Linking the Illawarra. Improving the Region's Transport

LINKING

THE ILLAWARRA

Improving the region’s transport connectivity

Thinking business

Disclaimer

This report has been prepared by PricewaterhouseCoopers (PwC) at the request of the Illawarra Business Chamber (IBC) in our capacity as advisors in accordance with the Terms of Reference and the Terms and Conditions contained in the Consultant Agreement between the IBC and PwC.

The information, statements, statistics and commentary (together the ‘Information’) contained in this report have been prepared by PwC from publicly available material and from discussions held with the IBC. PwC may in their absolute discretion, but without being under any obligation to do so, update, amend or supplement this document.

PwC have based this report on information received or obtained, on the basis that such information is accurate and, where it is represented by the client and other stakeholders as such, complete. The Information contained in this report has not been subject to an Audit. The Information must not be relied on by third parties, copied, reproduced, distributed, or used, in whole or in part, for any purpose other than detailed in our Consultant Agreement without the written permission of the IBC and PwC.¹

Illawarra Business Chamber

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Liability limited by a scheme approved under Professional Standards Legislation

Illawarra Business Chamber

PwC

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Foreword

A recent survey of members of the Illawarra Business Chamber (IBC) found that over 95% of businesses want to see better transport links to Sydney. Inefficiencies in transport links drive up the costs of doing business in the Illawarra and compromise future opportunities for market expansion. There are strong concerns that without effective planning and action now to address this issue, the projected expansion in the passenger and freight movement task over the next 20 years will see the transport and logistics costs for business increase significantly.

High quality transport connectivity is critical to the movement of people to work and hence to a productive labour market. For the Illawarra which is transitioning to a more knowledge intensive and service based economy this relationship between connectivity and efficient labour market functioning increases in importance. It is clear that ensuring ongoing improvements in the Illawarra’s transport infrastructure is critical to supporting the projected service sector and knowledge based growth of the regional economy.

This study assesses the transport connectivity between the Illawarra and Sydney by identifying the existing challenges and showing how connectivity and economic outcomes relate to benchmark regions identified in NSW, Victoria, Queensland and internationally. Uniquely, this study develops an evidence base analysis of what the problem is that needs to be solved – rather than justifying a specific road or rail project as the solution.

By assessing the network coverage and service quality this study finds that the Illawarra has the lowest transport connectivity, scoring 25 – 30% lower than the Australian benchmark regions. This is driven by: materially lower overall connectivity between the Illawarra and Sydney than that between the Australian benchmark regions and their respective proximate major metropolitan centre; inadequate cover of the rail freight network; and the topographical constraints of the main freight corridor which increases the cost of moving freight.

Given the Illawarra is the third largest economy in NSW, with strong labour market links as both an employment generator for surrounding regions and also supplying skilled workers for the Greater Sydney area, the scale of potential benefits from improving the transport connectivity is significant. This study shows that improved connectivity across the Illawarra network to match the level of its benchmark peers alone would reduce travel and freight costs by at least $150 million per annum in addition to broader benefits from enabling greater access to employment opportunities, increasing population and creating additional business and trade opportunities.

Improving transport connectivity internally and externally to the region is not only important to helping the economy diversify towards knowledge and service-based sectors, but is also one of the key tools for addressing the low labour force participation rate and average household incomes experienced in the Illawarra. This report found that in “examples in other vehicle-dependent

economies in transition have shown that low levels of connectivity can negatively affect these indicators where they are seen to act as a barrier to connecting the ‘right people with the right jobs in the right places.’”

This study highlights some significant transport connectivity deficiencies and articulates some challenges and opportunities in improving the transport connectivity of the Illawarra. On behalf of Illawarra businesses, I wish to acknowledge the work of PricewaterhouseCoopers, the Illawarra Business Chamber and the NSW Business Chamber in conducting and investing in this important piece of research. The NSW Government, regional and local stakeholders all need to work together to identify priorities and solutions to capture the potential benefits of improved transport connectivity in order to ensure the future growth and prosperity of the Illawarra.

Sue Baker-Finch

President, Illawarra Business Chamber

PwC

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Executive summary

Executive summary

Members of the Illawarra Business Chamber (IBC) continue to voice concerns that the cost and time taken to move people and goods is currently too high. The Chamber considers that addressing these concerns should be a priority. Connectivity is a key facet of regional competitiveness. For instance, the Grattan Institute’s Productive Cities report suggests that ‘connectivity is crucial to efficient labour market functioning and will increase in importance as the economy becomes more knowledge intensive.’²

Although manufacturing historically has accounted for the highest proportion of output, recent growth of the Illawarra region is strongly focused on service-based industries. As such, improving the transport connectivity of the Illawarra is central to supporting its future growth given, the importance of transport connectivity to these sectors. The size of the Illawarra’s economy underscores the relevance of this investigation for NSW: the region produced $16.5 billion of output in 2012-13, which accounts for 3.5% of the NSW economy.³

However, both the labour force participation rate and average household incomes in the Illawarra are clearly below those in the benchmark regions. It would be difficult to attribute this performance wholly to the relatively low level of connectivity. However, examples in other vehicle-dependent economies in transition have shown that low levels of connectivity can negatively affect these indicators where they are seen to act as a barrier to connecting the ‘right people with the right jobs in the right places’

Message 1:

Accessing jobs and trading opportunities in Sydney already costs Illawarra residents and businesses around half a billion dollars a year. Without action, the time and out of pocket costs are expected to increase to at least $690 million pa by 2031.

This study develops an evidence base which assesses the transport connectivity between the Illawarra region and Sydney. Connectivity is defined in terms of road and rail network coverage and service quality, for both freight and passenger transport tasks.

A range of indicators are used to qualitatively rate (and convert to a numerical score between 1 and 5) to compare overall connectivity in and to/from the Illawarra region. The results of the assessment are summarised below.

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Grattan Institute 2013, Productive cities: Opportunity in a changing economy, May, Carlton, Victoria, p.41.

3PwC GEM analysis

PwC

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Executive summary

Table ES 1: Illawarra connectivity scores

C0nnectivity attribute

External

Internal

Total

Origin-Destination

Road coverage

4.1

3.0

4.0

3.9

3.0
4.0 3.0
3.3 1.0
3.8 1.0

3.7 3.0 1.0

2.6

1.7

Rail coverage

5.0

Freight rail coverage

Network Coverage

Road speed (passenger) Road speed (freight) Public transport speed Public transport quality

Service Quality

Weighted Scores

1.0

2.0

1.0

4.6

4.5

3.5

2.2

2.4

2.0

1.0

2.0

3.0

2.0

2.0 2.8 3.1

2.2

2.4

3.0 4.3

3.1

2.9

3.0 4.3

2.8

2.7

2.0 3.0

2.0

2.1

3.0 2.8

2.6

2.4

4.0 2.0

3.0

2.1

2.0 2.5

2.2

1.8

1.5

1.8

Source: PwC analysis and estimates

Message 2:

Our assessment of the Illawarra’s connectivity reveals strengths and weaknesses. While the region is served by a reasonably comprehensive road and rail network, the low speeds on those networks are a major weakness. The scores for road user speed are consistently low across all external trip origins and destinations. This has a significant negative impact on the economic productivity of the region given that private trips account for a large proportion of the transport task. In particular, the connectivity performance between Sydney and Wollongong is mixed. Road and rail network coverage is strong, with scores of 4 and 5, respectively. Public transport speed and quality are average with scores between 3 and 4. However, road user speed is particularly poor, with a score of 1. The analysis also highlights a particular weakness in the Illawarra’s freight connectivity, particularly to Sydney’s west and southwest.

To identify the economic effects of differences in connectivity, the scores above are compared to scores in four benchmark regions. Comparison of the Illawarra with the four regions demonstrates that the Illawarra has the lowest overall connectivity (2.4 out of 5). The Illawarra’s score of 2.4 is 25-30% lower than the scores in the other Australian benchmark regions. The Illawarra’s low connectivity score is driven by both poor performances in network coverage and service quality.

The results are summarised in the table below.

PwC

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Executive summary

Table ES 2: Comparison of the Illawarra’s scored connectivity with benchmark regions

Central Coast
Gold

Coast

Illawarra

3.7

Geelong

3.4

Lille

4.3

Road coverage

3.5

5.0 4.0

4.2

1.5
3.8 3.0 4.0

3.6

1.8

3.0

Rail coverage

3.4

5.0

4.8

3.7

1.0

Freight rail coverage

Network Coverage

Road speed (passenger) Road speed (freight) Public transport speed Public transport quality

Service Quality

Weighted Scores

3.0

2.6

3.3

2.3

1.7 2.0

2.6 3.2 4.2

2.6

3.4

3.7

3.8

2.6 3.7
4.4 4.2 4.0

4.1

4.4

2.8

3.8

3.1

2.7

2.2

3.1

2.9

3.3

2.4

3.2

Source: PwC analysis and estimates

Message 3:

The assessed overall level of connectivity between the Illawarra and Sydney is materially lower than that experienced between the Australian benchmark regions and their respective CBDs. The inadequate coverage of the freight rail network and the topographical constraints of the main road freight corridor increase the cost of moving freight between the Illawarra and Sydney. Relatively high public transport journey times, particularly for rail, impact negatively on the productivity of commuters who seek access to the employment centres in Sydney. The Illawarra region is also an important employment generator. Around 10,000 workers travel from outside the region to jobs in the Illawarra – particularly from the Southern Highlands, the Shoalhaven and Sydney’s west and southwest. Improved connectivity will be crucial in ensuring the Illawarra retains access to specialist expertise, particularly in the health sector.

The high level economic impacts of (relatively) poor connectivity in the Illawarra region are highlighted by comparing the key economic, industry and land use indicators in the Illawarra with those exhibited by the benchmark regions. These indicators are summarised below.

Relative to the other benchmarked regions, the Illawarra has the highest output per employee ($160,000) and a relatively low unemployment rate (6.7 per cent) compared to similar regions, such as the Central Coast and Gold Coast (6.9 per cent and 7.4 per cent respectively). However, the participation rate and household income are the lowest of all regions. Improved transport connectivity can bring more people closer to more jobs to capitalise on the economic opportunities offered in the Illawarra.

PwC

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Executive summary

Table ES 3: Benchmarking regional economic outcomes

Australian averages and totals

Central Coast
Gold

Coast

Illawarra

Geelong

Lille*

Economy

Population, 2011 (‘000s) Output, FY13 ($bn)
336 16.5
28
322 12.5
28
256 11.8
39
527 26.5
56

21,508
1,521
43

1,208
€97
Growth in output, FY01 to FY13 (% real)

Output per employee, FY13 ($ ‘000s)

160

152

144

159

186

Industry

Labour force, 2011 (‘000s)
147 51.2 6.7
141
56.0
6.9
121 59.5
5.3
257 62.1 7.4

10,658
61.4

526 69.4 14.5
€444
7.9
Participation rate, 2011 (%)

Unemployment rate, 2011 (%)

5.6

Average household income, 2011 ($/week)
923 14.2
1,003
23.1
1,079
15.0
1,173 14.4

1,234

Out commuting, 2011 (%)

Land use

Urban density, 2011 (persons/km²)
1,400
12
700
7
500
8
1,800
19
6,600

42

Apartments (% of total

dwellings), 2011

14

Housing construction activity, 2011 ($m)
250 200
290 160
680 620
750 490

41,870 26,660

Commercial construction activity, 2011 ($m)

* All statistics for Lille are for 2010; not all statistics are available on a comparable basis. Sources: PwC GEM analysis, ABS Census 2011, ABS National Regional Profile 2011, Australia, Bureau of Transport Statistics 2011, France National Institute of Statistics and Economic Studies (INSEE) 2010, Nord France Invest, Welcome to Lille Region 2011

PwC

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Executive summary

Message 4:

A high value, service based economy is usually accompanied by a relatively high public transport mode share. The Illawarra region’s aspirations in this regard could be challenged by slow public transport journeys and infrequent services. This challenge is reflected in the scoring analysis which indicates that all internal origins and destinations fare poorly (scores below 3) in terms of public transport quality. This can negatively impact on labour force participation rates and incomes as the ‘right people’ are prevented from accessing the ‘right jobs in the right places’. For example, the lowest score (2) for public transport quality is exhibited by ‘Wollongong-Nowra’ and will act as a disincentive for Nowra residents to access jobs in Wollongong. Given the relatively dense land uses in the Illawarra and the physical constraints affecting main road corridors, this will further depress economic productivity as peak period congestion worsens over time.

The benchmarking of the Illawarra’s connectivity against Australian peers highlights a number of areas for improvement of the Illawarra’s transport network and services. Everyone will have a view on the right solution to the connectivity problems affecting the Illawarra region. However, it is clear that ‘doing nothing’ is not sustainable. The benchmarking exercise highlights that the Illawarra’s connectivity is around 25% worse than its peers and that the costs of moving passengers and freight between the Illawarra and Sydney are in the order of $550 million per year.

Message 5:

Improved transport connectivity could provide a boost to the Illawarra economy by expanding employment opportunities and making it an attractive place for residents and businesses alike.

If the connectivity of the Illawarra was improved to the level of its peers, the potential scale of the benefits could be in the order of $150 million per year, which reflects shorter journey times and lower freight costs. Not included in this estimate which could have an impact on the magnitude of potential benefits are in-commuting costs, internal road freight costs and rail freight costs. Broader benefits would flow through:

•••

Enabling greater access to employment opportunities Making the Illawarra a more attractive place to live Making the Illawarra a more attractive place to work and do business.

Message 6:

The size of the Illawarra economy is growing and the relative contribution of certain sectors is changing over time. Therefore, a multi-modal transport package is required to address the Illawarra’s main connectivity problems. Project proposals targeted at addressing these problems need to be affordable and generate net benefit for the community.

PwC

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Contents

Executive summary

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Why transport connectivity matters

1.1 1.2 1.3 1.4

Background

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How does transport connectivity influence economic outcomes? Scope and objectives of this study
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Our approach

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