SUBMISSION TO THE INQUIRY INTO OPTIONS FOR FINANCING FASTER RAIL

Phil Potterton and Anthony Ockwell Economic Connections Pty Ltd

18 December 2019

This submission:

 Outlines reasons that, except in the special circumstances of a private railway developer having monopoly ownership of amounts of adjoining land, faster rail services between capital cities and regional centres are unlikely to be in a position to self-fund their development and operations and may accordingly require predominant government funding for planning, implementation and operation  Outlines some principal economic benefits of faster rail services  Recommends additions to the Australian Transport Assessment and Planning guidelines for the economic evaluation of transport infrastructure projects, to better reflect the scope of these economic benefits  Observes that, while inter-urban agglomeration productivity effects are not at this stage recognised in either the United Kingdom’s or Australia’s guidelines, there is some encouraging research evidence as to their potential materiality  Recommends commissioning of research for publication into the drivers of business location decisions and the importance of available business travel options to those decisions, an area that will be important for maximising and recognising the economic benefits of faster rail  Contends that ‘passive taxation revenue gain’ is closely linked to the economic benefits of faster rail projects and recommends that a two-part ‘before and after’ research study, aligned with a small number of project cost-benefit and other analyses, is commissioned to gauge their magnitude  Identifies some further potential additional taxation and charging revenue sources to, in particular, help finance upfront capital and other costs and having regard to the time lag between investment and full phase-in of the passive taxation revenue effects  Indicates ways in which the funding requirement may be minimised by improving incrementally the existing national and networks, including track straightening to remove century-old excess curvature  Recommends that, where speed requirements call for establishment of new lines, opportunities to integrate these lines with the existing network are pursued, benefitting regional centres located ‘further along the line’ and freight traffic, as well as avoiding future network re-integration costs  Recommends also that planning of faster rail pursue appropriate opportunities to address missing network links and breaks of gauge, to maximise economic benefits and avoid future costs of network integration or re-integration.

The submission comprises nine short sections, with a total of ten recommendations.

An appendix provides a reference data set on existing public transport (passenger train and ) services to regional centres within distance ranges of 100, 200, 300 and 400 kilometres from Australia’s eight capital cities. The appendix has been developed for the submission from the database that underpins a paper on interstate passenger train, coach and ferry services (Potterton, forthcoming), as well as a future paper that compares Australia’s longer distance passenger train and coach services with those of selected countries.

1. Acknowledge that faster rail self-funding is a challenging goal

Passenger rail, both urban and regional, is an indispensable transport mode due to several features. These are: the capacity to move large numbers of people quickly and reliably into and out of confined urban spaces for employment and other purposes, thereby pre-empting what might otherwise be a chronically congested road system; the ability (shared with coaches) to connect many places along a

1 route with each other and with major urban centres, so servicing, particularly, those who are unable, or unwilling, to drive; and also for some distinctive service attributes, including high levels of schedule reliability, comfort, low noise nuisance and route legibility.

Yet, in commercial terms, longer distance passenger rail is sandwiched between road transport on the one hand and air transport on the other. Road passenger transport comprises both private car travel, offering door to door trip convenience and coach public transport, with an ‘in principle’ capacity, subject to road congestion, to offer cost-competitive services over the entire road network. For its part, air transport around the world typically offers an increasing time and speed advantage over other modes as distances exceed 300 kilometres, except in circumstances where (more costly to fund) high speed rail is in place.

While there are many regional centres within 300 kilometres of most Australian capital cities, they are predominantly small. This is intrinsically challenging for rail, as a ‘scale’ transport mode that operates most efficiently at high traffic densities. Just seven non-capital city centres have populations in excess of 100,000 (2016 census estimates). In size order, these are: Gold Coast (86 kilometres from ); Newcastle (163 kilometres from ); Sunshine Coast (104 kilometres from Brisbane): (86 kilometres from Sydney); Geelong (75 kilometres from ), (126 kilometres from Brisbane); and Maryborough (256 kilometres from Brisbane). Excluding also (a capital city 286 kilometres from Sydney and with a population, like those of the Gold Coast and Newcastle, above 400,000), the average population of some 17 other larger regional centres, that surround Brisbane, Sydney and Melbourne and which are listed in the appendix, is 52,000.

For regional passenger trains to obtain a market-leading position, in which operators are able to charge premium fares, both high frequency services and a substantial speed advantage over private car travel and coach services would be needed. Regional passenger trains do have a timetabled speed advantage over coaches at all distance ranges up to 400 kilometres,1 with the largest estimated at 18 kilometres per hour (25 per cent), for distances between 300 and 400 kilometres (Appendix, Table A.2). However, this speed advantage is unlikely to be large enough in many circumstances to attract passengers away from private car travel 2 and is certainly not large enough for rail operators to be in a position to command high fares. To establish a large speed advantage would likely call for significant investment, the more so on routes within 100 kilometres or so from the capital cities, where new alignments involving tunnelling and other major works may be required in denser, partly urban settings, with many competing land uses. Australia’s economic geography (i.e. two thirds of the population living in five cities) and its large size together make for extremely low population density outside the main cities. Thus it is challenging to find a network of sufficiently dense longer routes that might, through passenger revenues, defray the investment and operating costs and permit private sector self-funding. That said, full or predominant private sector funding of faster rail development may still be feasible in the special circumstances where a private investor, who is seeking to develop a new railway, acquires monopoly ownership of substantial parcels of land that adjoin the rail corridor and is thereby able to capture both consequential land value uplift and profits on ensuing property development and sales. This option raises planning and legal matters which are beyond the scope of this submission.

Except, therefore, in this special case, it is to be expected that faster rail projects will require substantial or complete government funding, as do projects in the road and other transport modes. It follows that faster

1 At higher distances, coach services have a slight speed advantage, due in particular to low road congestion conditions further from cities that permit higher speeds for coaches (Potterton, forthcoming). 2 Private car travel is faster than coach travel on most if not all routes, particularly in light of coach stopping patterns.

2 rail projects will need to compete alongside those other projects for government funding, primarily on the basis of their estimated net economic benefits (i.e. economic benefits less resource costs).

RECOMMENDATION 1: That the Committee note that: for faster regional passenger rail services to wholly or predominantly self-fund their investment and operational costs, a dense network of routes of up to 300 kilometres from capital cities, a distance over which competition from air transport is generally limited, would be required, enabling premium fares to be charged at high frequencies; and that, as these circumstances do not apply in Australia, except possibly in the special case of a railway developer acquiring monopoly ownership of land that adjoins the rail corridor, faster rail projects will need to compete with other transport projects for government funding, primarily on the basis of their net economic benefits.

2. Recognise the economic benefits of faster rail The economic benefits of transport projects comprise benefits to users, whether measured through the market (e.g. reduction in the market price of a service) or outside it, for example, an increase in leisure time resulting from less time spent travelling. Economic benefits also include (non-user) benefits that accrue to the wider society. Again, these can involve financial transactions – for example, additional government taxation revenue sourced from an increase in labour supply that the improved transport enables – or not, as in the case of improved air quality resulting from a reduction in transport emissions, due, say, to a modal shift from private car travel to public transport.

In the user benefit context, faster rail will, firstly, improve accessibility for existing rail passengers by reducing their travel time. Secondly, these people may also choose to travel more frequently, while others may travel on the route as well – an induced ‘new passenger trip’ effect.

Some of these new passenger trips may be made by workers who find that, with the availability of shorter trip travel time, they can move to a higher paying, more productive job (i.e. improved job matching), or alternatively they can work longer hours in the same job, without unduly impacting leisure time. Some may even enter or re-enter the labour force, to take up a job that is now ‘closer’ than previously, due to the improved rail accessibility. For people in both of these categories, the user benefit is measured at up to the value of the travel time saving. There is also a non-user or wider society impact, in the form of an increase in government revenue. This arises from the additional taxation on the higher incomes that are earned. The increase in disposable (after-tax) income itself is not a (user) benefit, as it was an insufficient attraction in the absence of the reduction in travel time.

These benefits are likely to be the more substantial in circumstances where there is investment response from businesses, in increasing the intensity of their operations, or in expanding or relocating them, in response to the improved rail accessibility. The net effect of this investment is to increase firms’ demand for labour, albeit net of any displacement of demand in other locations. These are circumstances where there are, in effect, material changes in secondary markets, including changes in land use, that are dependent on the change in the ‘primary’ transport market.

3 Thirdly, businesses, particularly in the advanced service or ‘knowledge economy’ sector,3 gain productivity (agglomeration) benefits from clustering together locally, accessing economies of scale in recruitment, in supplier inputs and in knowledge sharing and innovation. Clustered firms, notably in or near central business districts, have been found to be more productive than similar firms in other locations. However, as individual firms benefit from the behaviour of the many, this is an ‘external’ benefit, rather than a user benefit. Importantly also, the agglomeration externality may be either ‘static’ or ‘dynamic’ (Department for Transport, UK 2018). Static clustering occurs where firms are brought ‘effectively closer’ by the improved transport: that is, there is no change in land use. Dynamic clustering entails change to physical densities, through either the level or location of economic activity, with the latter involving change in land use.

Fourthly, faster rail may increase the ‘housing welfare’ of households that move into the catchment area of the new rail service, in order to access a lower combined cost of housing and transport to work, compared to options that are available otherwise. In essence, households, whether as renters or home owners, will be taking advantage of land values that are typically lower than in the metropolitan area, due to greater distance from the capital. In accessing a lower housing cost per unit of land, these households may possibly bear a higher daily transport (i.e. time plus financial) cost. However, they will experience an overall improvement in welfare. This effect may be best proxied by measuring land value uplift in relevant locations along the route, i.e. where residential development that is dependent on the new rail service is expected and planned to occur. This benefit is measured net of any reduction in land values in areas from which activity is expected to be displaced.

Fifthly, to the extent that business and residential growth relocates to non-metropolitan areas, metropolitan road traffic congestion is likely to be lower than in the business as usual case, albeit partially offset by any increased traffic congestion in the impacted regional areas. Given that the relocated activity is notionally sourced from across the metropolitan area, reliable measurement of the congestion impact may not be feasible.

Finally, faster rail projects may improve ‘livability’, for example in enabling increased capital city green space, or in facilitating an increase in home ownership in the general community. Such impacts may not be amenable to monetary valuation in a cost-benefit analysis, but supporting evidence should still be provided.

RECOMMENDATION 2: That the Committee note the ‘in principle’ economic benefits of faster rail projects, comprising: time savings for existing passenger trips and newly generated ones; improved labour market outcomes, due to people accessing more productive jobs and/or working longer hours, including in response to business expansion and/or relocation; agglomeration or clustering productivity benefits for firms, particularly in regional centres and including, similarly, instances where firms expand or relocate; housing cost reduction benefits for households that move their residence in response to the new accessibility opportunities; and reduced road traffic congestion in metropolitan areas, as a result of a redirection of some employment and residential growth to regional areas.

3 For statistical analysis purposes, the industry classifications that are usually taken to comprise this sector are: information, media and telecommunications; financial and insurance services; and professional, scientific and technical services.

4 3. Add to evaluation guidelines to better account for economic benefits To better evaluate faster rail projects, some additions to the ministerially-endorsed Australian Transport Assessment and Planning (ATAP) guidelines that are in use for transport project evaluation would be beneficial. These guidelines provide a technical underpinning to the Infrastructure Australia Assessment Framework (Infrastructure Australia 2018) that applies to transport infrastructure project proposals with a value of $100m or more. The changes would bring the Australian guidelines into closer alignment with those in use in the United Kingdom (Department for Transport 2018), where ‘transformational’ urban, regional and longer distance rail projects have been part of the national policy agenda for some 20 years.

Firstly, the standard approach in cost-benefit analysis, whereby demand modelling and analysis is conducted on the basis of fixed land uses, sits at odds with the objective of faster rail projects. This objective is to ‘take pressure off our largest cities’ (Australian Government 2019) by, in essence, diverting some part of future population growth and employment growth to regional centres by means of the improvement in accessibility that faster rail offers. To analyse projects that can address this objective, future land use modelling and forecasting which takes account of how businesses and households may change their location and their resulting transport activity profile – say with low, medium and high scenarios – will be required. The importance of future land use modelling in cases of large ‘city-shaping’ projects is acknowledged in the guidelines (Transport and Infrastructure Council 2018). However, further elaboration is needed that: land use modelling and forecasting should be commissioned in advance of the cost-benefit analysis, so that its results are available for use in that analysis; and that variable land use assumptions should then flow through into the modelling of future transport demand and the benefit valuation analysis for the project.

Secondly, the ‘rule of a half’ method for both estimating and valuing induced (generated) travel should be, as far as possible, confined to those users who do not alter their location in response to the faster rail project, i.e. for circumstances where the standard ‘fixed land use’ assumption remains valid. Estimates of travel generated by household or business relocation, which may be the larger amount in many cases, should be developed from the project’s customised spatial modelling results.

Thirdly, valuation of benefits to new users (i.e. residents, firms) who relocate in response to the project can be based on the expected land value uplift effect. While, in the standard cost-benefit analysis approach, land value uplift is eschewed, on grounds that it will ‘double-count’ time saving benefits that are capitalised into the change in land value, it is appropriate in relocation circumstances, where there are no available or reliable referents for the standard time saving (or generalised cost saving) method. At the same time, care will be needed to avoid double-counting and/or over-estimation of benefits. In particular, for each user, only one methodology – i.e. time savings or land value uplift – should be applied. Additionally, where the land value uplift reflects investments that are complementary to the faster rail project as well as the project itself – for example, land utilities servicing – an appropriate ‘pro rata’ or other adjustment should be made to the valuation.

RECOMMENDATION 3: That additions to the Australian Transport Assessment and Planning (ATAP) guidelines are made to better recognise the benefits of faster rail projects, including: a requirement for case-specific land use modelling and forecasting to be undertaken in advance of the project cost-benefit analysis; travel demand modelling to be based on variable, rather than fixed, land use and incorporating the land use forecasting; a correspondingly more circumscribed use of the ‘rule of a half’ methodology; and appropriate use of the land value uplift indicator to measure accessibility benefits to households and firms that are forecast to move location; with these changes aligning ATAP with the United Kingdom’s Transport Analysis Guidance.

5 4. Be open to inter-urban agglomeration effects from faster tail The urban agglomeration productivity effect, whereby firms are able to access economies of scale by clustering, is linked, in transport terms, to local or urban business travel on the one hand and to commuting travel behaviour on the other. In contrast, the inter-urban agglomeration productivity effect centres on longer distance business travel both between firms and within firms, i.e. where different internal activities are concentrated in different locations. Both effects are likely to be important for faster rail. For example, a Sydney-Newcastle faster rail service might strengthen agglomeration economies in Newcastle through reduced ‘economic distance’ (World Bank 2009) with Sydney and the opportunity for regular face to face contact for executives and other employees through fast, convenient travel, in an inter-urban agglomeration effect. The service might also strengthen urban agglomeration economies in either or both cities, through the improved commuting accessibility it would offer. Finally, the inter-urban effect might itself catalyse greater local urban clustering and productivity.

Inter-urban agglomeration economies are less studied and less well understood by economists than their urban counterparts and are not currently included in the UK’s Transport Analysis Guidance. There has, moreover, been continuing debate among academics regarding the likely nature and extent of the economic impact of the planned HS2 high speed rail line between London and cities in the north of England (Chen and Vickerman 2017, Graham and Melo 2010, Laird, Nash and Mackie 2014). Nevertheless, research findings regarding the impact of faster rail services, that were installed in the UK from the 1970s onwards, between London and regional cities, show significantly higher growth in advanced service sector employment and in regional gross value added in locations served by the lines that are within either one hour or two hour time windows from London, than in comparable other locations (Chen and Hall 2011, Chen 2013).4

What is not clear from this UK research is how the faster train travel to and from London facilitated economic growth: for example, was it the improved opportunity for in-person contact between businesses and between separately located parts of the same business, or were there size-related or other material factors in the regional locations themselves, or was it both in combination? Nevertheless, the findings are indicative for an unlocking of inter-urban agglomeration economies, with implementation of faster rail in Australia.5

RECOMMENDATION 4: That the Committee note that, while inter-urban agglomeration productivity effects from faster or high speed rail are not at this stage included in either the UK’s or Australian project evaluation guidelines, research findings are suggestive regarding the materiality of these impacts in the faster rail context.

4 The study analysed the economic and population growth performance of towns and cities on two UK lines (north to Edinburgh and west to Swansea) that are served by InterCity 125 trains which operate with maximum speeds of up to 200 kilometres per hour. The performance of these locations was compared with towns and cities on four non- upgraded lines, to King’s Lynn, Norwich, Ramsgate and Bournemouth. On all lines, towns and cities were grouped into one hour, two hour and more than two hour train time windows from London. Towns and cities with upgraded services experienced a sharp reduction in travel time to and from London, while those on the non-upgraded lines did not. Higher economic growth impacts were discernible for locations with upgraded services at the one hour and two hour windows and not at the more than two hour time window. 5 Notwithstanding differences of physical and economic geography between Australia and the UK that affect the opportunities for improved train services, the two countries are similar in the share of employment that the advanced service sector occupies:15.8 per cent of the Australian workforce (Australian Bureau of Statistics 2019) and 17.3 per cent of the UK workforce (Office for National Statistics 2019).

6 5. Understand firms’ decisions about their location and travel better In the Australian context, the question of what drives business location decisions and how these relate to the available business and commuting travel service options is important for future policy development and planning. This is because it will only be feasible to rebalance population growth away from the capital cities – other than to the extent of satellite housing development in nearby regional areas whereby households continue to connect to capital city jobs – if businesses are willing and able to similarly rebalance the location of their workforces.

Accordingly, strategic research into the drivers of business decision-making on where to locate their activities, in totality and in individual parts (e.g. production, distribution, back office, head office), not only in advanced service sector industries but also in other industries including manufacturing, would be helpful in informing faster rail policy and planning at the broadest level. It would also provide insights for better understanding of inter-urban agglomeration effects, for use in fine-tuning economic appraisal methods and parameters.

This research should include finding out: why firms are spatially organised in the way that they are and how they expect this to change in future; the importance of the different modes of transport to the locational profile in the context of other drivers (e.g. proximity to raw materials, proximity to customers, labour force availability, adequacy of access to social and other infrastructure); and the way in which faster rail, understood as achievement of certain service time windows and frequencies, might alter their future locational profile and why.

RECOMMENDATION 5: That research into the drivers of business location and relocation decisions and how these may be affected by the availability of fast, convenient rail and other travel options, is funded, commissioned and published, to better inform both faster rail planning and economic appraisal processes.

6. Measure the passive taxation revenue from the economic benefits Most of the economic benefits of faster rail have direct financial counterparts, with consequential additional taxation revenue effects, as businesses alter their strategies and locations, as workers change employment participation, hours worked and jobs and as households adjust their residential choices and locations.

Table 1 identifies these additional ‘passive’ taxation revenue effects. These cover taxes raised by all three spheres of government, in particular: company tax, capital gains tax, personal income tax and goods and services tax (federal); property stamp duty and payroll tax (state/territory); and property rates (local).

The taxation revenue effects identified include potential reductions in revenues, whether or not material, relating to those geographical areas (predominantly metropolitan) from which activity is relocated, compared to the business as usual situation. The business as usual situation may entail significant increases in metropolitan-sourced taxation revenue. Thus, absent very large effects from projects, ‘reduced capital gains tax’ in metropolitan areas should not be interpreted as implying a reduction in absolute terms.

7 Table 1: ‘In principle’ passive tax revenue effects resulting from impacts enabled by a faster regional passenger rail service

No Impact enabled by the COMPARED TO BUSINESS AS USUAL Sphere of upgraded or new rail service Additional tax revenue Reduced tax revenue government (regional) (metropolitan) Increased capital gains tax Reduced capital gains tax on Federal on sales of land and sales of land and properties properties other than main other than main residence in residence metro areas 1 Land value uplift along the line Increased stamp duty on Reduced stamp duty on State/territory sales of land and property sales of land and property in metro areas

Increased property rates Reduced property rates Local revenue revenue in metro areas 2 Businesses in regional and Reduced company tax and Federal metropolitan areas within the payroll tax revenue in any footprint of the line access Increases in company tax areas that experience dis- agglomeration (co-location) and payroll tax revenue agglomeration without economies of scale, offsetting revenue benefit to increasing output and government from profitability replacement land uses 3 Workers increase hours or engage in more productive jobs in response to the reduced travel times they experience Increases in personal Federal 4 Workers engage in more income tax and goods and productive jobs that are services tax accessible with reduced travel times and changed land use from business relocation, expansion and opportunities for increased production

To provide information to government and the community regarding the magnitude of these effects and, to build confidence in public sector faster rail funding, whether through budget allocations, borrowings, or public private partnerships that are premised on recourse to the budget over time, a research study should be commissioned. Its brief should be to analyse in detail the taxation revenue effects of, say, three planned faster rail projects. The study would be in two parts, with the first ‘ex ante’ part drawing on the land use modelling and cost-benefit analysis undertaken for each individual project. The second (‘ex post’) part of the study would take place five to ten years after implementation of the projects, to revisit and review the first study and to formulate learnings for future policy and planning. Both phases of the study should draw on appropriately broad expertise in government finance, macroeconomics, rail transport cost- benefit analysis and urban and regional planning. The results of both parts of the study should be published.

8 RECOMMENDATION 6: That a two-part research study into the expected additional taxation revenue effects resulting from faster rail services should be commissioned, with appropriately broad expertise, for publication, drawing on the land use modelling and cost-benefit analyses undertaken for a small number of individual faster rail projects, with a second part of the study to take place five to ten years following project implementation, to validate the first study and to provide learnings.

7. Consider additional revenue-raising options for upfront financing

Governments will, nevertheless, face challenges arising from uncertainty about the level of these passive tax revenue effects and also their timing. While a land value uplift effect arguably commences immediately upon project announcement, full tax revenue effects may take many years to eventuate. More immediate sources of additional revenue increase may therefore be required to reduce the funding requirement for construction and implementation that is sourced from general taxation revenue requirement and/or the borrowing requirement and to provide what can in effect be a form of project equity.

A temporary Commonwealth levy applied to the petroleum fuel excise could be considered. Drawing on the precedent of a “3 X3” road funding program, in which a levy of three cents per litre was imposed by the NSW Government between 1989 and 1992,6 a levy to finance faster rail development could be justified to the community on the basis that, in the longer term, road users, particularly in metropolitan areas, will benefit from reduced congestion on roads. A ‘3X3’ levy, at today’s fuel excise rate ($0.418 per litre) could raise approximately $1 billion per year, or over $3 billion over a three year period. As a federally imposed and nationally applicable levy, it follows that any faster rail funding program of this type must have relevance to all of the eight states and territories. As two jurisdictions (Tasmania and Northern Territory 7) have no connecting regional passenger rail services, the levy could be badged in a more general way, for example as intended to improve ‘regional passenger transport’, opening the way to use for coach, ferry, air transport, or regional road applications, in the absence of suitable rail projects. In addition, given that the states have primary responsibility for rail transport under the Australian Constitution, a suitably binding agreement between the Commonwealth and state and territory governments, whereby the latter undertook to apply funds raised to regional rail purposes, or to other regional passenger transport purposes in the absence of regional rail purposes, would be a prerequisite for such a levy.

Particularly in the longer term, say for faster rail projects that commence after five to ten years, road user charges that relate more directly to alleviation of urban congestion could provide valuable funding. Possible congestion-related charges fall into two main types, central area parking space levies and central area (‘cordon’) congestion charges.

Firstly, parking space levies, as in Perth, Melbourne and Sydney, are measures ‘to reduce traffic congestion, improve pedestrian safety, free up short-term shopper parking and create a central city environment that is both economically and environmentally healthy’ (WA Department of Transport 2017). NSW’s parking space levy raises $100m per year (Transport for NSW 2018). With alteration of governing legislation, where required,8 revenues might be used for regional faster rail purposes. It may be necessary

6 NSW Road History, https://www.ozroads.com.au/NSW/history.htm, accessed 12 December 2019 7 The Adelaide-Darwin Ghan service is a tourism experience train and does not provide scheduled intermediate stops. 8 For example, NSW’s Parking Space Levy Act 2009 requires revenue to be used “to encourage the use of public transport (in particular, public transport to and from, or within, those [leviable] districts)”. ( https://legislation.nsw.gov.au/#/view/act/2009/5, accessed 15 December 2019)

9 to increase the levy rates,9 so that existing revenues remain available for existing uses. It may possibly also be desirable, to ensure community support, for revenues from the early years of any increase to be fully applied to urban improvements. QLD government implementation of a parking levy in central Brisbane, were this to eventuate, would likely entail metropolitan application of funds raised for several years. However, inclusion of regional rail as a levy purpose could be considered for the state’s governing legislation. Extension of a levy in due course to Gold Coast and Sunshine Coast central areas should also be considered.

Secondly, central area cordon congestion charging could be considered with respect to each of the three east coast capital cities. As with parking levies, congestion charges must be justified first and foremost in terms of their intended city impact, i.e. to improve central area traffic efficiency and reduce local air pollution and carbon emissions. In addition, the perceived adequacy of the urban public transport alternative to and from the cordon area is critical to congestion charging gaining community acceptance. Accordingly, it is likely that, in the event of successful implementation, hypothecation of revenues for some years to urban public transport improvement purposes would be required.

RECOMMENDATION 7: That the Committee note possible sources of additional funding, where required, for the purpose of upfront faster rail capital costs and having regard to the time lag between construction and full phase-in of the passive taxation revenue effects: these include a three cents per litre for three years ‘3X3’ levy applied to the petroleum fuel excise (federal); increases to and/or extension of central city parking space levies (state); and introduction of central capital city cordon congestion charging (state).

8. Minimise cost and optimise the network by building on what exists In implementing faster rail, pursuing opportunities to modernise, integrate and, where appropriate, grow the existing national interstate passenger and freight rail network (and other networks, where applicable) will both minimise the year to year financing burden – while requiring a lengthy program – and aid proportionality between costs and benefits.

Extensive research and analysis by Philip Laird and colleagues has identified the scope for faster travel times on existing interstate and regional rail lines through, in particular, removing excess track curvature. This curvature was introduced into the network a century ago in order to allow easier grades that suited the then prevailing small wheeled steel locomotives (Laird and Michell 2019). For example, the ‘Wentworth deviation’, between Campbelltown and Moss Vale in NSW, would require 36 kilometres of new track, shortening the rail distance to Goulburn, and other centres in the direction of Melbourne, as well as to Canberra, by 18 kilometres. This would allow both faster train running (Laird 2010) and reduced train energy consumption. The deviation was costed by the 2001 Australian Rail Track Audit at $478m (Laird and Michell 2018) in 2000, translating to $782m in 2019 prices, or $22m per kilometre. On the Sydney-Melbourne route as a whole, some 194 kilometres of new track would be required, reducing point to point distance by over 50 kilometres and enabling the running of passenger tilt trains at speeds of up to 200 kilometres per hour (Laird and Lambert 2016). On the Sydney-Newcastle route, a targeted scope of work to ‘build out isolated restrictive curves’, undertake ‘limited realignment’ and provide ‘more functional passing and overtaking capacity’ could reduce the Sydney-Newcastle travel time

9 Terrill (2017) recommends that the Melbourne CBD parking space levy is increased from about $1,400 to about $2,400.

10 to ‘two hours or better’ (Michell, Martin and Laird 2014), while there are also line straightening opportunities further north between Newcastle and Brisbane (Laird 2016).

Maximising operating revenue is also positive for faster rail financing and, for this, facilitating faster movement for freight trains is important. Modern freight trains run at 80 kilometres per hour, with higher speeds for some priority and time-sensitive trains (Laird and Michell 2019). Thus all freight trains benefit from removal of speed restrictions due to excess track curvature. While separation of freight and passenger trains is desirable, if not essential, in the metropolitan environment, overall track utilisation levels fall away sharply beyond 100 kilometres from the major cities, with generally low frequencies for trains of both types. On the interstate network, the section between Crystal Brook and Port Augusta in has the highest utilisation across the country, with 80 trains per week, while, in the eastern states, the Sydney- and the Cootamundra-Melbourne sections each have 71 trains per week (Bureau of Infrastructure, Transport and Regional Economics 2018). It follows that track sharing on many lines and locations may continue to be feasible, even at faster speeds and somewhat higher frequencies. Track duplication to provide additional capacity, including conversion of passing loops and passing lanes, which have increased in number and in length over the past 20 years through Australian Government-funded ARTC investment, should also receive close consideration wherever required.

Line modernisation, including duplication, to accommodate faster trains also represents essential, incremental progress towards introduction of high speed rail in Australia in the longer term. As Michell, Martin and Laird (2014) put it, in relation to a proposed ‘medium speed rail demonstration project’ between Sydney and Canberra: “All new works would as far as possible be built to HSR standards for horizontal and vertical curvature, track spacing and running line infrastructure such as turnouts”.

RECOMMENDATION 8: That, in order to minimise the faster rail financial cost and funding burden and to point the way to high speed rail in Australia in the longer term, faster rail planning should pursue incremental improvements to the existing interstate and other passenger and freight rail networks, including track straightening to remove century-old excess curvature.

9. Avoid and address network breaks of gauge to pre-empt future costs Whether incremental line improvements, as suggested above, are sufficient to deliver services to particular regional centres that are ‘fast enough’ is in all cases a matter for specific investigation. In instances where the estimated speed gains are not sufficient and whole new lines are found to be required, it is important that these lines are fully integrated with the existing passenger and freight rail network. This will ensure that regional centres located further along lines on which there are centres that are served by faster rail – for example, Port Macquarie10 in the event of a Sydney-Newcastle faster rail service – will also experience reduced travel times. Freight traffic will similarly gain from increased train speed and reliability.

Planning for faster rail in connection with the regional surrounds of Brisbane, Sydney and Melbourne should also take opportunities to address missing network links and breaks of gauge, as doing so can both maximise economic benefits and avoid future network integration and/or re-integration costs.

10 The station for is Wauchope, 21 kilometres distant.

11 For example, planning for dual (i.e. narrow and standard) gauging11 of a Brisbane-Gold Coast faster rail line could be considered in the context of a longer term extension of the line to connect to the NSW North Coast (Sydney-Brisbane) line. Subject to investigation of environmental and constructability constraints, this would point the way to improved accessibility between northern NSW and the Gold Coast and Brisbane regions. Currently, public transport connectivity to both the Gold Coast and Brisbane from northern NSW locations such as Ballina and Lismore – with distances of less than 200 kilometres from Brisbane that are too short for viable aviation services – relies almost entirely on coach transport (see Appendix) that is susceptible to congestion and unreliability on the road network.12 Dual gauging would also enable a future Sydney-Newcastle-Gold Coast-Brisbane passenger train service, in the process joining up four of Australia’s seven largest urban areas.

RECOMMENDATION 9: That, where incremental improvements would deliver an insufficient speed improvement and whole new lines are found to be required, these lines should be integrated with the existing network, to the benefit of regional centres located ‘further along the line’ and of freight trains and also to avoid future re-integration costs.

RECOMMENDATION 10: That faster rail planning pursue opportunities to address missing network links and breaks of gauge, both to maximise economic benefits and to avoid future costs of network integration or re-integration.

11 The width difference between QLD narrow gauge (3 feet 6 inches) and standard gauge (4 feet 8½ inches) is sufficient for efficient and safe operations on both gauges. This contrasts with the situation in VIC. Dual gauging of standard gauge with VIC broad gauge (5 feet 3 inches) is problematic, particularly for turnouts (sets of switchable points that guide trains from one track to another) and related infrastructure, due to the small difference in width between the two gauges (Bernard Shepherd GHD Pty Ltd, personal communication). 12 The Byron Easy Bus timetable for services between northern NSW (Casino, Lismore, Ballina, ) and the Gold Coast and Brisbane states that “Timetables account for traffic density on Pacific Highway but cannot be guaranteed when delays occur due to accidents on the route” (https://www.byronbayshuttle.com.au/, accessed 12 December 2019).

12 APPENDIX: CAPITAL CITY TO REGIONAL CENTRE PASSENGER TRAIN AND COACH SERVICES WITHIN A 400 KILOMETRE DISTANCE RANGE

Table A.1 provides information on existing passenger train and coach services to regional centres within ranges of 100, 200, 300 and 400 kilometres to and from each of Australia’s eight capital cities. 25 regional centres within the orbit of Brisbane, Sydney and Melbourne are included, together with an additional 12 centres for the other five capital cities (Perth, Adelaide, Hobart, Darwin and Canberra).

The regional centres shown in the table include all of the regional cities identified in the Australian Government’s Faster Rail Plan (2019). It also includes other regional cities that fall within a 400 kilometre range of four major capitals (i.e. Brisbane, Sydney, Melbourne and Perth) that the Regional Australia Institute identifies in its decentralisation scenarios for future population growth (Regional Australia Institute 2019a, 2019b). Other regional centres are identified in relation to the remaining capital cities.

For each centre, road distance from the capital city, the number of return services (frequencies) per week, routes by operator, transport mode or modes (i.e. train, coach, or combined train and coach), scheduled service time and the end to end speed, as implied by timetables, are shown. Service times are in all cases those of actual services rather than averages. However, where there are a range of service times, ‘representative’ ones are selected, rather than the fastest or the slowest. In cases where there are only two services per day with different times, the faster of the two is shown. Service times on a route can vary due to differences in stopping patterns and differences in traffic conditions between peak and other periods: data are not assembled on either factor for this appendix.

Train service end to end speeds are calculated with reference to the road distance (shown) rather than the rail track distance. The latter is not available in all cases, while road distance provides the more relevant passenger service yardstick. However, due to many winding rail track alignments, rail track distances may be longer than road distances and, therefore, actual end to end train speeds may be slightly higher than shown.

Two further tables provide information on average weekly frequencies and average end to end speeds by distance range and mode for the identified capital city-regional centre services. Table A.2 provides this information in relation to Brisbane, Sydney and Melbourne surrounding areas (40 services in total) and Table A.3 provides the same information for those of the other capital cities (14 services).

The service information is sourced from operator timetables and booking systems and is current as at November and December 2019.

Populations for the Australian Bureau of Statistics ‘significant urban areas’ that correspond to the regional centres, with data as at the 2016 Census, are also shown. In a small number of cases, these span a wider area than the regional centre itself: i.e. Gold-Coast-Tweed Heads, Newcastle-Maitland, Nowra-Bomaderry, Canberra- and -Wodonga.

Services by distance range – Brisbane, Sydney and Melbourne

Existing train services to regional centres within 100 kilometres of Brisbane, Sydney and Melbourne (Sunshine Coast, Gold Coast, Wollongong, Geelong) have very high frequencies (in excess of 200 per week). They also involve navigating dense urban networks. All of the services other than between Melbourne and Geelong exhibit end to end speeds of less than 60 kilometres per hour. The all route

13 average end to end train service speed is 63 kilometres per hour (Table A.2). The average of two coach service speeds (Brisbane-Gold Coast and Sydney-Wollongong) is 53 kilometres per hour.

Six of nine identified regional centres that are between 100 and 200 kilometres of Brisbane, Sydney and Melbourne have train service frequencies in excess of 100 per week: Newcastle, Bomaderry, Ballarat, Shepparton, Traralgon and Bendigo. A seventh, Toowoomba has close to 100 coach services and two train services per week. Of the two remaining centres, Maryborough (VIC) is connected by coach to a frequent Ballarat-Melbourne train service, while Ballina in northern NSW has coach only service to Brisbane (49 per week).

At 92 kilometres per hour and 82 kilometres per hour respectively, Ballarat’s and Bendigo’s train services to and from Melbourne, which have been upgraded over the past 20 years, are markedly higher than those in NSW (for example, Newcastle at 59 kilometres per hour and Wollongong at 51 kilometres pe hour) and in QLD (Nambour, 57 kilometres per hour). On average at this distance range, the train speed differential with coach speeds is just three kilometres per hour.

Identified cities between 200 and 300 kilometres from the three capital cities comprise Maryborough (Fraser Coast), Lismore, Canberra, Albury-Wodonga, Bairnsdale and Warrnambool. All cities other than Canberra have frequencies between 20 and 35 per week. Canberra, a capital city itself and with a population four times greater than the centre with the second largest population, Maryborough (Fraser Coast), has 182 services per week (161 coach, 21 train). The average train speed (76 kilometres per hour) for all routes at this distance range is substantially higher than at lesser distances from the capital cities. This may be a function of urban congestion in entering and exiting city centres having a greater proportionate impact on shorter distance travel relative to longer distance travel.

Four of the identified cities, Bundaberg, , Parkes and Wodonga, are between 300 and 400 kilometres from their nearest (and home state) capital city. Bundaberg, on the QLD North Coast Line that also services two of Australia’s three northern cities with populations exceeding 100,000, Townsville and Cairns, has over 40 services per week. Its services are evenly split between trains and coaches. Wodonga has total service frequencies of over 30 per week (as does nearby Albury NSW) to Melbourne.

End to end train speeds to both Bundaberg and Wodonga are 80 kilometres per hour or higher. Average end to end train speeds across four routes at this distance range retain a substantial advantage over coach speeds (74 compared with 56 kilometres per hour).

Services by distance range – other capital cities Passenger transport routes to regional centres from other capital cities overwhelmingly involve coach rather than train services at all of the identified distance ranges.

Within 100 kilometres, the Adelaide-Murray Bridge coach route (75 kilometres) has much the highest frequency (40 services per week). In addition, the twice weekly Overland train from Melbourne to Adelaide sets passengers down at Murray Bridge. Goulburn (92 kilometres from Canberra) has 21 Sydney- Canberra weekly train services and a daily weekday coach service. The average end to end coach service speed (three routes) is 57 kilometres per hour, with speeds ranging from 42 kilometres per hour higher (Adelaide-Murray Bridge) to 73 kilometres per hour (Canberra-Goulburn) (Table A.3).

Between 100 and 200 kilometres, Bunbury (connecting to Perth) has 28 train services (28 per week), which is the highest service frequency at this distance range.

14 Between 200 and 300 kilometres, the Perth-Busselton coach route has the highest frequency (28 services per week), followed by Devonport (Hobart), Renmark (Adelaide) and Wagga Wagga (Canberra).

Distances for Katherine (Darwin) and Albury (Canberra) are above 300 kilometres. Katherine has 17 services per week, via long distance services to and from both Alice Springs and Broome and Albury has 21 Canberra services, as part of Canberra-Melbourne via Wodonga coach and combined train and coach services. At 76 kilometres per hour, the average of the end to end speeds on the two routes is slightly higher than the train speed average at this distance range for routes to centres surrounding Brisbane, Sydney and Melbourne (74 kilometres per hour). This likely indicates the lessening proportionate impact of capital city road congestion, as distances increase.

15 Table A.1 Passenger train and coach services between capital cities and surrounding regional centres within a 400 kilometre range

REGIONAL CENTRE SERVICES REGIONAL CENTRE BY CAPITAL CITY Road Popula ion Mode Return Scheduled End to end Full routes (operators) distance (2016) services time mins speed kph km per week BRISBANE T 21 270 80 Brisbane-Bundaberg, Brisbane-Rockhampton, Brisbane-Cairns (all Rail) Bundaberg 362 69,061 C 21 210 103 Brisbane-Bundaberg (Greyhound), Brisbane-Cairns (Premier Motor Service)

T 21 213 72 Brisbane-Bundaberg, Brisbane-Rockhampton, Brisbane-Cairns (all ) Maryborough (Fraser Coast) 256 101,504 C 35 300 51 Brisbane-Hervey Bay, Brisbane-Cairns (bo h Greyhound), Brisbane-Cairns (Premier Motor Service) T 217 110 57 Sunshine Coast Line and as per Maryborough above (all Queensland Rail) Nambour (Sunshine Coast) 104 307,545 C 7 100 63 Brisbane-Bundaberg (Greyhound)

T 336 88 59 Gold Coast and Airport Line (Queensland Rail) Gold Coast 86 624,264 C* 42 75 61 Sydney-Brisbane (Greyhound, Premier Motor Service), Brisbane-Byron Bay (Greyhound)

Ballina NSW 186 24,852 C 49 170 66 Brisbane-Balllina (Byron Easy Bus), Brisbane-Lismore (Premier Motor Service), Sydney-Brisbane (NSW TrainLink) 229 T 7 174 79 Sydney-Brisbane (NSW TrainLink) Lismore NSW 28,407 221 C 14 215 62 Lismore-Brisbane (Premier Motor Service), Sydney-Brisbane (NSW TrainLink) T 2 265 28 Brisbane-Charleville (Queensland Rail) Toowoomba 126 130,722 C 98 105 72 Brisbane-Toowoomba (Greyhound, Coaches) SYDNEY 372 45,379 T 7 399 72 Sydney-Brisbane (NSW TrainLink) Port Macquarie** C 14 370 69 Sydney-Brisbane (Greyhound, Premier Motor Service) T 287 166 59 Sydney-Newcas le (Intercity Trains) Newcastle 163 463,052 C 14 170 57 Sydney-Brisbane (Greyhound, Premier Motor Service) T 182 100 51 Sydney-Bomaderry (Intercity Trains) Wollongong 86 285,678 C 14 115 45 Sydney-Eden (Premier Motor Service)

T 112 176 53 Sydney-Bomaderry (Intercity Trains) Bomaderry 156 35,795 C 14 235 40 Sydney-Eden (Premier Motor Service)

Batemans Bay 278 16,044 C 14 360 46 Sydney-Eden (Premier Motor Service)

T 21 248 69 Sydney-Canberra (NSW TrainLink) Canberra ACT 286 432,369 C 161 210 82 Sydney-Canberra (Greyhound, Murrays Coaches)

Parkes 358 10,977 T&C 7 437 49 Sydney-Lithgow train and Lithgow-Parkes coach (NSW TrainLink)

T 7 386 60 Sydney-Dubbo (NSW TrainLink)

16

Table A.2 Average weekly frequencies and end to end speeds by distance range, passenger trains and coaches, Brisbane, Sydney and Melbourne surrounding regions Road No regional centres Average return services per week Average end to end speed kph distance served (mode) km Train Coach* Train Coach* Train Coach* 100 3 2 303 28 63 53 200 9 6 124 35 63 60 300 6 6 23 44 76 61 400 4 4 17 12 74 56 TOTAL 22 18

*Combined train and coach services are assigned to coach.

Table A.3 Average weekly frequencies and end to end speeds by distance range, coaches,* other capital city surrounding regions Road No regional Average return services per Average end to end speed distance centres week kph km served (coach) 100 3 22 57 200 3 13 56 300 4 17 64 400 2 19 76 TOTAL 12

*Train services connecting Goulburn (92 km from Canberra) and Bunbury (174 km from Perth) are not included in the table.

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