The Senate Rural and Regional Affairs and Transport References Committee Australia's rail industry October 2017 © Commonwealth of Australia 2017 ISBN 978-1-76010-667-6 This document was prepared by the Senate Standing Committee on Rural and Regional Affairs and Transport and printed by the Senate Printing Unit, Department of the Senate, Parliament House, Canberra. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License. The details of this licence are available on the Creative Commons website: http://creativecommons.org/licenses/by-nc-nd/3.0/au/. Membership of the committee Members Senator Glenn Sterle, Chair Western Australia, ALP Senator Barry O'Sullivan, Deputy Chair Queensland, NATS Senator Chris Back (to 22 June 2017) Western Australia, LP Senator Slade Brockman (from 17 August 2017) Western Australia, LP Senator David Bushby (from 22 June 2017 to 17 August 2017) Tasmania, LP Senator Anthony Chisholm Queensland, ALP Senator Malarndirri McCarthy Northern Territory, ALP Senator Janet Rice Victoria, AG Substitute members for this inquiry Senator Kim Carr Victoria, ALP to replace Senator Malarndirri McCarthy iii Secretariat Dr Jane Thomson, Secretary Ms Sarah Redden, Principal Research Officer Ms Trish Carling, Senior Research Officer Ms Erin Pynor, Senior Research Officer Ms Leonie Lam, Research Officer (to 1 June 2017, from 25 August 2017) Ms Helen Ulcoq, Research Officer (from 3 July 2017) Mr Michael Fisher, Administrative Officer PO Box 6100 Parliament House Canberra ACT 2600 Ph: 02 6277 3511 Fax: 02 6277 5811 E-mail: [email protected] Internet: www.aph.gov.au/senate_rrat iv Table of contents Membership of the committee ......................................................................... iii Recommendations .............................................................................................vii Abbreviations ..................................................................................................... ix Chapter 1.............................................................................................................. 1 Introduction and background ................................................................................. 1 Conduct of the inquiry ............................................................................................ 1 Early development of rail infrastructure ................................................................ 2 A history of differences .......................................................................................... 4 Role of the Commonwealth .................................................................................. 10 Key issues ............................................................................................................. 11 Structure of the report ........................................................................................... 12 Chapter 2............................................................................................................ 13 Current state of Australia's rail industry ............................................................. 13 Australia's rail industry ......................................................................................... 13 Regulatory environment ....................................................................................... 16 Standardisation and harmonisation ...................................................................... 18 Procurement and local content guidelines ............................................................ 24 Issues which have an impact of competitiveness, productivity and growth ........ 27 Workforce issues .................................................................................................. 32 Industry capability ................................................................................................ 36 Chapter 3............................................................................................................ 39 Importance of Australia's rail industry ................................................................ 39 A world class industry .......................................................................................... 39 Growing importance of rail in Australia .............................................................. 40 Employment and income generation .................................................................... 43 Industry decline and consequences ...................................................................... 46 Apprenticeships, training and skills ..................................................................... 48 Research, development and innovation ................................................................ 52 Chapter 4............................................................................................................ 55 Future of the industry ............................................................................................ 55 Barriers to growth and productivity ..................................................................... 55 The need for a national plan ................................................................................. 69 The ARA's proposed National Rail Industry Plan ............................................... 74 Chapter 5............................................................................................................ 79 Committee view and recommendations................................................................ 79 Appendix 1 ......................................................................................................... 85 Submissions received .............................................................................................. 85 Appendix 2 ......................................................................................................... 87 Public hearings and witnesses ............................................................................... 87 Appendix 3 ......................................................................................................... 89 The ARA's Enablers ............................................................................................... 89 vi List of recommendations Recommendation 1 5.10 The committee recommends that the Australian Government establish a National Rail Manufacturing Industry Plan to maximise the benefits of the $46 billion in investment expected over the next decade. Recommendation 2 5.11 The committee recommends that a National Rail Manufacturing Industry Plan develop a mechanism for the Commonwealth to smooth out the peaks and troughs in market demand and create more certainty and predictability for manufacturers servicing the rail industry. Recommendation 3 5.12 The committee recommends that, following the Australian Government's establishment of a National Rail Manufacturing Industry Plan, state and territory governments endorse the plan and agree on methods to adequately support, resource and progress the plan. Recommendation 4 5.18 The committee recommends the development of a National Rail Procurement Strategy by the Commonwealth in coordination with all states and territories. As signatories to the strategy, states and territories should include procurement contract measures – consistent with international trade obligations – which allow for the development of industrial capabilities for small and medium sized enterprises (SMEs). As part of these contract measures, consideration should also be given to: (a) maximising local content for the manufacture of passenger, freight and light rail rolling stock in procurement; (b) the relevant financial and non-financial costs and benefits of each project including, but not limited to: (i) the quality of goods and services (ii) fitness for purpose of the proposal (iii) the potential supplier's relevant experience and performance history (iv) flexibility of the proposal (including innovation and adaptability over the lifecycle of the procurement) (v) environmental sustainability of the proposed goods and services (such as energy efficiency and environmental impact) (vi) whole of life costs (c) requirements for contractors to undertake training strategies to educate and engage local apprentices, trainees and engineering cadets; (d) commitments to local industry development and supply chain engagement; and (e) harmonisation of safety standards. Recommendation 5 5.19 The committee recommends that a National Rail Procurement Strategy be used to work with all states and territories to maximise investment in local research and development, as well as engagement with universities and research agencies. Recommendation 6 5.23 The committee recommends the establishment of a Commonwealth coordinating body – to be headed by a tripartite council – to drive and coordinate a National Rail Manufacturing Industry Plan, a National Rail Procurement Strategy and industry consultation. Recommendation 7 5.24 The committee recommends the re-establishment of a Rail Supplier Advocate to promote the rail industry in dealing with Commonwealth, state and territory governments and industry bodies. Recommendation 8 5.25 The committee recommends that a Commonwealth coordinating body be given direct terms of reference to work directly with the rail manufacturing supply chain in developing and expanding industry capability networks. Recommendation 9 5.30 The committee recommends that the Australian Government work with state and