Posts Tagged ‘Brisbane’

VIDEO: Shaun Micallef: Australia’s NBN proposals

A High Speed Rail (HSR) network connecting Melbourne, Canberra, Sydney, and Brisbane has been shown to create more benefits than costs while fares would pay the operating costs of trains on such a network. Yet there seems little appetite in the government to build one. Initially, this may appear to be due to the high initial costs of $114bn to build it; but on closer inspection it may be necessary to re-evaluate the way we look at HSR as something for regional Australia rather than just for travel between the capital cities.

Cost benefit analysis suggests that HSR is worth building. The Phase 2 Study found that HSR has a BCR (Benefit Cost Ratio) of 1.1 when a 7% discount rate is used. Thus, the benefits of building HSR are greater than the costs. However, the bulk of these benefits would accrue to the users of HSR in the form of time savings. In 2028 dollars, HSR users would receive $141bn of the total $180bn of benefits that HSR is expected to create. An additional $14bn of benefit go to operator benefits, which help to pay the operating costs and up to $16bn (14%) of infrastructure costs, but this still leaves the government paying for $98bn (86%) of infrastructure spending on HSR. (Sources: HSR Phase 2 Study Executive Summary, pages 42, 9).

This means the government would be subsidising the travel costs of HSR users to the tune of $98bn. This is unlike the NBN, where the initial infrastructure spending is expected to be eventually recouped. The majority of users (65%) would be leisure travellers; however the bulk of the benefits would be realised by business travellers (the remaining 35%), who would receive $93.6bn of the $141bn of benefits. That is because of the higher value attached to their time. This point was raised by Alan Davies in Crikey, who proposed that “if the [time] saving is so valuable to business travellers, they should pay the full cost of constructing the line”. The Phase 2 Study even recognises that these travellers would be willing to pay a higher fare:

“Increasing the cost of fares would increase the financial returns and reduce the funding gap, although doing so would reduce the number of people using the system. Even so, the economic benefits of the program would remain positive.”Source: HSR Phase 2 Study Executive Summary, page 9

Higher fares would have the benefit of reducing the government’s cost below $98bn. However, it would do so by impacting leisure travellers the most, with many choosing not to travel on HSR. Business travellers would mostly still continue to use HSR, but the loss of many leisure travellers would see the total benefit of the project reduced. Although the Phase 2 Study claims the economic benefits in such a situation would still remain positive (i.e. a BCR greater than 1), this may be based on the less conservative 4% discount rate, rather than the more conservative 7% discount rate that is normally applied to transport infrastructure projects. The 1.1 BCR that a 7% discount provides is dangerously close to falling below the 1.0 required for the project to be economically viable. Therefore, as it stands HSR does not appear viable without a $98bn government subsidy, most of which would flow to business travellers who least need government welfare.

An alternative perspective

The Phase 2 Study emphasises that HSR accrues more benefits as time progresses, given the growth in population. If governments work collaboratively and actively to preserve potential HSR corridors then HSR cost increases should be limited. Therefore, HSR becomes more viable as time progresses with benefits growing faster than costs.

Since HSR gains most of its benefits from additional users, one way to increase the viability of HSR is to add additional population to the corridor. This would be much easier to achieve around the regional stations where constraints are much more limited than in the major cities. HSR could act as an enabler, allowing a greater number of people to live and work in regional areas without becoming isolated from those services only available in major cities. The Phase 2 Study’s assumptions of modest population growth in regional towns situated on the HSR route show that this was not considered as part of the feasability for HSR.

In fact, the Phase 2 Study finds that HSR will produce $73.2bn in benefits from intercity travel, more than the $67.5bn in benefits from regional travel (Source: Department of Infrastructure, page 43). This finding that most of the benefits accrue from intercity travel rather than regional travel suggest that not enough is being done to massively develop regional Australia. HSR provides this opportunity which in turn makes HSR more viable.

Proposed East Coast High Speed Rail alignment. Click to enlarge. (Source: Department of Infrastructure, page 17.)

Proposed East Coast High Speed Rail alignment. Click to enlarge. (Source: Department of Infrastructure, page 17.)

 

This idea was floated by the ABC show Catalyst in its 4 December 2014 episode “Future Cities“, in which Dr Julian Bolleter says:

“So, what we think is really important, as the capital cities grow beyond mid-century, is that we begin to think not so much in terms of mega cities, but mega regions. Essentially, it means chains of smaller cities connected with very good public transport infrastructure. So we could conceive of a mega region running from Brisbane to Sydney through Canberra to Melbourne which is bound together by a high-speed rail link, and those cities will have access to affordable land, and they’ll also be able to be designed from the ground up around the principles of 21st-century sustainability. High-speed rail can travel at about 350km/h, so there’s no city along this mega region that is further than two hours commute on a high-speed train from a capital city.”Source: Dr Julian Bolleter, ABC

Achieving this would require us to rethink how HSR would work in AustraliaShadow Transport Minister Anthony Albanese recently wrote on HSR in which he concluded one well thought out and one not so well thought out point. His statement that “people could live in regional Australia and commute to work in the city” was not well thought out; this is true only to the extent that people can currently commute to work in Sydney by flying into Kingsford-Smith Airport, or any other major city airport. However his point that “companies could establish themselves in the regions, taking advantage of lower costs but comfortable in the knowledge the city was a short train ride away” hits the nail on the head.

In order for HSR to be a success in spurring regional development people need to live, work, and spend leisure time in the same place. Employment opportunities as well as services that are needed on a day to day basis such as health and education would be provided locally. But the existence of HSR provides convenient access to services which are not needed day to day, such as medical specialists or major cultural festivals.

If the 1,700km HSR corridor had a station every 100km or so along major regional cities, and these cities were allowed to grow to 800,000 residents each (as Dr Bolleter suggests in the Catalyst video), then it would be roughly equivalent to a doubling of the existing populations of Sydney and Melbourne combined. Once it becomes prohibitively expensive to retrofit the necessary infrastructure into our growing major cities, it will become cheaper to build it in regional cities even after the cost of HSR is factored in. Australian cities have not reached that point yet, but it remains a question of when rather than if they do reach that point.

VIDEO: Malcolm Turnbull announces new Cabinet (ABC News)

The new Prime Minister Malcolm Turnbull will abandon the ban on urban rail funding and have a Minister for Cities instead of an Assistant Minister for Infrastructure. In a 14 minute press conference yesterday announcing his new ministerial line up, Mr Turnbull dedicated almost 3 minutes to cities and urban transport in which he stated that “infrastructure should be assessed objectively and rationally on its merits” and that “there is no place for ideology here at all”.

Malcolm Turnbull in Perth before becoming Prime Minister, about to take the train to Mandurah. Click to enalrge. (Source: Malcolm Turnbull.)

Malcolm Turnbull in Perth before becoming Prime Minister, about to take the train to Mandurah. Click to enalrge. (Source: Malcolm Turnbull.)

Mr Turnbull, an avid promoter of public transport who still intends to catch public transport as Prime Minister, is famous not just for taking public transport but also announcing to the world that he takes public transport.

“Livable vibrant cities are absolutely critical to our prosperity. Historically the federal government has had a limited engagement with cities. And yet that is where most Australian live. It is where the bulk of our economic growth can be found. We often overlook the fact that livable cities, efficient productive cities, the environment of cities are economic assets.

You know, making sure that Australia is a wonderful place to live in, that our cities and indeed our regional centres are wonderful places to live is an absolutely key priority of every level of government. Because the most valuable capital in the world today is not financial capital, there’s plenty of that and it is very mobile. The most valuable capital today is human capital. Men and women like ourselves who can choose to live anywhere. We have to ensure for our prosperity, for our future, for our competitiveness that every level of government works together constructively and creatively to ensure that our cities progress.

That federal funding of infrastructure in cities, for example, is tied to outcomes that will promote housing affordability. Integration is critical. We shouldn’t be discriminating between one form of transit and another. There is no ‘roads are not better than mass transit’ or vice versa. Each of them has their place. Infrastructure should be assessed objectively and rationally on its merits. There is no place for ideology here at all. The critical thing is to ensure that we get the best outcome in our cities.

Now of course, we have a Minister for Regional Development in the Deputy Prime Minister Warren Truss. But cities have been overlooked, I believe, historically from the federal perspective. So within the Ministry for the Environment I’m appointing the Honorable Jamie Briggs MP to be the Minister to Cities and the Built Environment to work with Greg Hunt, the Environment Minister, to develop a new Australian Government agenda for our cities in cooperation with states, local government, and urban communities.” – Malcolm Turnbull, Prime Minister (Press Conference, 20/09/2015)

The former Assistant Minister for Infrastructure Jamie Briggs will become the Minister for Cities and Built Environment. Transport and urban development consultant Alan Davies points out that this moves the cities portfolio out of the Department of Infrastructure, where cabinet member and Minister for Infrastructure Anthony Albanese held responsibility for the then Major Cities Unit; shifting it into the Department of the Environment. Mr Briggs will not be in cabinet, and will instead rely on his senior: the Minister for the Environment Greg Hunt.

Mr Davies raises concerns that yesterday’s announcement was mostly symbolic and that he wants to see action, saying “I don’t think it can just be assumed the appointment of Mr Briggs heralds a new dawning for cities that goes beyond rhetoric”. He adds that Mr Briggs “is neither personally influential – he’ll have to rely on Greg Hunt’s efforts in Cabinet – nor pushing policies that most in his party think are critical issues. Mr Briggs administrative support will come from the Department of Environment; in terms of the Commonwealth’s influence on urban policy that’s a much less relevant portfolio than Infrastructure”.

This is a big turnaround from the previous Prime Minister, Tony Abbott, who refused to fund urban commuter rail and abolished the Major Cities Unit. Mr Abbott argued that the funding of public transport was not in the government’s knitting, preferring to leave this to the states. He promoted himself as the infrastructure Prime Minister, committing billions of dollars to transport infrastructure so long as that infrastructure was roads or freight rail. This was consistent with the views on transport outlined in his 2009 book Battlelines.

“…there just aren’t enough people wanting to go from a particular place to a particular destination at a particular time to justify any vehicle larger than a car, and cars need roads.”Tony Abbott, Leader of the Opposition (Battlelines, p. 174)

But this was not a unanimously held view within the Coalition. The Deputy Prime Minister Warren Truss, who also holds the title of Minister for Infrastructure, has voiced his willingness to provide funding for rail projects: “The Federal Government is quite happy to fund metro rail projects” (Source: Herald Sun, Regional Rail Link unites state and federal MPs, 14/06/2015). Meanwhile, the Commonwealth Government has been willing to provide funding for urban rail projects as part of its asset recycling program; under this program it has provided funding to the NSW and ACT Governments for the Sydney Metro and Capital Metro projects.

NSW has a number of rail projects currently being planned which lack funding: the CBD and South East Light Rail extension South of Kingsford, light rail around Parramatta beyond the first line currently being planned, and a heavy rail line out to Badgerys Creek from the current South West Rail Link terminus at Leppington. But, these projects are all still in the planning phases and none will be shovel ready for many years. So the real test for the change of policy is likely to come from outside of NSW, with projects like the Melbourne Metro in Victoria and Brisbane’s Cross River Rail in Queensland.

However the most immediate project, which is both ready to go from a planning perspective and could be completed in the next few years, is the extension of the Gold Coast light rail. The Queensland Government is seeking to complete it in time for the 2018 Commonwealth Games, but has been unable to find sufficient funding for it. The initial line was funded jointly by the Commonwealth, Queensland, and Gold Coast Governments. The extension has the support of local MP Stuart Roberts, a member of the LNP and Turnbull supporter, and also the Queensland Government.

Queensland Deputy Premier Jackie Trad has called on Mr Turnbull to commit to funding the extension within a week, otherwise she argues that construction will not be able to commence in time to complete the project before the start of the 2018 Commonwealth Games. If this is the case, then Mr Davies’ question as to whether Mr Turnbull’s move is purely symbolic or not will be answered very soon.

Discussion on the need for and how to achieve an infrastructure boom, particularly in light of a fading mining boom, is continuing.

The need for an infrastructure boom was outlined here on this blog last week, and a few days after in an article on The Conversation, by Peter Sheehan from the University of Victoria. In it, Prof Sheehan explains that the mining boom has three phases: (1) rising resources export prices relative to import prices, (2) an expansion in mining capacity via investment in the resources sector, and (3) an increase in the quantity of resources exported. Each of the three leads to the next, later dropping back due to cause and effect. For example, rising prices of iron ore eventually lead to a greater quantity of iron ore exports, which brings iron ore prices back down again. It is the first two phases which have peaked and beginning to drop back down to normal, while the third is starting to pick up steam.

Prof Sheehan predicts that mining investment, the second of the three phases, has just recently peaked at $100 billion in 2012-13, but could fall to about half that in the next two years. Demand management is therefore needed to maintain investment and employment, thus preventing a recession. Given Australia’s infrastructure deficit, which he estimates at $700 billion; he calls for finding ways to commit to $200 billion in infrastructure projects over the next few years, thus filling the expected $50 billion a year hole left by falling mining investment. With state governments lacking significant revenue generating opportunities, he calls for federal government involvement; if not through direct funding then via guarantees. Other funding options include the sale of existing assets to build new ones, known as “recycling assets”; or through the private sector.

The requirements for private sector involvement in building infrastructure was recently discussed by Garry Weaven, Chairman of the investment company Industry Funds Management (the relevant part begins 3 minutes into the 10 minute interview). Mr Weaven’s main concern is about how much risk the private sector bears in relation to infrastructure projects. Recent financial failures such as the Cross City and Lane Cove Tunnels in Sydney or the CLEM7 and Airport Tunnels in Brisbane have made the private sector wary of new toll road projects. He points out that “[these deals have] been put together by syndicates who are only concerned to extract value out of making the deal happen, not out of the long term value of the project”. However, the value he refers to appears to be value to the private investors, rather than to the community. While such projects were a financial failure from the investor’s perspective, the community obtained brand new pieces of infrastructure in each case, often at no cost to the taxpayer due to funding coming from user access fees.

However, Mr Weaven suggests that there are around $50 billion in Australian super funds and foreign pension funds available over the next 5-10 years which could be used for infrastructure in Australia. This would go a long way towards the $200 billion target that Prof Sheehan called for in The Conversation article above. But much of this can only be accessed if investor concerns about risk are addressed.

When asked what could be done to reduce investor risk, Mr Weavan provided a number of possibilities; such as guarantees, cash, equity, or loans. But his focus was on having governments build a project first in order to prove traffic levels with a given toll level, then selling it to the private sector. This is the model that is being used for the NSW Government’s WestConnex toll road, a project that Mr Weaven also praised for being funded by the sale of Port Botany (an example of the asset recycling mentioned earlier).

Map of the proposed WestConnex alignment showing it connecting to the City West Link. (Source: WestConnex – Sydney’s next motorway priority, Infrastructure NSW, p. 17)

Map of the proposed WestConnex. Click to enlarge. (Source: WestConnex –
Sydney’s next motorway priority, Infrastructure NSW, p. 17)

Such proposals are not magic bullets to every infrastructure project, the devil is in the detail. Indeed, the inability of public transport to operate at a profit means those projects will almost certainly have to be entirely built and owned by the government, though franchising of their operations to the private sector is an option, as currently exists with buses and ferries in Sydney. With this in mind, $50 billion would put a serious dent in the infrastructure Australia needs in coming years.

But it will not pay for all Australia’s infrastructure needs. Nor can state governments pay for the remaining shortfall on their own. The federal government, with its superior revenue raising powers, needs to play a key role in paying for infrastructure. And here it is disappointing to see that Opposition Leader Tony Abbott continue to refuse to fund any urban rail infrastructure projects.

Mr Abbott originally claimed on April 4 that the Commonwealth has “no history of funding urban rail”. This was soon proven to be incorrect, as while the Federal Coalition may have had no history of funding urban rail the Commonwealth Government absolutely did. When asked about it at a press conference in Western Australia last week, Mr Abbott accepted that the current Federal Government had funded urban rail, but that this was the first time a Commonwealth Government had done so. This is also inaccurate, given that Commonwealth funding for urban rail dates back to the early 1990s, when the Building Better Cities program funded such rail projects as the Pyrmont Light Rail or the Y-Link for the Cumberland Line, both in Sydney. Urban planning and public transport were so neglected during the inbetween years of the Howard Government that when the Rudd Government took power in 2007, Infrastructure Minister Anthony Albanese claimed that he had found “not a single urban planner in the entire Commonwealth Public Service – not one”.

The federal Liberal Party's transport policy consists exclusively of road projects, with no committments to public transport. Click to enlarge. (Source: Our Plan Real Solutions For All Australians, Liberal Party, page 32)

The federal Liberal Party’s transport policy consists exclusively of road projects, with no committments to public transport. Click to enlarge. (Source: Our Plan Real Solutions For All Australians, Liberal Party, p. 32)

Mr Abbott has previously outlined the need for additional infrastructure, and he should be commended for recognising this problem. He also stated his view on Infrastructure Australia’s (IA) role:

“Under the Coalition, Infrastructure Australia would assess all these projects, publish cost benefit analyses for them, and provide a recommended order of priority for Commonwealth funding. If the government varied Infrastructure Australia’s priorities it would need to argue a national interest case for doing so against the yardstick of what makes the most economic sense.”Tony Abbott (April 2011)

However, by failing to argue the national interest in both promising to fund road projects that are not on IA’s priority list and then ruling out the funding of urban rail projects that are on its priority list, Mr Abbott has not lived up to his earlier commitment to lessen Australia’s infrastructure deficit with an apolitical and evidence based approach. This is disappointing, and should be revisited by the Federal Coalition with a view to funding urban rail projects.

The second phase of the federal government’s High Speed Rail (HSR) study, released earlier today, finds that a 1,700km long East Coast HSR line could cost $114bn and will not be completed until the second half of this century. The line will not require any ongoing government subsidy to pay for operational costs or asset maintenance, with fares comparable to the equivalent air fare. The report finds a benefit to cost ratio of 2.3 (indicating that every $1 spent provides $2.30 of economic value), which is much higher than in the report commissioned by the Greens earlier this year that reported total benefits of $48bn, an amount less than the $114bn cost.

Cost and completion dates for HSR broken down by stage, based on the optimal timetable. Click on image for higher resolution. (Source: High speed rail study phase 2 report - Executive Summary, Department of Infrastructure and Transport, page 20)

Cost and completion dates for HSR broken down by stage, based on the optimal timetable. Click on image for higher resolution. (Source: High speed rail study phase 2 report – Executive Summary, Department of Infrastructure and Transport, page 20)

If built, the project will be broken up into stages, with the Sydney to Canberra leg being the first. Even then, the earliest that portion will be operational is 2030, with an optimal commencement date of 2035. Brisbane may not be connected to Melbourne until 2058. The 1,700km of track includes 144km of tunnels, with 67km of this in Sydney. All up, tunnelling accounts for about one third of the cost of this project. The line will require a 200m wide corridor.

Federal Infrastructure Minister Anthony Albanese was quick to dismiss the notion that this would eliminate the need for a second Sydney airport, pointing out that it was already congested and that overseas travellers will still require air travel. He also downplayed the possibility of medium speed rail, such as in Britain, arguing that journeys must be under 3 hours or else people will choose to fly instead and that this was why Britain was now upgrading its medium speed rail to HSR. He also accepted that the high construction cost was the most sensitive part of any potential HSR line and ruled out any funding for it in this year’s budget.

Cost benefit analysis shows that benefits would outweigh costs using both a 4% and 7% discount rate. Click on image for higher resolution. (Source: High speed rail study phase 2 report - Executive Summary, Department of Infrastructure and Transport, page 21)

Cost benefit analysis shows that benefits would outweigh costs using both a 4% and 7% discount rate. Click on image for higher resolution. (Source: High speed rail study phase 2 report – Executive Summary, Department of Infrastructure and Transport, page 31)

The cost, roughly 4 times the cost of the National Broadband Network, is the biggest hurdle to building HSR in Australia. The interest expense of such a capital outlay alone would pay for the Gonski education reforms into perpetuity, and probably deliver far greater social and economic benefits to the nation. The discount rate of 4% also seems low, given that even the federal government’s long term borrowing costs, but a much more conservative 7% still provides a benefit to cost ratio of 1.1. This is above 1.0, but only barely, and suggests that this money could be spent on other more worthy infrastructure projects – such as the backlog of urban commuter rail improvements which Opposition Leader Tony Abbott has ruled out funding.

Ultimately this was certainly a study worth undertaking, if only to confirm that Australia is not yet ready for HSR. However, it has done much of the preparation required for it, thus allows the federal government to revisit the idea again in 10 or 20 years time when some of the assumptions currently used may no longer be valid. But until then, the video below probably best describes HSR in Australia.

The federal Liberal Party's transport policy consists exclusively of road projects, with no committments to public transport. Click on image for higher resolution. (Source: Our Plan Real Solutions For All Australians, Liberal Party, page 32)

The federal Liberal Party’s transport policy consists exclusively of road projects, with no commitments to public transport. Click on image for higher resolution. (Source: Our Plan Real Solutions For All Australians, Liberal Party, page 32)

Opposition Leader Tony Abbott declared last week that he would be committing no funding to public transport ahead of this year’s election, despite having committed $4bn to road projects in Sydney, Melbourne, and Brisbane.

“We spoke to Infrastructure Australia and their advice was that the most pressing road priority in Melbourne was the east-west link. The Commonwealth government has a long history of funding roads. We have no history of funding urban rail and I think it’s important that we stick to our knitting, and the Commonwealth’s knitting when it comes to funding infrastructure is roads.”Tony Abbott, Federal Opposition Leader (4 April 2013)

His first point, about the highest priority road project in Melbourne, is correct because he is talking about road projects specifically rather than transport projects in general. However, according to Alan Davies at The Urbanist, the East-West Link road is only on Infrastructure Australia’s “Real Potential” stage, the second of four categories, while the Melbourne Metro rail project is in it’s top “Ready to Proceed” category. At best, Mr Abbott is asking the wrong question, at worst he is committing money to a project with a benefit cost-ratio of only 0.50 (i.e. the benefit is less than the cost), when he could be funding the Melbourne Metro with a benefit-cost ratio of 1.30 (figures from Alan Davies’ article linked to previously).

His second point, on the Commonwealth government having no history of funding urban rail, is just flat out wrong. As Daniel Bowen points out when listing just some of the urban rail projects funded by the Commonwealth, “perhaps the Federal Coalition has no history of funding urban rail, but the Commonwealth most certainly does”.

“I think all but the most car-centric person would see that in modern growing cities, you can’t move everybody around by road — that rail, particularly in inner-city areas, is much more efficient. Unfortunately unlike some of his Liberal colleagues (and unlike conservatives in such places as the UK), Tony Abbott does appear to be the most car-centric person. It comes down to this: if you want more people on public transport, provide more public transport. If you want more people on the roads, build more roads. Abbott is clearly backing the latter.”Daniel Bowen (5 April 2013)

The decision to fund road projects over rail is not a merit based decision, it is a politically based on (and one which I have criticised the Labor Party for doing in the past on both WestConnex and the Parramatta to Epping Rail Link). As a comparison, urban rail has received a majority of Infrastructure Australia funding when merit is used as the criteria.

“Fifty-five per cent of Infrastructure Australia nation-building money went to urban rail on merit.” –  Professor Peter Newman, Infrastructure Australia advisory board member (4 April 2013)

The state governments in Victoria, Queensland, and Western Australia, all governed by Mr Abbott’s Liberal-National Coalition, have also all publically voiced their opposition to his decision.

“We will continue to vigorously pursue federal government funding for this important infrastructure development.” – Denis Napthine, Victorian Premier (4 April 2013)

“Given the current Federal (Labor) Government’s support of $236 million for rail infrastructure at the Perth City Link and $3 million towards planning of the MAX light rail project, we expect that future Federal governments, whether Liberal or Labor, would consider the benefits of funding such important transport initiatives based on merit.”Colin Barnett, WA Premier (4 April 2013)

“The reality is if there is not federal funding for these projects, they cannot proceed, we cannot afford to do them alone. We’ll continue that process of lobbying the federal coalition and federal Labor.”Scott Emerson, Queensland Transport Minister (4 April 2013)

Feeling the heat, Mr Abbott later clarified his statement, pointing out that his government would still fund freight rail and interstate transport, and that it was only commuter urban rail projects that he was referring to. On his side is the division of powers set out in the Australian constitution, where the Commonwealth government is responsible for freight and interstate transport, leaving state governments responsible for urban transport. While Mr Abbott is well within his rights to follow a strict interpretation of the role of the Commonwealth government, it is also true that such a view would preclude federal funding of schools and hospitals, given that they are a state responsibility. This is why the days of health, education, and transport being funded solely by the states has now long gone.

This is where his argument starts to fall apart on constitutional grounds, and it becomes clear that it is ideologically driven. He seems much like American conservatives, who see public transport as a socialist means of transport “for the masses” requiring government subsidy while seeing the private motor vehicle as a form of transport that is liberating and free and more in line with their small government philosophy. He looks at the inner city areas which most heavily use public transport and sees Labor and Greens leaning voters, then at the car dominated outer suburban areas are where the swinging voters he needs live and decides that the politically astute thing is to build more roads.

“Public transport is generally slow, expensive, not especially reliable and still [a] hideous drain on the public purse…Mostly though…there just aren’t enough people wanting to go from a particular place to a particular destination at a particular time to justify any vehicle larger than a car, and cars need roads”Tony Abbott, Battleline, page 174 (2009)

Not all conservatives still think this way. NSW Transport Minister Gladys Berejiklian has successfully championed public transport despite opposition from Infrastructure NSW Chairman Nick Greiner and CEO Paul Broad, while London Mayor Boris Johnson is pushing an ambitious £913m expansion of his city’s bike network. They understand that you can’t build your way out of congestion with more roads and that, while roads play an important role, so does public and active transport. It’s disappointing to see that Mr Abbott hasn’t worked this out yet.

The financial collapse of Brisbane’s airport link tunnel last week adds to a growing list of failed road projects funded as a Private Public Partnership (PPP). Brisbane’s Clem7 tunnel, as well as Sydney’s Cross City and Lane Cove Tunnels have all gone into receivership following lower than predicted patronage and thus an inability for the operator to pay its debts. In each case the road continued to operate and was sold to a new owner at a discount price.

NOTE: You can also add Sydney’s Airport Line to that list of failed PPPs, but it’s a different case and so won’t be discussed here

As this is a private company, the financial burden is on the investors and lenders, rather than the government. Queensland Premier Campbell Newman commented that “one thing I’ll say about Airport Link is this is one decision…that the taxpayers won’t end up paying for, thankfully”.

There is nothing stopping the Queensland Government from being the one to buy the road, something which previous Queensland or NSW Governments have not taken up the option of doing despite the . Even if it doesn’t, the infrastructure is now built, and will eventually revert back into public ownership.

The problem appears to be with the traffic forecasting. This is roughly how it works.

First, the private company works out how much the project will cost to build. Although there can be cost blow-outs, this is still the easiest bit to estimate so let’s assume it’s 100% accurate every time. They then multiply this amount by a percentage deemed to be a sufficient return on investment (usually the going rate of interest plus a few percent) to gives the necessary revenue.

The government then provides the company with traffic forecasts, their estimate of roughly how many cars are expected to use it. The company then divides the revenue figure by the traffic forecast to get a toll amount.

EDIT: It’s been pointed out in the comments section that these estimates can sometimes come from a private consultant, rather than the government. Where it comes from isn’t really all that important, and there was a reason that the description above was “this is roughly how it works”. But it’s a valid point and is noted.

Where it all went wrong is that, for a number of reasons including poor forward planning, freeway construction in Australia has been requiring more use of tunnels (all 4 examples above were tunnels). These cost about 4 times as much as surface construction. So, 4 times the cost means 4 times the necessary revenue, and 4 times the necessary toll. This assumes static traffic forecasts.

In reality, they are not – they are sensitive to price. Higher tolls mean lower traffic. And what happens if you revise that traffic forecast downward? The required toll goes up even further! A vicious cycle if there ever was one.

There are only really 2 solutions to this.

One is to go back to having the government build roads. Michael Pascoe points out that this also has the added benefit of allowing access to cheap debt, as government loans have a lower interest rate than loans to private businesses. However, government debt is now a dirty word, and so this is an unlikely option to be chosen.

The other is to reduce the cost of construction. Good planning can do this in the long term. The M2, which is entirely on the surface thanks to the maintenance of a dedicated reservation for it decades in advance, made an after tax profit of $38 million last year (Source: page 74, Transurban Annual Report). Whereas plans for the M4 East portion of WestConnex have it slotted like the Eastern Distributor rather than tunnelled in order to cut down on costs. While there remain a number of concerns over WestConnex itself, the aim of finding ways to bring down its cost of construction is definitely a welcome one.

A funny musical cartoon has been doing the rounds on the internet about passenger safety on trains. It’s by Melbourne’s train operator, Metro, and at the time of writing had over 9 million views on YouTube.

As I’ve described earlier, humour is one of the best ways of getting through to users of public transport, who generally tend to be quite dismissive and cynical about public transport. While Metro’s campaign seems to have been successful, another recent campaign by Queensland Rail in Brisbane that allowed the public to create their own etiquette posters soon turned into a meme where people would create satirical posters mocking the original concept.

Original train etiquette poster. Click on image for higher resolution. (Source: Queensland Rail.)

Original train etiquette poster. Click on image for higher resolution. (Source: Queensland Rail.)

 

Satirical parody of the above poster. (Source: College Humour.)