03 April 2017

Chief Executive Officer Infrastructure Victoria Level 16, 530 Collins Street VIC 3000

Dear Mr Masson, SUBMISSION ON SECOND CONTAINER PORT ADVICE EVIDENCE BASE LeadWest and the Western Transport Alliance welcome the opportunity to provide Infrastructure Victoria with a joint-submission in response to the discussion paper on the second container port advice Evidence Base. LeadWest is the regional organisation for Melbourne's west. Focused on advocacy for the region, LeadWest is a nonpartisan and not-for-profit, membership-based organisation. LeadWest’s objective is to foster and undertake actions that will support sustainable growth and development of Melbourne’s west. LeadWest was formed by the six local governments in Melbourne's west and they are joined in LeadWest’s membership by major companies and other organisations, each with substantial operations or interests that are based in Melbourne's west. LeadWest also has a growing number of affiliates, primarily not-for-profit organisations and each playing a significant role in our region. You can access more information on LeadWest at www.leadwest.com.au The Western Transport Alliance was also formed by the six local governments in Melbourne's west and is a coalition of organisations including VicRoads, the RACV, the Victorian Transport Association, transport and distribution businesses, and the Habitat Trust. It is currently chaired by Mr Stephen Wall, a director of LeadWest and the chief executive officer of Maribyrnong City Council.

OVERVIEW LeadWest and the Western Transport Alliance support the balanced, evidence-based approach adopted by Infrastructure Victoria as a basis for its advice to the Minister. We appreciate that it is complex to choose when and where to invest in new port capacity and welcome the invitation to submit: • any information that is different or contrary to the evidence put forward by Infrastructure Victoria • any evidence that expands the information that can be drawn on by Infrastructure Victoria. LeadWest and the Western Transport Alliance agree that container demand projections, navigating the Port Phillip Heads, and future ship size are key factors relevant to both when and where to invest in container capacity. We also support the emphasis placed on the important role that Melbourne’s west plays in the import and export supply chain for Melbourne and Victoria. There are however some areas of the evidence base where LeadWest believes further information should be gathered to ensure that a full and accurate picture of the future of containerised freight in Victoria is developed. Specifically, we believe that further work should be considered on the following areas of evidence: 1. whether the demand growth modelled by Deloitte, particularly post 2040, is too low; 2. detailed mapping of the exact origin and destination of containerised freight demand across Melbourne and Victoria, particularly accounting for significant growth predicted for Melbourne’s west; 3. further modelling of how both the geographic and modal structure of supply chains to the Port of Melbourne could change from its present state in the medium to long-term future; 4. reconsideration of the view that rail mode will not exceed 30 per cent, and what impact a greater rail mode share would have on future port capacity. 5. further evidence regarding the impact of growth in the suburbs surrounding the Port of Melbourne on road and rail capacity, as well as tolerance for social and environmental impacts; 6. a thorough economic analysis of the opportunity cost of increasing capacity at the Port of Melbourne, on both existing and alternative future use of land and supporting infrastructure;

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7. consideration of the current and future impact of freight traffic travelling to the Port of Melbourne on the health and safety of cyclist and pedestrians in Melbourne’s inner west; 8. consideration of the potential economic benefit of synergies between Bay West, Avalon Airport and a future Western Interstate Freight Terminal as part of the business case for a Bay West port option; and 9. consideration of the potential economic benefit of future channelling improvements being shared between all harbours in the Port Phillip Bay area.

FEEDBACK ON DEMAND FORECAST LeadWest and the Western Transport Alliance agree with Infrastructure Victoria that it is important to estimate future demand for both import and export containers. Given that the Port of Melbourne is not currently at capacity, it is this growth that will by the principal driver of when and where additional port investments are required. We note however that the long-term demand forecasts (particularly past 2040) provided by Deloitte for this report are a lot lower than other recent reports - most notably the 2014 analysis conducted by the Victorian Department of Finance. More detailed consideration should be given to this discrepancy, including whether Deloitte's model is too low. Demand will obviously impact when a second port will be viable, with higher demand meaning that the Port of Melbourne will reach capacity ahead of predictions and a second port may be required sooner. 1. We encourage Infrastructure Victoria to assess: a. whether the demand growth modelled by Deloitte, particularly post 2040, is too low in comparison to other recent models; and b. What impact a higher demand than any of the Deloitte modelling would have on when and where a second part may be required. LeadWest believes that the geographic location of both current and future demand across Melbourne, Victoria and South-eastern is a critical factor in deciding how this demand can be accommodated. At present, the discussion paper only considers overall growth in demand for containerised freight, and not where this demand (both import and export) will be generated. This information will be a key factor in the cost-benefit of both continued operations at Melbourne and the potential benefits of both options for a future second port.

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As noted later in the report on pages 50-54, most future residential and industrial growth is likely to occur in Melbourne's north and west. We agree that these regions, along with their hinterlands, are the future growth areas for Melbourne. Victoria in Future predicts that the population in Melbourne’s west will grow to 1.17 million by 2031, in Melbourne’s north to 1.23 million, in central Melbourne to 760,900, and in the regions to the north and west of Victoria to 1.47 million (i.e. a total of 4.57 million); whereas in contrast the population in Melbourne’s east will grow to 1.23 million, in Melbourne’s south to 1.6 million and in Gippsland and Alpine to 333,700 (i.e. a total of 3.16 million). Clearly, most of Victoria’s future population will be located to the north and west of Melbourne. LeadWest would argue that this disproportionate weighting of growth is likely to make both increased capacity at the Port of Melbourne and a second port at Bay West more favourable options in comparison to a second port at Hastings. Furthermore, the transport links into the western region and the Port of Melbourne serve a large south east Australian hinterland with export production and population centres largely to the north and west of Melbourne, including large parts of South Australia and the NSW Riverina, in addition to Victorian regional centres such as Ballarat, Bendigo, Mildura and Warrnambool. 2. We encourage Infrastructure Victoria to: a. commission detailed modelling of where demand will come from geographically within Victoria and Australia; and b. consider how the point-to-point movement of this growth in container freight would impact on the viability of a second port location.

FEEDBACK ON SHIP NAVIGATION SIMULATION LeadWest and the Western Transport Alliance agree with Infrastructure Victoria that critical to decisions on when and where to invest in new container capacity is assessment of the size of ships and number of ships that can access Port Phillip Bay through the Port Phillip Heads. We broadly support the evidence presented regarding these capacity constraints and do not see any major flaws in this analysis. We note and agree with the conclusion reach on page 37: that regarding ship size and call frequency, there is ample capacity with the use of ships up to the size of 14,000 TEU to accommodate all demand through The Heads until mid-2100.

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FEEDBACK ON SHIP SIZES LeadWest and the Western Transport Alliance agree with Infrastructure Victoria that assessment of likely future ships sizes is pre-requisite to an informed decision on when and where to invest in future container capacity. LeadWest and the Western Transport Alliance note the assessment of the Victoria University Institute of Supply Chain Logistics1 that it is problematic to assume that Post Panamax Plus vessels will visit Australian ports. Market size drives the TEU capacity requirement and thus the size of the vessel sent to a particular port. As expressed in the discussion paper, ships need to be close to full and without significant industry consolidation there is not enough demand to fill 18,000 TEU vessels for Australian services for decades and we are unlikely to see such ships before 2066. LeadWest and the Western Transport Alliance also agree with the evidence and conclusion reached on pages 43-44: that while The Heads present a theoretical constraint to ship sizes above 14,000 TEU entering Port Phillip Bay, the likelihood of ships above 14,000 TEU serving Melbourne is limited by the size constraints at Eastern Australia’s other major ports in and . As noted in the paper, constrained capacity in one of these three ports will almost certainly create a flow-on constraint on all three ports. Given the significant cost of investment in port capacity for vessel sizes above 14,000 TEU, it would also seem very unlikely that such investment will ever be made across all three main east coast ports. On the basis, the chances of ships above 14,000 TEU ever servicing the Australian market and therefore wanting to call at Melbourne seem remote.

FEEDBACK ON CAPACITY FOR GROWTH AT THE PORT OF MELBOURNE AND TRIGGER FOR A SECOND CONTAINER PORT LeadWest broadly supports the outlined parameters for considering capacity for growth at the Port of Melbourne. We particularly note the evidence showing the concentration of both current freight infrastructure, as well as potential for growth in this infrastructure, in Melbourne's west. Based on this evidence, LeadWest generally agrees that, subject to the coordinated development of supporting infrastructure, there is potential for further capacity to be

1 Victoria University Institute of Supply Chain Logistics, Build it – but will they come? Technical Report August 2014

Page 5 of 11 unlocked at the Port of Melbourne at a lower comparative cost than immediately building a new second port. We also note however that there are some factors that the current evidence base does not consider or appropriately emphasise, which are likely to limit the capacity for growth at the existing Port of Melbourne, or to make particular types of capacity expansion more favourable. LeadWest and the Western Transport Alliance agree with the evidence base regarding the supply chains that feed into the current operations of the Port of Melbourne. Critical in deciding the capacity for overall growth at the current port site is determining how and from where container freight arrives and departs the port. We particularly note that Melbourne is currently an import-dominated market with 70 per cent of imports staged at transport nodes, most which are in Melbourne’s west. While the paper presents a good picture of current supply chain flows, LeadWest and the Western Transport Alliance do not believe that sufficient evidence has been presented regarding potential changes to supply chains in the medium to long-term; what impact these changes would have on the use of supporting infrastructure; and how these changes could be directed or accommodated through policy. As noted in our earlier recommendation, there does not appear to be sufficient evidence presented regarding the specific 3. We recommend that Infrastructure Victoria consider how both the geographic and modal structure of supply chains to the Port of Melbourne could change in the medium to long-term future. LeadWest does not accept that a 30 per cent rail mode means of transporting containers to and from the port is an ‘aggressive target’, but rather represents an achievable target if the correct incentives are implemented. With the right policy settings, this high volume of staged outward traffic, currently hauled by individual trucks, could be transferred to the existing rail infrastructure that exists between the port and many of these transfer nodes. There are already intermodal terminals located in North Altona and Somerton and a planned Western intermodal terminal at Truganina which will all be adjacent to rail corridors, and could be used as a pilot for increased shuttle rail services into the port. 4. We recommend that Infrastructure Victoria re-considers its assertion that rail mode will not exceed 30 per cent, and what impact a greater rail mode share would have on future port capacity. Most of the evidence presented in the discussion paper demonstrates the potential technical capacity of expanding the Port of Melbourne. We believe that the broader ramifications of such expansion need much more emphasis in the evidence base than

Page 6 of 11 is currently the case. As outlined below, we thoroughly agree with the proposal on page 71 that modelling of these broader impacts be undertaken and included in the final advice to the Minister. There is not currently sufficient consideration of how future growth in non-freight traffic will impact on the use of both road and rail infrastructure. Clearly, the growth and densification of non-freight land use planned for Fisherman’s Bend, Footscray, North Melbourne and the E-Gate site will create significant growth in non-freight road traffic. This will have a compounding effect of both lower road capacity and a lower tolerance for impacts on amenity. 5. We agree that Infrastructure Victoria should develop further evidence regarding the impact of growth in the suburbs surrounding the Port of Melbourne on road and rail capacity, as well as tolerance for social and environmental impacts. The current evidence base does not properly consider the opportunity cost of either maintaining or increasing levels of activity at the Port of Melbourne. As noted on page 71 of the discussion paper, given its proximity to Melbourne's CBD and other current and future economic centres including Footscray, Parkville and Arden, both the land and supporting infrastructure surround the Port of Melbourne could be used for several other high value economic activities. Similarly, the evidence base does not consider the ‘negative externality’ cost that any increase in Port activity may create in terms of increased congestion or other negative factors for existing businesses. While these types of costs can be difficult to model, LeadWest and the Western Transport Alliance believe that Infrastructure Victoria will be providing the government with incomplete advice if these broader economic impacts of Port activity are not quantified and considered. 6. We agree that Infrastructure Victoria should include a thorough economic analysis of the opportunity cost of increasing capacity at the Port of Melbourne, on both existing and alternative future use of land and supporting infrastructure. While the evidence base accurately outlines many of the potential social impacts of increasing capacity at the Port of Melbourne, it does not consider the acute and devastating cost of cyclist and pedestrian injuries and fatalities in Melbourne's inner west resulting from collisions with freight trucks. This impact has most recently been highlighted by the tragic death of Yaşındaki Arzu Bağlar Karakoḉ following a collision with a freight truck on the corner of Somerville Rd and Whitehall St, Yarraville. Although recent announcements by the Victorian Government of 24 hour bans on trucks in some residential streets and improvements to cycling infrastructure in Melbourne’s inner west are welcome, we believe it is still critical that Infrastructure Victoria accurately model the impact of port expansion on this demographic. It is also

Page 7 of 11 important to consider the fact that expanding overall containerised freight capacity through a second port would have much less impact on cyclists and pedestrians, given that both potential sites are located away from dense residential areas. 7. We recommend that Infrastructure Victoria specifically consider the current and future impact of freight traffic travelling to the Port of Melbourne on the health and safety of cyclist and pedestrians in Melbourne’s inner west.

FEEDBACK ON EVIDENCE FOR LOCATION OF A SECOND CONTAINER PORT LeadWest and the Western Transport Alliance broadly support the parameters chosen by Infrastructure Victoria to frame the evidence base for the location of a second port. We are pleased that a long-term view of capacity for 9 million TEU has been set: as the current location of the Port of Melbourne demonstrates, it is critical that we anticipate how Melbourne’s changing landscape might impact the location of a second port 100 or even 200 years from now. We also support the emphasis placed on the capacity of a second port site to link to and build on existing road and rail networks. As outlined earlier, LeadWest and the Western Transport Alliance believe that it is critical for Infrastructure Victoria to not only model estimated growth in demand for containerised freight, but also where this demand will be based geographically. This is particularly important in the context of a second port, as the location of demand will significantly impact on the efficiency of supply chains at each potential site. This does not seem to have been considered in the current evidence base, and we reiterate our recommendation that such analysis be undertaken and incorporated into the final advice to the Minister. Hastings Option LeadWest and the Western Transport Alliance support the evidence considered in relation to the potential placement of a second container port at Hastings. We particularly note and emphasise the following points, which we believe are significant potential impediments to the cost effectiveness long-term sustainable operation of the Hastings site as a high-capacity container port: • an estimated overall cost nearly two times that of Bay West, including: o the complexity and high cost of Regional Rail East, which would be required and principally driven the target of transporting 10-30 per cent of container freight from Hastings via rail; o the cost of approximately 25 kilometres of new rail to link Hastings with the Cranbourne line;

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• the need for a significant amount of containerised freight to travel via busy road and rail corridors in the Melbourne metropolitan area to reach final destinations in Victoria’s north and west; • significantly greater impact on important marine environments; and • potential for worse impact on local residential land use, as well as residential and commercial amenity along the Dandenong-Caulfield rail corridor. As per earlier comments in our submission, we would reiterate the point that container ships above a capacity of 14,000TEU seem very unlikely to call at any port in Melbourne, due both to a lack of sufficient demand as well as the likely continuation of this capacity ceiling as a constraint at ports in Melbourne and Brisbane. There is therefore little reason to consider the capacity at Hastings for ships up to 18,500TEU as of any significant benefit in comparison to Bay West. Bay West Option LeadWest and the Western Transport Alliance support the evidence considered in relation to the potential placement of a second container port at Bay West. As noted on page 97, this discussion paper presents the first significant attempt to pinpoint the location of a potential Bay West site. We agree that the three modelled locations broadly represent the most likely and appropriate scenarios for a future port site. LeadWest and the Western Transport Alliance do not necessarily support the ‘Werribee corridor’ as the best of the three options. While we note the paper’s disclaimer that more analysis will need to be conducted as to the exact location of a Bay West port, we would note the following evidence which may make either the Kirk Point or Point Wilson alignments more favourable: • given the existing plans for land use in the Werribee South area to include high value residential and commercial development, there would be a significant opportunity cost to placing an industrial port within immediate visual proximity; • with the Point Wilson alignment, significant logistics synergies could be achieved between Bay West and Avalon airport, with the potential to also locate the Western Interstate Freight Terminal (WIFT) at the same location. Overall, while construction costs for these two corridors may be somewhat higher, there is every possibility that this cost would be offset by equal or greater broad economic benefit. 8. We recommend that Infrastructure Victoria consider the potential economic benefit of synergies between Bay West, Avalon Airport and a future WIFT as part of the business case for a Bay West port option.

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For all three sites, we note the following points of significance in the existing evidence base which clearly demonstrate the strength of a Bay West option in comparison to a port at Hastings: • approximately half the estimated overall cost to reach 9 million TEU, including 10-15km less new rail to link to existing broad and standard gauge lines; • much better linkages to existing and future freight infrastructure, including the Princes Freeway; Outer Metropolitan Ring Road; Geelong line and Regional Rail Link; and the national standard gauge freight network; • better placement to cater to both the current and future freight demand in Melbourne’s north and west, which will continue to represent an increasing majority of total freight demand; • significantly reduced environmental impact, due to the proposed innovate off-shore design; and • significantly reduced social impact due to greater remoteness from existing residential land use areas. One issue that has not been considered in the analysis of Bay West is the fact that, if it is required in the future, the overall burden of channelling and other thoroughfare maintenance would be contained to the Port Phillip corridor. As such, any improvements to channelling into and around Port Phillip Bay will benefit all port facilities within the Bay, including the Port of Melbourne, Princes Wharf, Geelong and Bay West. By contrast, improvement works at the mouth of the Port of Hastings will only benefit operations in that port, with no positive side effects for ports in Port Phillip Bay. 9. We recommend that Infrastructure Victoria consider the potential economic benefit of future improvements to Port Phillip Bay channelling being shared between all harbours in the Port Phillip Bay area.

CONCLUSION Overall position on evidence presented While we note that this paper is not the final advice for the Minister, we contend that the weight of the current evidence presented in this discussion paper supports the location of an eventual second container port at Bay West. Overall, we believe that, while Hastings will remain a great asset to Victoria as a specialised deep water port, Bay West container port would be a strategic decision that will drive the future economic capability of both the region and the state.

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Specifically, the evidence presented shows that Bay West would: • provide key linkages to the freight and logistics heartland of Melbourne, which is in Melbourne’s west; • support the significant growth expected in Melbourne’s north and West; • support potential geographic synergies between the Port of Melbourne and the second container port; and, • future-proof the second port for potential increases to interstate freight demand. All of this would be achieved without placing any additional constraints on Melbourne’s container freight capacity above constraints that already exist due to capacity at other Eastern seaboard ports. The Bay West option also offers better net environmental and social outcomes in comparison to a Hastings option. Providing certainty for the future As a final point, we would note the importance of using this exercise to provide certainty for future land use and infrastructure around all three port sites. As has already been noted in this submission, LeadWest and the Western Transport Alliance acknowledge that further capacity increases at the Port of Melbourne are likely to be able to accommodate the containerised freight demand for Victoria in the short to medium term. Even if a second container port is not required for another 50 years however, we believe that a clear decision should be made now, so that the myriad of stakeholders affected by a new second port can begin to factor this decision into their own long term planning.

Thank you again for the opportunity to contribute to this important planning process. We look forward to seeing the final advice provided by Infrastructure Victoria in May. Yours sincerely,

Craig Rowley Chief Executive Officer LeadWest

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