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Rail Transport Rail Transport Volume I: Report Report No. 13 21 August 1991 Australian Government Publishing Service Canberra © Commonwealth of Australia 1991 ISBN 0 644 22057 0 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without written permission from the Australian Government Publishing Service. Requests and inquiries concerning reproduction rights should be directed to the Manager, Commonwealth Information Services, Australian government Publishing Service, GPO Box 84, Canberra ACT 2601. Printed in Australia by P. J. GRILLS, Commonwealth Government Printer, Canberra INDUSTRY COMMISSION 21 August 1991 The Honourable John Kerin, MP Treasurer Parliament House CANBERRA ACT 2600 Dear Treasurer In accordance with Section 7 of the Industry Commission Act 1989, we submit to you the report on Rail Transport. Yours sincerely CONTENTS VOLUME I – REPORT PAGE TERMS OF REFERENCE iv CONTENTS v ABBREVIATIONS viii OVERVIEW AND RECOMMENDATIONS xiii 1. INTRODUCTION 1 1.1 Origin and scope of the inquiry 1 1.2 conduct of the inquiry 2 1.3 Structure of this report 2 2. THE SCOPE FOR AND BENEFITS OF RAIL REFORM 3 2.1 Role of transport in the economy 3 2.2 Trends in rail transport 7 2.3 Rail tasks and opportunities for substitution with other modes 10 2.4 Problems in railways 12 2.5 Ongoing rail reform 26 2.6 Potential economy-wide effects of reform: ORANI analysis 29 3. RELATIONSHIPS BETWEEN GOVERNMENTS AND RAILWAYS 37 3.1 Historical overview 37 3.2 Railway legislation 42 3.3 Reform of the relationship between governments and their railways 46 4. THE CASE FOR GOVERNMENT INTERVENTION IN RAILWAYS 63 4.1 Introduction 63 4.2 Economies of scale and natural monopoly 64 4.3 External costs and benefits 78 4.4 Equity objectives 79 4.5 Community services 81 CONTENTS V 5. COMPETITIVE, ENVIRONMENTAL AND SOCIAL ASPECTS OF RAIL AND ROAD TRANSPORT 91 5.1 Equitable competition between modes 92 5.2 Externalities 97 5.3 Urban infrastructure and land use 109 5.4 Regional implications of changed rail services 113 6. RAILWAY FINANCING AND CAPITAL INVESTMENT 119 6.1 Railway deficits 119 6.2 Investment decisions and asset management 126 6.3 Sources of funds 134 6.4 Financing of rail and road transport 143 6.5 Commonwealth and State roles 144 7. MANAGEMENT AND LABOUR PRODUCTIVITY 153 7.1 Introduction 153 7.2 Management and productivity 154 7.3 Specific labour productivity issues 158 7.4 Workforce reductions and productivity 174 8. URBAN PASSENGER SERVICES 185 8.1 Urban networks 185 8.2 Current levels of cost recovery 189 8.3 Assessment of arguments for subsidising urban rail services 191 8.4 Who should pay? 198 8.5 Costs 199 8.6 Revenue 204 8.7 Conclusion 216 9. NON-URBAN PASSENGER SERVICES 219 9.1 Non-urban passenger networks 219 9.2 Cost recovery 225 9.3 Assessment of the arguments for subsidising non-urban rail services 228 9.4 User pays 232 9.5 Improving efficiency and service 234 9.6 Fares 241 VI RAIL TRANSPORT VOLUME 1 10. BULK COMMODITY FREIGHT 247 10.1 Description of bulk rail freight tasks 247 10.2 Regulations and restrictions on mode of operation 250 10.3 Rail freight charges for grains 257 10.4 Rail freight charges for coal and other minerals 260 10.5 Operational efficiency 278 10.6 Other issues 284 11. NON-BULK FREIGHT 287 11.1 Non-bulk rail freight tasks 287 11.2 Intrasystem freight 289 11.3 Intersystem freight 295 11.4 Intersystem efficiency 306 11.5 National Rail Corporation 315 12. OPTIONS FOR STRUCTURAL REFORM 319 12.1 Introduction 319 12.2 The case for increased competition within the railway industry 320 12.3 A national rail network corporation 331 12.4 Overcoming impediments to competition 335 12.5 Regulations to facilitate competitive conditions 339 12.6 Amalgamation of government railways 346 REFERENCES 347 VOLUME II - APPENDICES A List of participants B Rail system maps C Statistics of the operation and use of Australian railways D Recent developments in rail reform in Australia E Total factor productivity and rates of return in Australian railways F Constitutional background G Social cost considerations H Railway labour market characteristics I Railways in other countries J Choosing the appropriate rate of return for coal rail investment K The effects of adopting international best practice in Australia's rail systems CONTENTS VII ABBREVIATIONS USED IN VOLUME 1 .. negligible - not applicable ABARE Australian Bureau of Agricultural and Resource Economics ABS Australian Bureau of Statistics ACAC Australian Conciliation and Arbitration Commission ACM Australian Chamber of Manufactures ACT Australian Capital Territory ACTU Australian Council of Trade Unions AFCC Australian Federation of Construction Contractors AFCO Australian Federation of Consumer Organisations AFULE Australian Federated Union of Locomotive Enginemen AGPS Australian Government Publishing Service AIRC Australian Industrial Relations Commission ALGA Australian Local Government Association AMIC Australian Mining Industry Council AMWU Amalgamated Metal Workers Union Amtrak trading name of the National Railroad Passenger Corporation (US) AN Australian National Railways Commission ANI Australian National Industries Limited ARRDO Australian Railway Research and Development Organisation ARTF Australian Road Transport Federation ARU Australian Railways Union ASE Australasian Society of Engineers ATAC Australian Transport Advisory Council ATOF Australian Transport Officers Federation AWB Australian Wheat Board AWU Australian Workers Union BCA Business Council of Australia BGQ Bulk Grains Queensland BHP Broken Hill Proprietary Company Limited BHPT BHP Transport Limited, subsidiary of BHP BTCE Bureau of Transport and Communication Economics BTE Bureau of Transport Economics BTR Bureau of Tourism Research CAPM Capital Asset Pricing Model CBD Central Business District CGC Commonwealth Grants Commission COPS Centre of Policy Studies (Monash University) CPI consumer price index DEET Commonwealth Department of Employment, Education and Training DIR Commonwealth Department of Industrial Relations DoTC Commonwealth Department of Transport and Communications DSS Commonwealth Department of Social Security ECMAL Exxon Coal and Minerals EPAC Economic Planning Advisory Council ETU Electrical Trades Union FCL full-car-load fob free-on-board FORS Federal Office of Road Safety GBE Government Business Enterprise VIII RAIL TRANSPORT GDP gross domestic product GMA Grocery Manufacturers of Australia Ltd GNP gross national product IAC Industries Assistance Commission IC Industry Commission ISC Inter-State Commission hp horsepower km kilometres LCL less-than-car-load Met trading name for the urban activities of the PTC mt million-tonnes MTCL Mount Thorley Coal Loader na not available NFF National Farmers' Federation NFG National Freight Group, part of ROA NFI National Freight Initiative NRC National Rail Corporation NRFC National Rail Freight Corporation NRMA National Roads and Motorists' Association NSW New South Wales NSWCA New South Wales Coal Association NT Northern Territory NTB National Training Board ntk net tonne-kilometres NZRC New Zealand Railways Corporation PTC Public Transport Corporation (Victoria) PUD pickup and delivery QLD Queensland QR Queensland Railways RIC Railway Industry Council ROA Railways of Australia Committee SA South Australia SEC State Electricity Commission SEP Structural Efficiency Principle SPC special Premiers' Conference SRA State Rail Authority of New South Wales STA State Transit Authority of New South Wales STAP State Transport Authority Plan (Victoria) Tasrail Tasmanian operations of AN TFP total factor productivity TNT TNT Limited TPC Trade Practices Commission Transperth trading name of the Metropolitan (Perth) Passenger Transport Trust UK United Kingdom US United States USA United States of America VIA VIA Rail Canada Inc. V/Line trading name for the non-urban activities of the PTC VFT Very Fast Train WA Western Australia Westrail Western Australian Government Railways Commission XPT Express Passenger Train (NSW) ABBREVIATIONS IX USED IN VOLUME 1 OVERVIEW AND RECOMMENDATIONS Railways are essential to Australia's transport system. They play major roles in moving coal, iron ore and grain to ports, and in carrying commuters, particularly to and from central business districts. They account for about half of freight tonne-kilometres moved by land transport, 9 per cent of urban trips to and from work, and almost 1 per cent of GDP. There are approximately 75 000 railway employees. − Yet there is ample evidence that many railway services are inefficiently operated and inefficiently priced, as is reflected in their large financial losses. Those inefficiencies give rise to substantial costs elsewhere in the economy, so that reform of the railways is an essential element of microeconomic reform. Most countries have nation-wide railway systems running on tracks of uniform gauge and owned by the national government. − Australia does not. Each colony established its own railway system last century, and ninety years after federation the nation still has separate incompatible systems owned individually by governments. World-wide, railways are servicing a declining share of the transport market. Their function is quite different from 100 years ago; now cars, buses, trucks and aeroplanes offer a greater range of choices in speed, price and service. The general decline of rail has continued over the past 20 years, but overseas there has been a revival of high-speed long- distance passenger trains, and there is a
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