Balance Research, Melbourne |
Questions and Answers following this paper
THE CHAIRMAN: I'd like to introduce you to Michael Isaachsen. Michael was raised in Adelaide (South Australia) and is the Director of Balance Research which, as he explained to me, he does for the love of it. I think that's magnificent: it's an unfunded, voluntary organisation.
Michael has been involved in making submissions to governments and various enquiries in the area of transportation. His work offers some fairly challenging views on the future balance between road and rail, and is centred on resource usage of transport and total costs to all levels of the community.
It's a really important area and I can say I was in Washington a couple of months ago and they're doing an enormous amount on looking at futures, scenario planning, looking at resource issues and what's likely to happen. I think that Michael's work is very much at the cutting edge of that.
So I look forward to hearing from you, Michael.
MICHAEL ISAACHSEN: I am asking you to think ahead 20, 50 or even
100 years. How will total transport demand grow? How will the community
and governments react to transport's drain on resources? How will
operators and customers react to changes in the price of inputs?
After an introduction looking at the factors likely to affect demand for transport, and the pressures to avoid forever expanding the highway system, I will look at how governments might respond with policies and how these and other factors might reflect into the market.
I will conclude by suggesting how the transport industry might adapt. Operators will take advantage of the changed market for transport inputs. Customers will then react to the changed relativity between road and rail prices.
| PART ONE - INTRODUCTION |
There is a general perception that rail will be part of the solution, but I think there is no perception of just how much rail must grow in order to prevent a blow-out in overall transport costs.
What will happen then, when governments become unwilling to go on expanding the highway system but transport tasks continue to grow? Will we see 24-hour gridlock around our cities? Or will governments, in concert with the industry, find ways to keep highways available for tasks that rail cannot perform?
There are many signs that the cost of road service will grow faster than the cost of rail. Governments will be led to reinforce this with deliberate policies leading to more and better rail service. This will have the direct objective of limiting the growth of road traffic because road traffic is so resource-hungry.
For the transport and logistics industry, this will mean opportunities to offer better services at lower costs than they otherwise would with continuation of present policies.
In the medium to long distance corridors the changes will ultimately deliver a mix of 100 and 160 Kph freight services, with regular passenger services up to 200 Kph.. And that's not the VFT, just ordinary trains.
But within metropolitan areas the changes in freight will be even greater. I understand that of all resources used by freight, including emissions, about 80% is in metropolitan areas, and the general perception, the perceived wisdom, is that rail cannot handle that: most metropolitan rail stations have been closed for many years. But if container technology had come to local transport a couple of decades earlier, the service would have become more efficient and some of those stations would have remained.
Rail will return to haunt many industrial areas with a mix of direct service and a new kind of intermodal. This will have short-haul road legs typically up to five kilometres, feeding small intermodal stations. Suburban freights, mainly overnight, will offer direct services from any station to and from the port, central rail yards and major origins or destinations, and "transfer service" to any other station.
The availability of these overnight services using very little energy and labour to move large loads silently through the suburbs, if priced equitably with road according to the marginal cost of resource usage, will lead to some shippers moving away from the instantaneous door-to-door truck service they are used to.
The combination of people-driven government policies with profit- driven industrial initiatives will bring about these and other changes to transport in coming decades. Governments will always need to subsidise transport in some way, but the investments they make will have to support the mode which uses less resources. If these moves are successful, highways will increase greatly in quality and safety but not so much in capacity.
The expected growth in total transport needs could thus be absorbed by rail, with innovations in technology and management, much of which will be undertaken by the private sector responding to signals from governments.
These are the kind of changes without which highways will choke up. Providing thes attractive alternatives will to some extent safeguard the capability of highways to serve those traffics for which road is always going to be needed.
The resource usage per unit of transport task will thus, in 100 years, be just a fraction of what it is today. Each tonne- kilometre and each passenger-kilometre will consume less energy and less labour and involve less land, less air and noise pollution, less people injured and less community disruption.
To make this happen in 100 years, governments, academics, industry and the wider community must start now, and get on with it!
With the relentless growth of the world economy, it is quite
probable that in less than 100 years the total transport task
will have doubled and doubled again. I would leave out of that
certain large non-contestable flows like mine outputs, because
world demands and availability of deposits may vary somewhat
independently of the national trends.
Of course it is not possible for this generation to know how the population trends will go, so far into the future, and there are other factors which may influence the total non-mine transport task.
But considering all reasonable scenarios, it must be assumed that the total task will eventually reach four times today's level.
The problem that the community will eventually perceive is that four times the total transport, on present expectations, would mean at least four times the present level of road traffic. When the wider community becomes concerned about this, it will become a political issue.
I say on present expectations. Until recently in this country it would have been said by many that rail, possibly excepting urban transit, would have to expect a decreasing share of the growing task. Rail might have been doing well if it maintained its volume in absolute terms. (This is omitting mine-outputs, remember.) However the outlook has changed in the past three or four years and Governments are beginning to express concern at the ever- growing cost of road transport including social and environmental costs.
As a result, I believe that many commentators and transport industry players would now consider it possible that rail will maintain its share of the growing task, percentage-wise.
If that is the case, then in 100 years or whenever the total task reaches four times, we may expect four times the total rail traffic, and we still reach four times the total road traffic.
When such growth in road traffic becomes a political issue, what might governments do about it?
At Balance Research, I have been looking at this question. And
the obvious related question, what might governments and the
transport industry do about it now, before it becomes an issue?
And how might resulting changes impact on the intermodal and logistics industry in coming decades?
Many commentators, academics, politicians and industry leaders have given voice to a need to provide more and better railway services. They indicate that ever-growing road traffic is a reason for this intention. But they are generally pessimistic about it, like a forlorn wish. They cannot see much chance of providing rail services on an economically sustainable basis other than for urban transit and long distance and bulk freight.
I have great confidence in suggesting that economically-sound ways will be found for rail to play the vital role in limiting road traffic growth. To achieve this, rail traffic in that "four- times growth time-frame" will have to grow not four times, but to eight, ten or twenty times its present level of passenger and general goods traffic.
Such modal shift, and railway growth, may be economically sound, but will the railway industry and the users of transport be ready for it? Will they have the right attitudes, the necessary mind- set and knowledge, to avoid the resource blow-out which we otherwise are facing?
Part of the Balance Research project is to develop educational programs on an inter-generational basis (covering two or three generations, a program lasting twenty to forty years) to address what can only be described as an attitude shortfall.
| PART TWO - GOVERNMENT AND MARKET REACTIONS |
However there are other factors silently at work which will cause significant changes in the transport marketplace and alter the relativity of road and rail costs, even without policy changes.
One scenario is that governments will not have to do much because
industry will respond to rising energy prices by finding new ways
to exploit the inherent, technical efficiency of rail.
This scenario arises from the expectation that the cost of energy will increase dramatically when an increasing percentage of liquid fuels have to be manufactured rather than extracted. This would mean substantially increased prices for transport with a significant and growing differential between road and rail. The basis of this differential is that rail uses less energy per unit of task and is easily adapted to electric transmission of energy, so taking advantage of sources of energy other than oil, including the growing variety of renewables.
Another factor that will lever road transport prices upwards
relates to the fact that prices are today depressed by the
existance of those few operators who fail to observe proper
standards.
There is anecdotal evidence of systematic infringement of driving hours, unroadworthy equipment, bad driving practices and unsafe loading. As these practices are gradually being eradicated by policing and education, including fatigue management, prices industry-wide will drift upwards to a sustainable, profitable level.
State and Federal road organisations are working on adjustments
to the road user charge regime. The 18 or 20 cents per litre RUC
may give way to electronic charging on a mass-distance basis
designed to recoup pavement damage and potentially, certain
externality costs.
The cost of pavement damage has been stated by researchers to be in proportion to the "fourth power" of the vehicle mass. So increasing the mass by a factor of two would increase the damage by the fourth power of two.
The essence of this is that two trips by a twenty-tonne vehicle will do less pavement damage than one trip by a forty-tonner.
On this basis, I would like to present a numerical example of how costs would escalate with vehicles of various masses.
Assume that a vehicle of 38 tonnes GVM causes $100 of damage in undertaking a certain trip. Vehicles of other GVM would do more or less damage, based on the "fourth power rule".
A four-tonne vehicle would do one cent's worth of damage in making the same trip. A twelve-tonne vehicle, one dollar.
A twenty-one tonne vehicle's damage bill would be ten dollars, and as stated, the 38-tonner would come in at $100 worth of pavement wear and tear.
With just six extra tonnes, the 44-tonner would cost the road owner $180, all other factors being equal.
Any charging system that takes this into account would substantially increase the cost basis for shippers using road transport.
That would make the idea of providing shorter road legs for intermodal quite attractive for all but the most sensitive goods.
Before getting into the rights and wrongs of externality costs
and other subsidies, it may be worth looking at the issue, a
contentious issue maybe, of whether road users, and especially
heavy vehicles, pay their way under the present regime of road
charges and fuel taxes.
There are many in industry who have expressed a belief that vehicles paying the present road charges, including fuel taxes, more than pay their way and indeed make a profit for the government. It is true that total taxes and charges, of some $13 billion p.a. for the whole of Australia, well exceed the total outlays by State and Federal governments on road building and maintenance.
But on the other hand there are at least four areas of debate about this. It seems to be the case that there are many other costs to governments and the community, emanating from road use, that are not considered in this apparently straightforward account of revenue and outgoings.
The expenditure on road maintenance in this account fails to consider the vast and growing backlog of maintenance in the nation's stock of roads and makes no provision for depreciation. And it fails to fully reflect outlays on road by local governments.
Neither is there any consideration of a rate of return on the road assets, valued in the hundreds of billions, as there is for railway tracks. I'm not saying that railway track owners get their full rate of return but it certainly is factored into the rail user charges.
There is little debate that road usage causes the community substantial detriment in various ways, although cash values are indeterminate at this stage. These range from the obvious emissions through to uncompensated costs of trauma and loss of amenity, and also include marginal costs of government expenditure on policing and public health. Even with very shadowy estimates, the annual usage of these resources would more than close the gap between road revenues and direct road costs.
Not to say, of course, that rail transport is free of harmful effects. These would have to be costed as well. But it is almost certain that community costs would be reduced by every unit of task transferred from road to rail.
Furthermore, some part of the fuel revenue is claimed by the Federal Government to be "normal tax revenue", related to business activity in general. This may be clearer under the year 2000 new tax arrangements.
And lastly it seems that of that revenue, a very great proportion comes from small vehicles whereas of the direct outlays on roads a very great part relates to heavy vehicles. This is a topic presently being looked at by road authorities as already mentioned.
New Zealand's system of road-use charging is often quoted. New
Zealand, in common with Australian States, used to have a system
of regulation of freight, requiring certain traffic, probably a
majority of ton-miles, to use the railway.
In negotiations to abolish regulation, the deal made by the NZ Government was that trucks would pay a ton-mile charge for road use. This resulted in substantial traffic staying with the railways, who of course do pay the cost of their road. This remains the case today, as I understand it.
In Australia, as regulation to rail was abolished by the States there was no requirement for highway trucks to pay marginal costs for road use other than the fuel tax. This naturally increased the demand for road space and led to cessation of many general freight services on the railways.
The growth of road transport in Australia, at the expense of
railways, was not only due to the imbalance between charging
regimes. Railways failed, in many cases, to provide the services
required by shippers, or to provide them effectively, or market
them. There may also have been petty jealousies between the
disparate operators, adversely affecting intersystem movements.
In other words, for much general traffic, rail was a "sitting duck" and customers were in many cases ready to be won over to road with little effort.
To these must be added those rail customers whose service was withdrawn or "priced off" by decision of railway operators who decided that they wanted to improve their bottom line by concentrating on the creamier traffic. These tasks were forced onto road where, arguably, they now cost the government and community more than the extra subsidy which might have kept them on rail.
The resulting growth in road traffic demanded new and better roads and these were provided, with the help of many billions of mainly Federal dollars. Road transport then became very effective and remains so today, while the main railways are, if not worn out, then archaic in their geometry or layout. Excessive curves and grades, and single track on busy lines prevent railways from being as effective as their technology would permit.
In other words, the phenomenal growth of the road transport industry has been driven by a market distortion, both in operating costs and investment.
There is no blame levelled at the industry. It naturally took advantage of the opportunities on offer. But such growth of the mode which uses more resources per unit task cannot be sustained for ever.
It is instructive to note that despite the second-rate tracks between capitals, and the fact that rail operators have to pay substantially more per tonne-Km for their tracks, and their rigorous safety regime, interstate railways carry their substantial loads at around zero loss, if not exactly a profit.
Governments may now be realising that it might have been better to invest in new and updated railways first, so retaining as much traffic as possible on rail and then ensuring that highways were brought up to a safe standard. This would have saved governments billions of dollars and minimised drain on community resources.
So what moves could governments make, when they finally feel the
political need to act?
Recognising that all three levels of government will benefit from a modal shift away from road, they could decide to make their assessments of the cost and benefits of change on an all- government basis, not forgetting of course the savings in community resources.
Governments would need at an early stage to identify and protect corridors of land which could be used for rail transport, and suitable sites for freight stations and terminals.
Governments would need to act together on a fair basis to decide which government would pay for which kind of investment or increased operating costs in order to ultimately reap the benefits.
As owners of more than half of the Nation's roads, it seems that Local Government would have a very great stake in this, as borne out by the worrying backlog in local road maintenance. Yet arguably they would be the least able to put up funds for change.
Councils could make a valuable contribution "in kind" by spearheading the public education campaigns and helping their local transport users to assess the changing marketplace.
It is State governments which make the greatest outlay on roads and other infrastructure and suffer the greatest indirect costs from traffic. These include the cost of hospitals and public health and policing, net of insurance and traffic fines.
It is also the States which have prime responsibility for the wellbeing of citizens.
Accordingly, it is the States, along with their Local governments, who will reap the benefits of a long-term change of growth from road to rail. This will ultimately recompense them for the cost of bringing about the change.
Nevertheless it is only the Federal Government which has the fiscal strength to lead such changes, and the administrative resources to coordinate them. Perhaps the role of the Federal Government will be to provide incentives to States, rather than actually paying for everything as some parties seem to expect.
One class of outlay the Federal Government might be justified in making is providing funds to the States to cover increased investment or operating costs which result from "unfortunate policies" of the past, such as closure of tracks and even the remaining break of gauge problems.
Existing road user taxes and charges could be reworked and levied
on a basis nearer to "user pays". Annual fees could be reduced
with the introduction of road usage fees, beyond the present fuel
taxes, to pay for resources used and damages done. Governments
have expressed interest in charging for community damage. This is
sometimes called externalities, although I think the idea is to
internalise such resource usage.
The usage fees could be levied using some kind of electronic tolling. This might be for all vehicles or just the heavy ones. Trials are under way but it's not certain when governments will take the next step and how they will set the charges.
Railway traffic could not be exempt from user charges, including community damage, although tonne-Km charges already apply in most cases.
If comprehensive charging happens, then the rules for determining the mass-distance charges for road would be hotly debated, but in the end they would be related to mass and axle configuration and possibly speed, suspension type, noise profile and a public hazard rating and could also vary by road location and time of day. Railway charges are simpler than this at present but could be reworked to take account of more variables including noise and other emissions.
Some part of these tolls could be passed on by governments to parties claiming to suffer damages. If so, it could be a politically acceptable move. People don't like heavy transport (nor large volumes of cars, for that matter) to be near their homes and if they see tangible evidence of road and rail users having to compensate them, they will know the government is serious about the problem.
Communities divided and disrupted by major transport facilities like railways and freeways may also come to be compensated by the owner of the facility, be it private or government owned.
The community dislike of transport and its infrastructure, and the consequent need for tolls, applies equally to highways and railways. However if governments charge the users according to the level of nuisance, the cost will often be greater per tonne- Km for road than for rail.
The Productivity Commission in its recent draft report on
railways recommends a more commercial approach to costing of rail
and road transport. My comment is that including all known costs
and revenues, rail freight is perhaps 80 % commercial at present,
whereas road freight is perhaps 50 %. If they both had to pay
100% of the full commercial and societal costs then the modal
split would change towards rail.
Governments, however, will be sensitive about placing the full cost of all resources and damages onto the travellers and shippers who buy transport, because it will depress the total demand. Some people think that wouldn't be a bad thing, though, as in economic terms, paying less than the full cost for anything leads to sub-optimal allocation of resources.
For a variety of reasons, it is likely that governments will continue to provide some level of subsidy for both rail and road traffic. Demand growth may nevertheless come to be depressed, though, by energy prices and other increased costs.
Balance Research said to the Productivity Commission that full commercial pricing for rail would be good for the community only when accompanied by full commercial pricing for road, and that, realistically, will never happen.
A "softer" alternative is to estimate what those total,
unsubsidised charges might have been, for road and for rail, then
for as long as it's not feasible to collect them in full, make a
concession per tonne-Km to each mode, after allowing for existing
direct and hidden subsidies.
Such a concesssion may, unfortunately, rule out or greatly restrict payment of compensation to those in the community who are affected by transport. But those costs should still be included in the public reckoning, to acknowledge the fact that the wider community, not just government, is a great subsidiser of transport by suffering its consequences.
It should be borne in mind that the reckoning of such costs and subsidies must separate the marginal costs from the fixed or "network costs". What we must look at when planning for a saving in resource usage is the saving from transferring slices of task from one mode to another. Adding capacity to a road or railway would typically be cheaper than building a new facility.
Railway operators, especially if they are private companies, will hopefully respond to the promise of a flow of equalised subsidy per tonne-Km by a combination of rate reductions, service improvements and key investments.
"Quarantining" of these subsidies may be an issue: governments would not want to be subsidising those traffic flows for which road is not a viable alternative. This could be achieved by making the subsidy nominally to the shipper, who would apply for it on the basis of reduced road traffic. Large numbers of small shippers, however, would have their applications handled by the operator.
Just in case operators, whether private or government-owned, get
other ideas about how to use their funding, governments may well
want to write in some added incentives for effectively limiting
growth of highway traffic in critical corridors and penalties for
failing to do so.
As part of this, a system of Universal Service Obligations could be put in place for all railway operators receiving the benefit of government investments or subsidies.
The USO scheme for telecommunication carriers could be a model: those operators who cannot or choose not to provide universal services contribute to a fund for those who do.
The USO operator would be obliged to carry all traffic offering, with price and service rates agreed with governments and designed to control growth of highway volumes. They would also be obliged to interconnect with other operators at mandated rates if commercial agreements cannot be reached.
A more pragmatic approach that some governments might take is
merely to decide that they want to see more use of rail for a
range of movements and commission railway operators to provide
services, particularly intermodal services, at prices which will
succeed in reducing the pressure on the road system.
This might be called Sunk Cost pricing. Road provision and maintenance is a sunk cost. It is something that governments are committed to, irrespective of achieved levels of traffic. So they might consider committing to the provision of an adequate railway and an adequate service on it. The users, the travellers and shippers, would then be charged the marginal cost of their trip.
The operator, private or public, would be commisioned to maintain and operate the railway to a certain basic capacity with services designed to attract a useful slice of the freight and passengers using the highway in the same corridor. If usage grows, the users would be paying enough to run more trains. Over the decades, if the total task grows, the highway would be maintained for safety, but the railway would be expanded for capacity.
When such an upgraded "sunk cost railway" becomes part of a network of such lines thoughout a State or region, or throughout the entire country, it would of course be even more effective in limiting road growth.
In the course of time, governments may decide to reduce the
concessions or subsidies. This would of course tend to depress
the total transport demand and perhaps this will become
politcally necessary if sustainability becomes a bigger issue.
For example it may be decided to start collecting from road and rail operators part of the cost to the wider community of their activities. The decreased support payments or increased charges, applying equally to road and rail, according to the marginal resources they use, would be in line with optimal allocation of scarce resources.
Investment in transport infrastructure is largely a function of
governments. With private tollways and private railways this
could change somewhat, but as long as the majority of roads are
free of usage charges it will be government money which provides
and maintains most infrastructure.
Governments can reduce the long-term cost to themselves and the wider community by investing in infrastructure for the transport mode which uses less resources per unit of task.
When the time comes that governments take a position against further road expansion, they will need to review their investment policies on highways and railways. Several inquiries have recommended this process but most governments seem unready to make such a decision.
They may do well to look at the productivity of alternative capital flows in terms of dollars per tonne-Km of capacity, allowing for the Present Value of unmet operating expenses and unmet costs to the wider community. As I mentioned earlier, many of these unmet costs are indeterminate in cash terms, but one thing is certain, they are not zero!
One factor making rail less interesting to governments is their seeming concern with cost per tonne-Km of actual, historical use, rather than of capacity. And average cost per tonne-Km at that, rather than marginal.
Balance Research suggests that outlay per tonne-Km of potential traffic be considered as an indicator. Where a railway exists or is being considered, the potential rail traffic is some proportion of the total traffic in that corridor. It is reasonable to assume that if a railway is upgraded or built and provided with attractive services and subsidised as much as the road, per unit task, it will attract some proportion of the load. If the highway is not expanded in capacity, and traffic grows over the decades, the capital productivity of the railway will show it to be a far better investment.
A number of sources have quoted figures on Federal outlays on road and rail in recent decades. These generally show that road had become the favoured mode for investment in interstate transport by the 1970's.
Since that time very little has been spent on interstate rail projects, and a lot of what was spent was in correcting past mistakes such as different rail gauges. The interstate highway system has been federally funded to the extent of some $30 billion.
The productivity of these outlays has not been investigated, as far as I have heard. But the railway carries something like 20% of the intercapital general goods traffic on tracks which have had very little invested on them, perhaps one billion, and cannot provide the fast service of which trains are capable, so reducing the price they can charge. The rail operators pay tonne-Km charges to the track owners and still come close to break-even.
The interstate highways carry perhaps four times the goods, but have cost perhaps twenty times the investment to establish. Additional capacity at each end of the interstate link has invariably been needed. And because the system is so attractive it will need more capacity in coming decades.
It is also a problem that much of the thinking by Federal politicians and officials is confined to the main intercapital routes. Any road can be part of an interstate journey. And the intercapital highways carry more local traffic in most instances, for most of their length, than they carry intercapital traffic.
Adding in other main roads and local arterial roads when considering investments, returns and efficiencies would reveal the enormity of the road asset on which there is no return and on which the maintenance bill cannot be met.
The application of capital productivity calculations, both for
future investments and in retrospect, may well have the effect of
boosting outlays on rail, considering that the interstate highway
system is now more-or-less complete anyway.
I have heard that the U.S. government has declared their interstate highway system to be "complete" and are now concentrating on improving transport efficiency, largely by promotion of intermodal transport. Federal road funds granted to the States are now labelled transport funds, I understand, and the States can spend them on rail or other modes of transport.
It is interesting to contemplate what would be today's split for intercapital traffic if around 1980 the railway between Melbourne and Sydney had been realigned, duplicated the whole way, and electrified. Federal politicians were considering part of such a program, namely electrification, but even this was shelved.
We would by now have Sydney to Melbourne freights moving at 100 to 160 kph and the capacity constraint of single track would be gone. Rail by now might be attracting, say, 80% of intercapital traffic and quite a bit of shorter-distance traffic as well. The investment outlay would have been less than that subsequently spent on the upgrading of the highway between those cities. The price of such a full program in 1980 could have been some $3 billion.
The productivity of such an outlay would have been far greater than the productivity of the intercapital highway. For a start, the cost of the Melbourne/Sydney intercapital highway, which might have gone ahead in a simpler form, would perhaps have been halved. This might have saved several billion dollars in construction costs on that corridor and countless billions in construction or maintenance costs or unmet maintenance on the Federal, State and Local roads supporting it.
Would it be possible to provide relief for an overloaded highway
by funding improvements to a railway in the same corridor?
Of course, highways will continue to need improvement in the future. But the fear in some quarters is that in busy and growing corridors, over the decades, we will need to add new lanes after new lanes, and new freeway after new freeway.
To avoid this, capacity shortfalls in those corridors could be addressed by adding capacity to a railway, or building a railway, while the highway is improved in terms of condition and geometry but not capacity. This strategy will lead to a net improvement in transport accident rates because a smaller proportion of the total task will be using the highway and that highway will be to a better standard.
The remaining level of congestion on the highway will depend on the quality of rail services. With mediocre service, travellers will still prefer to drive and will keep off the highway only because of congestion. If the rail service is fast, frequent and reliable and with good connections, road congestion will be less.
Just as an example, consider the contentious highway between
Melbourne and Geelong. Much of it is two lanes each way. It is
somewhat run down and the traffic load is excessive for the
layout. It has been in the news because the Federal Government
was taking too long to decide to support its upgrading.
The Victorian and Commonwealth governments are each spending over $100 M to bring it up to today's standard and increase its capacity by one lane each way. The extra lanes account for around $100 M, I understand.
Service levels will of course improve with the added capacity. But after a few years it's most likely that there will be pressure for a further lane to be added due to the reappearance of congestion. Already, new regional highways are being proposed to feed into it.
As an alternative to spending $100 M every ten years or so for increased highway capacity, the two governments could collaborate on providing intermodal links between the two cities. For a start, much of the goods are going to/from the Port of Melbourne or the long-distance rail facility near the Port. These could be handled at an intermodal site in Geelong and possibly provide timings about the same as direct road, but obviously in a "lumpy" fashion, a few times a day.
Other heavy traffic between the two cities could also be handled intermodally but in this case there would be a timing penalty. So it would become an experiment in measuring elasticity of demand for direct service and time-saving. But at the right price, some shippers would decide to accept a slower service so long as it is reliable.
For others, no cost savings, not even free service, would lead them to accept a slower schedule. But it will be essential for them to have long-term improvements which syphon a lot of traffic off the road.
An improvement to the passenger train service, already quite good, would also be needed.
It is the opinion of Balance Research that it is not feasible for
the community to be adding capacity to highways whenever they
become congested. It is really necessary to allow roads to
congest and allow the railways to absorb the peaks and overall
growth. The community in 100 years will not thank us if the
Geelong road is allowed to grow to, say, five lanes each way,
along with the needed extra capacity on local roads at each end.
Eventual addition of an extra track together with up-to-date trains and intermodal freight will have the same benefit for less capital cost, less land, less trauma and less pollution.
Highway improvements would still be needed, but they could then concentrate on upgrading to better geometry for safer operation rather than expanding capacity.
| PART THREE - THE TRANSPORT INDUSTRY |
Governments are unlikely to impose regulations requiring shippers of general goods to use certain modes. Their intervention would most likely be in the form of market signals. These will add to other changes in the market like energy prices.
Operators of transport services will then find ways to take advantage of the market situation.
It is most likely that rail operators will be able to offer keener rates (after considering inflation) and better services than they do now, while road operators will have to target those markets for whom price is not the most important factor.
On the ground, this may well mean that more goods will be subject to intermodal transfer. The road legs may be shorter, with intermodal transfer stations located conveniently for major industrial zones.
As we now see in Sydney's West, railway operators are setting up regular rail links for traffic to and from the port. There is no reason why this process should not extend to cover more regions which deal in overseas containers, including a number of intermodal stations around each metropolitan area.
That same network of intermodal stations could then handle loads to or from the long-distance railway terminals, or in some cases originate their own long-distance trains.
A further step that could become viable is for those intermodal stations to provide "transfer service", forwarding loads between one another, so providing a metro rail freight service, or short- haul intermodal.
Who would use such a service, though? It would entail two road legs, two intermodal transfers, and a cross-town train trip which initially at least would be overnight and may involve a rail-to- rail transfer along the way.
The wider community will, I believe, require governments to act to limit the growth of highway traffic, while industry will require continued availability of effective transport. Governments will thus be compelled to support this kind of service to the extent of making it a practical and attractive alternative for as much traffic as possible.
The aim of governments in supporting such a service would be to remove from the metropolitan freeways and arterials a proportion of existing heavy traffic and a growing proportion of new flows. This will still allow room for expansion in those traffics which would be unable to use the railway.
Governments may well decide to target certain traffics of substantial volume and, initially, those most likely to accept a slower service for the right price. The first flows to take advantage of such cross-town rail service would be in the nature of bulk materials, lower value goods, and any significant shipments of a regular nature. It may of course take several years for such industries to decide to take part and procure the necessary hardware.
Hardware may include versatile intermodal units which can dispense products while on a truck. I'm thinking here of liquid fuel intermodal units which can discharge at into a customer's tanks while mounted on their carrying vehicle.
For moving containers the short distance between intermodal stations and end-users, a simplified vehicle might be developed, very far from the highway rig commonly used for metro pick ups.
For rail traffic not to or from a major terminal, port or depot, an automated central transfer or sorting facility for containers would eventually be developed in each metropolis. Trains would unload their containers automatically (self-strip) onto a conveyor system. Each container would then be directed automatically to its destined train which would then self-load.
A problem in all Australian cities except Sydney is that most local tracks are of different gauge from the interstate and some intrastate links. Craning containers between the gauges would of course be much more efficient than the best we had at the old break of gauge stations. However when self-strip and self-load trains become available, the problem will be even less.
Once such a service becomes well established and "part of the scenery", it may well be expanded to provide enhanced services, including same-day short-haul intermodal service. This might of course be limited to times "between the peaks" of passenger transit unless there are track capacity enhancements to allow freight to move at all times.
Opportunities will arise, when road and rail subsidies are
equalised, or "Sunk Cost Support" is available, for private
initiatives to build, buy or just operate railway services
linking industrial areas or branch lines into the network.
The short-line operators will be able to interchange loads with other, probably bigger, operators who will be obliged under their Universal Service Obligation to provide this service in a seamless fashion. Seamless operation will include seamless rates and billing, which if not agreed commercially will be mandated by the USO rules.
Short Line operators may own their own tracks but under Australian rules could be obliged to allow other operators onto them. Similarly, if they need to run their own trainloads, rather than interconnecting, they will be able to do so.
But even with such offerings, many of the present style of JIT
logistic operations will not be attracted to rail, at least for
short haul or terminal-to-metro traffic. This will stay on road.
Continuing requirement for this time-critical traffic will make
it essential for less critical traffic to be attracted off the
road system.
On the other hand, with road movements destined to become so much more costly than rail, the JIT industry will become a more specialised service. Every shipper now buying JIT services, despite all the benefits, will want to weigh up those benefits against the increasing margin between JIT services and the slower and "lumpier" service obtainable by short-trip intermodal.
Manufacturers of bulk product will be seen despatching 20 or 100 containers every afternoon, one or more to each major buyer. The output of several such suppliers will be sorted overnight by rail logistic companies, and trains delivered to large downstream manufacturers at four in the morning with the average daily requirement of their main ingredients.
These manufacturers may still require direct road service in the case of extra inputs being required at such short notice that they were not known to the supplier in time for despatch the previous day.
JIT will thus become a far more exclusive add-on service. Logistics providers will offer their warehousing and distribution "with or without JIT". Some customers may forgo the savings now so prized from having several deliveries each day and opt to have one delivery by rail per day or every few days.
This will enable an interesting comparison with today's road- based JIT service which is not really much dearer than rail or intermodal service. The elasticity of demand for the enhanced, door-to-door, on demand freight service will thus be revealed.
Although I'm not here to talk about passenger movements, it is
relevant to logistics in that a lot of congestion comes from
passenger traffic.
In decades to come, as it will not be politically acceptable to keep expanding highway capacity, availability of road space will depend on governments and operators' ability to provide public transport services which meet the needs of the great majority of travellers, not just those going to city centres.
In typical cities, only a small percentage of trips are CBD oriented. Perhaps 80 % don't go near the city. If they go between outer and inner suburbs on the same side, they may choose the train. In most other cases, only those who cannot drive use public transport, as even the best cross-town links are nowhere near as good as the CBD services.
So that rail may fulfil its role of keeping the roads manageable, governments will ensure that innovative and comprehensive passenger services are provided so that those who have a choice will feel confident of a speedy and convenient journey.
Innovations may include parcel service for shoppers, connecting buses or trams right on the railway platform or beneath it, further improvements to bus or tram priority lanes and signalling, car or bike rentals, overnight car parking, incentives to employers to help staff and customers to travel by transit and more user-friendly ticketing.
Services could be made more comprehensive by guaranteeing feeder buses to operate the same hours as trains and providing new cross-town train services linking the radial lines. The NSW Government recently announced a new line of this kind.
Of course some of these initiatives will be very expensive, but not as dear as continuing to provide additional road space whenever congestion is bad.
It may not be as fast as a direct car trip, but if it is seen as safe, reliable, convenient and reasonably quick, public transport will manage to absorb much of the growth in demand.
This hypothetical exercise is based on completely successful
pegging of road traffic at present levels and absorbing all
growth onto rail. The time frame is over the number of years it
will take for the total transport task to reach four times what
it is today. That year may be called the year TX4.
Just consider a corridor where today's task is split 50/50 between road and rail. Let's call that one hundred units of traffic, fifty each. By the time the total grows to 400, the requirement is that road is still carrying 50 units. So rail will have to carry 350 units in the year TX4: this is a seven-fold increase.
In a case where rail is carrying just ten percent, and road ninety, the railway will have to strengthen itself to carry some 310 units in the year TX4. We are looking at a substantial growth here, some 31-fold. Of course that may be from a base where rail is working well under the capacity of its present infrastructure in that corridor - in some cases a single track could support the 31-fold increase.
What about the situation where rail is not carrying any traffic at present? By the year TX4 it must be carrying 300 units as against road's constant one hundred. You cannot express this as a growth factor. But you can look at today's traffic on the road and picture a railway carrying three times that load, all the growth over those years, while the highway goes on steadily.
This situation could describe the addition of freight services to a railway that is presently passenger only, or vice versa.
Think of a suburban passenger line passing through suburbs of average industrial activity. Think of all the trucks moving in that same corridor. Think of adding freight tracks, sidings and stations to the line, which will then carry three times that freight load, within seventy to one hundred years. Alternatively think of four times the present freight task passing along the roads of those average suburbs in that 70 to 100 year frame.
Of course, I cannot say that zero road traffic growth would be achievable, or even that the whole community wants it. But I can say that such an outcome would be a good target for those who wish to avoid increasing this country's use of resources.
The market changes, both government initiated and energy-led,
will bring the road/rail interface much closer to the customer,
greatly increase the use of intermodal even for shorter trips,
cut some traffic out of road altogether, bring JIT benefits into
sharper focus and avoid the need to forever expand the highway
system.
These changes will in effect reverse the trend of the past fifty years over the next fifty years or more.
Leadership on these changes is principally with governments. All levels of government would have to act together (that'll be a new experience for them), and the process thought through by departments, academics and the industry. If those parties fail, in the next few years, to grasp this nettle of change, the burden of resources used by transportation will blow out in coming decades and leave a wasteful and unsustainable transport system which our children and grandchildren will eventually have to deal with at far greater cost.
But I am an optimist, and I say that by the time the total transport task has grown four times, the change of emphasis back to rail will have achieved a substantial improvement to community life, saving resources of all kinds, compared to the outcome one might otherwise predict.
But that does highlight the resource issue, and also the issue of where are the governments' and industry's respective roles and what the options are that they can do.
We've probably got time for a question or two.