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General
This document was prepared with support from industry members including the Australian Rail Track Corporation, Asciano, Independent Rail, Queensland Rail, SCT and WestNet Rail.
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The Australasian Railway Association (ARA) 2010 All Rights Reserved
Chapter Name
CONTENTS
INTRODUCING THE NATIONAL FREIGHT STRATEGY
Forward Scope & Objective of Strategy Vision for Rail Freight Key Recommendations of the Strategy Next Steps Executive Summary 6 6 6 7 9 10
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14 15 15 15 15 16 16 16 16 16 17
17 18
18 18 19 22 22
Chapter Name
22
23 24 24 25
A CALL TO ACTION
Freight Transport Policy Action Plan
Single Australian Land Transport Economic Regulator Integrated Land & Transport Planner & a Single Australian Land Transport Policy Maker Informed & Cost-Effective Investment Rationalise and Consolidate Regulatory Requirements Internalising Externalities Clearly Stated & Quantified Social, Environmental & Economic Outcomes
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30 30 31 31 31 32
Industry Action
Operational Efficiency Industry Cooperation Improved Customer Offering
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32 33 33
34
34 34 34
38 39
39 39 39 39 39
INTRODUCTION
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 Australias economic expansion1. Despite its obvious social, environmental and economic advantages, Australias rail freight network is in a suboptimal 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 Governments 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.
Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010
Introduction
10
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.
Introduction
11
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.
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
12
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 Australias 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 levels3, 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 most efficient manner possible to ensure the productivity gains required to maintain Australias 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.
2 3
Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010 Bureau of Infrastructure Transport and Regional Economics (2006) Freight Measurement and Modelling in Australia. Report 112, BITRE, Canberra ACT
Introduction
13
A single land transport policy framework: to ensure transport policy is developed and implemented in an integrated manner and takes into account the Governments 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.
THE CASE FOR A NATIONAL FREIGHT STRATEGY AND THE ROLE OF RAIL
16
Infrastructure Australias 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. 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 Australias population will grow by 63% over the next 40 years to 35 million people by 20498. By 2030 Australias population will have reached 26 million. The increase will be driven by a greater number of women of childbearing age than projected, and increased net migration. Growth and concentration of population in Australias 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 Australias population will be living in eastern State capitals10.
4 5 6 7 8
Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010 Prime Minister Kevin Rudd (2010) Bureau of Infrastructure Transport and Regional Economics (2006) Freight Measurement and Modelling in Australia. Report 112, BITRE, Canberra ACT. Infrastructure Partnerships Australia (2008), The Australian Government Treasury (2010), Australia to 2050:Future Challenges, see URL: http://treasury.gov.au/igr/igr2010/Overview/pdf/IGR_2010_Overview.pdf Australian Bureau of Statistics (2005), Population Projections Australia, Issue 3222.0, 29 November Australian Bureau of Statistics (2005)
9 10
The Case for a National Freight Strategy and the Role of Rail
17
Australias 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.
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
Increased Trade
Treasury projections indicate that Australias 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 Australias GDP between 2010 and 2050. Continuing improvements in global trade linkages and sustained growth by Australias major trading partners, such as China, will ensure that international trade will continue to be a prominent factor in Australias 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.
5.2% 3.2%
2.4%
GDP
Road Freight
Passenger
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 Australias road network. 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.
11 12
The Australian Federal Treasury (2007), Intergenerational Report 2007, 2 April Australasian Railway Association (2010), Rail Freight Industry Workshop on Infrastructure Australias National Freight Networks Strategy, Melbourne 19 January Bureau of Transport and Regional Economics (2007), Estimating urban traffic and congestion cost trends if or Australian cities, Working Paper no. 79, Canberra. American Association of Rail (2010), see URL: http://freightrailworks.org/open-highways-one-train-at-a-time.php
13
14
18
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.
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.
Microeconomic Reform
Economic and operational regulations governing freight transport has been piece-meal and has inhibited operational efficiency in the freight transport market.
15
Victorian Department of Transport (2008), Freight Futures: Victorian Freight Network Strategy, see URL: http://www.doi.vic.gov.au/doi/doielect.nsf/2 a6bd98dee287482ca256915001cff0c/612a49cebbee70a1ca257521002095fa/$FILE/freightfutures.pdf Freight & Logistics Council of NSW (2009), Actions not Words: A Freight Agenda for NSW, November 2009
16
The Case for a National Freight Strategy and the Role of Rail
19
A Multi-Modal 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 Australias 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. The relevance of the table below 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.
Source: adapted from Ken Dymock (2007) General Manager, Distribution, Petro Canada, Chartered Institute of Logistics and Transport, Transportation Situation & Outlook Conference.
17 18 19 20 21 22
Department of Climate Change & Energy Efficiency (2008), Carbon Pollution Reduction Scheme: Australias Low Pollution Future, December 18 Department of Climate Change (2007), National greenhouse gas inventory, Garnaut Climate Change Review (2007), Transport, Planning and the Built Environment, Issues Paper - Forum 5 Department of Climate Change (2007), BITRE Australian Transport Statistics Yearbook 2007 Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook, Canberra
20
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. The industry must work closely with Government to ensure investment in infrastructure and reforms to transport policies lead to the greatest efficiency gains.
Average Freight Costs for Australian Inter-Capital Road and Rail Freight
Road Rail Rail (excl. PUD)
Cost
500
1500
4000
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 rails superior cost effectiveness.
Cost effective
Rail has the potential to be the most cost-effective land based mode of transportation despite structural impediments caused by lack of investment in track and facilities infrastructure and the effective Government subsidisation of road freight.
The Case for a National Freight Strategy and the Role of Rail
21
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.
1800 1600 1400 1200 1000 800 600 400 200 0 2001 2002 2003 2004 2005
Road
Rail
2006
2007
2008
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.
22
Cross Modal Fatality Rate Comparisons 1985/86 Mode Passenger Rail Road Pedestrians Cyclists
Source: Adena & Montesin (1988)
Fatalities per 100 million passenger kilometres 0.24 1.54 16.12 4.24
The above table suggests that passenger rail is seven times safer per passenger km as compared to 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 ARA 2006 Estimate Freight Corp 1998 Estimate Road .94 3.8 Rail .1 .55
200
150
100
50
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.
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.
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. Adena & Montesin (1988), Day to Day Travel in Australia 1985-86; CR 69; Instat and FORS ATSB (2005), Discussion Paper: Cross Modal Safety Comparisons, at URL: http://www.atsb.gov.au/publications/2005/cross_modal_safety_comparisons.aspx Based on dividing number of fatalities as reported by ATSB and dividing it by the total tonne-kms
24 25
26
The Case for a National Freight Strategy and the Role of Rail
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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).
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.
25
22.21
20
15
10
0.09
Ancillary Rail
27 28
LECG Consulting (2010), The cost of road crashes, published by the Australasian Railway Association Heavy Vehicles account for 10% of fatalities and we have assumed 10% of injuries. Does not take into account the greaterproperty damage heavy vehicle accidents cause and thus would suggest that our estimate is conservative. LECG Consulting (2010), The cost of road crashes, published by the Australasian Railway Association 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
29 30
24
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 32 33 34
UIC website, see URL http://www.railfreightportal.com/spip.php?article11 UIC (2009), Keeping Climate Change Solutions on Track: The Role of Rail, see URL http://www.railfreightportal.com BITRE (2007), Estimating urban traffic and congestion cost trends for Australian cities, Working Paper 71 American Association of Rail 2010, see URL: http://freightrailworks.org/open-highways-one-train-at-a-time.php
The Case for a National Freight Strategy and the Role of Rail
25
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. 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.
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 200809 to 201314, 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.
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.
Road
Rail
87%
82%
$3.4 B $2.1 B
23% 13%
18%
2007/08
2009/10 (estimate)
1989/1990
2007/08
2009/10 (estimate)
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
26
35
Source: Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook 2009, Canberra & ARA (2009), Australian Rail Industry Report 2008. ABS (2001), Freight Movements Survey, see url: www.abs.gov.au European Commission - EuroStat Port Jackson Partners (2005), The Future of Freight, published by the Australasian Railway Association Derived from NTC (2005), Third Heavy Vehicle Road Pricing Determination, see url: www.ntc.gov.au Synergies Economic Solutions (2006), Heavy Vehicle Road Pricing, see URL: www.synergies.com.au NTC (2005), Third Heavy Vehicle Road Pricing Determination, see url: www.ntc.gov.au
36 37 38 39 40 41
The Case for a National Freight Strategy and the Role of Rail
27
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.
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 Express Availability & Reliability Price Sensitive SydneyMelbourne 5% 70% 25% SydneyBrisbane 5% 70% 25% MelbourneBrisbane 5% 60% 35%
Due to the de-prioritisation of rail freight and inadequate track and facilities infrastructure, rails transit times and reliability has suffered. As the table below demonstrates rail transit times are much higher than road freight and rails reliability varies greatly with actual transit times varying from anywhere from 2-10 hours on scheduled times. Due to poor infrastructure, on some corridors rail only reaches average speeds of 45 km/h while heavy road vehicles reached average speeds of around 70km/h43.
42 43
Permits granted under Navigation Act 1912 (Cth) BTRE (2007), Australian Rail Freight Performance Indicators 2005-6, Information Paper 59
28
SydneyMelbourne 11 17
SydneyBrisbane 15 21.5-26
MelbourneBrisbane 23 36.5-45
MelbourneAdelaide 9 14.5-16.5
MelbournePerth 43 58-68
The inability to provide timely and reliable services has effectively ruled rail freight out of 65-75% of the NorthSouth freight task.
Cost
Rail has the potential to be the most cost-effective mode of land freight transportation. However, under-investment in rail infrastructure and taxes and subsidies favouring road transportation has stymied rails low cost potential.
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);
Average Freight Costs for Australian Inter-Capital Road and Rail Freight
Road Rail Rail (excl. PUD)
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.
Cost
500
1500
4000
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 rails ability to compete on the North-South corridor.
44 45 46
BITRE (2008), Road and Rail Freight: Competitors or Compliments :Department of Infrastructure, Regional Development & Local Government Port Jackson Partners (2005), The Future of Freight, published by the Australasian Railway Association ACIL Tasman (2010), Study into the Perceptions of Rail, published by the Australasian Railway Association
A CALL TO ACTION
32
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 Australias proposed National Freight Networks Plan, Ports Strategy and COAGs 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. 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;
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
A Call to Action
33
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.
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).
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.
47
Cavill & Humphreys (2001), Rail Freight Grants: Promoting Rail freight Growth in Britain, Association of European Transport
34
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.
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, provides real time information to long-haul train drivers to allow best-practice driving techniques that ensure fuel efficiency maximisation51.
48 49 50 51
See the Scottish Government website at URL: http://www.scotland.gov.uk/Topics/Transport/FT/freightgrants1 National Transport Commission (2009), Freight Rail Subsidy Framework, November Victorian Freight and Logistics Council (2010), Business gets behind rail revival, Media Release 18 February CRC for Rail (2008), Transformational Change in Australian Railways see URL: http://www.railcrc.net.au/media-centre/downloads/CRC-IRSEKeyNote-speech.pdf
A Call to Action
35
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.
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.
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.
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COAG (2005), National Partnership Agreement to Deliver A Seamless National Economy ACIL Tasman (2010), Study into the Perceptions of Rail, published by the Australasian Railway Association
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Maximise Performance
A collaborative, fully integrated supply chain for freight will ensure the levels of productivity needed to maintain Australias international competitiveness. Given the sheer size of Australias 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 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.
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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. Industry must also play it part in ensuring the longterm 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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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 grains off-season
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
Asciano
Investment in infrastructure to allow for reliable journeys between Parkes and Port Augusta Standardisation of track gauges between Victoria and NSW
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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