Balance | Balance Research made this submission to Australia's Productivity Commission in October 1998. The Commission's enquiry was into "Progress in Rail Reform". |
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| 5 October 1998 | |
It is commonly expected that the total transport task will
continue to grow in line with economic and population trends.
Total task may double in twenty or thirty years, and reach four
times its present level in perhaps fifty years.
Rail-based transportation generally uses less resources than
road and air, particularly in terms of marginal resource for
increments of task. Yet rail manages to attract far less of the
Nation's task than it could.
It follows that we are using far more resources for
transportation than we need to. On current policy, even with the
expected "rail revival", this trend will continue.
-------------------------
THE KEY PROBLEM
The key problem in transport is that by the time total transport
task reaches four times the present level, rail will be doing
well if it maintains its present percentage, on current
indications.
Thus, by that time, the road network will reach four times its
present traffic level, with at least the same expansion for
domestic air traffic.
Such growth outcomes will be unacceptable to most of the
community. Governments will then wish to stem that growth, but
the fundamental decisions need to be taken now if it is to be
avoided.
THE POTENTIAL OF RAIL
Rail-based solutions have the potential to limit this ever-
growing demand for road and air traffic.
Rail could absorb most of the increase over coming decades. The
governments, acting together, could achieve this with less total
transport outlay than under present policy.
Road traffic need never reach four times present levels: indeed
by acting resolutely it may be possible to keep it near today's
level.
In some cases, road network expansion could be forestalled with
only minor improvements to the rail system so long as services
are improved to meet the needs of travellers and shippers.
In other cases, major investments would be needed to make rail
competitive but in no case would this exceed the long term saving
to the community from reductions in road demand.
DRIVEN BY A MARKET DISTORTION
Travellers and shippers are driven to sub-optimal choices of road
transport over rail because of systematically differing levels of
a number of subsidy factors. These vary from the obvious to the
obscure, from direct government outlays to privately suffered
costs and from societal damage to global effects.
A leading factor is that rail operators are expected to pay for
their infrastructure whereas road systems are not usually
required to make any return.
It is almost certain that the total of transport-related costs,
both community and government, far exceeds the total of all taxes
and charges related to transport usage.
INTER-GOVERNMENT LAND TRANSPORT STRATEGY
Balance Research is proposing an Inter-Government Land Transport
Strategy.
This Strategy would have all levels of government, and all
departments, cooperate in identifying transport-related costs for
each transport mode and task.
Costs must include all forms of resource usage whether cash or
not and whether suffered by governments, users or the wider
community. Emphasis will be required on separation of network and
marginal costs.
This will reveal the extent of distortion in the transport
market-place and shed light on its knock-on effects on investment
of land transport funds.
The next step is adopting practical measures to eliminate or
equalise that market distortion and correct for its past effects.
Once the governments confirm that provision of road space as a
free or underpriced good is leading the ongoing problem, and
quantify it, they may adopt policies to restore the balance
between road and rail to what it might have been without those
past distortions.
Systemic underpricing of the mode which uses more resources will
make it falsely attractive. Correct market signals can only be
sent to users by charging adequately for that mode.
An alternative, of providing the competing mode's owners and
operators with money to achieve the same (total) level of under
pricing, will restore the balance but maintain the expected over-
demand for all transport.
A decision to maintain effectively subsidised transport is a
valid policy objective if it is clearly articulated and its
effects made transparent.
The Commonwealth could play a pivotal role in this research and
provide incentives for States to make the needed commitments.
An essential policy step, at this point, is that railway
operations (including feeder services) must be built up to
provide improved service in all domains (metro, country,
passenger, freight). This requirement is dictated by the need to
compensate for the past false attractiveness of road.
To put this another way, the financial imperative in rail policy
must not be the rail industry's bottom line but how rail can
improve the bottom line for the total transport structure.
Railway infrastructure owners must not be expected to perform
better, or charge more, than road infrastructure owners and must
receive the same support. Where they have not so received in the
past, this must be treated as a backlog and compensated.
If this cannot be achieved, road traffic will continue to grow
and thus total resource usage will continue to be above the
optimum.
Inter-government financial arrangements would need to be even-
handed as between modes. Even so, the Commonwealth should provide
extra assistance for States to catch up the backlog of rail
investment due to past policy shortcomings. It might also assist
rail for reasons of national goals such as the environment and
resource management.
Balance Research does not support calls for a National Rail
Highway to be Commonwealth funded. All links in the system are
important: the inter-capital links are the ones least in need of
support, as they are almost viable at present and will be
goldmines when subsidies are equalised.
Not that we say the main interstate links should not be brought
up to scratch, and quickly. They must, and Commonwealth "backlog"
funding should be used for this.
But to achieve the needed swing from road-traffic-growth to rail-
traffic-growth it is equally important to restore freight and
passenger facilities at all levels in the system. Rebuilding of
industrial sidings. Provision of basic services on under-utilised
lines. Moving goods by rail across metropolitan areas. Provision
of high quality bus links into every residential area. Upgrading
of tracks and services to relieve congestion on nearby roads.
We say, similarly, that the National Highway System and the RONI
program should not be funded by the Commonwealth. The Common
wealth should directly support State transport initiatives in
road or rail where a beneficial project might not proceed on
State finance alone, and to adjust for past shortcomings.
Interstate road links, whether the NHS or any border link, should
receive a subsidy from the Commonwealth based on the percentage
of interstate traffic on the link. Links within cities would thus
attract Commonwealth funding but only for their interstate
traffic component. Similar arrangements would apply for rail
links.
RAIL-BASED FUTURES PROJECT
"Rail-Based Futures" (RBF) is the name of the package of policies
and functional and educational programs being developed by
Balance Research to implement the changes required for the Inter-
Government Land Transport Strategy to succeed.
The prospect of road traffic ever reaching four times its present
level is not what most people want. Governments could adopt a
policy of keeping road traffic more or less at the present level:
rail can be made attractive enough to achieve this.
RBF Outcomes
At the target year, when total transport tasks reach four times
their present level, successful adoption of the RBF policies will
deliver the following outcomes (compared to "present policies"
case):
* The road network will be improved with safety and quality
measures but no significant net capacity growth for either
Metro or Country highways.
* There will be reductions (absolute) in harmful effects of
road traffic as emission and accident rates continue to
improve on a total traffic task which is not increasing.
* Rail traffic will have grown by factors of up to 8 times
(Metro passenger) and 30 times (country), bringing all main
lines into efficient, high volume operation. Many marginal
or now closed branch lines would reach economic traffic
levels, vis-a-vis fully costed road transport.
* A rail freight network will be re-established in all parts
of metro areas, with private sidings where warranted and
intermodal goods stations every few kilometres. This will
take up to 30% of HGV traffic off urban highways in the
first decade and carry perhaps 80% of long-term HGV traffic.
* Rail freight will be re-established at most country towns,
offering local carriers cheaper connections to the cities
and taking much pressure off country roads.
* The road freight industry will be about the same size as
today, but with greater emphasis on intermodal operations.
* Inter-capital and other long-distance railways will provide
faster transit than the highway both for passenger and
freight service.
* Total resource use for transport will be reduced. Less
energy will be needed, and much of that will be electricity.
Less transport equipment will be imported (most trucks are
imported, whereas most locomotives are made here). Far less
land will be dedicated to transport. The total transport
labour force will be about the same but doing different
tasks.
* Greatly improved and innovative passenger services will
attract "non-captive" travellers. In metro areas and
provincial suburbs, consistent levels of feeder bus and
cross-town service will enable families to be comfortable
without a car.
* Road Authorities will be able to counter the myth of "the
right to drive", once high quality public transport is
readily available. This will make it easier to require that
persons unsuitable to drive cannot easily obtain and keep a
licence: it couldn't be done under present circumstances.
RBF Functional Policy
In order to achieve this result, the following inter-governmental
policies and financial commitments would be required:
* Assess and publish the road deficit on the same basis as the
various rail deficits (urban passenger, intercapital
freight, etc). Deficits must include all costs traceable to
road use and rail use: all levels of government, private,
business, community, cash and non-cash.
* For as long as it it not possible to collect from car and
truck users the full cost they impose on the community,
adjust rail charges to ensure the same level of subsidy as
road.
* As it appears that total government resources used by trans
port exceed the total fuel taxes, community perceptions
would be improved if an amount of the annual tax reimburse
ments from Commonwealth to States were identified as being
transport-related and sourced from fuel tax.
* Recognise that the national transport network is not just
the intercapital links. More than 50% of freight on the
Melbourne to Sydney corridor does not go the full distance.
It is intrastate or country-to-country or country to
interstate capital. Rail service for much of this task has
been withdrawn, driving highway growth.
* Governments will cover the remaining costs of break of
gauge. Either the capital to remove the problem or
additional operating costs to move goods across the break at
no cost penalty to the user.
* Ensure protection of all land and other assets that are
likely to be required by a future generation for railway
purposes. Governments will not allow the present generation
to destroy that which a previous generation has put in place
just because we don't value it right now.
* Ensure that at least one railway operator acts as "Universal
Service Provider" on every line. This operator will be
financially supported by operators who provide less than
universal service. This is similar to Telecommunications
industry requirements. The USP will accept all traffic
offering and provide an interface to any short lines or
industrial railways.
* Provide mechanisms for railways to be rewarded for adding
value to the community and for reducing the extent of urban
sprawl and the consequent savings in urban infrastructure.
* Embark on a program of public education on transport issues,
to last for at least two generations. That is how long it
will take to change the car-loving attitude and the
expectation of driving everywhere as a matter of course.
* Ensure cooperation of all levels of government in investing
the funds available for transportation infrastructure in a
way which produces the most efficient network.
PRIVATE CAPITAL vs GOVERNMENT CAPITAL
These changes could occur with a fully governmental or fully
private rail system. As long as governments own the road system
and don't charge for it in full, they would need to make equal
subsidy to the operators or users of rail services, whoever they
may be.
Alternately, private finance could cover the cost of new works
and certain increased expenses for rail-based solutions, even if
the services continue to be government operated.
In return, governments would need to pledge the savings in road-
related costs until full road charging is implemented. When it
is, then full rail charging will be possible too and repayments
will be derived from revenues.
Using a more ad hoc approach, if governments together spend (say)
25% of total transport budgets on rail-based solutions, the total
budget will eventually reduce (relatively) as tasks transfer from
road.
THE KEY SOLUTION
Of all the above points, the key factor is equalisation of
subsidy. When the effects of excess road subsidy are cancelled
out, users, operators, governments and financiers will all see
rail as a technically efficient and profitable industry and
support it accordingly.
The other strategy items could then possibly fall into place
without further political involvement, other than limitation of
monopoly behaviour.
To achieve this, and its promise of lower resource demands,
governments will need to act on the basis of the "all government,
whole community" transport costing and adjust road and rail
charges to compete for all traffic on their natural merits.