As the treasurer lauds supply-side economics, a once-controversial recovery theory is gaining traction.This is the essence of modern monetary theory – that government budgeting is nothing like household or business budgeting, for the simple reason that government can create money.
Inland rail a hollow promise
Following John Howard’s 1996 federal election victory a man named Everald Compton entered the prime minister’s office to raise what he believed to be a visionary concept regarding an energy and rail corridor from Melbourne to Brisbane. The idea had certain appeal as an infrastructure project and, as Howard and others would soon recognise, political benefits that could be milked for years to come.
The original concept was to provide a way for freight between Melbourne and Brisbane to avoid the slow New South Wales coastal rail route that made it impossible for rail to compete on price and time with road freight, and to bypass a congested Sydney. An important and often forgotten part of the proposal was that it would also provide an adjacent energy corridor that would act as a catalyst for growth in inland communities.
Compton, founding chairman of Australian Transport and Energy Corridor, was not someone Howard could ignore, as he had been a major fundraiser for the successful Liberal campaign and was well connected on both sides of politics. He was considered a genuine bloke and a great contributor to Australian society, as a businessman, lobbyist and fundraiser. His proposal was put on the government’s agenda.
Twenty-one years later we now see a commitment in the recent federal budget of off-budget debt funding for the Australian Rail Track Corporation, a corporatised government agency, and vague assurances of a search for private investment partners to build a major inland rail line. Some are assuming this means the railway line will now be built I’m not that sure. History may give us reason to doubt it.
After the Howard meeting strong support was gained from then deputy PM Tim Fischer, a train fanatic who could also see the political benefits, particularly as the “Joh for Canberra” push was still a recent bad memory and the election saw Pauline Hanson entering federal parliament. The Nationals needed a nation-building dream that voters in NSW and Queensland would find appealing.
Again, during the 1998 election, lip service was paid to the rail project as something the Nationals in particular promised to pursue. Talk of private-sector funding and the government acting as a facilitator of the route and approvals was the political spin of the day.
In 2001 – the year I was elected MP for New England – another National Party leader and the minister for transport, John Anderson, grasped the project with enthusiasm during the election campaign and in the company of Compton hammered a golden stake into the banks of the McIntyre River on the border between NSW and Queensland – a symbol of the start of the Inland Rail Corridor.
However, the symbolic ceremony didn’t herald the start of the project. It had provided a useful tool for the Nationals in particular to articulate their support for nation-building, which was a tradeable theme during the campaign. But nothing tangible was started after the election. Still, to avoid offending Compton’s followers, some of whom were National heartland heavyweights in Queensland, a number of feasibility studies followed during the next decade, considering the “viability” of such a project and “looking into the possible route options”.
The largest study, by Ernst and Young in 2006, concluded that the three route options on the table were not viable under three different economic models. Another, completed by ACIL Tasman in 2010, concluded that the project was not viable in the short term and marginal in terms of benefit–cost analysis in the medium to long term. It was predicated on freight growth assumptions that were debatable. Suggestions that much more coal could be exported via the Brisbane port were queried. Corridor realignment and access issues from the Brisbane suburb of Acacia Ridge into Brisbane’s port were glossed over – significant issues that remain today. But the politics was endlessly played while delaying any concrete action. Labor played along, wary of being seen to be opposed to some bold infrastructure. They participated in the delaying tactics of funding further studies, neither denouncing nor progressing the idea.
The theory was that if a freight train could travel between Melbourne and Brisbane in less than 24 hours, it would be more competitive than road transport and hence attract business back to rail, thereby removing “dangerous heavy trucks” from our roads. This is not as simple as it sounds.
A whitegoods manufacturer, for example, currently has one freight movement, on road from its Melbourne warehouse to its warehouse in Brisbane. Whereas using rail would require three freight movements – from warehouse to rail yard to the destination warehouse – so speed, reliability of service and cost are critical to the issue.
Even though it is a complicated issue, one needs to look at where the freight is going to come from to see whether the political toy that keeps on giving will ever be more than a plaything. The current Melbourne to Brisbane rail connection travels via Sydney and up the east coast to its destination in Queensland. If the Melbourne to Brisbane component of that freight could be rerouted via inland NSW, it would alleviate congestion on the Melbourne to Sydney and Brisbane to Sydney freight corridors.
Studies indicate that the contestable freight that originates in either Melbourne or Brisbane is only 4.5 million tonnes per annum (mtpa), which is equivalent to one medium train a day each way. Even if in fact all that freight business could be captured by this new service, a $10 billion investment can’t be made on that basis alone.
There are tonnages from west of Toowoomba to Brisbane that might use the proposed upgraded route as well as potentially small tonnages of cotton and some grain from northern NSW. Perth to Brisbane freight might also choose to use the route.
Studies show that most of the freight does not and will not go north to south but will continue to move west to east, to the ports of Newcastle and Port Kembla. The rail line from Moree in NSW to the port of Newcastle currently carries 120mtpa, and when combined with inland freight to Port Kembla of 20mtpa, these together account for 60 per cent of total east coast freight availability going anywhere by ship, rail or road. The demand to move things up and down the east coast, excepting Sydney, doesn’t look sufficient to make the plan viable.
So, with the concept now receiving more federal funding, is it a real goer or is it just doing the political rounds as once again the Nationals are threatened by One Nation? Will anything actually be done before the next federal election? Going by Australian Rail Track Corporation documents prepared for the government in 2015, there is still much to talk about, including the all-important route determinations – after 21 years of deliberation.
One way the Turnbull government could demonstrate that its renewed interest is about more than just further fact-finding would be to go back to where they came from. That is, go back to the McIntyre River on the border, where Anderson and Compton drove the stake into the bank 16 years ago and establish the missing rail link over a relatively short distance from a village called North Star, north-east of Moree, to Yelarbon in Queensland, which would physically establish rail track continuity between Melbourne and Brisbane via the inland.
This would also mean that with appropriate gauge changes in Queensland any growth of freight on the Sydney to Brisbane market could proceed up the Hunter Valley, via Werris Creek near Tamworth, and on to Queensland rather than up the coast, at least until the potential new routes were established.
The second part of the vision was an energy corridor, with land alongside the rail line acquired for gas, electricity and other cross-land energy transmission.
Some are suggesting that the proposed new route being pushed by Deputy Prime Minister Barnaby Joyce from Narromine near Dubbo to Narrabri through the Pilliga Scrub has more to do with providing a corridor for a gas pipeline than a more efficient freight service.
Landholders in the Namoi Basin and the adjacent Liverpool Plains are fighting to stop coal seam gas developments due to the risk of polluting water resources. Is the interest in taking a shortcut through the scrub rather than using the existing line via Werris Creek to Narrabri a means to use a populist issue to solve the hard problem of gas permits, access across private lands and NSW energy demands? If it is, maybe it’s time for some honesty.
The third and possibly most important aspect of the original vision was to provide an infrastructure base to encourage the growth of inland communities. This is where all governments have let down country people.
A train run mainly to beat a truck up the Newell Highway won’t be stopping to pick up a bag of potatoes in a small town on the way through, especially when most of the freight is going west to east.
The argument that our roads will be safer if we use rail doesn’t stack up as a motivating concern either, when you consider the same political parties have been closing rail lines down for years.
A railway line that will alleviate congestion in Sydney will not be the growth trigger once thought. Growing country towns will not become a reality this century without appropriate digital technology, notably the national broadband network. The NBN should be the infrastructure priority. A second-class internet and communication system will do more damage to the future in the regions than any benefits flowing from upgraded north–south rail.
The political reality is that in all likelihood the Labor Party will win the next election and, on the basis of a Productivity Commission report or some such economic document, Labor will either not proceed with this project at all or will only establish the missing rail link inland on the Queensland border.
The National Party wins either way, first by having a regional infrastructure issue to spruik into the next election and second as a sledgehammer to later beat up Labor regarding its regional credentials.
Regional Australians will have missed the train again, and in all likelihood naively voted to do so.
This article was first published in the print edition of The Saturday Paper on Jun 10, 2017 as "Government happy to be off track".
A free press is one you pay for. In the short term, the economic fallout from coronavirus has taken about a third of our revenue. We will survive this crisis, but we need the support of readers. Now is the time to subscribe.