Look beyond a silver bullet train for stimulus


Marion Terrill, Grattan Institute and Tom Crowley, Grattan Institute

Amidst a global pandemic, some people are starting to dream big about infrastructure projects to help get Australia moving again. The decades-old dream of an Australian fast train is back in the headlines. But, as alluring as it sounds, the federal opposition’s idea for a bullet train from Melbourne to Brisbane is not a good use of a generation’s worth of infrastructure spending.

After the coronavirus crisis, there may be good reasons to fast-track infrastructure to create jobs and stimulate the economy. But it remains as important as ever that funding go only to worthy projects. A bullet train does not fit the bill.




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No silver bullet

Federal Labor claims the train would be an “economic game-changer” for the regions in its path. But a study into the train, commissioned by Labor itself in government in 2010, found no evidence for this.

Any regional development was too uncertain, the authors concluded, to be considered in their cost-benefit analysis. In fact, they found the project could damage towns along the route:

The history of the impact of transport improvement in Australian towns is that they concentrate activity in the larger centres and create commuter towns lacking in higher level services. Without concerted efforts to the contrary, this is also a likely outcome of the introduction of HSR [high-speed rail].




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Of course, as advocates will be quick to point out, the study did conclude total benefits would outweigh costs by a considerable margin: $2.30 in benefit for every $1 of cost. But this rosy calculation was based on a series of assumptions that are either outdated or inappropriate. As our upcoming report on fast rail will explain in more detail, it’s unlikely the train’s benefits would exceed its costs if a rigorous independent assessment were carried out today.

The benefits are also narrowly concentrated. The biggest winners would be business travellers between Melbourne, Sydney and Brisbane. Wider benefits to society accounted for only 3% of the total, and the effect on economic growth was expected to be minimal.

That’s because the train would take a very long time to build. According to the study, the project would only be “shovel ready” 15 years after funding was committed. This makes it completely ineffective as a timely stimulus during a downturn.




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Advocates also argue the train would reduce emissions by taking high-emitting planes out of the sky. But a net reduction won’t be achieved for many years – maybe decades – because constructing the line would create so many emissions.

If built, this train would be the most expensive infrastructure project in Australian history. The study estimated the price tag at A$114 billion – A$130 billion in today’s dollars. As our chart shows, this is enough to pay for an entire generation’s worth of infrastructure.

Projects are not presented as an alternative to the train but provide a point of reference for the scale of spending required for the high-speed rail project. Projects in yellow have active government funding commitments. Figures indicate total project funding costs, including private contributions. Figure for the fast train is in 2019 dollars.
Source: Based on most recent figures from Department of Infrastructure, Transport, Regional Development and Communications, Infrastructure Australia, NSW, Victorian and Queensland governments, Brisbane City Council, AECOM, ABS, Author provided

So what should be done?

It is true current low interest rates would make borrowing to pay for such a large project cheaper than ever before, and fast-tracking infrastructure may be justified to aid economic recovery. But that doesn’t give governments a blank cheque to spend on whatever they like. The crisis does not absolve government of its responsibility to scrutinise projects to decide whether they are worthwhile.

A good place to start is by identifying the problem you want to solve.

If regional development is the goal, other options are available to governments that are more likely to be effective than a bullet train. Infrastructure Victoria and Infrastructure NSW both identify better digital connectivity as a pressing need for regional and rural areas. The current strain on the national broadband network as many of us try to work from home is a good reminder of the link between connectivity and productivity.

If governments do want to focus on transport, “smaller picture” projects, though not as glamorous, tend to deliver more bang for buck, as previous Grattan work has argued.




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Projects that can be fast-tracked to start construction soon are also more likely to support economic recovery. Infrastructure Australia’s priority list suggests a range of transport projects and initiatives that are much further developed, including improving the Sydney-Canberra rail link. And the priority list includes projects that benefit all states and territories, not just the big three on the east coast.

The coronavirus crisis has upended many of our assumptions about “normal operating procedure” for governments. But it doesn’t mean we throw the old rule book out the window. Governments should only spend public money on projects that have clear and tangible benefits to society – not on grand “nation-building” projects that are big on style but low on substance.The Conversation

Marion Terrill, Transport and Cities Program Director, Grattan Institute and Tom Crowley, Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Regional cities beware – fast rail might lead to disadvantaged dormitories, not booming economies



Many commuters already travel from regional cities to work in capital cities like Melbourne so what impacts will fast rail have?
Alpha/Flickr, CC BY-NC

Todd Denham, RMIT University and Jago Dodson, RMIT University

Governments are looking to fast rail services to regional cities to relieve population pressures in Sydney, Melbourne and Brisbane. The federal government is funding nine business cases for such schemes. But what economic effect might these fast links have on the regional cities?

The current fast rail schemes seem oriented at relieving population pressures in the major cities rather than a productive regional economic purpose. The minister for population, cities and urban infrastructure recently stated:

… the National Faster Rail Agency begins operating from today [July 1]. The new Agency will oversee the government’s 20-year fast rail agenda, which will connect satellite regional cities to our big capitals. This will allow people to reside in regional centres with its [sic] cheaper housing and regional lifestyle but still access easily and daily the major employment centres.




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The argument seems built on a pitch to city workers priced out of metropolitan housing markets. It treats regional towns as remote dormitories for metropolitan workers rather than as regional cities that serve as service hubs and employment centres. But will subsidising metropolitan workers to live in cheaper regional towns have a positive economic effect on those towns?

An unequal relationship

Concern is growing among international observers that fast rail connections between two cities benefit the larger of the pair. Professor Michael Storper observed:

One of the biggest mistakes we’ve made was being naïve about connectivity – give infrastructure and it spreads. Well, often it concentrates. The high-speed train network in France, guess what it did. It advantaged Paris.

While Paris is seen as benefiting the most from the national fast rail TGV service, the regional cities of Lyon and Lille have strengthened their economic positions. The Lyon and Lille fast rail stations form the hub of their respective regional transport networks and have attracted new commercial activity. They also sit at intersections of major European fast rail networks.

It’s a pattern that cannot be easily achieved for Australia’s regional cities due to our widely dispersed settlements. So what does this mean for our regional cities?

Improving transport infrastructure doesn’t just improve regional business access to metropolitan markets. It decrease the costs of trade in both directions. And large cities are typically more productive economically. This is because they offer more specialised goods and services and can leverage the agglomeration effects of shared high-quality labour markets and infrastructure, plus a concentration of skills and knowledge.




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Reduced travel times can mean regional businesses become less efficient than metropolitan competitors that can offer a wider range of specialist goods and services. This may lead to regional business closures, employment losses and wage decline. Unless a regional city is able to develop a specialised set of high-skill, high-wage industries that complement or outcompete the metropolis it risks being economically disadvantaged by faster rail.

New regional demand arising from commuter population growth might counter the loss of higher-order regional jobs due to improved transport links. But that will largely be in lower-value retail and personal service sectors. The result will still be a net economic gain for the metropolis.




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An influx of commuters earning metropolitan wages might also inflate regional housing markets. This would disadvantage lower-paid regional workers. The beneficiaries of this scenario are likely to be local rentiers, such as landholders and developers who can profit from land-price inflation.

This interest group will likely vocally promote regional fast rail. But sustainable economic prosperity for regional cities requires more than population-driven land speculation.




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The example of Geelong

The most advanced of the current Australian proposals is the Geelong-Melbourne route. It has received federal and state funding for planning with an estimated total cost of at least A$10 billion. But planners need to ask how this spending will provide a net economic benefit, and how the benefits will be distributed.

Growth in commuter population and the services this attracts may be seem like a resolution to metropolitan population problems, but could further concentrate higher-paid jobs in Melbourne. Faster commutes mean Melbourne-based firms will have a greater pick of Geelong-based workers, thus consolidating metropolitan competitive advantage. Fast rail thus risks placing Geelong at a competitive disadvantage, with jobs and workers being exported to Melbourne.

Meanwhile the pressure of housing another 145,000 residents in the next 20 years already falls on Geelong, a city of 280,000 people. The strain on infrastructure and services is proportionately greater than would be the case in Melbourne, which has nearly 5 million residents.




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What can policymakers do about this?

To resolve this conundrum, thought must be given to what specialised high-value jobs will be attracted to regional cities to accompany fast rail investments, so these cities remain competitive and productive, regionally, nationally and internationally. This might include policies such as relocating public agencies, regional targeting of university-based research and development spending, boosting services such as schools and hospitals, and providing incentives for innovative private companies to relocate to regional towns.

Policymakers should also consider positioning regional cities as rail network hubs in their own right. An example would be connecting Geelong, Ballarat and Bendigo by rail, along with better linkages to national and international airports.

We don’t yet know for sure what the effects of fast rail on regional cities will be. But the impact of this infrastructure needs to be assessed very carefully lest it turns Australia’s regional cities into dependent population dormitories rather than regional dynamos, at vast public expense.The Conversation

Todd Denham, PhD Candidate, School of Global, Urban & Social Studies, RMIT University and Jago Dodson, Professor of Urban Policy and Director, Centre for Urban Research, RMIT University

This article is republished from The Conversation under a Creative Commons license. Read the original article.