The Coalition’s roads to nowhere

ScreenHunter_3539 Jul. 31 08.24

By Leith van Onselen

Business groups have taken aim at the Abbott Government’s road funding fettish, arguing that Australia’s dilapidated rail freight network is in desperate need of upgrading and is hampering the nation’s export competitiveness. From The AFR:

Grain exporters are becoming increasingly frustrated with Australia’s poor freight rail networks, claiming lack of investment in rail infrastructure, which has reduced haulage loads and created track congestion, is forcing more grain onto trucks…

GrainCorp’s supply chain manager, Matthew Warrington, told an industry conference in Melbourne on Tuesday railing grain to ports for export on the east coast of Australia now cost $10 a tonne more than in Western ­Australia, and $20 a tonne more than Canada.

A decade ago, 90 per cent of grain exported by GrainCorp arrived at ports by train but today only 10 per cent does, creating some 44,000 extra truck ­journeys annually.

Agricultural companies say farmers would transport more commodities by rail if networks were better.

It is true that Australia’s freight railways have suffered from decades of neglect. Supply chain costs make up a major component of total cost in marketing Australian products overseas, and the decline in rail freight competitiveness, therefore, weighs directly on both productivity and Australia’s export competitiveness.

Whether investing a significant amount of taxpayer funds into freight rail is the best use of taxpayer funds is a moot point. Arrangements would obviously need to be put into place to ensure that the costs of such investment doesn’t fall entirely on the taxpayer, whereas the lion’s share of the benefits flow to private firms (e.g. producers and private above-rail operators). Setting access charges at an appropriate level to both recoup the cost of the investment, while still providing rail operators and exporters with net benefits would be key to ensuring its success.

What the above does highlight, however, is the need for rigorous cost-benefit analysis of alternative uses of scarce taxpayer funds, to ensure that investment takes place only on projects that provide the biggest pay-offs to the economy and society as a whole.

This is where the Abbott Government’s infrastructure policy falls down. By biasing roads over rail, the Coalition is in effect “picking winners” and not basing investment on objective cost-benefit criteria that chooses individual projects on merit, rather than mode.

On a related matter, there may also merit in introducing genuine mass-distance-location charging for road freight (explained here), so that trucks are charged based on their weight, distance traveled and the roads they used. Such charges are already used for rail freight, and reforms along these lines could help to create a more level playing, and remove distortions on modal choice that promote the over use of road freight at the expense of rail..

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Comments

  1. ceteris paribus

    So what is the motivation for Toni’s ineffective “road fetish”? Is it a big winner with the petrol head voting constituencies in marginals?

    • Exactly.

      What we need is measured objective analysis, but all get is we-need-more-roads from the conservatives and we-need-more-rail-and-public-transport from the left.

      The ideal probably lies somewhere inbetween.

    • Strange Economics

      That and the construction industry lobbyists, and the fund managers and banks that do the PPP joint development funding with a govt guarantee, and the trucking industry. Roads effectively subsidise the trucking industry. Quite a lot of lobby groups benefit more from roads.
      If they did cost-benefit analysis a lot of pork barrels which get more votes/party support wouldn’t win. So analysis is not a good idea from the party point of view.


      • Roads effectively subsidise the trucking industry.

        So a wealth transfer from all taxpayers to Lindsay Fox.
        Funny how if you look at anything government funded in this country (probably every other country too) you can find a billionaire receiving the country’s taxes.

      • StatsSailor, the beneficiaries are landowners advantaged by shrinking distance, which becomes embedded in land prices, while the cost is to sucker taxpayers.

        The model breaks down when roads to nowhere don’t lift land prices and therefore help no one except the bitumen contractor. This is the problem Abbott faces. Japan famously gold-plated their roads and bridges to moderate their land price downturn – to no avail.

    • drsmithyMEMBER

      Trains put you at the mercy of communist central planners who dictate where you can go and when.

      Cars allow independent capitalists the freedom they need to go wherever they want, whenever they want.

      • drsmithyMEMBER

        Traffic lights are a crypto-communist trojan horse, I guess.

        Traffic lights, like speed limits, are just bureaucratic red tape impairing the efficiency of truly free-flowing traffic !

      • suburban dream, car culture and lack of “communist” public transportation also made many (especially Americans) completely dependant on cars – nothing is within walking distance, to survive you need a car (also petrol, oil, tyres and other oil based products)

        free from government oil big business slaves

    • GrossConsumerProduct

      Tony wants to build roads to wedge ALP between the Greens (the party of the do nothing) and the Coalition (the do something party).
      The Greens are better at grass roots, NIMBY protest than ALP, which weakens the ALP. Particularly in the inner urban seats around East-West Link in Melbourne, for example.
      Tony’s transport policy has nothing to do with transport and everything to do with (what he knows) politics.

  2. Although … if we’re talking about the transport of agricultural commodities, that takes place over a minority of the year, while roads are used all of the year, and are essential to any hopes of a more decentralised population.

    Rail will probably be part of a network, where roads are still needed to bring the goods to a point where there is sufficient density of goods to justify itself. Casting the choice as ‘roads are dumb’ doesn’t work.

    One of the interesing things I learned from doing some work for the organisation that runs the railway tracks here is that the frieght route to and from Perth is one of the few anywhere that is genuinely profitable. Rail will always demand public funding, so pointing out that one or the other uses public money evokes a spat between the pot and kettle.

    In the (sub)urban context, road spending on mega roads into the CBDs is lame, when the metro areas and the jobs in them are dispersed. Perhaps more discussion of the funneling of traffic onto main roads needs some re-thinking, away from a hierarchy of roads and more toward a network of roads, which might be cheaper, more robust, and provide more benefits to people in areas local to them than freeways into the CBD.

    Random: Did anyone see the article on adelaide now about how the government thinks it would be a good idea to double Adelaide’s population by 2040.

    • It’s called intermodal transport and it is seemingly the Voldemort of Australian infrastructure. Send the containerised freight from the port over rail to the distribution node to be transferred onto trucks for the last 10-20km. The whole thing can be totally automated quite easily, and has been done in a number of European cities already.

      I worked for a little while for a guy putting together plans and strategies to overhaul eastern Australia’s intermodal network, he was quite a visionary guy but obviously not built for the Government bureaucrat mindset. While some of the plans were very expensive (equivalent to NBN) even small stuff, that was a fraction of current spending on tunnels, which would alleviate major bottlenecks were ignored or put into the too-hard basket because of the number of organisations that would need to be involved (Stevedores, Ports Corporations, Councils, State Govt, Carriers, etc.). It was really disheartening to see first hand.

      Bureaucrats are too afraid of upsetting the apple cart to propose such plans, they need to come from the body politic.

      • drsmithyMEMBER

        It’s called intermodal transport and it is seemingly the Voldemort of Australian infrastructure. Send the containerised freight from the port over rail to the distribution node to be transferred onto trucks for the last 10-20km. The whole thing can be totally automated quite easily, and has been done in a number of European cities already.

        +1

        I have never understood how or why long-distance trucking on a large scale even exists. Rising fuel prices must kill it eventually, surely ?

      • @DS,

        It’s probably not a coincidence that the time frame the farmers are complaining has seen rail freight plummet is also a time frame which has seen a very strong AUD. If it happens that there is a change in Australia’s terms of trade which sees the AUD fall back to the long term average, rail freight could suddenly get a lot more attractive.

        wrt specifically grain, the reverse process (truck from producer to regional terminal, rail from terminal to port) does intuitively seem far more efficient than trucking from farm to port.

  3. Freight rail should be one of the pillars of infrastructure spending in this country. Intermodal the most efficient (in terms of mass moved/distance/energy) way to move bulk goods over large distances. Instead it’s kept locked in the basement while pork-barrel roads in marginal electorates take the limelight and urban concentration intensifies (largely due to lack of services out in regional towns).

  4. Actually, there has been a lot of money spent on railway infrastructure in Australia in the past few years. A lot of this as stimulus during the GFC. Howard and the states formed the Australian Rail Track Corporation in the late 90’s, but didn’t give them much money to do anything besides plan. The consequence unintended by Howard was that when the GFC hit, the ARTC had a load of business cases ready to go, and so, many actually were funded.

    Of course, the farmers want the government to pay for the infrastructure to take their produce, and a lot of that was not high on the priority list for major upgrades identified by ARTC.

    It is a sad commentary on the media that a lot of the stimulus spend WAS on well targeted rail infrastructure, but almost universally not reported on, but that pork for farmers gets a headline.

  5. Stephen Morris

    As explained yesterday, under the Westminister system of “elective dictatorship”, Cabinet Minister implement the policies which benefit the Courtiers who attend them.

    The sale of tax farms over road tolls (which for cosmetic reasons are packaged up into a road building projects) is one of the most effective ways of enriching Courtiers from the investment banking and construction industries.

    This is not going to go away just because it’s economically inefficient!

    To address these problems one needs first to address the underlying problems of constitutional political economy: Australia’s corrupt system of elective government.

    – – – –

    p.s. I might add that the privatised grain handling monopolies are in no position to complain about unnecessary road transport. In some cases they have closed local receiving depots and physically destroyed the infrastructure (to ensure that they could not be subject to a purchase offer from a potential new entrant) thereby requiring farmers to bear the cost of road transport to larger regional depots. In some cases farmers have been forced to build on-farm storage to replace what was perfectly good existing infrastructure.

    It is a classic case of exploition by privatised monopolies.

  6. surflessMEMBER

    Unfortunately, two groups get infrastructure, marginal seats and mining companies, anyone else can get stuffed.

  7. Well I guess the government could always bribe Malaysian, Indonesian or Vietnamese officials for ‘pork contracts’ if their plans don’t work…

  8. A special interest group puts in for a piece of the infrastructure pie. Understandable and not without merit.

    More generally I support expenditure on roads as a key (but not sole) component of any national infrastructure program.

    Probably good to see cost benefit analysis at least being discussed – particularly as it appeared a no-go area when it came to our biggest single infrastructure investment – the NBN.

    • Exactly how would you propose that the value of future uses of the NBN be incorporated into the analysis?

      Benefit/Cost analysis is fine where costs and benefits are quantifiable, but where the costs or benefits are not quantifiable, the outcome can be anything the analyst wants…. and therefore crap.

      In that case, using the electoral process as a form of crowdsourcing the benefits is probably the nearest thing to a reasonable approach. Especially if those voting are paying.

      Having said that, we voted for the Coalition whose policy of demolishing the NBN was explicit. So we got what we deserved.

      • drsmithyMEMBER

        Having said that, we voted for the Coalition whose policy of demolishing the NBN was explicit.

        If by “we” you mean less than half the population…

    • General Disarray

      Probably good to see cost benefit analysis at least being discussed – particularly as it appeared a no-go area when it came to our biggest single infrastructure investment – the NBN.

      Never a no-go area. Just totally different inputs to a CBA for a road or rail project. Fairly easy to model for them in comparison.