Coalition resurrects high speed pork

sdfs

By Leith van Onselen

It seems you can’t keep a dumb idea down. Just when it appeared that the Rudd Government’s pie-in-the-sky high speed rail (HSR) project linking the major East Coast capitals died with the former Government, the Abbott Government has sought to resurrect it. From The Australian:

THE push for an east coast, high-speed, rail link has received a boost, with the Abbott government holding a series of high-level meetings with Japanese, Chinese, Spanish and French rail companies in Australia and abroad.

Trade Minister Andrew Robb said the talks had included discussions on financial models to make the project viable, despite its hefty estimated price tag of $110 billion and the government’s fiscal constraints…

Mr Robb’s comments reveal the Coalition is continuing to ­explore options to build the project, provided it can be predominantly privately funded, and the government has committed to trying to purchase the identified land corridor for the route…

Travel times for Melbourne-Sydney and Sydney-Brisbane would be less than three hours. For the project to be viable without subsidy, the highest ticket prices would need to be about equal to a business-class flight, about $300-$400 for the Melbourne-Sydney sector, proponents say.

…the Japan Bank for International Co-operation was willing to fund the project if the Australian government was prepared to underwrite a certain minimum level of patronage.

Let me reiterate my view of why a HSR line linking the East Coast capitals makes little sense on either economic or social grounds.

Cost:

In Europe and Asia, with high density populations, HSR can work well. But in a large, sparsely-populated country like Australia, it makes little sense.

It is around 2000 kilometres Melbourne to Brisbane. Even if we assume that the population doubles by 2050, then we are still only looking at a catchment of around 22 million people along the route, versus hundreds of millions in Europe or Asia. Put simply, finances will never work on this project

Indeed, the Stage 2 feasibility study, which was completed in April 2013 by the High Speed Rail Advisory Group (the body tasked by the former Labor Government with overseeing the eventual building of a high speed rail line) found a high-speed rail link along the East Coast would cost taxpayers a whopping $114 billion (in 2012 dollars). That’s a price tag of nearly $5,000 per man women or child, or nearly $9,800 per employed person.

Further, to be competitive with air travel, ticket prices would need to be at least comparable with a discount plane ticket – say $100 between Melbourne and Sydney. This means it would be highly unlikely that HSR would ever be able to pay back, or even significantly offset, its cost of construction, with ongoing operational subsidies also likely as far as the eye can see.

Convenience:

The route between Melbourne and Sydney is roughly 900 kilometres, which would require an average travel speed of around 300 kilometres per hour to make it within the claimed three hours.

Proponents argue that HSR would be a ‘game changer’ for regional communities along the route, suggesting that the train would need to stop at these locations. But the more stops that are included in the route, the slower the trip, making the three hour promise seem little more than a pipe dream.

For example, if the HSR train stopped just six times between Melbourne and Sydney, it could add up to one hour to the trip, assuming 10 minutes per station (including slow down, boarding, and acceleration times). If this was the case, then the Melbourne to Sydney HSR journey would slow to four hours, making it even less competitive against air travel.

Further, some of the time savings noted by proponents are spurious. They often mention airport travel and waiting times as costs disadvantaging air travel, but conveniently ignore the time and cost associated with traveling to/from the CBD to board HSR (most of us don’t live near the CBD, after all).

Equity:

HSR is not mass transit. It is corridor transit. At best, it is a niche market serving predominantly a highly specialised, relatively wealthy, and narrow customer base (i.e. high-income business travelers and tourists). It will do little to relieve urban traffic congestion and its contribution to improving air quality (or reducing carbon emissions) will be negligible because it is unlikely to carry enough riders to make much of a difference. These factors undermine HSR justifications based on public good arguments.

For the tens-of-billions cost, Australia could probably fix-up most of the infrastructure in Australia’s cities and major towns, and/or build world class freight infrastructure, providing a much bigger productivity pay-off in the process, whilst also improving living standards for a wider share of the population.

Moreover, why should residents in Adelaide, Northern Queensland, Darwin, Alice Springs, Hobart, Perth, or a range of other regional towns not located near the line be called upon to fund (via their taxes) a massively expensive project that provides no benefit to them and minimal (if any) productivity benefit to the nation?

Conclusion:

Sound infrastructure investment is all about weighing-up alternatives and choosing projects that deliver the biggest social/productivity pay-offs per dollar spent. HSR looks likely to fail this most basic test, and smells like another one of those dubious big ticket pet projects that politicians and greenies love, but leaves taxpayers and the economy significantly worse-off.

It is exactly the opposite of what Australia needs if it is to rebuild its competitiveness. If the Coalition goes ahead with the project, Abbott will likely go down as the “infrastructure pork Prime Minister”.

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74 Responses to “ “Coalition resurrects high speed pork”

  1. The Lorax says:

    Yeah but, the world’s fifth busiest air route is Sydney to Melbourne:
    http://en.wikipedia.org/wiki/World's_busiest_passenger_air_routes

    • So? Are planes struggling to meet passenger demand?

      • The Lorax says:

        My point being that although Australia may be sparsely populated most people (20M+) live in the SE corner and we have two cities (at least) with globally significant traffic volumes … and as you know, our elite seems determined to grow the populations of those two cities very rapidly.

        I’d also add that a lot of the Syd-Mel traffic would be business traffic that would indeed be CBD to CBD.

        But yes, for $110 billion we could probably do a lot of more useful things.

        It seems they have similar problems with the California HSR between LA and SF, but then they have Elon Musk and his hyperloop.
        http://en.wikipedia.org/wiki/California_High-Speed_Rail

      • emess says:

        The planes aren’t. Sydney airport is.

        And the monopoly owners of said airport are a major impediment to a new airport.

      • tmarsh says:

        Seen the traffic problems?
        Social cost of the cars/taxis?
        No rail to Melbourne still.

        Anyway, what if: as part of a broader strategic plan, we were to decentralise away from the coast/away from cities.

        Say, another 10 million people across, say, 10 major centres, connected by rail.

        Gov’t departments shift there.

        Balance property costs, reduce congestion, pipe water (Ord, wherever) to where it needs to go.

        Just thinking out loud. I’m not even to the Rudd paper napkin stage.

      • Lath says:

        How many airports could you build with $110 billion?

        On the other hand would the good citizens of Albury-Wodonga fork out $200+ for an hour’s commute to the big smoke? I doubt it.

      • Jason says:

        Anyway, what if: as part of a broader strategic plan, we were to decentralise away from the coast/away from cities.

        Say, another 10 million people across, say, 10 major centres, connected by rail.

        tmarsh, the more ‘stops’ you add between major population centres, the less convenient HSR becomes. The real advantage of air travel is flexibility of routes to meet demand (meaning less allocative waste). It’s the same reason that buses are more cost-effective at serving inner-city than trains are.

        Money would be far better spent on improving intermodal freight infrastructure. Freight rail lines to population centres inland with intermodal terminals to transfer containers onto trucks for the last ten miles. This also has the benefit of easing congestion in the major coastal cities.

        To get people to move out into the boonies you need services and jobs, which need import and export infrastructure. Just putting HSR out there will only encourage people living further away but travelling longer to get to work. People travelling 200km+ a day to go to work simply isn’t practical, efficient or desirable.

      • Researchtime says:

        my post has disappeared

      • emess says:

        Lath, for $110bn in Sydney, you can build zero airports in the medium term. The owners of Sydney Airport have an effective monopoly for that time frame, based on their being able to wring the most out of the original sales position.

      • migtronix says:

        No the passengers are struggling to find a non-monopolist they can get a decent price from…

        @Research: Act of God?

        EDIT: @Jason too right, freight has to come first and it would be a big boon to both city consumers and rural producers

      • Researchtime says:

        Probably because I disagreed with the above thesis…

      • migtronix says:

        @Research that does sound like the petty and venal God I recall from the old testament.

      • tmarsh says:

        Jason, you’re missing the point.

        Decentralisation. The jobs don’t stay in the cities.

        Centralisation is killing the quality of life in the cities.

        Look at France (yes, I know more people).

        TGV connected to SCNF.

        All part of long term co-ordinated, strategic approach.

      • Jason says:

        Centralisation is killing the quality of life in the cities.

        Then you and I agree. Where we disagree seemingly is in what leads to consolidation in regions. You seem to think that you need people to live out there first and then business will come. It’s actually the other way around, the opportunities have to exist and then the people will come. If you put in HSR that’s sending the wrong signal – it’s telling people they can live further away from the city but still access the city easily, hence the situation of people pushed out of the city UGBs using highspeed rail to still commute to cities.

        If you DON’T want this type of behaviour, then why have HSR at all? If all it is going to service is the holiday traveller and odd business traveller, why do we need the HSR when the current system handles these needs fine? To move the current amount of people that are travelling by air over HSR would cost a lot more than it does currently.

        If you want to create opportunities in regional Australia, you need to start with the regional towns and grow up. Ease the bottlenecks in the transport system by migrating freight from road to rail by increasing intermodal transport priority. This alone will significantly reduce logistics costs to regional centres making more possible for less. Then of course you need to have de-regulated land planning policies as well (this is key to attracting business and residents to the area). Putting HSR to Newcastle doesn’t mean business will flock there if there are no opportunities – it just means more people pushed out of expensive Sydney to commute from Newcastle everyday.

      • emess says:

        Are planes struggling to meet demand Leith?

        Well since flight time gate to gate has increased by over 25% Melbourne Sydney since the arrival of jets in the sixties, and by over 15% from the piston engined DC6b aircraft that preceded them, one could conclude that, yes, planes are struggling to meet demand. And burning a lot of fossil fuels uselessly.

    • Jason says:

      Japan has 4 routes in the top ten despite all of them being connected to the HSR network. Last time I was in Japan, going from Tokyo-Kyoto-Osaka-Hiroshima, the only other people I saw on the Shinkansen were other tourists because they had the JR Rail Pass (unlimited travel for a fixed price, only available to foreigners). Flying is now cheaper in Japan than HSR in many cases, despite the networks already running at significant loss to try and subsidise to compete.

      • dkirkwood says:

        I respectfully disagree on this Jason.

        I travel regularly to Japan for business – and Tokyo-based business types (and their Australian tag alongs) are frequent users of the Shinkansen. Particularly for meetings in Osaka, HSR is the quickest and most convenient way to get there from Tokyo. And we weren’t alone – most carriages >80% full any time I’ve been on it.

        Demand for the Shinkansen is such that Japan is in the process of building a second mag-lev based HSR along the same routes. I do wonder if this is a bridge too far (and haven’t looked enough at the data to venture an opinion), but the Japanese have seen the Shinkansen perform well over a multi-decade time frame and seem confident that this one will work as well.

  2. Stephen Morris says:

    I don’t want to say “I told you so” (actually I do want to say “I told you so”!) but I did tell you so, on 26 August last year to be precise.

    Let me quote:

    “The high speed rail link will be initiated by the Abbott government, but it will only ever run between Sydney and Canberra.

    “There will be promises of extending it to Melbourne and Brisbane but these will be abandoned (on the grounds of cost) once the Sydney-Canberra link is in place.

    “Mr Abbott has made no secret of his intention to fulfil Henry Parkes’ dream of creating a unitary Australian state with Sydney as its magnificent imperial capital.

    “Constitutionally, it would be difficult to move the seat of Parliament from Canberra to Sydney. The next bext alternative is to turn Canberra into a suburb of Sydney with a high speed rail link.”

    The Sydney-Canberra high speed rail link has been a dream of Sydney chauvinists at least since the last “Kirrbilli Prime Minister”, John Howard.

    They will eventually get what they want, to the detriment of Australia as a whole.

    • The Lorax says:

      Are you a Victorian Stephen?

    • Stephen Morris says:

      p.s.

      Mr Robb’s comments reveal the Coalition is continuing to ­explore options to build the project, provided it can be predominantly privately funded, and the government has committed to trying to purchase the identified land corridor for the route…

      It will not be privately funded.

      It will be privately financed.

      Funding refers to the ultimate source of money use to pay for the resources needed to build, maintain and operate infrastructure. Funding may be from user payments, or from taxes, or from a combination.

      Financing refers to transactions in the capital makets to bridge the timing gap between the outlay of funds and the receipts of funds, from whatever source.

      Private financing does not create one cent – not one single, solitary cent – of additional funding.

      On the contrary, because of the relative illiquidity of private financing, in the absence of offsetting efficiency gains – many of which can be obtained by contracting out – private financing actually reduces the net amount of funding available for infrastructure.

      (See Morris’s 7th Law of Privatisation.)

      The real purpose of private financing is:

      a) to hide the real levels of debt being incurred for public works; and

      b) to enrich the Mates of corrupt politicians.

      • Jason says:

        Bang on Stephen. The Liberals in particular seem to have form on this when it comes to infrastructure corruption.

    • migtronix says:

      +100 Viceroy Morris

      EDIT: It will be the same with an ETS, we’ll get one, one that is extremely pro polluter.

      • Rusty Penny says:

        I thought you didn’t believe in AGW theory.

      • migtronix says:

        I don’t, that is to say I absolutely think the “99.99% species extinction” rabble are pure morons and not worth listening to on any thing.

        Having said that, and reiterating that I acknowledge certain molecules are just the right size to refract infra-red/UV radiation, which like a day at the beach with no sun screen will certainly burn you good, THEY ARE POLLUTERS even if I don’t think CO2 is the pollutant the Fossil Fuel cartels are absolute polluters and have been turning this beautiful, lush planet to shit for ‘lo 100 years….

  3. emess says:

    On the other hand, it might just be posturing in the negotiations with Sydney Airport Corporation which have just commenced. Coincidentally of course.

    Given that the Howard Government gave Sydney Airports the ability to strangle the development of the biggest and busiest airport in the country as part of the sales act, the question might be how much Sydney Airports will gouge before High Speed Rail becomes economic?

    • dennis says:

      emess,

      HSR especially between SYD-CBR is no threat to SYD airport

      What’s the expected travel time MEL-SYD, 3 hrs? Then you have to make your way to the CBD to catch it, it won’t be like a suburban train were you just hop on, then there is the frequencies between stations etc. There will be no time savings over catching a flt at the a/port.

      Nothing but an economic white elephant.

      • tmarsh says:

        Catch cab to airport. Traffic. Queue at checkin. Wait.
        Other end, cab.
        Or drive to airport, traffic, park (or get dropped off).

      • dennis says:

        TM,

        And what do you think will be the case with a CBD train station, oh don’t forget to pack a bag for the over night, no day trips on this one. Only the big end of town will be working out of the CBD as well. :-)

      • emess says:

        You missed my point dennis. It’s not about economics IMO, it’s about a posturing stance by the present government in negotiations with the Sydney Airport mob.

        For the reasons you point out, not a particularly convincing stance. However, that leads to opinions about the negotiation skills of the present government. And it’s all downhill from here.

      • Jason says:

        tmarsh, you guys don’t use the train?

        The Brisbane Airtrain service is quite good. The only time I cab it is when the flight is too early and the train isn’t operating.

  4. Jason says:

    If the ALP couldn’t get the private sector to chuck in $27b for the NBN, what hope does Tony ‘Sovereign Risk’ Abbott have of getting $80b+? It’s never going to happen.

  5. Acme says:

    The key words in the story are:

    “the Japan Bank for International Co-operation was willing to fund the project if the Australian government was prepared to underwrite a certain minimum level of patronage.”

    No need to go to the Japanese. I will build the thing myself if the government underwrites the patronage.

    Helloooo taxpayers.

    • Jason says:

      Hah, I didn’t even notice that, such patronage guarantees will no doubt be heavily inflated – just as the ones are frequently on public-private-partnership toll roads.

      The question is, after the hell they gave Labor on the NBN, are the Liberals really that stupid?

      • Rusty Penny says:

        The question is, after the hell they gave Labor on the NBN, are the Liberals really that stupid?

        The Liberals at their very best are still this stupid, this mob, well….. life is like a box of chocolates

  6. AnonNL says:

    Investment in local infrastructure and public transport would do more good than a High Speed Rail linking East Coast cities.

    Adelaide is in desperate need of some decent roads and a Ring Route to prevent congestion and from what I’ve seen other cities are as well.

    The whole of Australia could use a decent road system which takes into account safety to prevent the many unnecessary deaths on the roads here… I’m all for making life interesting but throwing poorly thought, inconsistent situations at road users is a bit much…

    • Rusty Penny says:

      Out capital cities will always require expensive infrastructure, it’s a bottomless hole of government spending, much like welfare to the rich.

      One would have to think the last thing we need is more expensive infrastructure just so the next paper shuffler can live 50km from the CBD because that’s the location of housing estates selling 320sqm residential blocks.

      CBD office space only obtains value (vale captured by its owners) when tax payer funded infrastructure shuttles punters there to work.

      It’d be cheaper to build the office space 50km away, and the punter can walk or drive 5 minutes to work

      • AnonNL says:

        Previous comments from me have been about the need for Australia to leave the landing sites (i.e. Capital Cities) and start decentralising (satellite cities)…

        but to get this underway you do need proper infrastructure linking various residential pockets.

      • Rusty Penny says:

        $110 billion in infrastructure spending earmarked for a HSR, being diverted into this, provides for this much needed infrastructure

      • tmarsh says:

        Anon. Rail and cars/buses and bikes.Not cars to the exclusion of all others

    • Bluebird says:

      +1. City traffic is deliberately kept congested because it makes more money for auto, finance, tolls, and oil.

      Spending $110bn would probably fix our traffic woes entirely in both Syd, Melb, Bris and probably Adelaide too.

      But that would make too much sense.

      Gotta keep us oppressed, tired and pissed off. Macchy!

      Where da Greens on this one Lorax? Start the trains? Nup. Don’t actually want power do they. They’re happy with their comfy little sideline role having a tug over reffos and gay marriage.

      • migtronix says:

        +100

        Although Big Clive might help us out here:

        Clive Palmer has launched an extraordinary attack on China’s government, calling them “mongrels” who “shoot their own people”.

        The head of the Palmer United Party was being asked about his legal battle against a Chinese state-owned company on the ABC’s Q&A program last night.

        LOL

        EDIT: BTW just to be clear the tug at reffos line is going waaaay too far for me LOL

        http://www.abc.net.au/news/2014-08-19/clive-palmer-attacks-chinese-government/5679900

      • tmarsh says:

        What a bizarre comment. Do you know what some of the greens (like Bandt) have actually been responsible for?

        Then, there’s CSG.

      • Bluebird says:

        Yeah I was half watching q and a last night.

        No doubt Clive will want to fix firb. Not.

    • Jason says:

      We’d be better off encouraging development of more regional centres and easing of urban growth boundaries than throwing more good money after bad on city infrastructure. As Stephen Morris often mentions – this city-centric attitude is part of the problem.

      We should be much more spread out – more like the United States. Sure we don’t have as much arable land, but we still have more than enough to serve 24-odd million people. The smart approach to infrastructure would be to branch out land-wise, encouraging use of things like regular rail for freight and passengers between regional centres. To maintain convenience, ensure your routes are configured to allow for minimum distance between stops (eg. 200km wouldn’t be too bad out in the boonies, at each stop you’d have roughly a 100km radius that would need to be done by car)

      Passenger rail over long distances needn’t be high-speed rail either, which has a large price premium and much higher requirements on materials and earthworks per length of rail (significantly increasing cost). Comfortable overnight sleeper trains would function just as well at serving the holiday set who want to go to the beach for a long weekend.

      • Rusty Penny says:

        A lack of arable land should make things easier.

        A city doesn’t so much need water, just within 150km where potable water can be sourced.

        A friend of mine iterated the following from time in Qatar.

        Other than the coastal fringe, the rest of the place is desert.

        For all intents and purposes the land has no value.

        They understand gas as a resource is finite, and want to move to something sustainable. They want to attempt hi tech manufacturing, thinking the base of the Arabian gulf has some logistics advantages.

        So land that otherwise has no value, they give the land away for free to hi tech manufacturers as long as they build the infrastructure.

        Surrounding it will be the workers shelter, also built on free land.

        Now, think that could be replicated here?

        Free land, meaningful career in hi tech manufacturing, sounds good. Mortgage low, wage demands lower, competitiveness rises.

        As I said, you think we could replicate this?

      • tmarsh says:

        + many.

        @Rusty. As long as it’s not “worker shelter” in the vein of some of the Gulf states.

        There’s shelter, then there’s shelter.

        Building in the desert isn’t particularly intelligent if all the houses are sucking power from aircon.

        We could incentivise uptake of solar PV through an RET….oh, wait.

        So, we’ll have these places sucking power (coal, FTW!). I suppose centering around natural gas (not CSG) makes sense.

        I agree 100% with decentralisation but not under current policy settings (with particular focus on lack of incentivisation of solar. Big coal gets free kicks why not solar.)

        A city in the desert could be a big mistake.

        On the other hand, look at Lismore or Casino. LOTS of room to move, crying out for jobs, beautiful spot, water, right near 1 international airport (connect via rail?), near rail (Casino). Could support a big city right there.

  7. Leviathan says:

    There are a great deal of very, very poor assumptions in this.

    Population

    Firstly this link would service as many people as almost any link in Japan. Each rail link does NOT service all of Japan, nor anywhere else in Asia does a single link service the entire population. They service only one particular route.

    The argument about national population sizes is entirely spurious and designed specifically to mislead.

    A link servicing 10 million people makes it one of the biggest single links immediately. (Outside of Chinese links such as Beijing).

    I find it disheartening when this blog can spend so much time pointing out the deliberately misleading use of facts and figures by others, and then engage in such wholesale deception.

    However it continues with the deception, which I feel is just cognitive bias.

    Convenience

    The convenience argument is just as spurious. There is not a single, unwavering route for these trains – like ALL TRAINS – you can have express, regional services, intermediate servicing. There is not a single line in other words. This isn’t the 19th century. These trains are co-ordinated with multiple trains all travelling the same route – thats the BEAUTY of trains.

    So while an express leave for each capital every 20 minutes – other trains are servicing destinations along the way changing every 10 minutes. Meaning travel times are barely impacted because each train will stop only once or twice – or not at all – and every destination is still serviced with a train departing once every hour.

    Equity.

    These trains are also NOT designed to service inner city congestion. What a ridiculous argument. However they absolutely WILL reduce congestion for people travelling to the airports.

    That said a train will carry up to 1500 passengers. While a 747-400 about 500. With 5 trains an hour in one direction on a single line that could be up to 180,000 people per day – or 360,000 people in both directions.

    That is 720 planes per day taken out of the sky every single day..

    At 78 kg’s per passenger to fly this route, at 380,000 passengers per day on a train – that is 2,964,000 kgs of carbon saved per day. Yes – that is 3 million tonne/day. ALmost a billion per year.

    Oh and guess what – the cost is easily comparable, you can access the trains via public transport and they are without a doubt the choice of your average commuter and NOT the super rich or tourist.

    As someone who used to use the Euro star regularly I can assure the benefits over flights are not even worth comparing – it is an open and shut case, no argument – NADA. Heading out to stanstead, heathrow, gatwick or whatever was costly, time consuming, INCREDIBLY frustrating, and the journey and travel time horrendous. Eurostar – middle of London, incredible comfort, broad band, the works.

    In short – the arguments which have been presented here are spurious and appear to be agenda driven when such glaring and gaping holes can be driven through them.

    Really disappointing stuff.

    • arescarti42 says:

      In short – the arguments which have been presented here are spurious and appear to be agenda driven when such glaring and gaping holes can be driven through them.

      “Really disappointing stuff.”

      Agreed.

      10 minutes per station? In my experience taking the shinkansen, you’re looking at maybe 1-2 minutes per station.

      And whilst not everyone lives near the CBD, that’s where the majority business travelers go when they hop off at the airport. Last time i flew into Melbourne on business, it took me over an hour to get from the airport to the CBD.

      I’m not saying that HSR makes economic sense (the case hasn’t been made) but the arguments in this article are just sheer conjecture

      • Leviathan says:

        Exactly.

        I would like to see some reasonable points made – we all would – but just cherry picking information where it suits is very destructive to the brand of Macrobusiness.com.au

        For a website which promotes itself as being different to the MSM, to relying on facts and data – this “agenda” and it has to be called that as it is so obviously biased and lacking in factual analysis, along with the unrelenting agenda promoting urban sprawl do the entire website a massive disservice.

        We all want to get to the truth – not to be convinced of someone’s beliefs and agendas.

    • Jason says:

      That’s all well and good Leviathan, but if it’s not cost-effective then who is going to use it? Look at Japan, patronage numbers have been falling sharply with the introduction of discount carriers like Skymark, and Japan now has four routes in the world top ten most congested despite all of those routes having an existing HSR network connection!

      Let’s look at existing passenger travel numbers on the east coast. Along that corridor, Brisbane-Gold Coast-Sydney-Melbourne, about 17 million trips occur per year by plane.

      Let’s say we want a 50-year pay-off of the $110bn (assuming it doesn’t blow out – highly unlikely). You would need revenue of $4.7bn per year to pay back the original $110bn investment at the current 3.7% 15 yr bond rate.

      Assuming no operating costs, the ticket price (at 17 million passenger trips per year) would be $276 per trip to meet that revenue requirement. Now this totally ignores potential cost blowouts, operating costs (which will be significant in terms of revenue), assumes 100% transfer from air to rail, etc. Now you may say population growth will increase patronage, so I calculated by 50 years the price will be $139 at current growth rates of around 1.4% – still not that much of a discount compared to air travel (ignoring any potential fuel scarcity issues).

      The HSR advisory group however says there’ll be 84 million trips per year. I am not sure where they’re getting that figure from. This is all basic back of the envelope stuff, but if basic analysis isn’t promising then I doubt details will unlock any secrets. The only way HSR could possibly usurp air would be if regulation artificially forced scarcity in airport capacity (hasn’t happened yet). Unfortunately air travel, like buses are highly flexible when it comes to meeting demand.

      I like HSR, I liked using it in Japan, but if it doesn’t make economic sense and can’t generate a return to pay off the debt required to fund it, then it’s terrible policy.

      • Leviathan says:

        Well – if you read my post above if you have EASILY accessible transport (fantastic, right to the CBD) and a train leaving every ten minutes – see my assessment above – then that is 138,700,000 trips per year.

        IF ticket prices are incredibly cheap, and the service is fantastic, and easily accessible – then MORE people will use the service. It will actually grow the usage – this is the ENTIRE point which people simply gloss over.

        At $790 a ticket it would be paid off in one year.

        At $79 a ticket it would be paid off in ten years.

        Seems pretty damned reasonable to me.

      • Jason says:

        138 million trips per year? Are you off your rocker mate? What could that possibly be based off? Current combined air travel on the east coast is only on the order of 17-18 million trips per year. Not all of these trips would be guaranteed to move to HSR either. If you’re assuming short road trips (eg. Brisbane-GoldCoast, Newcastle-Sydney) would move to HSR, then I would kindly suggest you think again, because driving such distances really doesn’t actually cost that much money if you have a half reasonable car (ie. < 6 cyl) and the convenience of having a car at your destination is considerable given lack of public transport in these areas.

        You've got to be realistic about demand. Fluffing patronage numbers doesn't help anyone – just look at what's happened with the number of public-private toll roads around the place. If you read the article you would see that the private sector isn't so dumb on this – they're seeking a guaranteed minimum patronage before even looking at financing such a project. If those numbers aren’t met then the taxpayer is on the hook!

    • Ronin8317 says:

      At 114 billion dollars, assuming an interest cost of 5%, that is 5.7 billion dollars. The number of passengers flying between Sydney and Melbourne right now is 7 million. So the interest rate (let alone repayment) is $814 per passenger. A plane ticket from Sydney to Melbourne is around $100.right now.

      To give you a comparison, the HSR between Shanghai and Beijing have an annual revenue around 2.2 billion US, and they make a modest profit.

      This is not to say that a HSR can’t be built, we need the construction cost to come down by a factor of 10. It need to cost 10 billion dollars instead 100 billion dollars,

    • tmarsh says:

      Brilliant

    • Mark Heydon says:

      Your traffic numbers are ridiculous. 180,000 passengers per day? Clearly I am not getting your sense of humour.

      My back of the envelope calculations can’t get this to make financial sense with anything approaching realistic assumptions. It is a money pit and would be for its entire lifetime.
      https://docs.google.com/spreadsheets/d/1DfSgPz079RhDCg1b4lhzBvv-tj9mIj_36GfGmkHW1eU/edit?usp=sharing

      • Leviathan says:

        Well they would when you have skewed everything to confirm your cognitive bias.

        Here is a much better summary.

        5 trains per hour (easy), that is 380,000 trips per day resulting in ticket prices of $70 return means the ENTIRE project is paid off in ten years.

        Why would I even bother getting on a plane, with all the ridiculous hassle, when I can save time, travel in absolute comfort, do business, whatever for half the price.

        Plus the massive increase in usage from travellers to the regional areas, increasing tourism and trade as well.

        Sorry – you just can’t even seem to FIND the back of envelope.

      • Mark Heydon says:

        5 trains per hour might be 380,000 seats, but it isn’t 380,000 paying passengers. Is this so hard to understand?

  8. Stomper says:

    Alex Malley FCPA, Chief Executive of CPA Australia was on ABC Breakfast this morning floating the same thing.

    You would think he would have more sense?

  9. spleenblatt says:

    why should residents in Adelaide, Northern Queensland, Darwin, Alice Springs, Hobart, Perth, or a range of other regional towns … be called upon to fund (via their taxes) a massively expensive project that provides no benefit to them and minimal (if any) productivity benefit to the nation?

    Because without wishing to mock our venerable Prime Minister, this is Team Australia. If we wish to consistently apply your logic to every public endeavour as we would a new rail project which will be privately financed, anyway and funded by users, then that is where the whole Team starts to unravel.

    People start playing their own game, focus on their own objectives, stop thinking about how they can help their team mates out, resent having to share the ball, and before you know it you are at the bottom of the ladder, ousting your CEO and Board every three years, trading your best players for some has-been show pony, and doubling the cost of Team membership, beer and pies to cover lost revenues.

    Pretty soon you are in a death spiral and accept a low ball offer from a mining magnate to buy your Team out.

    Time for us to start pulling together and stop worrying about scoring bonus productivity points. We’ve got to stay on the field, work as a team, and the scoreboard will look after itself.

    Go Team Australia ! Build it, you good thing !

    • Leviathan says:

      Well said.

    • Jason says:

      Because without wishing to mock our venerable Prime Minister, this is Team Australia. If we wish to consistently apply your logic to every public endeavour as we would a new rail project which will be privately financed, anyway and funded by users, then that is where the whole Team starts to unravel.

      Assuming they’d get any private funding which is HIGHLY unlikely without baking taxpayer liability for patronage numbers into the cake.

    • migtronix says:

      Masterfully rendered and a rousing call, bravo!

  10. tsport100 says:

    So the entire argument against is distance v cost?? Australia is ‘different’??

    Yet the now almost complete Hume Hwy dual carriageway upgrade has no toll and is considered a better investment??

    What costs more per km to construct, multi-lane expressways or rail??

    The lack of high speed rail investment in Australia is an embarrassment for a supposedly advanced economy. The regional rail network in general is so slow that user numbers will remain low as travelling by car takes less time. (the roads keep getting modernised to FREEway standard but the rail gets nothing)

    Current intercity rail travel times: Melb to Syd is 12 hours – Syd to Bris is 14 hrs. Travelling by road takes as much as 25% less time!!

    Yet as the population ages and vehicle ownership costs continue to rise (and will rise further if the AU is devalued) there is a need for a reasonably fast and affordable rail system.

    At least a rail system has a user pays revenue model, unlike the 1,000s of kms of FREEway upgrades.

    It seems NIMBYs rule this blog!

    • Jason says:

      Sydney to Brisbane in 10.5 hours? I suppose if you don’t stop – a highly dangerous route to take.

      Then again, why not just fly? Only $100, $150 if you include getting to the airport. Takes only 90 minutes!

      By the way – the user of the freeway and highway system DOES pay – what do you think fuel excise is? Granted they never should have froze indexation..

  11. doctorX says:

    “In Europe and Asia, with high density populations, HSR can work well. But in a large, sparsely-populated country like Australia, it makes little sense.”

    this is completely false statement. What makes our HSR unprofitable is high cost. If we build HSR at prices similar to those in Europe or Asia it would be very profitable. The Madrid–Levante high-speed rail line is 940 kilometres long with an estimated cost of 12.5 billion euros ($18b). This price would make Melbourne to Sydney line not only financially feasible but very profitable. with 15 million potential passengers a year, cost of fares could be lower than air tickets.

    • Jason says:

      Good to see someone else pointing this out. The geography has a part to play on costs – an estimated 25% of the cost outlay is on building tunnels through the great dividing range and blue mountains. Perhaps if we’d still had a local steel industry that would’ve allowed us to bring down costs a bit, unfortunately it’s been left too late now.

      A lot of people in support of the HSR don’t seem to have any numbers or CBA to back them up.

  12. joeflood says:

    Well I must say when this idea was first floated by my bosses Paul Wild and John Brotchie – was it 1981-2 – I laughed my head off. I even wrote a pantomime melodrama set around the notion and had it staged in CSIRO, with theme song “the Wild and Brotchie Choochoo”

    Pardon me boys, is that the Wild and Brotchie Choochoo
    Magnetic track, it runs to Sydney and back
    — Never a bend, until we get up to the very end,
    Choo choo wild and woolly you’re for me.

    Nevertheless, it has a certain attraction and almost came off except that the govt woudln’t give the BHP consortium any tax breaks.

    • St Jacques says:

      /Applause.

      And anyway it’s so backward looking, so 20th century! As more and more business is done on-line the place to invest big infrastructure capital is NBN.

    • migtronix says:

      Now I’m laughing my head off. Cheers.

  13. erusso says:

    I like the idea but I am unsure the that economics stack up.

    If however the government could capture all/part of the uplift in real estate along the corridor it could probably be paid for. Why should property owners earn a free rent. Some land could be compulsory acquired then rezoned – not the other ridiculous way they do it.

    • Rusty Penny says:

      Why should property owners earn a free rent?

      That’s the reason the Liberal party exists

  14. Ronin8317 says:

    On the subject of outlandishly expensive Australian infrastructure, Dallas recently opened the light rail link from their airport to the city CBD.

    http://blogs.crikey.com.au/planetalking/2014/08/19/dallas-does-a-light-rail-link-to-dfw-for-a-mere-us-2-50/

    Cost per trip from airport to CBD is only $2.50 US!!

    The cost of DART is funded by a 1% sales tax.