A pox on rail fanatics

A lot of people are interested (recreationally) in rail transport. I have no issue with such rail fans. When I lived in Sydney, I preferred to live in areas, where it was possible to commute to the city by train, and, internationally, there are many great rail journeys.

What I have issue with, is people, who push the case for rail transport to the point of advocating projects that clearly have no hope of ever being economic. I have even less time for the politicians that indulge them, wasting billions of our taxpayer dollars building train lines that generate massive losses.

Whatever the reason, it seems to be the case that rail fanatics in this country are forever proposing new train lines, and many are strident in such advocacy. The main stated justifications seem to be environmental (overcoming congestion and pollution), engineering, and economics (commonly a pork-barrel dressed up as sound economics).

While railways were hugely profitable in the 19th century and opened up many nations, they have struggled to remain profitable in subsequent centuries. Despite this (and closures of many lines), proposals for new railway ventures, that are clearly uneconomic, get rationalised on the basis of (often questionable) external benefits, being "nation building" projects etc.

The main problem with rail is that almost all public railways run on government subsidies. With rail freight, even if its costs are the same as road, most freight customers will choose road because it is more flexible. Roads also serve motorists, as well as freight and passenger services.

With the current fad for light rail, people seem to forget that countless cities (eg Sydney and Perth in this country) used to have light rail systems but scrapped them in favour of buses. Sydney had a tram system that was in operation from 1861 until 1961. Perth's original tramway network was in operation between the end of the nineteenth century and 1958.

I don't particularly like light rail for two reasons. Firstly, buses can travel on any road, while light rail needs expensive rail lines to be especially built. Secondly, unlike most conventional city rail, which is generally built almost entirely underground or on elevated lines, light rail is commonly built at road level, and regularly intersects with and delays traffic.

One would imagine that objective cost-benefit studies would routinely be used to decide on which rail projects to proceed with. (There is a government body, Infrastructure Australia, established in 2008, that has statutory responsibility for strategically auditing proposed infrastructure, but some of its assessments seem dubious and politically influenced.) Most dud rail schemes fail to pass objective cost-benefit tests, which are then either ignored or get fudged. Moreover, in this country existing rail networks, apart from urban people transport and those serving mines, are bleeding market share.

The rail link between the east coast and Perth is rapidly losing freight market share to foreign-crewed container ships, and to road transport. Price competition has reduced the rail share of non-refrigerated goods travelling to Perth from around 90 per cent to closer to 50 per cent. Worse still, the Sydney-Melbourne rail link now carries only token tonnages of freight, being down to only about one per cent of the market, while Sydney-Brisbane is around 5 per cent. The Sydney-Melbourne rail line is now said to be totally uneconomic, while the Hume Highway has become a major truck route.

The suburban rail networks are also heavily loss-making. Taxpayers are footing the bill for commuter train travellers because the price of tickets does not reflect the full cost of the service. In NSW the cost of each rail journey is subject to an estimated 70 per cent subsidy. The stated justification for such subsidies is that they are claimed to save more than three times the ticket cost in reduced congestion and other social costs.

The big-ticket train projects of recent decades have nearly always ended up being financial disasters. The most obvious such project was the Alice Springs to Darwin Railway. The Commonwealth, SA and NT governments put up a total $560 million towards the $1.1 billion cost, with a private consortium committing $740 million. The all-up cost back then was $1.3 billion. The FreightLink consortium was contracted to build and operate the line with ownership to eventually transfer back to public hands after 50 years.

David Hill, then Chief Executive of NSW Rail, conducted a study on the costs and benefits of completing the line, and concluded that the investment "would constitute a major misallocation of the nation's resources". The Bureau of Transport Economics also investigated the potential of the line and recommended instead that the highway be upgraded. Other critics of the project said it was destined to be a white elephant, with insufficient demand for domestic and export rail freight to cover operating expenses.

The project indeed turned out to be an economic disaster. After failing to make a profit and later being placed in voluntary administration, FreightLink agreed to sell its ownership of the rail link in May 2008. The line is now owned by the US railroad company Genesee & Wyoming Inc, which purchased it for a mere A$334 million.

We are now seeing a repeat of this disaster with the current Inland Rail project.

Inland Rail is a 1700km freight rail network that will connect Melbourne and Brisbane via Albury, Parkes, Narromine, Narrabri. North Star, and the Darling Downs. The Australian Government (spanning the Gillard, Turnbull and Morrison eras) committed $9.3 billion in grant and equity funding. While the project will utilise many existing rail routes, one third will be a new route carved through state- and privately-owned land. The project is widely regarded as a huge pork-barrel to the National Party and its inland NSW electorates, though there are farmers who oppose the project and its impact on their properties.

Infrastructure Australia gave the project an equivocal cost-benefit assessment. It said that:

...the proponent's stated benefit-cost ratio is 1.1 using a 7 per cent discount rate" but also identified "a number of risks which could impact on the economic viability of the project. Factors such as a decrease in demand for Australia's coal exports, weak oil prices, reduced demand for interstate freight, and upgrades to the Newell Highway, could adversely impact the economic case for Inland Rail.

The Bureau of Transport and Communications Economics in an analysis published in 1996 concluded that:

…from our limited analysis, the proposed inland railway emerges as an investment of uncertain economic merit….Also unclear from our results is whether the inland railway makes more economic sense than investing a similar amount in the existing coastal railway.

The project is due for completion in 2026, and large operating losses due to high capital costs and insufficient traffic are a near certainty.

Victoria's Regional Fast Rail Project, implemented by the Bracks government is another dud. It commenced in the early 2000s with the aim of significantly cutting the passenger rail travel times between various regional centres to Melbourne. The initial costing put the project at $80 million. It eventually cost $750 million and was completed in 2009. Rather than shave travel times, in a number of cases it is claimed that it now takes longer to get to Melbourne.

There are many relatively recent passenger rail projects across the country, some of which [eg Gold Coast Light Rail, (Perth) Northern Suburbs Transit System] seem to function well. In addition, both Sydney and Melbourne are implementing a plethora of new rail projects (eg Melbourne and Sydney Metros, Melbourne Airport Rail) with other big projects (eg Melbourne's $50-100 billion Suburban Rail Loop) proposed. The jury is still out on the cost-benefits of these projects, with huge sums of money being involved.

The NSW government's handlingo of Sydney's controversial light rail line has been heavily criticised by its Auditor-General, who has highlighted failures in reporting the true cost of the project that has now hit $3.1 billion.

One of the more contentious light rail projects is that in Canberra.

Stage 1 from Gungahlin to Civic has been built at a cost of about $1 billion. Stage 2 from Civic to Woden is going ahead at a further cost of about $2 billion (without an adequate business case). There are proposals to later build further lines from Civic to Canberra Airport, and from Civic to Belconnen.

The problem with public transport in Canberra is that the city is very spread out and low population density does not facilitate economical public transport. Consequently the existing Canberra bus network is the most subsidised in the country, and light rail is not economically viable in the ACT. This, however, did not stop the Territory Labor/Greens government from going ahead with light rail, and facilitating substantial medium rise apartment developments along the light rail corridor (to increase potential patronage).

With Stage 1, the ACT government calculated a benefit-cost ratio of 1.2. The ACT Auditor General said almost 60 per cent of the "benefits" were wider economic and land benefits, whose inclusion was debatable. The transport benefits were said to amount to just 49 cents for every $1 spent. The Productivity Commission further noted that bus rapid transport would have provided similar benefits to light rail for a quarter of the cost.

Overall, the ACT will be stuck with at least a $3 billion light rail network funded by public debt, and likely to generate substantial operating losses into the future.

The Sydney Monorail was another flop. Experts had warned (even during its inception) that it was a foolhardy idea since monorails have low carrying capacity, and the one in Sydney was not integrated with the city's wider public transport. Clive James, in his 1991 Postcard from Sydney television special noted that "the monorail runs from the middle of downtown Sydney, to the middle of downtown Sydney, after circumnavigating the middle of downtown Sydney". It was pulled down in 2013, fifteen years after its construction.

There are quite a number of hare-brained rail proposals, that thankfully (to date) have not been built.

Every 10 years or so, for example, there is a grand proposal for high-speed rail linking our east coast cities but to date (thankfully) no one has been prepared to fund it.

Anthony Albanese recently promised that, if elected, a Labor government would start work on establishing a High Speed Rail Authority to oversee planning for a route running from Brisbane to Melbourne via Sydney and Canberra. A feasibility study that found a service could be profitable, but would require significant government investment towards the expected huge ($114 billion) construction cost.

The Grattan Institute has rubbished these proposals saying that:

Australia should dump the decades-old dream of building a bullet train from Brisbane to Melbourne via Sydney and Canberra, and we should be wary of expensive promises to upgrade regional rail. The east-coast bullet train advocated by the federal ALP would be an expensive folly: Australia's small population and vast distances make it unviable.

An even more crackpot scheme is a proposed Canberra to Eden railway. The plan proposed to rebuild the existing (unused) rail line to Bombala, as well as extending it north to Canberra Airport and south to the Port of Eden. The proposal is totally crazy because current travel (passenger or freight) between the two centres is minimal, and the only obvious reason why it was dreamt up is because the remains of the old rail line between Queanbeyan and Bombala still exist.

The NSW government in 2018 announced $1 million in funding for a feasibility study. The executive summary, which estimated the project would cost $6.3 billion, found there would be "little if any, return on investment".

So there we have it! Rail construction, especially of regional and inter-city lines, nearly always has been unsuccessful in this country in recent decades. Road, sea and air transportation have been out-competing rail. Voters therefore ought to be extremely wary of governments proposing to build new rail lines dependent on taxpayer funding.