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Towards 2050:

National Freight StrategyThe Role of Rail

Australasian Railway Association Inc.

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Towards 2050: National Freight Strategy

TABLE OF CONTENTS

INTRODUCING THE NATIONAL FREIGHT STRATEGY

1.1 Forward .............................................................................................................. 5

1.2 Scope & Objective of Strategy ............................................................................ 5

1.3 Vision for Rail Freight ......................................................................................... 7

1.4 Key Recommendations of the Strategy .............................................................. 8

1.4A Next Steps ......................................................................................................... 11

1.5 Executive Summary .......................................................................................... 13

WHY A NATIONAL FREIGHT STRATEGY & THE ROLE OF RAIL

2.1 Why a Freight Strategy? ................................................................................... 17

Population Growth ........................................................................................................................ 18

Increased Trade............................................................................................................................. 19

Land Use and Transport Corridors ................................................................................................ 19

Road Congestion ........................................................................................................................... 20

Lack of Integrated Planning & Microeconomic Reform ................................................................ 21

Increasing Energy Prices & the Carbon Restricted Economy ........................................................ 22

2.2 A Multi‐Modal Solution .................................................................................... 24

2.3 The Contribution of Rail .................................................................................... 26

Cost effective ................................................................................................................................ 26

Superior Safety Record ................................................................................................................. 27

Environmentally Friendly & Fuel Efficient .................................................................................... 31

Solution to Congestion .................................................................................................................. 32

2.4 Current State of Rail ......................................................................................... 33

Infrastructure ................................................................................................................................ 34

De‐Prioritisation and Under‐Utilisation of Freight Rail ................................................................. 35

Market Failures in Land Freight Market ....................................................................................... 36

Impacts .......................................................................................................................................... 38


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A CALL TO ACTION

3.1 Freight Transport Policy Action Plan ................................................................. 42

Single Australian Land Transport Economic Regulator ................................................................ 42

Integrated Land & Transport Planner & a Single Australian Land Transport Policy Maker .......... 43

Informed & Cost‐Effective Investment ......................................................................................... 44

Rationalise and Consolidate Regulatory Requirements ............................................................... 45

Internalising Externalities ............................................................................................................. 46

Clearly Stated & Quantified Social, Environmental & Economic Outcomes ................................. 46

3.2 Industry Action ................................................................................................. 48

Operational Efficiency ................................................................................................................... 48

Industry Cooperation .................................................................................................................... 49

Improved Customer Offering ........................................................................................................ 50

3.3 Outcomes of a Freight Strategy ........................................................................ 51

Competitive Neutrality.................................................................................................................. 51

Maximise Performance ................................................................................................................. 51

Value for Money ........................................................................................................................... 52

CONCLUSION AND APPENDIX

4. Conclusion ........................................................................................................ 53

Appendix 1: Specific Government Investment Projects ............................................. 55

Asciano/Pacific National, ARTC & Queensland Rail ...................................................................... 55

Asciano .......................................................................................................................................... 55

SCT ................................................................................................................................................. 55

WestNet ........................................................................................................................................ 56

RailCorp ......................................................................................................................................... 56


Introduction1


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1.1 Forward

Australia faces significant challenges in ensuring its future international competitiveness. The

Federal Government has placed transport, and in particular freight transport, as a central plank to

promoting the productivity growth needed to maintain Australia’s economic expansion1.

Despite its obvious social, environmental and economic advantages, Australia’s rail freight network

is in a sub‐optimal state, due to historical underinvestment in rail infrastructure over the past 30

years.

The Towards 2050 National Rail Freight Strategy addresses key challenges facing Australia in the

coming decades in relation to freight transportation and outlines solutions to meet these challenges.

The Strategy is targeted at both internal and external stakeholders including freight industry players,

Federal and State Governments, and transport policy makers.

The strategy has explicitly taken a long‐term view of a national freight strategy, given the long‐term

nature of infrastructure projects and the Federal Government’s focus on forecasting and planning to

the year 2050.

The Strategy is a collaborative effort between various rail freight operators in Australia. The

Australasian Railway Association has been tasked by the industry with the preparation of the

strategy and has received substantive input from industry partners and Government agencies

including Infrastructure Australia in its preparation.

1.2 Scope & Objective of Strategy

The Strategy provides a principle based approach to freight transport policy. These principles should

be adhered to by all freight transport policy frameworks and decision making processes. These

principles apply equally to all modes of freight transportation and do not seek a special policy status

for rail freight.

Similarly the policy principles in this strategy apply equally to all types of rail freight including bulk

and non‐bulk and do not distinguish between privately or publicly owned rail services or

1 Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010


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infrastructure. The aim of a national freight strategy is to provide an holistic view of solutions to

future freight transportation.


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1.3 Vision for Rail Freight

Vision

“The Australian rail industry aims to be the preferred mode of

medium‐long distance land freight transport within an integrated

multi‐modal system that will provide Australia with the safest,

environmentally friendly, cost effective land freight transportation

solution”


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1.4 Key Recommendations of the Strategy

The National Freight Strategy has put forward the following key recommendations

Integrated Transport & Land Use Planning

Integrated national transport and land use planning is a key requirement to achieving a truly

efficient freight transport market. The need to identify and protect future transport corridors and

multi‐modal freight facilities will ensure that the future freight network capacity is not constrained,

especially by continuing urban expansion, and that transport priorities are identified to aid urban

development and to meet future growth in intra and interstate trade and the export market.

Competitive Neutrality in all Transport Policy Decisions

A properly functioning transport market free from distortions is the key to an efficient freight

transport industry. Government economic and operational regulations must apply equally to all

modes of transport to avoid an artificial bias towards any mode of transport. In this respect the

principals underlying the following regulations should be the same across all modes of transport:

− road pricing and rail track access charges;

− safety requirements; and

− OH&S requirements.

This strategy advocates the promotion of the right mode of transport in the circumstances for the

freight task. Competitive neutrality will ensure this.

Address Market Failure (Internalising Externalities)

In selecting the right mode of freight transport all externalities associated with the movement of

freight should be identified and internalised where possible. While the financial cost effectiveness

of freight transport is an important consideration, any transport policy should also ensure that non‐

financial costs associated with freight transportation are captured in the decision making process

including:


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− environmental costs such as emissions, noise and land use;

− safety costs such as fatalities, injuries and property damage; and

− congestion and its associated costs.

If the transport decision making process cannot internalise these costs, the Federal Government

must ensure that the mode that exhibits the best safety and environmental performance receives

incentives or subsidies to ensure that the community enjoys the benefits of this superior

performance.

Clearly Stated Social, Environmental & Economic Objectives

The Federal Government needs to clearly state social, environmental and economic policy

objectives. These objectives may include:

− Environmental performance (emissions, noise, land use)

− Safety

− Congestion

− Competitive markets (ensure freight users have a viable modal transport options)

− Energy security

− Efficiency

The implementation of these socio‐economic objectives go hand in hand with internalising

negative transport externalities and should guide investment decisions in land freight

infrastructure.

A Single Land Transport Economic Regulatory Framework

A single national economic regulatory framework should be established. This will ensure consistent,

competitively neutral pricing and access arrangements for all modes of land transport across all

jurisdictions.


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A Single Land Transport Policy Framework

The imperative to take account of broader government social, environmental and economic policy

objectives, the need to internalise negative externalities and the recognition that freight transport

extends beyond local council and state borders and is increasingly reliant on multi‐modal supply

chains necessitates an overarching land transport policy framework.

Informed & Cost‐Effective Investment

The correction of market failures combined with the implementation social, environmental,

economic policy objectives, operational efficiency and value for money should guide investment

decisions regardless of the public or private nature of the ownership of the infrastructure. This

requires policies that provide incentives to the private sector for economically viable infrastructure

projects to go ahead.

This will ensure the greatest economic benefit for Australia from freight transport infrastructure expenditure.

Consolidating and Rationalising Regulatory Requirements

The myriad of, often inconsistent and duplicative, regulations governing land transport must be

consolidated and rationalised. Separate state operational and economic regulations create a

significant compliance cost for national freight carriers as does modal based regulations for multi‐

modal freight service providers.


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1.4A Next Steps

A Single Land Transport Economic Regulator

The establishment of a single land transport economic regulator that determines road and rail access

charges across all jurisdictions, based on similar competition and cost recovery principals, would

ensure competitive neutrality amongst all land freight modes and consistency of economic

regulations on a national level.

This regulatory function can be administered by an existing regulator such as the Australian

Competition and Consumer Commission, or the creation of a new regulator.

Introduction of Competitively Neutral Road Charges for Heavy Vehicles

The Government must ensure that heavy vehicles pay the actual costs associated with their use of

road infrastructure, ending the effective cross‐subsidisation of heavy vehicles by smaller vehicles

and increase the Government’s cost recovery capacity for road infrastructure investments.

Mass distance road charging is one tool to ensure competitive neutrality in the land freight market.

Access arrangements similar to those for rail could also be considered.

A Single Land Transport Planner

Integrated national land use and transport planning is essential to the efficient running of the land

freight transport sector. The planner would promote the creation of a seamless national freight

supply chain and ensure infrastructure investment and land availability to achieve this.

A Single Land Transport Policy Agency

A single land transport policy agency would ensure the implementation of a truly national multi‐

modal policy framework for land freight transportation, take into account the Government’s wider

policy objectives, assist with the consolidation of regulatory frameworks and ensure the required

expertise and knowledge to make informed and cost effective transport infrastructure investments.


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Review of Regulatory Framework Governing Freight Transport

A joint state and Federal review, possibly through COAG or a Ministerial Council, is required to

identify opportunities to consolidate, harmonise and rationalise regulations governing the land

freight transport sector.

Government Review of the Cost of Transport Externalities

A review is required to quantify the cost of transport externalities and make recommendations on

ways to internalise these externalities. While much research has been conducted on discrete

externalities, such as environmental degradation, air pollution, congestion and safety, no review has

consolidated the research and put forward policy frameworks or mechanisms to internalise these

externalities.

Government Initiatives to Promote Cost Effective, Safe & Environmentally Friendly Freight

Transportation

The correction of market distortions, externalities and other market failures in the land transport

sector is a long‐term process. In the interim the Federal Government must ensure that cost

effective, safe and environmentally friendly freight transport options are promoted and utilised.

The Government should provide financial incentives for economically viable, yet commercially

unviable, projects undertaken by the private sector. This will ensure maximum economic benefit for

Australia with minimal Government spending.

To ensure environmental and safety performance is improved, Government subsidies and incentives

should be initiated to encourage the greater utilisation of the safest and most environmentally

friendly transport options


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1.5 Executive Summary

The Challenge

Australia faces many challenges in ensuring its international competitiveness, requiring significant

improvements in its productivity performance. The Federal Government has placed transport, and

in particular freight transport, as a central plank to promote the productivity growth needed to

maintain Australia’s economic position2.

Freight transport faces many external challenges including population growth and the resultant

increased demand for transport, increased trade volumes domestically and internationally,

congestion, increasing energy prices and increasing scarcity of urban land.

Obstacles have been created that inhibit the efficient operation of the freight transport market

including market distortions as a result of government pricing, subsidies and investment decisions,

fragmented and incremental transport planning and a regulatory environment that acts as a barrier

to the efficient provision of freight infrastructure and services.

Given the projected doubling of the freight task by 2020 from 2000 levels,3 and the challenges

highlighted above, business as usual practices in freight transport planning cannot continue. The

significant inefficiencies created by the incremental, piece‐meal approach to freight transport

planning is no longer sustainable.

The National Freight Strategy

The implementation of the National Freight Strategy will result in three key objectives:

− competitive neutrality in the freight transport market;

− maximising performance and efficiency in the provision of freight services; and

− value for money for governments and customers.

If these objectives are achieved, it will ensure significant improvements in freight transport’s

productivity and ensure that the vision of an integrated multi‐modal system that will provide

2 Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010 3 Bureau of Infrastructure Transport and Regional Economics (2006) Freight Measurement and Modelling in Australia. Report 112, BITRE, Canberra ACT


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Australia with the safest, environmentally friendly, cost effective freight transportation solution is

met.

The National Freight Strategy advocates a multi‐modal solution to the challenges facing freight

transportation. All modes of freight transport must be utilised in the most efficient manner possible

to ensure the productivity gains required to maintain Australia’s international competitiveness.

The Federal Government must actively remove any hurdles to creating a collaborative fully

integrated supply chain for freight. Each mode of freight transportation has a comparative

advantage in certain circumstances and must be utilised appropriately to achieve maximum

efficiency gains. The strategy advocates the use of the right mode for the circumstance.

The Role of Rail

Rail is central to any multimodal freight transport solution. Rail is the most cost effective mode of

land freight transportation for journeys over 1500km and with increasing liquid fuel prices, will enjoy

absolute price advantage for all non‐urban journeys. Rail freight is up to 9 times safer than road

freight. Rail freight is 10 times more fuel efficient and causes up to 10 times less emissions than

road freight. Given the severe road congestion in an around Australia’s ports and major arterial

roadways, modes, such as rail, must be utilised to alleviate road congestion.

A Call to Action / Recommendations

The ultimate goal of the National Freight Strategy is to create a competitive, efficient and cost‐

effective freight transport system. To achieve this, the freight industry and governments must work

collaboratively and ensure:

− Competitively neutral economic regulations for transport: Economic regulatory frameworks

governing transport should be competitively neutral, allowing for the right mode to be used

in the appropriate circumstances. Of major concern are the inconsistent principles used in

determining road pricing and rail access charges.

− Externalities are internalised/clearly articulated Government objective: The true cost of

externalities (social, environmental, safety etc.) must be incorporated into transport policy

frameworks and investment decisions. This goes hand in hand with the articulation and

incorporation of the Government’s socio‐economic objectives.

− Integrated transport and land use planning: where local, state, national transport and land

use planning are addressed in a holistic manner.


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− A single land transport policy framework: to ensure transport policy is developed and

implemented in an integrated manner and takes into account the Government’s broader

policy objectives.

− Rationalising and consolidating regulatory requirements: The myriad of multi‐jurisdictional

economic, safety, OH&S, access and competition regulations are a significant impediment to

operational efficiency and must be consolidated and rationalised.

− Operational efficiency: The freight industry must work together to ensure operational

efficiency, through greater collaboration such as ensuring interoperability and collaborative

supply chain arrangements.

− Cost Effective Investment: The Strategy recommends that the most economically viable

transport investments be prioritised regardless of public or private ownership, ensuring

value for money.

− Customer offering: The rail freight industry must ensure its product offerings meet the

dynamic needs of its customer based on service quality and price.

Long‐Term Goal: A Truly Integrated, Competitive Multi‐Modal Freight Supply Chain

In the long‐term, the strategy seeks to achieve a competitive, cost effective, integrated multi‐modal

freight supply chain free from market distortions and failures, where Government decisions are

made based on holistic and integrated policy and planning frameworks. This will ensure a freight

transport network capable of meeting the challenges posed by future developments in

demographics and trade.


The Case for aNational Freight Strategy

& the Role of Rail2


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2.1 Why a Freight Strategy?

HIGHLIGHTS

− The freight task is expected to double by 2020, and triple by 2050 from 2006 levels , as a

result of population growth (set to reach 35 million by 2050) and increased intra state,

interstate and international trade

− Increasing urban population and limited urban land availability will create conflicts between

land use planning and transport planning, necessitating an integrated approach to planning.

− Government policies have led to market distortions through inadequate and inconsistently

applied operational and economic regulations. A freight strategy is required to address

these inadequacies.

− Environmental and safety concerns have increased in recent years, yet there has been a

failure to adequately capture the environmental and safety externalities associated with

road transportation. These externalities need to be internalised in the transport policy

framework

− Increasing liquid fuel costs will change the dynamics of the land transport market, making

road transportation significantly more expensive and rail transport more viable. However

under‐investment in rail infrastructure will inhibit any modal switch between road and rail.

Australia faces many challenges in ensuring its future economic growth. The Federal Government

has placed transport, and in particular freight transport, as a central plank to promoting the

productivity growth needed to maintain Australia’s economic expansion4. Freight transport has been

identified as the transport priority for COAG in 20105.

Infrastructure Australia’s proposed National Freight Networks Plan is a step in the right direction.

However, the network and infrastructure focus of the strategy should be expanded to ensure an

holistic approach which addresses key policy issues such as economic and operational regulations,

modally neutral transport policies and integrated transport and land use planning.

4 Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010 5 Prime Minister Kevin Rudd (2010)


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Freight movements overall are projected by the Bureau of Transport and Regional Economics6 to

double between 2000 and 2020 as a result of:

− population growth; and

− Increased international, inter‐state and intra‐state trade.

Infrastructure Partnerships Australia7 has provided research suggesting a tripling of the freight task

by 2050.

However there are many market and structural impediments restricting the supply of freight

transport services including:

− The scarcity of urban land, jeopardising future planning for transport corridors;

− Increasing road congestion restricting capacity;

− Complexity of regulatory regime governing freight transport

− Government investment decisions, taxes and subsidies distorting the land freight market;

and

− Increasing energy prices and the increasingly carbon restricted economy.

Population Growth

Recent projections prepared by Treasury show that Australia’s population will grow by 63%

over the next 40 years to 35 million people by 20498. By 2030 Australia’s population will

have reached 26 million. The increase will be driven by a greater number of women of

child‐bearing age than projected, and increased net migration.

6 Bureau of Infrastructure Transport and Regional Economics (2006) Freight Measurement and Modelling in Australia. Report 112, BITRE, Canberra ACT. 7 Infrastructure Partnerships Australia (2008), 8 The Australian Government Treasury (2010), “Australia to 2050:Future Challenges”, see URL: http://treasury.gov.au/igr/igr2010/Overview/pdf/IGR_2010_Overview.pdf


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Growth and concentration of population in Australia’s major cities are set to increase. While in

2004, 62% of the population lived in capital cities, it is projected that by 2051 this number will rise to

more than 66%9. Over 50% of Australia’s population will be living in eastern State capitals10.

Australia’s increasing population, particularly on the east coast, will drastically increase the demand

for both freight and passenger transport. Given the current state of transport corridors, there is

likely to be major policy conflicts between the provision of freight and passenger transportation,

congestion problems and a lack of available land for the expansion of transport networks.

Increased Trade

Treasury projections indicate that Australia’s GDP will continue to grow by 2.4% per annum in real

terms over the next forty years11, fuelled by international trade. This translates to a 258% increase

in Australia’s GDP between 2010 and 2050.

Continuing improvements in global trade linkages and sustained growth by Australia’s major trading

partners, such as China, will ensure that international trade will continue to be a prominent factor in

Australia’s future economic growth.

This will inevitably increase the demand for freight transport. Demand for land freight

transportation will increase as a result of inter‐state and intra‐state trade and the need to distribute

international goods to and from port facilities.

Land Use and Transport Corridors

While the demand for passenger and freight transportation is growing, the supply of such

transportation is becoming more restricted. To accommodate Australia’s accelerating population

growth, it has become necessary to increase urban density and utilise surplus lands in and around

our major cities.

9 Australian Bureau of Statistics (2005), Population Projections Australia, Issue 3222.0, 29 November 10 Australian Bureau of Statistics (2005) 11 The Australian Federal Treasury (2007), Intergenerational Report 2007, 2 April


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However, the growth in demand for residential land has put in jeopardy the ability to expand

transport infrastructure in urban areas. Sydney, for example, suffers from significant bottle‐necks in

both its passenger and freight rail networks, yet faces land restrictions when trying to address these

bottle‐necks through network expansion. As a result, rail freight is increasingly coming into conflict

with passenger rail services12.

Road Congestion The Bureau of Transport and Regional Economics has estimated that:

− road congestion costs Australia up to $15 billion per annum, or about one per cent of GDP;

and

− road congestion cost will double by 2020.13

Growth in Australian Road Task 1975‐2007 (Compounded Annual Growth Rate)

Source: Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook 2009, Department of

Infrastructure, Transport, Regional Development and Local Government, Canberra; Australian Bureau of Statistics (2008), Australian

System of National Accounts, Cat. no. 5204.0, ABS, Canberra

As the above graph indicates the growth in road transportation, particularly road freight, in the last

30 years has grown much faster than GDP. This growth has created a serious congestion problem in

Australia’s road network.

12Australasian Railway Association (2010), Rail Freight Industry Workshop on Infrastructure Australia’s National Freight Networks Strategy, Melbourne 19 January 13 Bureau of Transport and Regional Economics (2007), Estimating urban traffic and congestion cost trends if or Australian cities, Working Paper no. 79, Canberra.

Road Freight Passenger GDP

5.2%

3.2%

2.4%


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A freight strategy is required to address such issues and to ensure that all modes, in particular rail,

play their part in alleviating the impending road congestion crisis.

Rail is a high density mode of transportation that can create significant new capacity for both

passenger and freight journeys with limited land availability. One freight train has the potential to

remove the equivalent of up to 150 trucks off the road14

Lack of Integrated Planning & Microeconomic Reform

Given Australia’s growing and aging population and the need for high productivity gains to ensure

international competitiveness, realising the efficiency gains from integrated planning and

microeconomic reform is essential.

Integrated Policy & Planning Frameworks

The need for national transport planning is paramount to ensure the provision of the most efficient

freight network. Freight networks go beyond local council and state boundaries and require a

national approach. The current state based approach to transport planning has created significant

inefficiencies. The Victorian15 and NSW16 governments have both outlined strategies for their freight

networks, yet these strategies have major compatibility issues. For example the NSW and Victorian

rail freight networks use different track gauges, and have differing track quality, requiring the use of

multiple locomotives for journeys between NSW and Victoria. Individual State freight plans are not

sufficient. A national plan is needed if the greatest productivity gains are to be achieved.

Microeconomic Reform

Economic and operational regulations governing freight transport has been piece‐meal and has

inhibited operational efficiency in the freight transport market. Safety, OH&S, competition, access

and pricing regimes differ across jurisdictions and are unnecessarily burdensome. For example track

access pricing is determined by individual state regulatory bodies, who often determine different

pricing structures using different recovery models, despite the fact that most operators run services

across interstate borders, subjecting them to different regimes.

14 American Association of Rail (2010), see URL: http://freightrailworks.org/open-highways-one-train-at-a-time.php 15 Victorian Department of Transport (2008), Freight Futures: Victorian Freight Network Strategy, see URL: http://www.doi.vic.gov.au/doi/doielect.nsf/2a6bd98dee287482ca256915001cff0c/612a49cebbee70a1ca257521002095fa/$FILE/freightfutures.pdf 16 Freight & Logistics Council of NSW (2009), Actions not Words: A Freight Agenda for NSW, November 2009


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Increasing Energy Prices & the Carbon Restricted Economy

Increasing liquid fuel prices and the impending carbon restricted economy will necessitate a

complete overview of our use and perception of transport.

Energy Prices . Increasing energy prices over the coming decade will necessitate the shift towards fuel efficient

transportation. The recent wild fluctuations in world oil prices has thrown doubt on any long‐term

projections for oil prices, however the combination of declining reserves and increasing demand

would indicate a continued increase in oil and other energy prices. As the graph below

demonstrates, the historical trend in oil prices is upwards.

Price of Oil (per barrel) in USD

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

1989 USD (Real)

Nominal USD

Source: International Energy Agency


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Carbon Restricted Economy

The Australian Government has set a target of a 60% reduction in GHG emissions per annum in 2050

from 2000 levels17.

The Federal Department of Climate Change and Energy Efficiency18 estimated that the

transportation industry accounted for 13.2% of Australia’s domestic emissions in 2007. Emissions

from cars account for approximately 54% of Australia’s total domestic transport emissions, and are

projected to increase by 40% between 1990 and 202019. Trucks and light commercial vehicles

account for 31% of Australia’s transport emissions, and emissions from these modes are projected to

increase by 112% between 1990 and 2020.

Passenger and freight rail services are only responsible for 2.4% of total transport emissions20. This

is despite the fact that passenger rail accounts for 5‐10%21 of passenger journeys and freight rail

accounts for approximately 50% of the land freight task22.

GHG emissions performance and future energy input costs need to be incorporated into

infrastructure investment and policy decisions.

17 Department of Climate Change & Energy Efficiency (2008), Carbon Pollution Reduction Scheme: Australia’s Low Pollution Future, December 18 18 Department of Climate Change (2007), National greenhouse gas inventory, 19 Garnaut Climate Change Review (2007), Transport, Planning and the Built Environment, Issues Paper - Forum 5 20 Department of Climate Change (2007), 21 BITRE – Australian Transport Statistics Yearbook 2007 22 Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook, Canberra


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2.2 A MultiModal Solution

Given the projections of the doubling of the freight task by 2020 from 2006 levels, increasingly

congested road, capacity constraints for rail and ports, and increasing scarcity of urban land, all

modes of freight transport must be used in the most efficient manner. This will ensure the

productivity gains required to maintain Australia’s international competitiveness.

The Federal Government must actively ensure the removal of any hurdles in creating a collaborative

fully integrated supply chain for freight. Each mode of freight transportation has a comparative

advantage in certain circumstances (see table below as an example) and must be utilised

appropriately to achieve maximum efficiency gains.

Comparisons of Benefits of Various Modes of Freight

Attribute Ocean Tanker Rail Truck

Scale 1 ML+ 100 kL 5‐60 kL

Unit costs Very low High Very high

Capital costs Very High Low Very low

Access Very limited Limited High

Responsiveness 1‐4 weeks 2‐4 days 4‐12 hours

Flexibility Limited Good High

Usage Long haul Medium haul Short haul

Source: adapted from Ken Dymock (2007) General Manager, Distribution, Petro Canada,

Chartered Institute of Logistics and Transport, Transportation Situation & Outlook Conference.

The relevance of the above table is to show that each transport mode has a role to play in the

movement of freight. It highlights the comparative advantage of each mode, including cost of

infrastructure, reliability, speed and flexibility.

At the heart of a multi‐modal approach to freight supply chains is the ability to use the right mode

of transport for the job. Nearly all sea freight journeys will require a transfer to other modes of

transport including rail and road. Similarly a large portion of rail freight journeys will require a

transfer to road transportation. In determining the right mode the Federal Government must ensure

that the freight market is set up in such a way to incorporate safety, environmental and economic

considerations.


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The industry must work closely with Government to ensure investment in infrastructure and reforms

to transport policies lead to the greatest efficiency gains.

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When the cost of multi‐modal transportation is factored in, rail becomes the cost effective mode for

freight journeys above 1500 km. When excluding the high cost of multi‐modal transport, rail

becomes the cost effective mode for freight journeys over 500 km. With adequate and integrated

multi‐modal facilities and changes to competition regulations, rail will enjoy a price advantage over

road transport for all freight journeys over 500km.

The above analysis assumes oil prices of between $US 30‐50 per barrel. At oil prices above $US 100

per barrel, rail enjoys an absolute price advantage over road in most inter‐capital corridors. Given

the general upward trend in oil prices, the Federal Government should ensure that rail infrastructure

is adequate to allow the Australian economy to take advantage of rail’s superior cost effectiveness.

Superior Safety Record

FACTS

− Around 1500 people die on the roads every year in Australia

− Road accidents accounts for 94% of all fatal accidents relating to transport,

− Rail is responsible for only 2‐3% of all land transport accidents

− Heavy vehicle accidents account for around 170 fatalities p.a.

− Rail freight accounts for around 30 fatalities p.a.

− Rail Transport (including freight) is up to 7‐9 times safer than road transportation

− The cost to the Australian economy of road accidents is up to $31 billion p.a.

− The cost to the Australian economy of heavy vehicle accidents is up to $3 billion p.a.

− Over 80% of heavy vehicle accidents occur on highways

− Switching long distance land freight transportation to rail will save up to 110 lives and $2.1 billion p.a.

Over 1500 people die on our roads every year, many more are seriously injured or permanently

disabled. These road accidents cost the Australian economy up to $31 billion per annum. Not all

accidents or fatalities are preventable, however where they are, governments must act to prevent

such deaths.


28


A modal shift towards rail transport is the solution to this needless waste of lives and money. Rail

transport is 7‐9 times safer than road transport in relation to both passenger and freight.

However historical underinvestment in rail infrastructure and favourable road pricing and road

subsidies has encouraged Australia’s over‐reliance on the use of road transportation. This over‐

reliance on roads has cost Australia 14 thousand lives and close to 500 billion dollars in the last

decade.

Fatalities

Rail transport is the safest form of land transportation in Australia in terms of the incidence of

fatalities. In 2008, 1442 fatalities occurred on our road networks while only 33 fatalities occurred on

our rail network (excluding suicides). Rail accounts for only 2‐3% of land transportation fatalities.

Source: Extracted from ATSB Transport Safety Report, Rail Statistics (2009) &

the Australian Roads Death Database

Similarly, freight rail is by far the safest form of land freight transportation, maintaining a superior safety record as compared to road based freight transportation.

Year Rail Fatalities as % of Total Land Transport Fatalities

2001 3.05%

2002 3.27%

2003 2.59%

2004 2.65%

2005 2.77%

2006 2.43%

2007 2.63%

2008 2.29%

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2001 2002 2003 2004 2005 2006 2007 2008

Road

Rail

Total Land Transport Related Fatalities


29


0

50

100

150

200

250

2001 2002 2003 2004 2005 2006 2007

Rail (Estimate)

Road

Source: Extracted from ATSB Transport Safety Report, Rail Statistics (2009) &

the Australian Roads Death Database23

There is little recent Australian data on the incidence of transport fatalities and cross‐modal

comparisons (especially for freight transportation). The most often cited independent research on

the cross‐modal incidence of transport fatalities was conducted in 198824. Figures from this research

have been cited by the Australian Transport Safety Bureau (ATSB) as recently as 200525.

Cross Modal Fatality Rate Comparisons 1985/86

Mode Fatalities per 100 million passenger kilometres

Passenger Rail 0.24

Road 1.54

Pedestrians 16.12

Cyclists 4.24

Source: Adena & Montesin (1988)

The above table suggests that passenger rail is seven times safer per passenger km as compared to

23 Rail freight fatalities were estimated by using total rail fatalities per annum, subtracting passenger related deaths from the total and apportioning 60-70% of level crossings fatalities to rail freight. 24 Adena & Montesin (1988), Day to Day Travel in Australia 1985-86; CR 69; Instat and FORS 25 ATSB (2005), Discussion Paper: Cross Modal Safety Comparisons, at URL: http://www.atsb.gov.au/publications/2005/cross_modal_safety_comparisons.aspx

Rail Freight Fatalities as a % of Total Land Freight Fatalities

2001 14.89%

2002 14.00%

2003 12.28%

2004 14.00%

2005 14.52%

2006 11.47%

2007 11.86%

2008 11.07%

Total Land Freight Related Fatalities


30


road travel. This does not factor in the incidence of pedestrian and cyclist fatalities that are caused

as a result of accidents with motor vehicles.

Independent research for the incidence of fatalities for freight transportation is scarce. The

Australasian Railway Association (ARA) has estimated the incidence of rail freight fatalities per billion

tonne kilometres to be approximately be approximately 0.126 (excluding suicide) while heavy

vehicles had a rate of 0.94.

Freight Fatalities per Billion Tonne Kilometres

Source Road Rail

ARA 2006 Estimate .94 .1

Freight Corp 1998 Estimate 3.8 .55

The Freight Corp estimates show the incidence of fatalities in 1998 for both rail and road to be much higher than in 2006. This conclusion

would seem to be consistent with the improved safety of freight transportation and the significant increase in freight tonne kilometres.

The above table indicates that rail freight is 7‐9 times safer than road freight. This result is consistent

with figures for passenger transportation.

Reducing the Economic Cost of Freight Transport Accidents & Saving Lives

The cost of road accidents in 200627 was calculated by the Bureau of Infrastructure, Transport and

Regional Economics (BITRE) to be nearly $20.1 billion per annum in 2010 dollars (assuming 3% rate

of inflation).

Based on this research, it is estimated that the cost attributed by BITRE to heavy vehicle accidents to

be approximately $2.1 billion per annum28

However the above estimates have been criticised for using a very low statistical value of a human

life (VSL) in calculating the cost of road accidents. International comparisons would suggest a VSL of

around $6.8 million29, while the BTE research used a VSL of around $3 million in calculating their

estimates for the cost of road crashes (in 2010 dollars).

26 Based on dividing number of fatalities as reported by ATSB and dividing it by the total tonne-kms 27 LECG Consulting (2010), The cost of road crashes, published by the Australasian Railway Association 28 Heavy Vehicles account for 10% of fatalities and we have assumed 10% of injuries. Does not take into account the greater property damage heavy vehicle accidents cause and thus would suggest that our estimate is conservative. 29 LECG Consulting (2010), The cost of road crashes, published by the Australasian Railway Association


31


Using a VSL of around $6.8 million, and using the methodology of BITRE, would increase the cost of

road accidents to around $31 billion and the cost of heavy vehicle accidents to approximately $3

billion per annum (in 2010 dollars).

Research conducted by LECG Consulting puts the figure of road accidents closer to $35 billion per

annum

Safety costs resulting from heavy vehicles could be significantly reduced by regulations promoting a

modal shift towards rail. Around 80% of all heavy vehicle fatalities occur on highways30. If this

freight was moved onto rail, 110 lives and $1.9 billion would be saved. Given the expectation that

land freight volumes will double by 2020 from 2006 levels, our estimated savings should increase

correspondingly.

Environmentally Friendly & Fuel Efficient

Rail freight’s environmental performance speaks for itself. Rail freight uses 10 times less energy

compared to road freight, for every tonne of freight carried one kilometre. Given the Federal

Government’s climate change commitments, a modal shift towards rail freight would have

significant positive impacts on Australia’s emissions performance.

Given the possible introduction of an emissions trading scheme and other policy mechanisms to

reduce GHG emissions and increasing energy prices, a shift to rail freight will provide significant cost

savings to the Australian economy. 30 Hassall K. (2000), Urban Truck Accidents in Australia, Fatalities and Serious Injuries: 1990 to 1999. Department of Civil and Environmental Engineering, Melbourne University, 23 October

0

5

10

15

20

25

Light Commercial Vehicles

Rigid Truck Articulated Heavy Vehicles

Heavy Rail Ancillary Rail

0.09 0.321.013.18

22.21

Source: ARA Rail Industry Report 2008


32


Rail freight is the most efficient land transport mode, from an urban planning perspective, because it

avoids road congestion, reduces exhaust emissions and provides health benefits for the urban

community31 through improved air quality. A modal shift towards rail has the potential to remove

significant numbers of heavy vehicles off the road and, with adequate intermodal facilities, reduce

the number of light commercial vehicles.

The United Nations Environment Programme has supported the International Union of Railways in

highlighting the significant emissions savings that could be achieved by a modal shift away from road

transport to rail freight32.

Solution to Congestion

Road congestion costs Australia up to $15 billion per annum33. With an increasing population,

increasing incidence of passenger and freight transport, congestion costs will rise significantly

without appropriate transport policies.

Investment in dedicated rail freight infrastructure will have massive benefits in relieving road

congestion. It has been often quoted that one freight train has the capacity to remove up to 150

trucks from the road34. Investment in dedicated freight infrastructure will untangle rail freight from

urban and regional passenger rail infrastructure, increasing future capacity to provide passenger

transport. This will translate into a significant reduction in private car journeys.

31 UIC website, see URL http://www.railfreightportal.com/spip.php?article11 32 UIC (2009), Keeping Climate Change Solutions on Track: The Role of Rail, see URL http://www.railfreightportal.com 33 BITRE (2007), Estimating urban traffic and congestion cost trends for Australian cities, Working Paper 71 34 American Association of Rail 2010, see URL: http://freightrailworks.org/open-highways-one-train-at-a-time.php


33


2.4 Current State of Rail

HIGHLIGHTS

− Under‐investment in rail infrastructure in the past 30 years has left the rail network in a

dilapidated state, inhibiting modal shift towards rail despite its cost advantage and superior

safety and environmental performance

− Poor planning and government policies have distorted the freight transport market in favour

of road freight and severely restricted rail freight’s competitiveness (reliability, flexibility,

cost‐effectiveness).

− The impact of such policies has been to create an unhealthy reliance on road transportation

and inhibit the operation of efficient, cost effective land transport market.

The rail industry is still grappling with the same issues that it faced some 20‐30 years ago. There have

been incremental increases in capacity through programs implementing clearways, duplication and

reducing track curvature. However the basic structural issues facing the industry have not been

addressed:

− Different track classifications, quality and gauges inhibiting the ability to run freight services

across Australia’s network using a single locomotive.

− Track quality curvature and kinematic enveloping (tunnel, bridge widths etc.) reducing

maximum speeds, loadings and double stacking and ability to use cheaper, environmentally

friendly cutting edge locomotive technology from overseas.

− Fragmented supply chains inhibiting operational efficiency in the provision of freight.

− Lack of adequate multi‐modal facilities near industrial centres and adequate connection to

rail networks and ports.

These structural impediments have arisen due to a historical underinvestment in rail infrastructure,

the de‐prioritisation of rail as a transport policy solution and market failures and distortion in the

land freight market.


34


The recent announcement by the Federal Government of increased rail infrastructure expenditure

along with the prioritisation of freight as the number one transport agenda for COAG is a welcome

first step in addressing these issues. The Federal Government has earmarked a further $7.9 billion

over six years towards rail track infrastructure, increasing annual expenditure by $1.3 billion.

Infrastructure

Historically there has been an underinvestment in rail infrastructure, with rail infrastructure only

receiving between 20‐30% of the investment for the combined investment in road and rail

infrastructure. This has left rail networks in a sub‐optimal state and has significantly impaired the

ability of rail freight service providers to compete with road freight.

The total Government expenditure for road in 2007‐08 was approximately $13.1 billion consisting of:

− $2.7 billion from the Federal Government

− $7.3 billion by state and territories (includes grants provided by the Federal Government)

− $2.1 billion by local governments

Total expenditure on roads, including private expenditure reached approximately $14 billion. Under

the Nation Building Program, Federal funding for roads will increase to an average of $4.6 billion per

year for the period from 2008–09 to 2013–14, an increase of $1.9 billion.

Total expenditure for rail track infrastructure (private and public expenditure) in 2007/8 was

approximately $2.1 billion dollars. This figure is set to increase by $1.3 billion as a result of recent

Federal Government announcements. As the diagram on the following page demonstrates, rail

infrastructure expenditure has not exceeded 25% of total land transport infrastructure for the past

30 years.


35


road

rail

Source: ARA Industry Report 2008; Media Release Minister Albanese (2009), Budget Provides Historic Investment in Rail, 12 May;

Productivity Commission (1991), Rail Industry, Report no 13

DePrioritisation and UnderUtilisation of Freight Rail

The de‐prioritisation and under‐utilisation of freight rail has been masked by the success of the

mining boom. Rail enjoys a majority share of bulk freight transportation, largely driven by private

investment in infrastructure to meet the needs of the burgeoning mining industry. The rail industry

would welcome greater government participation in the provision of rail infrastructure for this vital

export driven industry, especially in light of increased incidence of bottlenecks in the rail freight

network. Indeed Infrastructure Australia’s focus on infrastructure of ‘national significance’ should by

definition include bulk rail freight lines.

The mining boom, its resultant investment in rail infrastructure and high volumes have masked the

under‐investment and under‐utilisation of other bulk rail freight sectors such as grain lines. Grain

lines provide vital capacity in handling the grain freight task. However, given the seasonal nature of

the grains harvest, capital equipment is left unused for large periods of time increasing the costs to

service operators. Due to the under‐investment in grain lines, the quality of tracks and the

locomotives that can run on such track are incompatible with the rest of the rail freight network.

This stops the transfer of grain locomotives to other freight tasks and creates significant

inefficiencies.

82%

18%

87%

13%

77%

23%

$15.9 B

$3.4 B

$2.1 B

$14 B

2007/08 2007/082009/10 (estimate)

2009/10 (estimate)

1989/1990

% of Total Road – Rail Infrastructure Expenditure

Infrastructure Expenditure Road ‐ Rail


36


Similarly, the low modal share of rail freight for non‐bulk items is of particular concern. For non‐bulk

items, ail only accounts for 21%35 of the total land freight task. Road freight transportation will

always be a necessity, especially for short‐to‐medium distance multi‐modal journeys, however

Australia’s over reliance on road transportation for medium‐to‐long distance journeys is an anomaly

internationally.

Similarly rail freight in Australia is over‐looked by user of freight and governments as a solution to

issues arising in niche markets such as the transportation of hazardous material. Despite rail’s

superior safety record (see section on safety), rail freight’s modal share for the transportation of

potentially hazardous material, such as petroleum related commodities, is small by international

standards. Around 5% of petroleum products are transported by rail36, while for example in

Germany rail transports around 25%37.

Market Failures in Land Freight Market

Road Pricing

The disparity between the principles underpinning road pricing and rail access charges is a significant

impediment in creating competitive neutrality in the land transport market. Rail access charges

generally work on the principle of full cost recovery while road pricing, via the PAYGO system, does

not recover full costs from heavy vehicles. This leads to a disparity in costs where rail service

providers must spend up to 30‐40% of their operating costs on rail access charges while heavy

vehicle operators only spend 5% of total costs on road charges38.

While the National Transport Commission (NTC) insists that road pricing regimes extract all costs

from users of heavy vehicles, the PAYGO system does not achieve full cost recovery due to the

following reasons:39

• Non‐allocable and non‐attributable allocable infrastructure expenditure cannot be

accurately quantified and attributed to any specific class of vehicles (this accounts for 67% of

total roads expenditure).

35 Source: Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook 2009, Canberra & ARA (2009), Australian Rail Industry Report 2008. 36 ABS (2001), Freight Movements Survey, see url: www.abs.gov.au 37 European Commission - EuroStat 38 Port Jackson Partners (2005), The Future of Freight, published by the Australasian Railway Association 39 Derived from NTC (2005), Third Heavy Vehicle Road Pricing Determination, see url: www.ntc.gov.au


37


• The attribution of cost using historical data under costs the future costs of road

infrastructure.

• Fuel charges are used as an inaccurate approximation for distance charging (a light vehicle in

urban congested areas will use more fuel per km than a heavy vehicle on open highways)40.

• The PAYGO system allocates cost based on use and ignores costs of construction directly

related to heavy vehicles (roads that cater for heavy vehicles must have thicker slabs,

significantly increasing constructions costs.)

• Externalities caused by different classes of vehicles (environmental, safety, congestion

amenity etc.) not factored into pricing regime.

NTC’s third determination on heavy vehicle road pricing41 explicitly acknowledges its inability to

factor in the cost of externalities into the road pricing regime. NTC recommended that B‐double

prime movers be explicitly subsidised to ensure they pay no more than road train prime movers. The

grounds for the subsidy is to ensure the heavy vehicle pricing system does not encourage the use of

less safe, less efficient vehicles that might cause more environmental damage.

It is strange that such subsidisation is not extended to rail freight, which is the safest and most

environmentally friendly mode of land freight transportation. The subsidisation of B‐double prime

movers may correct market distortions within the road transport market, but creates further

distortions in the road‐rail transport market.

Emissions Trading Scheme (ETS)

With respect to the ETS and fuel excise reductions for liquid fuels, the rail industry believes the

current proposal, to provide price offsets for liquid fuels but not electrically generated energy, will

distort the land transport market in favour of road transportation. This distortion will lead to poor

emissions performance, by favouring road transportation which is up to 9 times less fuel efficient

than rail transportation. In light of the shift towards renewable sources of electrical energy, this

penalty on electrical powered freight movements will further deteriorate Australia’s emissions

performance.

40 Synergies Economic Solutions (2006), Heavy Vehicle Road Pricing, see URL: www.synergies.com.au 41 NTC (2005), Third Heavy Vehicle Road Pricing Determination, see url: www.ntc.gov.au


38


Source of Infrastructure Expenditure

The public nature of road infrastructure and the significantly more private nature of rail

infrastructure investment further distort the land freight market. While government investment

decisions are made based on economic evaluations, private sector investment decisions are made

based on financial evaluations which have higher risk premium thresholds, higher funding costs,

shorter time‐frame for full recovery of investment and tend not to factor in all social benefits to the

community.

These factors create a situation where investment in economically viable rail infrastructure is not

made because this investment would not further the profit maximising goals of private firms. This

problem does not exist in road infrastructure investment. This further distorts the land transport

market in favour of road transportation.

International Shipping Permits

Permits42 granted to international shipping to carry coastal trade between Australian ports counters

the outcome of competitive neutrality, where foreign own ships are not required to meet Australian

industrial and OH&S regulations.

Impacts

Reliability and Service Performance

Reliability and transit times are a major determinant of market share in the land freight industry.

An Ernst & Young study (2006) found that time sensitivity and reliability were of greater importance

to freight forwarders than price or cost effectiveness.

Freight Type Syd‐Melb Syd‐Bne Melb‐Bne

Express 5% 5% 5%

Availability & Reliability 70% 70% 60%

Price Sensitive 25% 25% 35%

Source: Ernst & Young 2006

Due to the de‐prioritisation of rail freight and inadequate track and facilities infrastructure, rail’s

transit times and reliability has suffered. As the table below demonstrates rail transit times are much

42 Permits granted under Navigation Act 1912 (Cth)

39

higher t

anywhe

only rea

around 7

Mod

Roa

Rail

The inab

the Nort

Cost

Rail has

under‐in

stymied

43 BTRE (244 BITRE (Local Gov

9

han road fre

re from 2‐10

ches averag

70km/h 43.

de Syd

d 11

17

bility to prov

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the potentia

nvestment in

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2007), Australia(2008), Road anvernment

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verage Freight

an Rail Freight Pnd Rail Freight:

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nd reliable se

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.

t Costs for Au

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Source: BITRE (2

ervices has e

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Source: BITRE (2

dicators 2005-6,Compliments :D

0

tance (km)

Aust

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oor‐to‐Door (H

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‐45

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, Information PaDepartment of I

40

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PUD)


40


The above diagram demonstrates the price disadvantage rail is placed under due to poor multi‐

modal infrastructure within Australia. When excluding the high cost of multi‐modal transport, rail

becomes cost effective for freight journeys over 500 km. However, when the cost of multi‐modal

transportation is factored in, rail only becomes cost effective for freight journeys above 1500 km.

This severely restricts rail’s ability to compete on the North‐South corridor.

Access pricing also significantly limits the cost effectiveness and competitiveness of rail freight. Due

to the subsidised nature of road pricing, only 5% of total road freight costs stem from road access

charging while track charges accounts for between 30‐40% of rail freight costs45

Customers Perception

Customer perceptions of rail freight have deteriorated as a result of the deficiencies in the rail

freight service offering. A recent survey of freight forwarders by ACIL Tasman46 has indicated that

customers who have access to rail freight are reluctant to use such services due to a perception of:

− being unreliable (possibly due to a lack of dedicated freight lines, and de‐prioritisation of

freight services);

− being excessively bureaucratic with processes and paperwork (possibly due to the volume of

regulatory burdens imposed on rail)

− lack of coverage (due to poor infrastructure and lack of inter‐modal facilities); and

− this lack of coverage leading to higher costs and time wasted on administration for the

freight forwarder.

45 Port Jackson Partners (2005), The Future of Freight, published by the Australasian Railway Association 46 ACIL Tasman (2010), “Study into the Perceptions of Rail”, published by the Australasian Railway Association


A Call to Action3


42


3.1 Freight Transport Policy Action Plan

HIGHLIGHTS

− Address market distortions (ensuring economically neutral and consistent economic

regulations for all modes across all jurisdictions through a single economic regulatory

framework)

− Integrated planning (nationally integrated land and transport planning)

− A single national land transport policy framework

− Rationalise and consolidate regulatory requirements (uniform and consistent safety, OH&S

competition and environmental regulations for all modes of transport)

− Encourage informed and costs effective investment (Redress the current and historical

underinvestment in rail infrastructure)

− Internalise externalities (safety, environmental and congestions related costs)

− Clearly state and incorporate environmental, social and economic govt objectives into the

transport policy framework

Single Australian Land Transport Economic Regulator Creating an economically competitive level playing field for road and rail freight providers is of

utmost importance for the freight industry, freight forwarders, customers and in ensuring Australia’s

productive capacity to maintain international competitiveness. Competitive multi‐modal freight

transportation will ensure highly efficient, safe, innovative, environmentally friendly and cost

effective freight solutions for Australia.

Road‐Rail Pricing

The current disparity between road pricing and rail access charges has distorted the land transport

market in favour of road transportation, depriving Australia of the economic, safety and

environmental benefits of rail transportation. The principal of full cost recovery must underpin both

road pricing and rail access charges


43


The establishment of a single Australian land transport economic regulator that determines road and

rail access charges across all jurisdictions would ensure uniform cost recovery principals and

subsequently competitive neutrality amongst all land freight modes and consistency of economic

regulations on a national level.

This regulatory function can be administered by an existing regulator such as the Australian

Competition and Consumer Commission, or the creation of a new regulator.

Mass distance road charging is one tool to ensure competitive neutrality in the land freight market,

where pricing for heavy vehicles and rail would be governed by principals of full cost recovery.

Access arrangements similar to those for rail could also be considered.

Integrated Land & Transport Planner & a Single Australian Land Transport

Policy Maker

The rail industry believes current decision‐making by governments is incremental, short‐term and

subsequently leads to sub‐optimal outcomes. A longer‐term infrastructure planning focus will

ensure an holistic approach to developing a viable and efficient national rail network.

Australia has no coordinated national strategy for investment in rail infrastructure, investment in

rolling stock, and the location, capacity and access to rail terminals. A nationally coordinated freight

strategy aligned to land‐use planning and coordinated across all levels of government will provide

greater certainty for public and private infrastructure expenditure.

Infrastructure Australia’s proposed National Freight Networks Plan, Ports Strategy and COAG’s

transport priority of freight is a step in the right direction. The scope of these strategies should be

expanded to include an holistic approach to transport planning, addressing the key policy issues such

as economic and operational regulations, modally neutral transport policies and integrated transport

and land use planning. The best long‐term solution is the establishment of a single Australian

integrated land transport planner and a single Australian Land Transport Policy maker.


44


Some criteria to guide integrated planning and national transport policy development include:

− nationally consistent freight infrastructure investment regime (Federal, state, local

governments and private sector);

− linking future freight infrastructure investment to demand forecasting and future population

growth and movements;

− ensuring adequate facilities to maximise utilisation of existing and future rail networks;

− co‐location of rail infrastructure and rail facilities near commercial centre;

− modal neutrality, where government freight policy decisions encourage modal competition;

− increased Government incentives to ensure private investment in rail is optimised and thus

enjoy the safety and environmental of rail;

− ensuring viable modal competition on high volume corridors;

− internalising externalities (safety, environment, land use, congestion) when making freight

infrastructure investment decisions; and

− ensuring maximum interoperability of the infrastructure with existing freight network,

rolling stock and facilities.

Informed & CostEffective Investment

The rail industry understands the need for cost‐effective investment and recognises the need to

invest in infrastructure that will maximise social, economic and financial outcomes for Australia.

As a part of a national transport policy, the rail industry would seek investment in rail infrastructure

where expected current/future demand will be high, supply chains are facing capacity or

bottlenecks, where the infrastructure promotes interoperability between rail networks, control

systems and rolling stock, and where the investment decision has been based on the principles

enunciated in this strategy.


45


Appendix 1 highlights specific infrastructure investments put forward by the rail industry that would

meet the above criteria. While members have differing views on which projects should be

prioritised the following projects had significant support:

− Gauge standardisation across state borders;

− Progressive improvement of track quality across the network (concrete slabs, improved track

curvature, gauge standardisation etc) that will allow longer train configurations and the use

of leading edge locomotive technologies from overseas;

− Further investment in multi‐modal facilities near commercial centres such as ports;

− Kinematic enveloping improvements on high demand infrastructure that will allow the

double stacking of trains; and

− Improved North‐South freight train infrastructure (whether it be through freight corridors

north and south of Sydney or through the provision of an inland corridor).

Incentives for Investment

Unlike road infrastructure, the private sector contributes significantly to investment in rail

infrastructure. Because of the profit maximising imperatives of the private sector, many

economically viable rail, but not commercially viable, projects are over‐looked. This is a poor policy

outcome for Australia, given rail’s superior environmental and safety performance. Through

incentives and subsidies, the Government can ensure such projects are initiated.

Rationalise and Consolidate Regulatory Requirements

The myriad of, often inconsistent and duplicative regulations governing transportation must be

consolidated and simplified.

Separate state operational and economic regulations create a significant compliance cost for

national freight carriers as does modal based regulations for multi‐modal freight service providers.

Any unnecessary additional costs reduces Australia’s ability to compete internationally and increases

costs to domestic consumers.


46


Internalising Externalities

The superior safety and environmental performance of rail freight must be recognised and

incorporated into the transport infrastructure investment decision process and into transport policy

development. In the absence of a mechanism to fully internalise such negative externalities, the

Federal Government should provide both supply and demand side incentives to encourage the use

of rail freight. The UK Government actively encourages the greater utilisation of rail via the

following schemes47:

- Freight Facilities Grants (FFG) ‐ The rail FFG scheme is a capital grant scheme that aims to

encourage the transfer of freight from roads to the more sustainable rail options by helping

rail service providers to invest in the facilities needed to compete in financial terms with

road.

- Rail Environmental Benefit Procurement Scheme (REPS) (Scotland48) ‐ The scheme assists

freight customers with the operating costs associated with running rail freight transport

instead of road.

- Track Access Grant (TAG) – Grants are paid to rail service operators to cover some of the

costs of rail track access.

Clearly Stated & Quantified Social, Environmental & Economic Outcomes

Governments need to clearly articulate and support transport policy objectives. The market alone

may not be able to deliver these objectives. These objectives may include:

− Environmental performance (emissions, noise, land use)

− Safety

− Congestion

− Competitive markets (ensure freight users have a viable modal choice on high volume

corridors)

− Efficiency

− Flexibility

− Energy Security

47 Cavill & Humphreys (2001), Rail Freight Grants: Promoting Rail freight Growth in Britain, Association of European Transport 48 See the Scottish Government website at URL: http://www.scotland.gov.uk/Topics/Transport/FT/freightgrants1


47


The terms of reference of the National Transport Commission’s (NTC) review of ‘Freight Rail Subsidy

Framework’49 also acknowledges the need for clearly stated Government objectives to support

Government decisions on investment and expenditure.

There is broad industry support for a national policy framework, with economic, social and

environmental government objectives.

Flexibility should be added as an objective to ensure infrastructure investment is able to respond to

changing market demands.

The Government should also ensure that their socio‐economic objectives are clearly and accurately

incorporated in Government’s infrastructure investment decision making.

49 National Transport Commission (2009), Freight Rail Subsidy Framework, November


48


3.2 Industry Action

HIGHLIGHTS

The rail industry has invested two dollars for every one dollar spent by government to ensure

operational efficiency (for example the Melbourne‐Perth journey has been cut from over 7 days to 3‐

4 days through investment in intermodal facilities).

The rail industry acknowledges the need for cooperation in the provision of freight transport.

The rail industry is aware of customer perceptions of its freight services and is actively seeking to

change these perceptions through innovative products and new marketing strategies.

Operational Efficiency

The industry has committed to improving the operational efficiency of its services. The industry has

been active in ensuring future interoperability of rail networks and systems and improving supply

chain management to ensure greater reliability and efficiencies.

Freight operators have invested heavily in rail facilities to ensure the quickest handling, loading and

loading times for trains. It should be noted that for every one dollar in Government investment the

rail industry has invested two dollars50. This private investment has ensured significant

improvements in journey times and reliability, with providers able to provide Melbourne to Perth

services in 3‐4 day as opposed to the previous journey times of over 7 days. Operational efficiency

can be improved further and the industry will continue to invest in operational capabilities and

improve its service provision.

The rail industry has also developed innovative systems to improve fuel efficiency and

environmental performance. The Freight‐miser driving system, developed by the rail industry,

50 Victorian Freight and Logistics Council (2010), “Business gets behind rail revival”, Media Release 18 February


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provides real time information to long‐haul train drivers to allow best‐practice driving techniques

that ensure fuel efficiency maximisation51

The issue of interoperability is an ongoing one and the industry is working in a cooperative manner

to ensure that a myriad of operational functions including train protection and communication

systems will be interoperable across state networks.

Industry Cooperation

Supply Chain Cooperation

The industry has shown a willingness to coordinate supply chains; however cooperative efforts led

by the private sector are constrained. The Australian Logistics Council (ALC) believes many

companies “shy away” from collaboration projects because of perceived competition and access law

breaches. Various government reviews of national competition policies have indicated the

restrictive nature of competition laws in relation to the provision and administration of large scale

infrastructure52.

Data Framework

Australia has no national data framework. The Australian Standing Committee on Transport (SCOT)

Working Group report recommended a National Transport Data Framework governed by an

independent national body in 2004. The rail freight industry is supportive of any collaborative

efforts in collating data and through the Australasian Railway Association, has been instrumental in

collating and publishing rail freight data through the Annual Rail Industry Report and collaboration

with BITRE in publishing the annual Australian rail freight performance indicators.

Research

Research in rail is coordinated by the Rail CRC and funded by government, industry and universities.

The CRC is undertaking research to address key issues faced by rail freight. The rail industry provides

$4 million per annum to the CRC in financial and in‐kind contributions.

51 CRC for Rail (2008), “Transformational Change in Australian Railways” see URL: http://www.railcrc.net.au/media-centre/downloads/CRC-IRSE-KeyNote-speech.pdf 52 COAG (2005), National Partnership Agreement to Deliver A Seamless National Economy


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Uniform National Rail Safety Regulations & Standards

The rail industry fully supports the COAG agreement to establish a national regulator for rail and

progress made on uniform model safety legislation. The rail industry is keen to offer its continuing

support in participating in the process to establish the National Rail Safety Regulator.

Improved Customer Offering

The rail freight industry is working hard to improve the product offering to customers. A recent

survey of freight forwarders by ACIL Tasman53 has indicated that customers who have access to rail

freight are reluctant to use such services due to a perception of:

− being unreliable (possibly due to a lack of dedicated freight lines, and de‐prioritisation of

freight services);

− being excessively bureaucratic with processes and paperwork (possibly due to the volume of

regulatory burdens imposed on rail)

− lack of coverage (due to poor infrastructure and lack of inter‐modal facilities); and

− lack of coverage leading to higher costs and time wasted on administration for the freight

forwarder.

The rail freight industry, through the ARA, is developing a marketing and advertising strategy to

address the findings of the ACIL Tasman report. The industry has already made significant

improvements in its customer offerings, including prioritised express premium services between

Sydney to Perth and Melbourne and Perth and door‐to‐door delivery.

53 ACIL Tasman (2010), “Study into the Perceptions of Rail”, published by the Australasian Railway Association


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3.3 Outcomes of a Freight Strategy

Competitive Neutrality

The objective of competitive neutrality is a level economic playing field for all modes of freight

transport to ensure a competitive freight market.

A fair and level competitive playing field will allow the Australian economy to choose the right

freight transport mode for the right job. Competitive neutrality will inevitably lead to the increased

utilisation of freight rail services for medium‐long distance journeys and ensure that Australia

benefits from the social, environmental and safety benefits of rail.

To achieve competitive neutrality, the Federal Government must:

− make adjustments to taxes, rebates and access charges that provide road freight with

subsidies, distorting the market in favour of road freight; and

− ensure equitable infrastructure funding for road and rail.

In the absence of such measures, Government incentives and increased infrastructure spending for

rail is required to address these market distortions and to ensure Australia benefits from the social,

environmental and economic benefits of the greater use of rail.

Maximise Performance

A collaborative, fully integrated supply chain for freight will ensure the levels of productivity needed

to maintain Australia’s international competitiveness. Given the sheer size of Australia’s freight task,

all modes of freight transport must be utilised and rail will play an integral part in this supply chain.

Rail freight is the best suited land based mode for medium‐long distance transport with superior

environmental and safety performance. The rail industry can identify and a make a case for

addressing:

− Bottlenecks in the rail freight networks

− Interoperability between various rail networks, locomotives and operating systems

− Cumbersome, duplicative and sometimes inconsistent regulations that govern the operation

of rail services

− Land use planning


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Industry and Federal Government cooperation will ensure the delivery of such measures. The

industry has also put in place concrete measures to improve its internal operational performance.

Value for Money

The freight strategy seeks value for money and investment for freight customers, the Government

and the private sector. The strategy advocates using the right mode of transport for the job and

does not advocate a rail only solution to freight. The strategy advocates a multi‐modal solution for

Australia’s freight task and readily acknowledges the role of road transport in providing short‐

medium freight transportation solutions. It would not be financially or economically viable to rely on

rail for such transportation.

The rail industry seeks the end to policies that lead to market distortions and advocates adequate

modal competition on all high volume corridors. This will ultimately lead to greater choice for

freight customers, lower prices, greater innovation, better social outcomes and better quality

services.


Conclusion and Appendix4


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4. Conclusion

To meet the impending challenges posed by the tripling of the freight task by 2050 and related

issues of population growth, congestion, environmental stewardship and energy security,

governments and industry must work together to address the operational, regulatory and financial

barriers to a truly national efficient integrated freight transport system.

To address these barriers and provide an environment in which the freight industry is able to

respond to future challenges, it is recommended that the Federal Government establish an

integrated Australian land transport planner, and a single Australian land transport policy maker

that provide:

− a long‐term truly integrated, multi‐modal vision for freight transport;

− Alignment of freight transport policy with Government social, environmental and economic

policy objectives including land use planning;

− The identification and internalisation, where possible, of externalities; and

− The identification of key investment requirements based on future needs.

To address the market distortions in the land transport sector created by the current economic

regulatory regimes, it is recommended that the Federal Government establish a single

independent Australian land transport regulator to ensure:

− modally neutral economic and operational framework for the transport sector; and

− principles of cost recovery for infrastructure that are the same across modes and

jurisdictions;

These reforms will be the key vehicles that will ensure integrated planning, competitive neutrality

and an holistic approach to transport policy that considers a diverse set of issues including funding,

economic and operational regulation, transport and land use interactions and the impact of other

policy issues, such as the environment and energy security, on transport planning.


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Industry must also play it part in ensuring the long‐term vision for a national freight network.

Industry must commit to improving its operational efficiency, customer offerings and must work

cooperatively to ensure priority infrastructure needs are identified and actioned. Above all, the

industry must ensure interoperability of infrastructure with capital equipment, control systems and

facilities.


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Appendix 1: Specific Government Investment Projects

The following list of projects has been identified by industry players as priorities in ensuring the

efficient operation of the rail network. The ARA does not purport to present a whole‐of‐industry

view in identifying prioritised infrastructure.

Asciano/Pacific National, ARTC & Queensland Rail

− passing loop extension on the Maitland‐Brisbane line or double tracking of Maitland‐

Brisbane

− Dedicated northern Sydney freight corridors and enhancements of existing lines

− Provision of double‐stacking capability between Sydney & Melbourne

− Investment in multi‐modal terminals in Sydney, Melbourne and Brisbane

− Improvement of track quality to allow for leading edge rolling stock technology from

overseas markets

− Upgrade of the East‐West Line

Asciano

− Investment in infrastructure to allow for reliable journeys between Parkes and Port Augusta

− Standardisation of track gauges between Victoria and NSW

SCT

− Standardisation of track gauges between Victoria and NSW

− Inland North‐South freight corridor, failing that a North South Corridor that has guaranteed

and reliable access south and north of Sydney

− Incremental improvement of track quality to allow for leading edge rolling stock technology

from overseas markets

− Investment in multi‐modal terminals in Sydney, Melbourne and Brisbane

− Investment in infrastructure to allow for reliable journeys between Parkes and Port Augusta

− Standardisation of grain lines with rest of network to allow locomotives to be shifted to

other freight tasks during grain’s off‐season


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WestNet

− Upgrade of 200 km of East‐West rail line to meet DIRN standard

− Further investment in East‐West rail line to enable the accommodation of leading edge

rolling stock technologies from overseas markets

− Duplication of Brunswick to Bunbury Harbour line

− Incremental improvement of track quality of grain lines

RailCorp − Greater rail access and facilities in and around ports facilities

− Freight line linking Western Sydney industrial area with rail facilities

− Rail corridors (freight and passenger) north of Sydney CBD

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