Despite the "rail revival", road traffic will still grow, eventually doubling and redoubling. The role of rail is to grow faster, absorbing the growth. Without this, the resources used in transport will be unsustainable.



Balance Research made this submission to Australia's Productivity Commission in October 1998. The Commission's enquiry was into "Progress in Rail Reform".







Balance Research

P.O. BOX 555, FOOTSCRAY, VICTORIA 3011 (03)9689 7555
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 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 

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 


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 

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.


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.


Balance Research is proposing an Inter-Government Land  Transport 

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 

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 


"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" 

*    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 

*    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 

*    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.


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 


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.