ARA - National Freight Strategy - Towards 2050

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Towards 2050: National Freight Strategy
General
This document was prepared with support from industry members including the Australian Rail Track Corporation, Asciano, Independent Rail, Queensland Rail, SCT and WestNet Rail.
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Published by
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Chapter Name
CONTENTS
INTRODUCING THE NATIONAL FREIGHT STRATEGY
Forward Scope & Objective of Strategy Vision for Rail Freight Key Recommendations of the Strategy Next Steps Executive Summary 6 6 6 7 9 10
WHY A NATIONAL FREIGHT STRATEGY AND THE ROLE OF RAIL

Why a Freight Strategy?
Population Growth Increased Trade Land Use and Transport Corridors Road Congestion Growth in Australian Road Task 1975-2007 (Compounded Annual Growth Rate) Price of Oil (per barrel) in USD Integrated Policy & Planning Frameworks Microeconomic Reform Increasing Energy Prices & the Carbon Restricted Economy Energy Prices Carbon Restricted Economy
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14 15 15 15 15 16 16 16 16 16 17
A Multi-Modal Solution The Contribution of Rail

Cost effective Average Freight Costs for Australian InterCapital Road and Rail Freight Superior Safety Record Environmentally Friendly & Fuel Efficient Solution to Congestion
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18 18 19 22 22
Chapter Name
Current State of Rail

Infrastructure De-Prioritisation and Under-Utilisation of Freight Rail Market Failures in Land Freight Market Impacts
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23 24 24 25
A CALL TO ACTION
Freight Transport Policy Action Plan
Single Australian Land Transport Economic Regulator Integrated Land & Transport Planner & a Single Australian Land Transport Policy Maker Informed & Cost-Effective Investment Rationalise and Consolidate Regulatory Requirements Internalising Externalities Clearly Stated & Quantified Social, Environmental & Economic Outcomes
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30 30 31 31 31 32
Industry Action
Operational Efficiency Industry Cooperation Improved Customer Offering
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32 33 33
Outcomes of a Freight Strategy

Competitive Neutrality Maximise Performance Value for Money
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34 34 34
CONCLUSION AND APPENDIX

Conclusion Appendix 1: Specific Government Investment Projects
Asciano/Pacific National, ARTC & Queensland Rail Asciano SCT WestNet RailCorp
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39 39 39 39 39
INTRODUCTION
Forward
Australia faces significant challenges in ensuring its future international competitiveness. The Federal Government has placed transport, and in particular freight transport, as a central plank to promoting the productivity growth needed to maintain Australias economic expansion1. Despite its obvious social, environmental and economic advantages, Australias rail freight network is in a suboptimal state, due to historical underinvestment in rail infrastructure over the past 30 years. The Towards 2050 National Rail Freight Strategy addresses key challenges facing Australia in the coming decades in relation to freight transportation and outlines solutions to meet these challenges. The Strategy is targeted at both internal and external stakeholders including freight industry players, Federal and State Governments, and transport policy makers. The strategy has explicitly taken a long-term view of a national freight strategy, given the long-term nature of infrastructure projects and the Federal Governments focus on forecasting and planning to the year 2050. The Strategy is a collaborative effort between various rail freight operators in Australia. The Australasian Railway Association has been tasked by the industry with the preparation of the strategy and has received substantive input from industry partners and Government agencies including Infrastructure Australia in its preparation.
Vision for Rail Freight

Vision
The Australian rail industry aims to be the preferred mode of medium-long distance land freight transport within an integrated multi-modal system that will provide Australia with the safest, environmentally friendly, cost effective land freight transportation solution
Scope & Objective of Strategy

The Strategy provides a principle based approach to freight transport policy. These principles should be adhered to by all freight transport policy frameworks and decision making processes. These principles apply equally to all modes of freight transportation and do not seek a special policy status for rail freight. Similarly the policy principles in this strategy apply equally to all types of rail freight including bulk and non-bulk and do not distinguish between privately or publicly owned rail services or infrastructure. The aim of a national freight strategy is to provide an holistic view of solutions to future freight transportation.
Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010
Introduction
Key Recommendations of the Strategy

The National Freight Strategy has put forward the following key recommendations
Integrated Transport & Land Use Planning

Integrated national transport and land use planning is a key requirement to achieving a truly efficient freight transport market. The need to identify and protect future transport corridors and multi-modal freight facilities will ensure that the future freight network capacity is not constrained, especially by continuing urban expansion, and that transport priorities are identified to aid urban development and to meet future growth in intra and interstate trade and the export market.
Competitive Neutrality in all Transport Policy Decisions

A properly functioning transport market free from distortions is the key to an efficient freight transport industry. Government economic and operational regulations must apply equally to all modes of transport to avoid an artificial bias towards any mode of transport. In this respect the principals underlying the following regulations should be the same across all modes of transport: road pricing and rail track access charges; safety requirements; and OH&S requirements. This strategy advocates the promotion of the right mode of transport in the circumstances for the freight task. Competitive neutrality will ensure this. Address Market Failure (Internalising Externalities) In selecting the right mode of freight transport all externalities associated with the movement of freight should be identified and internalised where possible. While the financial cost effectiveness of freight transport is an important consideration, any transport policy should also ensure that non-financial costs associated with freight transportation are captured in the decision making process including: environmental costs such as emissions, noise and land use; safety costs such as fatalities, injuries and property damage; and congestion and its associated costs. If the transport decision making process cannot internalise these costs, the Federal Government must ensure that the mode that exhibits the best safety and environmental performance receives incentives or subsidies to ensure that the community enjoys the benefits of this superior performance.
Clearly Stated Social, Environmental & Economic Objectives

The Federal Government needs to clearly state social, environmental and economic policy objectives. These objectives may include: Environmental performance (emissions, noise, land use) Safety Congestion Competitive markets (ensure freight users have a viable modal transport options) Energy security Efficiency
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The implementation of these socio-economic objectives go hand in hand with internalising negative transport externalities and should guide investment decisions in land freight infrastructure.
A Single Land Transport Economic Regulatory Framework

A single national economic regulatory framework should be established. This will ensure consistent, competitively neutral pricing and access arrangements for all modes of land transport across all jurisdictions.
A Single Land Transport Policy Framework

The imperative to take account of broader government social, environmental and economic policy objectives, the need to internalise negative externalities and the recognition that freight transport extends beyond local council and state borders and is increasingly reliant on multi-modal supply chains necessitates an overarching land transport policy framework.
Informed & Cost-Effective Investment

The correction of market failures combined with the implementation social, environmental, economic policy objectives, operational efficiency and value for money should guide investment decisions regardless of the public or private nature of the ownership of the infrastructure. This requires policies that provide incentives to the private sector for economically viable infrastructure projects to go ahead. This will ensure the greatest economic benefit for Australia from freight transport infrastructure expenditure.
Consolidating and Rationalising Regulatory Requirements

The myriad of, often inconsistent and duplicative, regulations governing land transport must be consolidated and rationalised. Separate state operational and economic regulations create a significant compliance cost for national freight carriers as does modal based regulations for multi-modal freight service providers.
Introduction
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Next Steps
A Single Land Transport Economic Regulator
The establishment of a single land transport economic regulator that determines road and rail access charges across all jurisdictions, based on similar competition and cost recovery principals, would ensure competitive neutrality amongst all land freight modes and consistency of economic regulations on a national level. This regulatory function can be administered by an existing regulator such as the Australian Competition and Consumer Commission, or the creation of a new regulator.
Review of Regulatory Framework Governing Freight Transport

A joint state and Federal review, possibly through COAG or a Ministerial Council, is required to identify opportunities to consolidate, harmonise and rationalise regulations governing the land freight transport sector.
Government Review of the Cost of Transport Externalities

A review is required to quantify the cost of transport externalities and make recommendations on ways to internalise these externalities. While much research has been conducted on discrete externalities, such as environmental degradation, air pollution, congestion and safety, no review has consolidated the research and put forward policy frameworks or mechanisms to internalise these externalities.
Introduction of Competitively Neutral Road Charges for Heavy Vehicles

The Government must ensure that heavy vehicles pay the actual costs associated with their use of road infrastructure, ending the effective cross-subsidisation of heavy vehicles by smaller vehicles and increase the Governments cost recovery capacity for road infrastructure investments. Mass distance road charging is one tool to ensure competitive neutrality in the land freight market. Access arrangements similar to those for rail could also be considered.
Government Initiatives to Promote Cost Effective, Safe & Environmentally Friendly Freight Transportation
The correction of market distortions, externalities and other market failures in the land transport sector is a long-term process. In the interim the Federal Government must ensure that cost effective, safe and environmentally friendly freight transport options are promoted and utilised. The Government should provide financial incentives for economically viable, yet commercially unviable, projects undertaken by the private sector. This will ensure maximum economic benefit for Australia with minimal Government spending. To ensure environmental and safety performance is improved, Government subsidies and incentives should be initiated to encourage the greater utilisation of the safest and most environmentally friendly transport options
A Single Land Transport Planner

Integrated national land use and transport planning is essential to the efficient running of the land freight transport sector. The planner would promote the creation of a seamless national freight supply chain and ensure infrastructure investment and land availability to achieve this.
A Single Land Transport Policy Agency

A single land transport policy agency would ensure the implementation of a truly national multi-modal policy framework for land freight transportation, take into account the Governments wider policy objectives, assist with the consolidation of regulatory frameworks and ensure the required expertise and knowledge to make informed and cost effective transport infrastructure investments.
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Executive Summary
The Challenge
Australia faces many challenges in ensuring its international competitiveness, requiring significant improvements in its productivity performance. The Federal Government has placed transport, and in particular freight transport, as a central plank to promote the productivity growth needed to maintain Australias economic position2. Freight transport faces many external challenges including population growth and the resultant increased demand for transport, increased trade volumes domestically and internationally, congestion, increasing energy prices and increasing scarcity of urban land. Obstacles have been created that inhibit the efficient operation of the freight transport market including market distortions as a result of government pricing, subsidies and investment decisions, fragmented and incremental transport planning and a regulatory environment that acts as a barrier to the efficient provision of freight infrastructure and services. Given the projected doubling of the freight task by 2020 from 2000 levels3, and the challenges highlighted above, business as usual practices in freight transport planning cannot continue. The significant inefficiencies created by the incremental, piece-meal approach to freight transport planning is no longer sustainable.
the most efficient manner possible to ensure the productivity gains required to maintain Australias international competitiveness. The Federal Government must actively remove any hurdles to creating a collaborative fully integrated supply chain for freight. Each mode of freight transportation has a comparative advantage in certain circumstances and must be utilised appropriately to achieve maximum efficiency gains. The strategy advocates the use of the right mode for the circumstance.
The Role of Rail

Rail is central to any multimodal freight transport solution. Rail is the most cost effective mode of land freight transportation for journeys over 1500km and with increasing liquid fuel prices, will enjoy absolute price advantage for all non-urban journeys. Rail freight is up to 9 times safer than road freight. Rail freight is 10 times more fuel efficient and causes up to 10 times less emissions than road freight. Given the severe road congestion in an around Australias ports and major arterial roadways, modes, such as rail, must be utilised to alleviate road congestion.
A Call to Action / Recommendations

The ultimate goal of the National Freight Strategy is to create a competitive, efficient and cost-effective freight transport system. To achieve this, the freight industry and governments must work collaboratively and ensure: Competitively neutral economic regulations for transport: Economic regulatory frameworks governing transport should be competitively neutral, allowing for the right mode to be used in the appropriate circumstances. Of major concern are the inconsistent principles used in determining road pricing and rail access charges. Externalities are internalised/clearly articulated Government objective: The true cost of externalities (social, environmental, safety etc.) must be incorporated into transport policy frameworks and investment decisions. This goes hand in hand with the articulation and incorporation of the Governments socio-economic objectives. Integrated transport and land use planning: where local, state, national transport and land use planning are addressed in a holistic manner.
The National Freight Strategy

The implementation of the National Freight Strategy will result in three key objectives: competitive neutrality in the freight transport market; maximising performance and efficiency in the provision of freight services; and value for money for governments and customers. If these objectives are achieved, it will ensure significant improvements in freight transports productivity and ensure that the vision of an integrated multimodal system that will provide Australia with the safest, environmentally friendly, cost effective freight transportation solution is met. The National Freight Strategy advocates a multi-modal solution to the challenges facing freight transportation. All modes of freight transport must be utilised in
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Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010 Bureau of Infrastructure Transport and Regional Economics (2006) Freight Measurement and Modelling in Australia. Report 112, BITRE, Canberra ACT
Introduction
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A single land transport policy framework: to ensure transport policy is developed and implemented in an integrated manner and takes into account the Governments broader policy objectives. Rationalising and consolidating regulatory requirements: The myriad of multi-jurisdictional economic, safety, OH&S, access and competition regulations are a significant impediment to operational efficiency and must be consolidated and rationalised. Operational efficiency: The freight industry must work together to ensure operational efficiency, through greater collaboration such as ensuring interoperability and collaborative supply chain arrangements. Cost Effective Investment: The Strategy recommends that the most economically viable transport investments be prioritised regardless of public or private ownership, ensuring value for money. Customer offering: The rail freight industry must ensure its product offerings meet the dynamic needs of its customer based on service quality and price.
Long-Term Goal: A Truly Integrated, Competitive Multi-Modal Freight Supply Chain

In the long-term, the strategy seeks to achieve a competitive, cost effective, integrated multi-modal freight supply chain free from market distortions and failures, where Government decisions are made based on holistic and integrated policy and planning frameworks. This will ensure a freight transport network capable of meeting the challenges posed by future developments in demographics and trade.
THE CASE FOR A NATIONAL FREIGHT STRATEGY AND THE ROLE OF RAIL
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Why a Freight Strategy?

HIGHLIGHTS
The freight task is expected to double by 2020, and triple by 2050 from 2006 levels , as a result of population growth (set to reach 35 million by 2050) and increased intra state, interstate and international trade Increasing urban population and limited urban land availability will create conflicts between land use planning and transport planning, necessitating an integrated approach to planning. Government policies have led to market distortions through inadequate and inconsistently applied operational and economic regulations. A freight strategy is required to address these inadequacies. Environmental and safety concerns have increased in recent years, yet there has been a failure to adequately capture the environmental and safety externalities associated with road transportation. These externalities need to be internalised in the transport policy framework Increasing liquid fuel costs will change the dynamics of the land transport market, making road transportation significantly more expensive and rail transport more viable. However under-investment in rail infrastructure will inhibit any modal switch between road and rail. Australia faces many challenges in ensuring its future economic growth. The Federal Government has placed transport, and in particular freight transport, as a central plank to promoting the productivity growth needed to maintain Australias economic expansion4. Freight transport has been identified as the transport priority for COAG in 20105.
Infrastructure Australias proposed National Freight Networks Plan is a step in the right direction. However, the network and infrastructure focus of the strategy should be expanded to ensure an holistic approach which addresses key policy issues such as economic and operational regulations, modally neutral transport policies and integrated transport and land use planning. Freight movements overall are projected by the Bureau of Transport and Regional Economics6 to double between 2000 and 2020 as a result of: population growth; and Increased international, inter-state and intra-state trade. Infrastructure Partnerships Australia7 has provided research suggesting a tripling of the freight task by 2050. However there are many market and structural impediments restricting the supply of freight transport services including: The scarcity of urban land, jeopardising future planning for transport corridors; Increasing road congestion restricting capacity; Complexity of regulatory regime governing freight transport Government investment decisions, taxes and subsidies distorting the land freight market; and Increasing energy prices and the increasingly carbon restricted economy.
Population Growth
Recent projections prepared by Treasury show that Australias population will grow by 63% over the next 40 years to 35 million people by 20498. By 2030 Australias population will have reached 26 million. The increase will be driven by a greater number of women of childbearing age than projected, and increased net migration. Growth and concentration of population in Australias major cities are set to increase. While in 2004, 62% of the population lived in capital cities, it is projected that by 2051 this number will rise to more than 66%9. Over 50% of Australias population will be living in eastern State capitals10.
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Prime Minister Kevin Rudd (2010), Speech: Adelaide Australia Day Celebrations, 20 January 2010 Prime Minister Kevin Rudd (2010) Bureau of Infrastructure Transport and Regional Economics (2006) Freight Measurement and Modelling in Australia. Report 112, BITRE, Canberra ACT. Infrastructure Partnerships Australia (2008), The Australian Government Treasury (2010), Australia to 2050:Future Challenges, see URL: http://treasury.gov.au/igr/igr2010/Overview/pdf/IGR_2010_Overview.pdf Australian Bureau of Statistics (2005), Population Projections Australia, Issue 3222.0, 29 November Australian Bureau of Statistics (2005)
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The Case for a National Freight Strategy and the Role of Rail
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Australias increasing population, particularly on the east coast, will drastically increase the demand for both freight and passenger transport. Given the current state of transport corridors, there is likely to be major policy conflicts between the provision of freight and passenger transportation, congestion problems and a lack of available land for the expansion of transport networks.
Road Congestion
The Bureau of Transport and Regional Economics has estimated that: road congestion costs Australia up to $15 billion per annum, or about one per cent of GDP; and road congestion cost will double by 2020.13
Increased Trade
Treasury projections indicate that Australias GDP will continue to grow by 2.4% per annum in real terms over the next forty years11, fuelled by international trade. This translates to a 258% increase in Australias GDP between 2010 and 2050. Continuing improvements in global trade linkages and sustained growth by Australias major trading partners, such as China, will ensure that international trade will continue to be a prominent factor in Australias future economic growth. This will inevitably increase the demand for freight transport. Demand for land freight transportation will increase as a result of inter-state and intra-state trade and the need to distribute international goods to and from port facilities.
Growth in Australian Road Task 1975-2007 (Compounded Annual Growth Rate)

6 5 4 3 2 1 0
5.2% 3.2%
2.4%
GDP
Road Freight
Passenger
Land Use and Transport Corridors

While the demand for passenger and freight transportation is growing, the supply of such transportation is becoming more restricted. To accommodate Australias accelerating population growth, it has become necessary to increase urban density and utilise surplus lands in and around our major cities. However, the growth in demand for residential land has put in jeopardy the ability to expand transport infrastructure in urban areas. Sydney, for example, suffers from significant bottle-necks in both its passenger and freight rail networks, yet faces land restrictions when trying to address these bottle-necks through network expansion. As a result, rail freight is increasingly coming into conflict with passenger rail services12.
Source: Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook 2009, Department of Infrastructure, Transport, Regional Development and Local Government, Canberra; Australian Bureau of Statistics (2008), Australian System of National Accounts, Cat. no. 5204.0, ABS, Canberra
As the above graph indicates the growth in road transportation, particularly road freight, in the last 30 years has grown much faster than GDP. This growth has created a serious congestion problem in Australias road network. A freight strategy is required to address such issues and to ensure that all modes, in particular rail, play their part in alleviating the impending road congestion crisis. Rail is a high density mode of transportation that can create significant new capacity for both passenger and freight journeys with limited land availability. One freight train has the potential to remove the equivalent of up to 150 trucks off the road14.
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The Australian Federal Treasury (2007), Intergenerational Report 2007, 2 April Australasian Railway Association (2010), Rail Freight Industry Workshop on Infrastructure Australias National Freight Networks Strategy, Melbourne 19 January Bureau of Transport and Regional Economics (2007), Estimating urban traffic and congestion cost trends if or Australian cities, Working Paper no. 79, Canberra. American Association of Rail (2010), see URL: http://freightrailworks.org/open-highways-one-train-at-a-time.php
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14
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Lack of Integrated Planning & Microeconomic Reform

Given Australias growing and aging population and the need for high productivity gains to ensure international competitiveness, realising the efficiency gains from integrated planning and microeconomic reform is essential.
Safety, OH&S, competition, access and pricing regimes differ across jurisdictions and are unnecessarily burdensome. For example track access pricing is determined by individual state regulatory bodies, who often determine different pricing structures using different recovery models, despite the fact that most operators run services across interstate borders, subjecting them to different regimes.
Integrated Policy & Planning Frameworks

The need for national transport planning is paramount to ensure the provision of the most efficient freight network. Freight networks go beyond local council and state boundaries and require a national approach. The current state based approach to transport planning has created significant inefficiencies. The Victorian15 and NSW16 governments have both outlined strategies for their freight networks, yet these strategies have major compatibility issues. For example the NSW and Victorian rail freight networks use different track gauges, and have differing track quality, requiring the use of multiple locomotives for journeys between NSW and Victoria. Individual State freight plans are not sufficient. A national plan is needed if the greatest productivity gains are to be achieved.
Increasing Energy Prices & the Carbon Restricted Economy

Increasing liquid fuel prices and the impending carbon restricted economy will necessitate a complete overview of our use and perception of transport.
Energy Prices
Increasing energy prices over the coming decade will necessitate the shift towards fuel efficient transportation. The recent wild fluctuations in world oil prices has thrown doubt on any long-term projections for oil prices, however the combination of declining reserves and increasing demand would indicate a continued increase in oil and other energy prices. As the graph below demonstrates, the historical trend in oil prices is upwards.
Microeconomic Reform
Economic and operational regulations governing freight transport has been piece-meal and has inhibited operational efficiency in the freight transport market.
Price of Oil (per barrel) in USD

140.00 120.00 100.00 80.00 Nominal USD 60.00 40.00 20.00 0.00 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1989 USD (Real)
Source: International Energy Agency
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Victorian Department of Transport (2008), Freight Futures: Victorian Freight Network Strategy, see URL: http://www.doi.vic.gov.au/doi/doielect.nsf/2 a6bd98dee287482ca256915001cff0c/612a49cebbee70a1ca257521002095fa/$FILE/freightfutures.pdf Freight & Logistics Council of NSW (2009), Actions not Words: A Freight Agenda for NSW, November 2009
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Carbon Restricted Economy

The Australian Government has set a target of a 60% reduction in GHG emissions per annum in 2050 from 2000 levels17. The Federal Department of Climate Change and Energy Efficiency18 estimated that the transportation industry accounted for 13.2% of Australias domestic emissions in 2007. Emissions from cars account for approximately 54% of Australias total domestic transport emissions, and are projected to increase by 40% between 1990 and 202019. Trucks and light commercial vehicles account for 31% of Australias transport emissions, and emissions from these modes are projected to increase by 112% between 1990 and 2020. Passenger and freight rail services are only responsible for 2.4% of total transport emissions20. This is despite the fact that passenger rail accounts for 5-10%21 of passenger journeys and freight rail accounts for approximately 50% of the land freight task22. GHG emissions performance and future energy input costs need to be incorporated into infrastructure investment and policy decisions.
A Multi-Modal Solution
Given the projections of the doubling of the freight task by 2020 from 2006 levels, increasingly congested road, capacity constraints for rail and ports, and increasing scarcity of urban land, all modes of freight transport must be used in the most efficient manner. This will ensure the productivity gains required to maintain Australias international competitiveness. The Federal Government must actively ensure the removal of any hurdles in creating a collaborative fully integrated supply chain for freight. Each mode of freight transportation has a comparative advantage in certain circumstances (see table below as an example) and must be utilised appropriately to achieve maximum efficiency gains. The relevance of the table below is to show that each transport mode has a role to play in the movement of freight. It highlights the comparative advantage of each mode, including cost of infrastructure, reliability, speed and flexibility.
Comparisons of Benefits of Various Modes of Freight

Attribute Scale Unit costs Capital costs Access Responsiveness Flexibility Usage Ocean Tanker 1 ML+ Very low Very High Very limited 1-4 weeks Limited Long haul Rail 100 kL High Low Limited 2-4 days Good Medium haul Truck 5-60 kL Very high Very low High 4-12 hours High Short haul
Source: adapted from Ken Dymock (2007) General Manager, Distribution, Petro Canada, Chartered Institute of Logistics and Transport, Transportation Situation & Outlook Conference.
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Department of Climate Change & Energy Efficiency (2008), Carbon Pollution Reduction Scheme: Australias Low Pollution Future, December 18 Department of Climate Change (2007), National greenhouse gas inventory, Garnaut Climate Change Review (2007), Transport, Planning and the Built Environment, Issues Paper - Forum 5 Department of Climate Change (2007), BITRE Australian Transport Statistics Yearbook 2007 Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook, Canberra
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At the heart of a multi-modal approach to freight supply chains is the ability to use the right mode of transport for the job. Nearly all sea freight journeys will require a transfer to other modes of transport including rail and road. Similarly a large portion of rail freight journeys will require a transfer to road transportation. In determining the right mode the Federal Government must ensure that the freight market is set up in such a way to incorporate safety, environmental and economic considerations. The industry must work closely with Government to ensure investment in infrastructure and reforms to transport policies lead to the greatest efficiency gains.
Average Freight Costs for Australian Inter-Capital Road and Rail Freight
Road Rail Rail (excl. PUD)
Cost
500
1500
4000
The Contribution of Rail

HIGHLIGHTS
Rail is the most cost effective mode of land freight transportation for journeys over 1500km and with increasing liquid fuel prices; rail will enjoy absolute price advantage for all non-urban journeys. Rail freight is 7-9 times safer than road freight. Rail freight is 10 times more fuel efficient and causes up to 10 times less emissions than road freight. Rail freight network reforms hold the key to the alleviation of road congestion (one freight train removes up to 150 tucks off the road).
Source: BITRE (2008)
When the cost of multi-modal transportation is factored in, rail becomes the cost effective mode for freight journeys above 1500 km. When excluding the high cost of multi-modal transport, rail becomes the cost effective mode for freight journeys over 500 km. With adequate and integrated multi-modal facilities and changes to competition regulations, rail will enjoy a price advantage over road transport for all freight journeys over 500km. The above analysis assumes oil prices of between $US 30-50 per barrel. At oil prices above $US 100 per barrel, rail enjoys an absolute price advantage over road in most inter-capital corridors. Given the general upward trend in oil prices, the Federal Government should ensure that rail infrastructure is adequate to allow the Australian economy to take advantage of rails superior cost effectiveness.
Cost effective
Rail has the potential to be the most cost-effective land based mode of transportation despite structural impediments caused by lack of investment in track and facilities infrastructure and the effective Government subsidisation of road freight.
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Superior Safety Record FACTS

Around 1500 people die on the roads every year in Australia Road accidents accounts for 94% of all fatal accidents relating to transport, Rail is responsible for only 2-3% of all land transport accidents Heavy vehicle accidents account for around 170 fatalities p.a. Rail freight accounts for around 30 fatalities p.a. Rail Transport (including freight) is up to 7-9 times safer than road transportation The cost to the Australian economy of road accidents is up to $31 billion p.a. The cost to the Australian economy of heavy vehicle accidents is up to $3 billion p.a. Over 80% of heavy vehicle accidents occur on highways Switching long distance land freight transportation to rail will save up to 110 lives and $2.1 billion p.a. Over 1500 people die on our roads every year, many more are seriously injured or permanently disabled. These road accidents cost the Australian economy up to $31 billion per annum. Not all accidents or fatalities are preventable, however where they are, governments must act to prevent such deaths. A modal shift towards rail transport is the solution to this needless waste of lives and money. Rail transport is 7-9 times safer than road transport in relation to both passenger and freight. However historical underinvestment in rail infrastructure and favourable road pricing and road subsidies has encouraged Australias over-reliance on the use of road transportation. This over-reliance on roads has cost Australia 14 thousand lives and close to 500 billion dollars in the last decade.
Fatalities
Rail transport is the safest form of land transportation in Australia in terms of the incidence of fatalities. In 2008, 1442 fatalities occurred on our road networks while only 33 fatalities occurred on our rail network (excluding suicides). Rail accounts for only 2-3% of land transportation fatalities.
Total Land Transport Related Fatalities

Year 2001 2002 2003 2004 2005 2006 2007 2008 Rail Fatalities as % of Total Land Transport Fatalities 3.05% 3.27% 2.59% 2.65% 2.77% 2.43% 2.63% 2.29%
1800 1600 1400 1200 1000 800 600 400 200 0 2001 2002 2003 2004 2005
Road
Rail
2006
2007
2008
Source: Extracted from ATSB Transport Safety Report, Rail Statistics (2009) & the Australian Roads Death Database
Similarly, freight rail is by far the safest form of land freight transportation, maintaining a superior safety record as compared to road based freight transportation.
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Total Land Freight Related Fatalities

Year 2001 2002 2003 2004 2005 2006 2007 2008 Rail Freight Fatalities as a % of Total Land Freight Fatalities 14.89% 14.00% 12.28% 14.00% 14.52% 11.47% 11.86% 11.07%
Cross Modal Fatality Rate Comparisons 1985/86 Mode Passenger Rail Road Pedestrians Cyclists
Source: Adena & Montesin (1988)
Fatalities per 100 million passenger kilometres 0.24 1.54 16.12 4.24
The above table suggests that passenger rail is seven times safer per passenger km as compared to road travel. This does not factor in the incidence of pedestrian and cyclist fatalities that are caused as a result of accidents with motor vehicles. Independent research for the incidence of fatalities for freight transportation is scarce. The Australasian Railway Association (ARA) has estimated the incidence of rail freight fatalities per billion tonne kilometres to be approximately be approximately 0.126 (excluding suicide) while heavy vehicles had a rate of 0.94. Freight Fatalities per Billion Tonne Kilometres Source ARA 2006 Estimate Freight Corp 1998 Estimate Road .94 3.8 Rail .1 .55
250 Road Rail (Estimate)
200
150
100
50
0 2001 2002 2003 2004 2005 2006 2007 2008
Source: Extracted from ATSB Transport Safety Report, Rail Statistics (2009) & the Australian Roads Death Database23
There is little recent Australian data on the incidence of transport fatalities and cross-modal comparisons (especially for freight transportation). The most often cited independent research on the cross-modal incidence of transport fatalities was conducted in 198824. Figures from this research have been cited by the Australian Transport Safety Bureau (ATSB) as recently as 200525.
The Freight Corp estimates show the incidence of fatalities in 1998 for both rail and road to be much higher than in 2006. This conclusion would seem to be consistent with the improved safety of freight transportation and the significant increase in freight tonne kilometres. The above table indicates that rail freight is 7-9 times safer than road freight. This result is consistent with figures for passenger transportation.
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Rail freight fatalities were estimated by using total rail fatalities per annum, subtracting passenger related deaths from the total and apportioning 60-70% of level crossings fatalities to rail freight. Adena & Montesin (1988), Day to Day Travel in Australia 1985-86; CR 69; Instat and FORS ATSB (2005), Discussion Paper: Cross Modal Safety Comparisons, at URL: http://www.atsb.gov.au/publications/2005/cross_modal_safety_comparisons.aspx Based on dividing number of fatalities as reported by ATSB and dividing it by the total tonne-kms
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Reducing the Economic Cost of Freight Transport Accidents & Saving Lives
The cost of road accidents in 200627 was calculated by the Bureau of Infrastructure, Transport and Regional Economics (BITRE) to be nearly $20.1 billion per annum in 2010 dollars (assuming 3% rate of inflation). Based on this research, it is estimated that the cost attributed by BITRE to heavy vehicle accidents to be approximately $2.1 billion per annum28. However the above estimates have been criticised for using a very low statistical value of a human life (VSL) in calculating the cost of road accidents. International comparisons would suggest a VSL of around $6.8 million29, while the BTE research used a VSL of around $3 million in calculating their estimates for the cost of road crashes (in 2010 dollars).
Using a VSL of around $6.8 million, and using the methodology of BITRE, would increase the cost of road accidents to around $31 billion and the cost of heavy vehicle accidents to approximately $3 billion per annum (in 2010 dollars). Research conducted by LECG Consulting puts the figure of road accidents closer to $35 billion per annum. Safety costs resulting from heavy vehicles could be significantly reduced by regulations promoting a modal shift towards rail. Around 80% of all heavy vehicle fatalities occur on highways30. If this freight was moved onto rail, 110 lives and $1.9 billion would be saved. Given the expectation that land freight volumes will double by 2020 from 2006 levels, our estimated savings should increase correspondingly.
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22.21
20
15
10
3.18 1.01 0.32

Heavy Rail
0 Light Commercial Vehicles Rigid Truck Articulated Heavy Vehicles
0.09
Ancillary Rail
Source: ARA Rail Industry Report 2008
27 28
LECG Consulting (2010), The cost of road crashes, published by the Australasian Railway Association Heavy Vehicles account for 10% of fatalities and we have assumed 10% of injuries. Does not take into account the greaterproperty damage heavy vehicle accidents cause and thus would suggest that our estimate is conservative. LECG Consulting (2010), The cost of road crashes, published by the Australasian Railway Association Hassall K. (2000), Urban Truck Accidents in Australia, Fatalities and Serious Injuries: 1990 to 1999. Department of Civil and Environmental Engineering, Melbourne University, 23 October
29 30
24
Environmentally Friendly and Fuel Efficient

Rail freights environmental performance speaks for itself. Rail freight uses 10 times less energy compared to road freight, for every tonne of freight carried one kilometre. Given the Federal Governments climate change commitments, a modal shift towards rail freight would have significant positive impacts on Australias emissions performance. Given the possible introduction of an emissions trading scheme and other policy mechanisms to reduce GHG emissions and increasing energy prices, a shift to rail freight will provide significant cost savings to the Australian economy. Rail freight is the most efficient land transport mode, from an urban planning perspective, because it avoids road congestion, reduces exhaust emissions and provides health benefits for the urban community31 through improved air quality. A modal shift towards rail has the potential to remove significant numbers of heavy vehicles off the road and, with adequate intermodal facilities, reduce the number of light commercial vehicles. The United Nations Environment Programme has supported the International Union of Railways in highlighting the significant emissions savings that could be achieved by a modal shift away from road transport to rail freight32.
Current State of Rail

HIGHLIGHTS
Under-investment in rail infrastructure in the past 30 years has left the rail network in a dilapidated state, inhibiting modal shift towards rail despite its cost advantage and superior safety and environmental performance Poor planning and government policies have distorted the freight transport market in favour of road freight and severely restricted rail freights competitiveness (reliability, flexibility, cost-effectiveness). The impact of such policies has been to create an unhealthy reliance on road transportation and inhibit the operation of efficient, cost effective land transport market. The rail industry is still grappling with the same issues that it faced some 20-30 years ago. There have been incremental increases in capacity through programs implementing clearways, duplication and reducing track curvature. However the basic structural issues facing the industry have not been addressed: Different track classifications, quality and gauges inhibiting the ability to run freight services across Australias network using a single locomotive. Track quality curvature and kinematic enveloping (tunnel, bridge widths etc.) reducing maximum speeds, loadings and double stacking and ability to use cheaper, environmentally friendly cutting edge locomotive technology from overseas. Fragmented supply chains inhibiting operational efficiency in the provision of freight. Lack of adequate multi-modal facilities near industrial centres and adequate connection to rail networks and ports.
Solution to Congestion
Road congestion costs Australia up to $15 billion per annum33. With an increasing population, increasing incidence of passenger and freight transport, congestion costs will rise significantly without appropriate transport policies. Investment in dedicated rail freight infrastructure will have massive benefits in relieving road congestion. It has been often quoted that one freight train has the capacity to remove up to 150 trucks from the road34. Investment in dedicated freight infrastructure will untangle rail freight from urban and regional passenger rail infrastructure, increasing future capacity to provide passenger transport. This will translate into a significant reduction in private car journeys.
31 32 33 34
UIC website, see URL http://www.railfreightportal.com/spip.php?article11 UIC (2009), Keeping Climate Change Solutions on Track: The Role of Rail, see URL http://www.railfreightportal.com BITRE (2007), Estimating urban traffic and congestion cost trends for Australian cities, Working Paper 71 American Association of Rail 2010, see URL: http://freightrailworks.org/open-highways-one-train-at-a-time.php
25
These structural impediments have arisen due to a historical underinvestment in rail infrastructure, the de-prioritisation of rail as a transport policy solution and market failures and distortion in the land freight market. The recent announcement by the Federal Government of increased rail infrastructure expenditure along with the prioritisation of freight as the number one transport agenda for COAG is a welcome first step in addressing these issues. The Federal Government has earmarked a further $7.9 billion over six years towards rail track infrastructure, increasing annual expenditure by $1.3 billion.
The total Government expenditure for road in 2007-08 was approximately $13.1 billion consisting of: $2.7 billion from the Federal Government $7.3 billion by state and territories (includes grants provided by the Federal Government) $2.1 billion by local governments Total expenditure on roads, including private expenditure reached approximately $14 billion. Under the Nation Building Program, Federal funding for roads will increase to an average of $4.6 billion per year for the period from 200809 to 201314, an increase of $1.9 billion. Total expenditure for rail track infrastructure (private and public expenditure) in 2007/8 was approximately $2.1 billion dollars. This figure is set to increase by $1.3 billion as a result of recent Federal Government announcements. As the diagram on the following page demonstrates, rail infrastructure expenditure has not exceeded 25% of total land transport infrastructure for the past 30 years.
Infrastructure
Historically there has been an underinvestment in rail infrastructure, with rail infrastructure only receiving between 20-30% of the investment for the combined investment in road and rail infrastructure. This has left rail networks in a sub-optimal state and has significantly impaired the ability of rail freight service providers to compete with road freight.
Infrastructure Expenditure Road Rail
% of Total Road Rail Infrastructure Expenditure

Road Rail
Road
Rail
$15.9 B $14 B 77%
87%
82%
$3.4 B $2.1 B
23% 13%
18%
2007/08
2009/10 (estimate)
1989/1990
2007/08
2009/10 (estimate)
Source: ARA Industry Report 2008; Media Release Minister Albanese (2009), Budget Provides Historic Investment in Rail, 12 May; Productivity Commission (1991), Rail Industry, Report no 13
26
De-Prioritisation and Under-Utilisation of Freight Rail

The de-prioritisation and under-utilisation of freight rail has been masked by the success of the mining boom. Rail enjoys a majority share of bulk freight transportation, largely driven by private investment in infrastructure to meet the needs of the burgeoning mining industry. The rail industry would welcome greater government participation in the provision of rail infrastructure for this vital export driven industry, especially in light of increased incidence of bottlenecks in the rail freight network. Indeed Infrastructure Australias focus on infrastructure of national significance should by definition include bulk rail freight lines. The mining boom, its resultant investment in rail infrastructure and high volumes have masked the under-investment and under-utilisation of other bulk rail freight sectors such as grain lines. Grain lines provide vital capacity in handling the grain freight task. However, given the seasonal nature of the grains harvest, capital equipment is left unused for large periods of time increasing the costs to service operators. Due to the under-investment in grain lines, the quality of tracks and the locomotives that can run on such track are incompatible with the rest of the rail freight network. This stops the transfer of grain locomotives to other freight tasks and creates significant inefficiencies. Similarly, the low modal share of rail freight for non-bulk items is of particular concern. For non-bulk items, ail only accounts for 21%35 of the total land freight task. Road freight transportation will always be a necessity, especially for short-to-medium distance multi-modal journeys, however Australias over reliance on road transportation for medium-to-long distance journeys is an anomaly internationally. Similarly rail freight in Australia is over-looked by user of freight and governments as a solution to issues arising in niche markets such as the transportation of hazardous material. Despite rails superior safety record (see section on safety), rail freights modal share for the transportation of potentially hazardous material, such as petroleum related commodities, is small by international standards. Around 5% of petroleum products are transported by rail36, while for example in Germany rail transports around 25%37.
Market Failures in Land Freight Market

Road Pricing
The disparity between the principles underpinning road pricing and rail access charges is a significant impediment in creating competitive neutrality in the land transport market. Rail access charges generally work on the principle of full cost recovery while road pricing, via the PAYGO system, does not recover full costs from heavy vehicles. This leads to a disparity in costs where rail service providers must spend up to 30-40% of their operating costs on rail access charges while heavy vehicle operators only spend 5% of total costs on road charges38. While the National Transport Commission (NTC) insists that road pricing regimes extract all costs from users of heavy vehicles, the PAYGO system does not achieve full cost recovery due to the following reasons:39 Non-allocable and non-attributable allocable infrastructure expenditure cannot be accurately quantified and attributed to any specific class of vehicles (this accounts for 67% of total roads expenditure). The attribution of cost using historical data under costs the future costs of road infrastructure. Fuel charges are used as an inaccurate approximation for distance charging (a light vehicle in urban congested areas will use more fuel per km than a heavy vehicle on open highways)40. The PAYGO system allocates cost based on use and ignores costs of construction directly related to heavy vehicles (roads that cater for heavy vehicles must have thicker slabs, significantly increasing constructions costs.) Externalities caused by different classes of vehicles (environmental, safety, congestion amenity etc.) not factored into pricing regime. NTCs third determination on heavy vehicle road pricing41 explicitly acknowledges its inability to factor in the cost of externalities into the road pricing regime. NTC
35
Source: Bureau of Infrastructure, Transport and Regional Economics (2009), Australian Transport Statistics Yearbook 2009, Canberra & ARA (2009), Australian Rail Industry Report 2008. ABS (2001), Freight Movements Survey, see url: www.abs.gov.au European Commission - EuroStat Port Jackson Partners (2005), The Future of Freight, published by the Australasian Railway Association Derived from NTC (2005), Third Heavy Vehicle Road Pricing Determination, see url: www.ntc.gov.au Synergies Economic Solutions (2006), Heavy Vehicle Road Pricing, see URL: www.synergies.com.au NTC (2005), Third Heavy Vehicle Road Pricing Determination, see url: www.ntc.gov.au
36 37 38 39 40 41
27
recommended that B-double prime movers be explicitly subsidised to ensure they pay no more than road train prime movers. The grounds for the subsidy is to ensure the heavy vehicle pricing system does not encourage the use of less safe, less efficient vehicles that might cause more environmental damage. It is strange that such subsidisation is not extended to rail freight, which is the safest and most environmentally friendly mode of land freight transportation. The subsidisation of B-double prime movers may correct market distortions within the road transport market, but creates further distortions in the road-rail transport market.
International Shipping Permits

Permits42 granted to international shipping to carry coastal trade between Australian ports counters the outcome of competitive neutrality, where foreign own ships are not required to meet Australian industrial and OH&S regulations.
Impacts
Reliability and Service Performance
Reliability and transit times are a major determinant of market share in the land freight industry. An Ernst & Young study (2006) found that time sensitivity and reliability were of greater importance to freight forwarders than price or cost effectiveness. Freight Type Express Availability & Reliability Price Sensitive SydneyMelbourne 5% 70% 25% SydneyBrisbane 5% 70% 25% MelbourneBrisbane 5% 60% 35%
Emissions Trading Scheme (ETS)

With respect to the ETS and fuel excise reductions for liquid fuels, the rail industry believes the current proposal, to provide price offsets for liquid fuels but not electrically generated energy, will distort the land transport market in favour of road transportation. This distortion will lead to poor emissions performance, by favouring road transportation which is up to 9 times less fuel efficient than rail transportation. In light of the shift towards renewable sources of electrical energy, this penalty on electrical powered freight movements will further deteriorate Australias emissions performance.
Source of Infrastructure Expenditure

The public nature of road infrastructure and the significantly more private nature of rail infrastructure investment further distort the land freight market. While government investment decisions are made based on economic evaluations, private sector investment decisions are made based on financial evaluations which have higher risk premium thresholds, higher funding costs, shorter time-frame for full recovery of investment and tend not to factor in all social benefits to the community. These factors create a situation where investment in economically viable rail infrastructure is not made because this investment would not further the profit maximising goals of private firms. This problem does not exist in road infrastructure investment. This further distorts the land transport market in favour of road transportation.
Source: Ernst & Young 2006
Due to the de-prioritisation of rail freight and inadequate track and facilities infrastructure, rails transit times and reliability has suffered. As the table below demonstrates rail transit times are much higher than road freight and rails reliability varies greatly with actual transit times varying from anywhere from 2-10 hours on scheduled times. Due to poor infrastructure, on some corridors rail only reaches average speeds of 45 km/h while heavy road vehicles reached average speeds of around 70km/h43.
42 43
Permits granted under Navigation Act 1912 (Cth) BTRE (2007), Australian Rail Freight Performance Indicators 2005-6, Information Paper 59
28
Typical Freight Transit Times Door-to-Door (Hours)

Mode Road Rail
Source: BITRE (2008)44
SydneyMelbourne 11 17
SydneyBrisbane 15 21.5-26
MelbourneBrisbane 23 36.5-45
MelbourneAdelaide 9 14.5-16.5
MelbournePerth 43 58-68
The inability to provide timely and reliable services has effectively ruled rail freight out of 65-75% of the NorthSouth freight task.
Cost
Rail has the potential to be the most cost-effective mode of land freight transportation. However, under-investment in rail infrastructure and taxes and subsidies favouring road transportation has stymied rails low cost potential.
Access pricing also significantly limits the cost effectiveness and competitiveness of rail freight. Due to the subsidised nature of road pricing, only 5% of total road freight costs stem from road access charging while track charges accounts for between 30-40% of rail freight costs45
Customers Perception
Customer perceptions of rail freight have deteriorated as a result of the deficiencies in the rail freight service offering. A recent survey of freight forwarders by ACIL Tasman46 has indicated that customers who have access to rail freight are reluctant to use such services due to a perception of: being unreliable (possibly due to a lack of dedicated freight lines, and de-prioritisation of freight services);
Average Freight Costs for Australian Inter-Capital Road and Rail Freight
Road Rail Rail (excl. PUD)
being excessively bureaucratic with processes and paperwork (possibly due to the volume of regulatory burdens imposed on rail) lack of coverage (due to poor infrastructure and lack of inter-modal facilities); and this lack of coverage leading to higher costs and time wasted on administration for the freight forwarder.
Cost
500
1500
4000
Source: BITRE (2008)
The above diagram demonstrates the price disadvantage rail is placed under due to poor multi-modal infrastructure within Australia. When excluding the high cost of multi-modal transport, rail becomes cost effective for freight journeys over 500 km. However, when the cost of multi-modal transportation is factored in, rail only becomes cost effective for freight journeys above 1500 km. This severely restricts rails ability to compete on the North-South corridor.
44 45 46
BITRE (2008), Road and Rail Freight: Competitors or Compliments :Department of Infrastructure, Regional Development & Local Government Port Jackson Partners (2005), The Future of Freight, published by the Australasian Railway Association ACIL Tasman (2010), Study into the Perceptions of Rail, published by the Australasian Railway Association
A CALL TO ACTION
32
Freight Transport Policy Action Plan

HIGHLIGHTS
Address market distortions (ensuring economically neutral and consistent economic regulations for all modes across all jurisdictions through a single economic regulatory framework) Integrated planning (nationally integrated land and transport planning) A single national land transport policy framework Rationalise and consolidate regulatory requirements (uniform and consistent safety, OH&S competition and environmental regulations for all modes of transport) Encourage informed and costs effective investment (Redress the current and historical underinvestment in rail infrastructure) Internalise externalities (safety, environmental and congestions related costs) Clearly state and incorporate environmental, social and economic govt objectives into the transport policy framework
The establishment of a single Australian land transport economic regulator that determines road and rail access charges across all jurisdictions would ensure uniform cost recovery principals and subsequently competitive neutrality amongst all land freight modes and consistency of economic regulations on a national level. This regulatory function can be administered by an existing regulator such as the Australian Competition and Consumer Commission, or the creation of a new regulator. Mass distance road charging is one tool to ensure competitive neutrality in the land freight market, where pricing for heavy vehicles and rail would be governed by principals of full cost recovery. Access arrangements similar to those for rail could also be considered.
Integrated Land & Transport Planner & a Single Australian Land Transport Policy Maker
The rail industry believes current decision-making by governments is incremental, short-term and subsequently leads to sub-optimal outcomes. A longer-term infrastructure planning focus will ensure an holistic approach to developing a viable and efficient national rail network. Australia has no coordinated national strategy for investment in rail infrastructure, investment in rolling stock, and the location, capacity and access to rail terminals. A nationally coordinated freight strategy aligned to land-use planning and coordinated across all levels of government will provide greater certainty for public and private infrastructure expenditure. Infrastructure Australias proposed National Freight Networks Plan, Ports Strategy and COAGs transport priority of freight is a step in the right direction. The scope of these strategies should be expanded to include an holistic approach to transport planning, addressing the key policy issues such as economic and operational regulations, modally neutral transport policies and integrated transport and land use planning. The best long-term solution is the establishment of a single Australian integrated land transport planner and a single Australian Land Transport Policy maker. Some criteria to guide integrated planning and national transport policy development include: nationally consistent freight infrastructure investment regime (Federal, state, local governments and private sector); linking future freight infrastructure investment to demand forecasting and future population growth and movements;
Single Australian Land Transport Economic Regulator

Creating an economically competitive level playing field for road and rail freight providers is of utmost importance for the freight industry, freight forwarders, customers and in ensuring Australias productive capacity to maintain international competitiveness. Competitive multi-modal freight transportation will ensure highly efficient, safe, innovative, environmentally friendly and cost effective freight solutions for Australia.
Road-Rail Pricing
The current disparity between road pricing and rail access charges has distorted the land transport market in favour of road transportation, depriving Australia of the economic, safety and environmental benefits of rail transportation. The principal of full cost recovery must underpin both road pricing and rail access charges
A Call to Action
33
ensuring adequate facilities to maximise utilisation of existing and future rail networks; co-location of rail infrastructure and rail facilities near commercial centre; modal neutrality, where government freight policy decisions encourage modal competition; increased Government incentives to ensure private investment in rail is optimised and thus enjoy the safety and environmental of rail; ensuring viable modal competition on high volume corridors; internalising externalities (safety, environment, land use, congestion) when making freight infrastructure investment decisions; and ensuring maximum interoperability of the infrastructure with existing freight network, rolling stock and facilities.
Kinematic enveloping improvements on high demand infrastructure that will allow the double stacking of trains; and Improved North-South freight train infrastructure (whether it be through freight corridors north and south of Sydney or through the provision of an inland corridor).
Incentives for Investment

Unlike road infrastructure, the private sector contributes significantly to investment in rail infrastructure. Because of the profit maximising imperatives of the private sector, many economically viable rail, but not commercially viable, projects are over-looked. This is a poor policy outcome for Australia, given rails superior environmental and safety performance. Through incentives and subsidies, the Government can ensure such projects are initiated.
Informed & Cost-Effective Investment

The rail industry understands the need for cost-effective investment and recognises the need to invest in infrastructure that will maximise social, economic and financial outcomes for Australia. As a part of a national transport policy, the rail industry would seek investment in rail infrastructure where expected current/future demand will be high, supply chains are facing capacity or bottlenecks, where the infrastructure promotes interoperability between rail networks, control systems and rolling stock, and where the investment decision has been based on the principles enunciated in this strategy. Appendix 1 highlights specific infrastructure investments put forward by the rail industry that would meet the above criteria. While members have differing views on which projects should be prioritised the following projects had significant support: Gauge standardisation across state borders; Progressive improvement of track quality across the network (concrete slabs, improved track curvature, gauge standardisation etc) that will allow longer train configurations and the use of leading edge locomotive technologies from overseas; Further investment in multi-modal facilities near commercial centres such as ports;
Rationalise and Consolidate Regulatory Requirements

The myriad of, often inconsistent and duplicative regulations governing transportation must be consolidated and simplified. Separate state operational and economic regulations create a significant compliance cost for national freight carriers as does modal based regulations for multi-modal freight service providers. Any unnecessary additional costs reduces Australias ability to compete internationally and increases costs to domestic consumers.
Internalising Externalities
The superior safety and environmental performance of rail freight must be recognised and incorporated into the transport infrastructure investment decision process and into transport policy development. In the absence of a mechanism to fully internalise such negative externalities, the Federal Government should provide both supply and demand side incentives to encourage the use of rail freight. The UK Government actively encourages the greater utilisation of rail via the following schemes47: Freight Facilities Grants (FFG) - The rail FFG scheme is a capital grant scheme that aims to encourage the transfer of freight from roads to the more sustainable rail options by helping rail service providers to invest in the facilities needed to compete in financial terms with road.
47
Cavill & Humphreys (2001), Rail Freight Grants: Promoting Rail freight Growth in Britain, Association of European Transport
34
Rail Environmental Benefit Procurement Scheme (REPS) (Scotland48) - The scheme assists freight customers with the operating costs associated with running rail freight transport instead of road. Track Access Grant (TAG) Grants are paid to rail service operators to cover some of the costs of rail track access.
Industry Action
HIGHLIGHTS
The rail industry has invested two dollars for every one dollar spent by government to ensure operational efficiency (for example the Melbourne-Perth journey has been cut from over 7 days to 3-4 days through investment in intermodal facilities). The rail industry acknowledges the need for cooperation in the provision of freight transport. The rail industry is aware of customer perceptions of its freight services and is actively seeking to change these perceptions through innovative products and new marketing strategies.
Clearly Stated & Quantified Social, Environmental & Economic Outcomes

Governments need to clearly articulate and support transport policy objectives. The market alone may not be able to deliver these objectives. These objectives may include: Environmental performance (emissions, noise, land use) Safety Congestion Competitive markets (ensure freight users have a viable modal choice on high volume corridors) Efficiency Flexibility Energy Security The terms of reference of the National Transport Commissions (NTC) review of Freight Rail Subsidy Framework49 also acknowledges the need for clearly stated Government objectives to support Government decisions on investment and expenditure. There is broad industry support for a national policy framework, with economic, social and environmental government objectives. Flexibility should be added as an objective to ensure infrastructure investment is able to respond to changing market demands. The Government should also ensure that their socio-economic objectives are clearly and accurately incorporated in Governments infrastructure investment decision making.
Operational Efficiency
The industry has committed to improving the operational efficiency of its services. The industry has been active in ensuring future interoperability of rail networks and systems and improving supply chain management to ensure greater reliability and efficiencies. Freight operators have invested heavily in rail facilities to ensure the quickest handling, loading and loading times for trains. It should be noted that for every one dollar in Government investment the rail industry has invested two dollars50. This private investment has ensured significant improvements in journey times and reliability, with providers able to provide Melbourne to Perth services in 3-4 day as opposed to the previous journey times of over 7 days. Operational efficiency can be improved further and the industry will continue to invest in operational capabilities and improve its service provision. The rail industry has also developed innovative systems to improve fuel efficiency and environmental performance. The Freight-miser driving system, developed by the rail industry, provides real time information to long-haul train drivers to allow best-practice driving techniques that ensure fuel efficiency maximisation51.
48 49 50 51
See the Scottish Government website at URL: http://www.scotland.gov.uk/Topics/Transport/FT/freightgrants1 National Transport Commission (2009), Freight Rail Subsidy Framework, November Victorian Freight and Logistics Council (2010), Business gets behind rail revival, Media Release 18 February CRC for Rail (2008), Transformational Change in Australian Railways see URL: http://www.railcrc.net.au/media-centre/downloads/CRC-IRSEKeyNote-speech.pdf
A Call to Action
35
The issue of interoperability is an ongoing one and the industry is working in a cooperative manner to ensure that a myriad of operational functions including train protection and communication systems will be interoperable across state networks.
Uniform National Rail Safety Regulations & Standards

The rail industry fully supports the COAG agreement to establish a national regulator for rail and progress made on uniform model safety legislation. The rail industry is keen to offer its continuing support in participating in the process to establish the National Rail Safety Regulator.
Industry Cooperation
Supply Chain Cooperation
The industry has shown a willingness to coordinate supply chains; however cooperative efforts led by the private sector are constrained. The Australian Logistics Council (ALC) believes many companies shy away from collaboration projects because of perceived competition and access law breaches. Various government reviews of national competition policies have indicated the restrictive nature of competition laws in relation to the provision and administration of large scale infrastructure52.
Improved Customer Offering

The rail freight industry is working hard to improve the product offering to customers. A recent survey of freight forwarders by ACIL Tasman53 has indicated that customers who have access to rail freight are reluctant to use such services due to a perception of: being unreliable (possibly due to a lack of dedicated freight lines, and de-prioritisation of freight services);
Data Framework
Australia has no national data framework. The Australian Standing Committee on Transport (SCOT) Working Group report recommended a National Transport Data Framework governed by an independent national body in 2004. The rail freight industry is supportive of any collaborative efforts in collating data and through the Australasian Railway Association, has been instrumental in collating and publishing rail freight data through the Annual Rail Industry Report and collaboration with BITRE in publishing the annual Australian rail freight performance indicators.
being excessively bureaucratic with processes and paperwork (possibly due to the volume of regulatory burdens imposed on rail) lack of coverage (due to poor infrastructure and lack of inter-modal facilities); and lack of coverage leading to higher costs and time wasted on administration for the freight forwarder. The rail freight industry, through the ARA, is developing a marketing and advertising strategy to address the findings of the ACIL Tasman report. The industry has already made significant improvements in its customer offerings, including prioritised express premium services between Sydney to Perth and Melbourne and Perth and door-to-door delivery.
Research
Research in rail is coordinated by the Rail CRC and funded by government, industry and universities. The CRC is undertaking research to address key issues faced by rail freight. The rail industry provides $4 million per annum to the CRC in financial and in-kind contributions.
52 53
COAG (2005), National Partnership Agreement to Deliver A Seamless National Economy ACIL Tasman (2010), Study into the Perceptions of Rail, published by the Australasian Railway Association
36
Outcomes of a Freight Strategy

Competitive Neutrality
The objective of competitive neutrality is a level economic playing field for all modes of freight transport to ensure a competitive freight market. A fair and level competitive playing field will allow the Australian economy to choose the right freight transport mode for the right job. Competitive neutrality will inevitably lead to the increased utilisation of freight rail services for medium-long distance journeys and ensure that Australia benefits from the social, environmental and safety benefits of rail. To achieve competitive neutrality, the Federal Government must: make wIn the absence of such measures, Government incentives and increased infrastructure spending for rail is required to address these market distortions and to ensure Australia benefits from the social, environmental and economic benefits of the greater use of rail.
Value for Money

The freight strategy seeks value for money and investment for freight customers, the Government and the private sector. The strategy advocates using the right mode of transport for the job and does not advocate a rail only solution to freight. The strategy advocates a multi-modal solution for Australias freight task and readily acknowledges the role of road transport in providing short-medium freight transportation solutions. It would not be financially or economically viable to rely on rail for such transportation. The rail industry seeks the end to policies that lead to market distortions and advocates adequate modal competition on all high volume corridors. This will ultimately lead to greater choice for freight customers, lower prices, greater innovation, better social outcomes and better quality services.
Maximise Performance
A collaborative, fully integrated supply chain for freight will ensure the levels of productivity needed to maintain Australias international competitiveness. Given the sheer size of Australias freight task, all modes of freight transport must be utilised and rail will play an integral part in this supply chain. Rail freight is the best suited land based mode for medium-long distance transport with superior environmental and safety performance. The rail industry can identify and a make a case for addressing: Bottlenecks in the rail freight networks Interoperability between various rail networks, locomotives and operating systems
Cumbersome, duplicative and sometimes inconsistent regulations that govern the operation of rail services Land use planning Industry and Federal Government cooperation will ensure the delivery of such measures. The industry has also put in place concrete measures to improve its internal operational performance.
CONCLUSION AND APPENDIX
40
Conclusion
To meet the impending challenges posed by the tripling of the freight task by 2050 and related issues of population growth, congestion, environmental stewardship and energy security, governments and industry must work together to address the operational, regulatory and financial barriers to a truly national efficient integrated freight transport system. To address these barriers and provide an environment in which the freight industry is able to respond to future challenges, it is recommended that the Federal Government establish an integrated Australian land transport planner, and a single Australian land transport policy maker that provide: a long-term truly integrated, multi-modal vision for freight transport; Alignment of freight transport policy with Government social, environmental and economic policy objectives including land use planning; The identification and internalisation, where possible, of externalities; and The identification of key investment requirements based on future needs.
To address the market distortions in the land transport sector created by the current economic regulatory regimes, it is recommended that the Federal Government establish a single independent Australian land transport regulator to ensure: modally neutral economic and operational framework for the transport sector; and
principles of cost recovery for infrastructure that are the same across modes and jurisdictions; These reforms will be the key vehicles that will ensure integrated planning, competitive neutrality and an holistic approach to transport policy that considers a diverse set of issues including funding, economic and operational regulation, transport and land use interactions and the impact of other policy issues, such as the environment and energy security, on transport planning. Industry must also play it part in ensuring the longterm vision for a national freight network. Industry must commit to improving its operational efficiency, customer offerings and must work cooperatively to ensure priority infrastructure needs are identified and actioned. Above all, the industry must ensure interoperability of infrastructure with capital equipment, control systems and facilities.
Conclusion and Appendix
41
Appendix 1: Specific Government Investment Projects

The following list of projects has been identified by industry players as priorities in ensuring the efficient operation of the rail network. The ARA does not purport to present a whole-of-industry view in identifying prioritised infrastructure.
SCT
Standardisation of track gauges between Victoria and NSW Inland North-South freight corridor, failing that a North South Corridor that has guaranteed and reliable access south and north of Sydney Incremental improvement of track quality to allow for leading edge rolling stock technology from overseas markets Investment in multi-modal terminals in Sydney, Melbourne and Brisbane Investment in infrastructure to allow for reliable journeys between Parkes and Port Augusta Standardisation of grain lines with rest of network to allow locomotives to be shifted to other freight tasks during grains off-season
Asciano/Pacific National, ARTC & Queensland Rail

passing loop extension on the Maitland-Brisbane line or double tracking of Maitland-Brisbane Dedicated northern Sydney freight corridors and enhancements of existing lines Provision of double-stacking capability between Sydney & Melbourne Investment in multi-modal terminals in Sydney, Melbourne and Brisbane Improvement of track quality to allow for leading edge rolling stock technology from overseas markets Upgrade of the East-West Line
WestNet
Upgrade of 200 km of East-West rail line to meet DIRN standard Further investment in East-West rail line to enable the accommodation of leading edge rolling stock technologies from overseas markets Duplication of Brunswick to Bunbury Harbour line Incremental improvement of track quality of grain lines
Asciano
Investment in infrastructure to allow for reliable journeys between Parkes and Port Augusta Standardisation of track gauges between Victoria and NSW
RailCorp
Greater rail access and facilities in and around ports facilities Freight line linking Western Sydney industrial area with rail facilities Rail corridors (freight and passenger) north of Sydney CBD
42

ARA - National Freight Strategy - Towards 2050

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Towards 2050: National Freight Strategy

Towards 2050: National Freight Strategy

WHY A NATIONAL FREIGHT STRATEGY AND THE ROLE OF RAIL

A Multi-Modal Solution The Contribution of Rail

Current State of Rail

Outcomes of a Freight Strategy

CONCLUSION AND APPENDIX

Towards 2050: National Freight Strategy

Vision for Rail Freight

Scope & Objective of Strategy

Key Recommendations of the Strategy

Integrated Transport & Land Use Planning

Competitive Neutrality in all Transport Policy Decisions

Clearly Stated Social, Environmental & Economic Objectives

Towards 2050: National Freight Strategy

A Single Land Transport Economic Regulatory Framework

A Single Land Transport Policy Framework

Informed & Cost-Effective Investment

Consolidating and Rationalising Regulatory Requirements

Review of Regulatory Framework Governing Freight Transport

Government Review of the Cost of Transport Externalities

Introduction of Competitively Neutral Road Charges for Heavy Vehicles

A Single Land Transport Planner

A Single Land Transport Policy Agency

Towards 2050: National Freight Strategy

The Role of Rail

A Call to Action / Recommendations

The National Freight Strategy

Long-Term Goal: A Truly Integrated, Competitive Multi-Modal Freight Supply Chain

Towards 2050: National Freight Strategy

Why a Freight Strategy?

Growth in Australian Road Task 1975-2007 (Compounded Annual Growth Rate)

Land Use and Transport Corridors

Towards 2050: National Freight Strategy

Lack of Integrated Planning & Microeconomic Reform

Integrated Policy & Planning Frameworks

Increasing Energy Prices & the Carbon Restricted Economy

Price of Oil (per barrel) in USD

Source: International Energy Agency

Carbon Restricted Economy

Comparisons of Benefits of Various Modes of Freight

Towards 2050: National Freight Strategy

The Contribution of Rail

Source: BITRE (2008)

Superior Safety Record FACTS

Total Land Transport Related Fatalities

Towards 2050: National Freight Strategy

Total Land Freight Related Fatalities

250 Road Rail (Estimate)

0 2001 2002 2003 2004 2005 2006 2007 2008

3.18 1.01 0.32

0 Light Commercial Vehicles Rigid Truck Articulated Heavy Vehicles

Source: ARA Rail Industry Report 2008

Towards 2050: National Freight Strategy

Environmentally Friendly and Fuel Efficient

Current State of Rail

Infrastructure Expenditure Road Rail

% of Total Road Rail Infrastructure Expenditure

$15.9 B $14 B 77%

Towards 2050: National Freight Strategy

De-Prioritisation and Under-Utilisation of Freight Rail

Market Failures in Land Freight Market