CHAPTER 3

REPORT ON THE BREW REPORT AND ON THE CONTINUING ROLE OF THE COMMONWEALTH IN THE AUSTRALIAN RAIL INDUSTRY

CHAPTER 3

OBSERVATIONS ON THE BREW REPORT

Observations on the Brew Report

3.1 Issues which arose in evidence to the Committee included the process for conducting the review was done without broad consultation; that many groups were either not approached or excluded from discussions; or, that those that were involved were given limited time with the review team. In response, Mr Brew advised that he was

3.2 The Committee notes that Mr Brew's terms of reference were focussed very much on providing advice on the commercial aspects and future operational potential of AN.

3.3 In its submission to the Committee, Rail 2000 whilst acknowledging that the Brew Report provides a framework for the resolution of AN and NRC's problems, was also critical of the report claiming 'serious flaws' in the recommendations. [2]

3.4 The submission went further to cast doubt over the actual financial situation at AN and suggested that the review team had placed higher importance on what it considered to be 'rubbery figures' [3]

3.5 The Brew Report chose not to comment on the likely impact the proposals would have on regional communities. In evidence to the Committee, Mr Brew summarised his report as one which was '...totally focussed on the financial position of AN' [4] as was required by the terms of reference.

3.6 It was further explained that the objectives of the Brew Report were designed to arrest, or stabilise, what was identified by the review team as a 'deteriorating financial position.' [5]

3.7 In their submission to the Committee, the ACTU Rail Unions considered the recommendations of the Brew Report as '...shallow, error ridden, lacking in detail and not addressing the fundamental problems of the Australian rail transport industry'. [6]

3.8 The Brew Report found that the value of the work on order for AN had fallen by about 25 per cent each year from 1994/1995, that it was difficult even for management at AN to establish an accurate statement of its financial position and that essentially

3.9 In explaining the thrust of his report to the Committee, Mr Brew advised that '...what the report sought to do was to recommend ways in which the projected operating losses could be reined in and some improvement made in the trading position...' [8]

3.10 In a concluding general remark to the Committee, Mr Brew commented that 'the die has been cast. It is now the task for the AN people to play the game by the new rules.' [9]

3.11 However, it would appear that Mr Brew formed this view at an earlier time. For example, the view of the current AN management is that there are no other options available other than those prescribed in the findings of the Brew Report, even though the report was formulated on the basis of purely financial information. [10] To that extent, the outcomes proposed by the Brew Report appear to confirm information which had been progressively gathered by the Department of Transport and Regional Development (DTRD) and presented to the Government. [11] Moreover, this was confirmed by the Chairman of AN when he indicated to the Committee that 'the Brew Report does agree with the Commission's point of view'. [12]

Observations on the Brew Findings

3.12 The Committee received a range of views on the Brew Report in a number of key areas recognised as important to the future of rail. Generally, there was recognition that the report at least synthesised many of the issues facing both AN and NR.

3.13 In Port Augusta for example, where the railways still form an integral component of the community, it was noted by the City Council that the Brew Report came as a sense of relief because ' once the announcement was made, at least the work force knew at the end of the line at some time decisions would be made.' [13]

3.14 However, this was not a view held by the union movement in Port Augusta. It was the unions view that the proposals of the Brew Report would lead to asset stripping of the AN organisation by private contractors and that the work would more than likely be transferred interstate. The unions believe that there still is a continuing role for the Government in the rail industry and it is this involvement which would continue to give centres such as Port Augusta a future. [14]

3.15 The ACTU Rail Unions' submission provided an analysis of each of the recommendations of the Brew Report. In particular, the submission addressed the Brew Report's findings as they apparently exceeded the terms of reference. The submission also extended the debate on the Governments proposed rail reform process by raising issues involving the principles behind road and rail policy development, overseas experiences, implications of private versus public ownership of railways as well as focussing on future options for both AN and NR. [15]

Particular Recommendations in the Brew Report

3.16 The first recommendation called for the establishment of a national track access and infrastructure body. A consistent theme in submissions is that the proposed National Track Access Authority (NTAA) is seen as a key component in the success of much of the reform process, both in terms of track access charges and a known track access regime. However, the evidence in relation to the establishment of a track access body recognised the need for sufficient funding and Commonwealth government support for such an organisation but that the current funding proposal for that organisation was clearly viewed in evidence as inadequate.

3.17 The proposal to remove the Commonwealth's equity in NR was given qualified support from NR itself, noting that a number other matters should be resolved in the first instance. [16]

3.18 It was recognised that as TASRAIL only currently provides a freight service, the Tasmanian Government supports the proposed sale. [17] However, it was explained that in supporting this recommendation the government of Tasmania preferred to ensure that there would be no further closure of services and that the rail system remain viable and not lead to a transfer and increase in road usage. [18]

3.19 The same perspective was applied to the South Australian Freight Business, where issues involving pricing and charges on the country lines, particularly those involving the transportation of grain were given focus in the debate.

3.20 For example, the South Australian Farmers Federation advised the Committee that the rail system in South Australia delivers 55% of that states grain to ports and silos and it was argued that no rail operator could expect to succeed without the commitment of its customers. It was their view an appropriate price regime is important, as '...it is essential that the freight rates and operating costs related to the rail network infrastructure are internationally competitive'. [19]

Footnotes

[1] Evidence, 3 February 1997, p.406.

[2] Rail 2000, Submission 20, p.7.

[3] Ibid, pp.6-7.

[4] Evidence, 3 February 1997, p.400.

[5] Evidence, 3 February 1997, p.403.

[6] ACTU Rail Unions, submission no. 25, p.2.

[7] Evidence, 3 February 1997, p.394.

[8] Evidence, 3 February 1997, p.403.

[9] Evidence, 3 February 1997, p.417.

[10] Evidence, 28 January 1997, p.33.

[11] Evidence, 3 February, 1997, p.328.

[12] Evidence, 28 January 1997, p.32.

[13] Evidence, 29 January 1997, p.78.

[14] Evidence, 29 January 1997, p.134-152.

[15] ACTU Rail Unions, Submission 25

[16] Evidence, 3 February 1997, p.377.

[17] Tasmanian Government, Submission 45

[18] Evidence, 5 February 1997, p.430.

[19] Evidence, 28 January 1997, pp.46-47.