public Accounts and Audit, John Fullerton said:
“From a strict ARTC point of view, no, the revenue that flows to us would never cover the full capital cost and provide a return.”
The Government needs to take a step back and ensure they have got the fundamentals of this project right from the outset. Otherwise in the years to come Inland Rail will be studied alongside Westconnex for how not to deliver a major infrastructure project.
In conclusion I want to congratulate the Australian Logistics Council for organising this event and bringing together such a talented group of professionals from across the nation’s freight and logistics sector. I greatly respect the experience, the expertise and the leadership right here in this room.
I also acknowledge the work the ALC has done over many years to build consensus within the sector and across the political system around public policy issues important to the future of our country.
The fact is there is too much partisanship today; too many people are simply spoiling for a fight and are prepared to put tribal loyalties ahead of the national interest; too often a good idea is shot down for no other reason than it was proposed by someone in the other party.
Now, I am not saying we have to always agree on everything, and I have just outlined some of the key points of policy difference between Labor and the Coalition in the areas of infrastructure and transport.
However, I do want to signal today my willingness to work with the current Government to find common ground, and ensure we end up with a National Freight and Supply Chain Strategy that prepares Australia for the future challenges and best serves your businesses, your customers and of course, the wider Australian community.
Australia’s long term national interest demands nothing less.