CHAPTER 6
OPTIONS AVAILABLE TO THE COMMONWEALTH GOVERMENT FOR
A CONTINUING ROLE IN THE AUSTRALIAN RAIL INDUSTRY
Introduction
6.1 The Committee has been asked to examine and report on options
for Commonwealth involvement in the Australian rail industry.
6.2 The November 1996 rail proposals, which are largely in accord
with the recommendations in the Brew report constitute a strong statement on the immediate
option the Commonwealth has chosen. Aspects of the November 1996 rail proposals coincide
with views put to the Committee.
6.3 Options put to the Committee by the rail industry, came from
public and private sector, freight operators, trade unions, transport economists
specialising in the rail industry, individuals and current rail industry participants.
6.4 The dramatic reduction in total workface numbers in the rail
industry, the progressive closure of track, and the consequent loss of business to rail in
the AN network presents a scenario which requires policy which results, in the Committee's
view, in a rail industry which has potential to develop as a preferred means of transport.
6.5 The Committee has considered the views put to it on the
Commonwealth`s options as follows:
Integrated Rail Operations in an Australian context
6.6 A consistent perspective on future rail operations highlighted
in submissions on this subject is the model of an integrated rail service as the only
viable way of providing a competitive transport mode to road and ship.
Both Queensland Rail (QR) and NSW Freightcorp stressed this need in
their analysis. QR noted that, in terms of commercial success, integrated railway systems
predominate (USA, Canada, India and New Zealand). The reasons for this success, in QR's
view are
- Infrastructure is effectively used allowing necessary
tradeoffs for best possible service
- non-separation of services eliminates or reduces legal and
administrative costs
- avoidance of new institutions which prevents duplication of
administration and need for extra resources
- corporatisation and national competition policy which have
led - in QR's case - to a) a separate access unit independent of QR's
own integrated business to ensure non-discriminatory access costs; and,
b) separated `above-track' from `below-track' costs. [1]
NSW Freightcorp, in common with QR indicated that a key component in
developing and integrated rail system that was competitive in the freight transport
market, is development of Australian competition policy in relation to rail, so
While the new Australian rail environment may initially attract a number
of rail operators, the market is not large enough and margins are not
high enough to sustain more than 2 or 3 major operators in the medium
to long term. [2]
6.7 In common with the QR submission, the NSW submission also
pointed out that the key to promoting rail use in competition with other modes is to have
integrated systems, but with clear track access charging policies, which is transparently
neutral in its pricing policies and access regime.In addition, NSW Freightcorp noted
- policy in relation to track access should be clarified before sale of
AN and NR
- purchasers cannot be expected to be attracted to rail unless they
can gain access to the track on commercially sustainable terms. [3]
- The key to an integrated rail policy in Australia - resulting from
the development of national competition policy - will be elimination
of the intrastate/interstate market separation and development of a0
national operators in intermodal transport, including rail, and, b)
regionally based shortline operators providing specific services (such
as grain haulage). [4]
6.9 In its submission, the ACTU rail unions provide the Committee
with a detailed analysis of how overseas rail developments should influence Australian
thinking on options for future involvement in rail.The unions' submission noted (quoting a
1993 ILO conference on restructuring of railways) that a consensus of views from all
levels of the rail industry provide a framework of questions to be addressed
- ensure equality of treatment of transport modes
- grant railways management autonomy
- redefine the relationship between State and the railways
- provide transitional assistance to financial recovery
- promote healthy but fair and transparent competition
- safeguard safety standards
- ensure harmonisation of national and international regulation. [5]
6.11 The rail unions submission on options for reform asserted
The main international benchmarks for Australian rail systems
are the US private rail operators, which are freight operators owning their own track and
negotiating track access charges for competitors who need to use parts of their track. In
1993, NZ Rail was privatised and bought by a regional US operator, Wisconsin Central, but
maintained as an integrated system
The Brew proposal to separate track and operations in Australian railways
is a case of picking bits and pieces of policy from Britain, the US
and New Zealand to suit his own agenda, rather than a coherent approach
to rail management, tailored to the specific geography and market conditions
in Australia. [6]
6.12 Rail 2000 indicated in its submission that the changes inherent
in the government's the November 1996 rail proposals is indicative generally
of a worldwide, though not universal trend for governments to divest themselves
of their interest in running railways. [7]
6.13 In its conclusion to a comprehensive view of the proposals made
in the November 1996 rail proposals, Rail 2000 said
With a new era of competition for Australia's rail industry just beginning
government still has responsibilities as opposed to the `abandon ship'
mentality adopted by the current administration. Continued government
involvement in the industry should be seen to fulfil two key roles.
To provide a competitive base fro greater access to the rail network
for other operators, through the continued ownership of a rail operator
and through the provision of a more equitable funding for rail and road
transport. And to ensure the responsible utilisation of the taxpayer
funded rail assets that they control. Ultimately the rail industry should
be operated as a whole, with Australia's overall economic performance
in mind and not pander to its own self interest nor be subjected to
attacks of overzealous political ideology. [8]
Two views taken by the Committee from active major private operators
in rail - and intermodal transport - BHP and TNT gave their views. BHP told the Committee
..we see that it is really a very complex issue in resolving
the challenges that are before us for the rail system. Foremost amongst those, though, are
the points we have listed. In the first instance, we think that there are some significant
shortcomings in the current rail infrastructure system and those need to be funded on an
appropriately targeted and managed basis to bring rail up to a system where, from a
customer's perspective, rail can provide the sort of service that is required
consistently....
The second point, in terms of the national track access
authority, is we see it is really going to be pivotal to how this works. Our view is that
Australia will benefit from an integrated national system and that the objectives of the
track access authority have to be tailored to ensure that the long term viability of the
national system is one of the key criteria upon which it operates. Certainly, the other
criteria, in terms of effectively and efficiently managing the funds that it has
available, where and how it spends its money and so on, will be very important. But, in
terms of the long term of the operation, we think that it has to have an eye to
maintaining a national system and not allowing sectional interest to detract from
that,which from time to time happens.
The final one is that within that framework, you have considerable
scope for above the rail competition to occur and bring with it the
sorts of benefits that often flow from true competition. [9]
6.14 TNT submission stressed similar concerns. [10]
6.15 In his discussions with the Committee, Mr van Onselen of Box
Car Pty Ltd said that differences between transport modes is stark in Australia at present
Looking at the major difference between road and rail, both of
which operate on publicly owned infrastructure, there are two major differences that very
clearly emerge. Firstly, the road freight transport business in Australia is conducted
almost entirely by the private sector, whereas the interstate rail freight transport
business,in fact, almost the entire rail freight business,is conducted by organisations
owned and heavily supported by their respective government owners. So there is a
fundamental difference: the above rail or above permanent way operation in the road
industry is private sector owned and operated; the above permanent way operation in the
railway industry in this country is publicly owned and government sector operated.
There is a second fundamental difference. Competition exists in the
road freight transport industry amongst those many private operators.
I would contend to you that there is virtually no competition, certainly
not real rail to rail competition, amongst the current six government
owned freight rail authorities in this country. There is certainly some
degree of presumed competition at this point, as a result of the support
the two private rail operators, TNT and SCT, receive from the 100 per
cent Commonwealth owned railway, Australian National. [11]
and noted the importance, as other witnesses have done of pricing of
access within a defined competition policy as of prime commercial importance.
The most important issue relating to interstate rail is the issue of
access and the cost of access. The simple fact is the private sector
will only enter a business if there is an opportunity to make a profit
and if the rules are clear and specific. At this point in time, we have
gone from three different gauges in this country to half a dozen different
access regimes. In order to operate a train from Melbourne to Perth,
you need to deal with the state access bodies of Victoria, South Australia,
or AN, and Western Australia. You also need to deal with the three rail
authorities that are involved in actually operating the permanent way
through signalling and track. If you want to run the train from Brisbane,
you can add two more governments and two more state rail authorities
to that. Until it is very clear what the rules are and what the prices
are going to be, I think it unlikely that the private sector will make
substantive capital investments in the Australian railway industry.
[12]
6.16 The Committee has found the views put to it on the option of an
integrated rail policy have, inevitably, overlapped with the question of the current
government proposals for rail.In its discussions with the Commonwealth Department of
Transport and regional Development (DTRD), the Committee asked how policy development, in
terms of options for rail industry, could be analysed in light of the November 1996 rail
proposals.
Senator BOB COLLINS,Mr Chairman, as always. Mr Gemmell,
the minister, of course, is not appearing at these hearings and I have a number of
questions to ask about government policy but not in terms of soliciting your opinion on
it, simply in terms of what the department knows and is public property. Could you in fact
advise the committee as to what the government's approach to the rail industry currently
is? I mean, what the government's rail policy is in its essential terms?
Mr Gemmell,Senator, the government is seeking to
enhance the role of rail in the transport sector by restructuring the way in which
interstate rail operations are provided in Australia, in particular by separating the
ownership of interstate track from below rail and above rail operations, allowing
competition in the above rail services, promoting competition in the above rail services,
and in terms of its own ownership of above rail services, actually seeking to sell those
on the open market.
Senator BOB COLLINS,Does the federal government see
itself as a continuing and future supplier of rail in Australia?
Mr Gemmell,You would have to say the answer is difficult, in
terms of government, but certainly in the foreseeable future the government
is looking at maintaining ownership of the essential facility of interstate
track and, in fact, trying to expand that somewhat to include all interstate
tracks, much of which are owned by the states. [13]
Committee Observation
6.18 In this brief discussion, the Committee has not canvassed in
detail the description of other national solutions to the current trend - identified in a
number of submissions - of Government leaving rail activities as an owner of systems which
have fared badly in intermodal competition - particularly with road.
6.19 The central importance of developing an integrated land
transport policy which includes rail is of considerable importance, in the Committee's
view, in this process.
6.20 The initiatives announced by the government in the November
1996 rail proposals go some distance to setting a different basis for a policy.
Nevertheless, as the Committee has noted, the significant questions arising from a number
of the rail proposals - such as the role and functions of the proposed national track
authority, and the future of national rail passenger transport if not addressed could
quickly lead to fragmentation of the existing system.
6.21 The Committee has made no recommendation on the options
available to the government on Commonwealth involvement, other than stress that rail must
be part of a national transport policy.
Footnotes
[1] Submission 28, Queensland rail,
p. 1-2.
[2] Submission 24, NSW Freightcorp,
p. 3
[3] Submission 24, NSW Freightcorp,
p. 5.
[4] See above.
[5] Submission 25, ACTU rail unions,
pp. 6-8.
[6] See above, p. 15.
[7] Submission 20, Rail 2000, p. 15.
[8] See above, p. 16.
[9] Evidence, Canberra (1), p.345. -
BHP
[10] Submission 27, TNT.
[11] Evidence, Canberra, 5 February
1997, p. 457.
[12] Evidence, Canberra, 5 February
1997, p. 458.
[13] Evidence, Canberra, 3 February
1997, p. 324.