RailToday’s solution for tomorrow’s problems
Towards 2050:
National Freight StrategyThe Role of Rail
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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
RailToday’s solution for tomorrow’s problems
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.
RailToday’s solution for tomorrow’s problems
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.
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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
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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
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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
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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
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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
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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.
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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.
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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
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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
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• 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
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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
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Towards 2050: National Freight Strategy
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
RailToday’s solution for tomorrow’s problems
A Call to Action3
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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
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Towards 2050: National Freight Strategy
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.
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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.
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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.
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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
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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
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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.
RailToday’s solution for tomorrow’s problems
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