Chapter 5
Committee view and
recommendations
5.1
The Perth
Freight Link is the most expensive infrastructure project ever undertaken in
Western Australia. It has total funding from the federal and state governments likely
to exceed its proposed capital expenditure of $1.9 billion, which includes $1.2
billion of Commonwealth funds. This amount of funding is a once-in-a-generation
opportunity to invest in the infrastructure needs and long-term economic
prosperity of Western Australia.
5.2
However, if
the Perth Freight Link proceeds, it will blow this opportunity on a project that
will not achieve what it proposes to do, and is not wanted - not only by the
communities that it would run through but also by the business and transport sectors
it purports to assist.
5.3
The committee
believes Western Australia desperately needs investment in transport and
freight infrastructure to ensure the prosperity and economic health of the
state over the coming decades. This investment could be the key driver of the
efficiency and productivity of the state's business, agricultural, industrial
and primary resource sectors over the coming decades, as well as having flow-on
benefits for the general Australian economy.
5.4
However, it
is clear from the evidence that the Perth Freight Link is not the right project
for Australian governments to invest in. Accordingly, the committee considers
that the Commonwealth should redeploy the funding earmarked for the Freight
Link to other, more productive and properly-planned infrastructure funding in Western
Australia.
5.5
This would
mean that the Commonwealth could work collaboratively with Infrastructure
Australia and the government of Western Australia to identify the best possible
freight and transport infrastructure for Western Australia and plan its
development in a robust, transparent and efficient way.
Commonwealth funding
and the Business Case for the Freight Link
5.6
In the
2014-15 Budget, the Commonwealth committed a total $925 million to the
Freight Link, including $59 million of funding delivered under the
2013-14 Budget for improvements to the Leach Highway/High Street
Fremantle. In April 2016 the Commonwealth committed a further $260.8 million to
the project, taking total federal funding for the Freight Link to a massive
$1.2 billion.
Poor
design and insufficient consultation with Western Australia and Infrastructure
Australia
5.7
The Freight
Link proposal was poorly and hurriedly conceived by the Commonwealth before
funding was committed. Evidence suggests that the Commonwealth undertook
virtually no consultation with the government of Western Australia to develop
the Freight Link, which was clearly unaware of the proposal before the 2014-15
Budget announcement.
5.8
Moreover, the
committee finds it incredible that the Commonwealth would approve a project
that was not mentioned in any Western Australian government statements on
future infrastructure priorities for the state, a fact noted by Infrastructure
Australia.[1]
5.9
It is also
apparent that Infrastructure Australia was not aware of the Perth Freight Link
proposal until its public announcement by the Commonwealth.[2]
Given Infrastructure Australia's role in ensuring effective infrastructure
planning across our nation, the committee considers that a project of this size
should have been evaluated by the agency much earlier than May 2015.
5.10
The committee
also notes that Infrastructure Australia's assessment of the Freight Link was
lukewarm at best, and that it noted several flaws in the Business Case,
including that its costs may exceed the estimates provided and that other
options were not adequately assessed.
The
Business Case for the Freight Link is fundamentally flawed
5.11
Much of the
evidence considered by the committee showed that, if implemented, the Freight
Link is likely to deliver fewer benefits than the Business Case proposes.
Despite its best efforts, the committee was not able to consult the full Business
Case, which remains confidential, and so has been forced to rely upon the
Executive Summary to the Business Case, publically released in
December 2014.
5.12
In
considering the Executive Summary, it appears there is a significant risk that
the capital costs of the Freight Link would be much more than estimated. Indeed,
this has been recently proved by the additional Commonwealth funding of
$260.8 million to tunnel certain parts of the project.
5.13
Most
seriously, the project does not incorporate a strategy to improve traffic flows
through Fremantle to the port itself. This means the project is likely to cause
traffic congestion around the Stirling Bridge. The committee understands that
upgrades to bridges into Fremantle alone could add as much as $500 million to
capital costs. It is also concerning that no solution has been proposed as to
how the City of Fremantle - which already faces significant traffic flow
problems - would handle increased volumes of freight transport through its
urban and residential streets.
5.14
Moreover,
there are substantial parts of the Freight Link proposal that are still to be
confirmed more than two years after its announcement. For example, the state
government has indicated it is considering tunnelling or trenching parts of the
route, which would also add substantially to capital costs and additionally to
ongoing operational expenditure. Additionally, there is still great uncertainty
about the introduction of the toll system that is part of the Freight Link's
design, particularly how much revenue it would accrue, and how much the
necessary supporting infrastructure would cost to build.
5.15
Any increase
in capital costs, or lower-than-forecast revenue, would make the economic
benefits of the Freight Link far smaller than the Business Case estimates.
5.16
This shortfall
in benefit would be compounded further by the likelihood that the economic
benefits outlined in the Business Case Executive Summary have been overstated.
For example, it is forecast in this Executive Summary that more than
$3.92 billion of benefits would be created by the Freight Link, but it is
unclear how these benefits are calculated. Without accessing the modelling
contained in the full Business Case, the committee is not clear how the
proposed reduction of travel time by nine-and-a-half minutes for vehicles using
the Freight Link translates to a total of $2.469 billion in benefits for the
Western Australian economy.
5.17
It seems to
the committee that this is but one example of the incredibly generous and
unrealistic estimation of the project's Business Cost Ratio [BCR] contained in
the Business Case.
5.18
These
significant uncertainties in the design, capital costs and economic modelling
underpinning the Freight Link project make it impossible to have any confidence
in the accuracy of the cost and benefit estimates contained in the Business
Case Executive Summary.
The
project was developed with insufficient consultation and transparency
5.19
The committee
also had concerns about evidence suggesting that such a large and expensive
policy proposal should have been undertaken with much more comprehensive
consultation with local governments, industry stakeholders, and groups and
individuals from the communities who will be most affected.
5.20
Local
governments overwhelmingly told the committee that they were not convinced the
project was necessary or viable. The committee understands that local
governments were not consulted about the plan's development and, moreover, that
they were not given opportunities to shape its implementation in any meaningful
way.
5.21
The committee
also took evidence showing business and agricultural sectors are uneasy about
the Freight Link, and of a widespread perception that the project does not give
any certainty for the future capacity of Western Australia to meet its freight
task.
5.22
The large
number of submissions from community groups and individuals who would be
affected by the Freight Link also demonstrated how poorly the project has been
received. Some of this evidence showed that it would cause damage to the
environment, destroy Indigenous and other heritage areas, and have profoundly
negative social and health outcomes for communities that live along the route.
5.23
Moreover, the
committee was moved by the personal testimonies of people whose houses stand to
be seized by the Western Australian government, trauma that is magnified by lack
of certainty about the Freight Link's implementation.
Delays
and uncertainty to the project's implementation
5.24
Since its
announcement, the Freight Link has been beset by difficulties in its
implementation.
5.25
Currently
there are cases before the Supreme Court of Western Australia considering the
environmental and Indigenous heritage aspects of the first stage of the Freight
Link, Roe 8. Consequently, it is unlikely Roe 8 will commence construction anytime
soon, even though tenders were awarded and work was scheduled to commence in
late 2015. The committee heard that the delay to Roe 8 may mean that the
tendering process will have to be undertaken again, depending on the outcome
and length of these cases, which will complicate matters still further.[3]
5.26
Regarding the
second stage of construction, the Western Australian Premier, the Hon
Colin Barnett, stated in November
2015 that work developing and implementing stage 2 of the Freight Link would be
delayed for at least until
late-2016.[4]
5.27
These
uncertainties mean that the Freight Link's route, its cost, and its full
effects could remain unresolved for quite some time. Given this, the committee
considers it is appropriate for the Commonwealth to reconsider its commitment
to the project, and what infrastructure Western Australia needs to boost
productivity and economic growth well into the future.
Recommendation
1
5.28
The committee
recommends that the Commonwealth withdraw its support for the Freight Link
project, and re-commit the project's total federal funding of $1.2 billion
to the development and implementation of future Western Australian freight
infrastructure projects.
Recommendation
2
5.29
The committee
recommends that the Commonwealth work collaboratively with the state government
to identify and develop future projects that will best meet the long-term
infrastructure needs of Western Australia, and that these projects are
supported by fully developed Business Cases that are submitted to
Infrastructure Australia for assessment and published publically.
Recommendation
3
5.30
The committee
recommends that the Commonwealth release the full Business Case for the Freight
Link, as assessed by Infrastructure Australia, to provide transparency on the
project's proposed economic and social benefits.
The
need for a full analysis of all policy options
5.31
It is clear from
the Business Case Executive Summary that viable alternatives to the Freight
Link were not considered. In this, the committee reached the same conclusion as
Infrastructure Australia, who stated in its assessment of the project that:
A rapid
BCR was completed for the preferred option only, assessed against the Base
Case. A rapid BCR was not completed for additional options to determine if the
preferred option provided the greatest net benefits... The options did not
include consideration of the Outer Harbour at Cockburn Sound South [sic] of
Perth.[5]
5.32
The committee
sees this omission as further proof that the Freight Link proposal was poorly
conceived, badly designed and irresponsibly committed to by the Commonwealth
government.
Fremantle
port close to capacity
5.33
The committee
received almost unanimous evidence that the existing port at Fremantle will
reach its optimum capacity over the next decade, and that it cannot handle the
new generation of cargo ships and cranes needed for a fully modern freight
task. It is clear to the committee that the Freight Link, should it go ahead, would
service a port that is close to reaching capacity. The committee considers that
it would be far more judicious to consider improvements to rail and traffic
management strategies to improve the port's operation, rather than investing in
an expensive, unpopular and badly designed Freight Link.
A
second port at Kwinana is necessary and inevitable
5.34
The committee
also heard repeatedly that the proposal for a second harbour not only has a
long history of bipartisan political support, but also has strong backing from
industry and the community. Given this, the committee sees that the
construction of a second port is not only necessary for the economic future of
Western Australia, it is also inevitable.
5.35
This was most
clearly expressed during the committee's second hearing, which focussed on the
City of Kwinana's Indian Ocean Gateway proposal. This proposal showed a second
port at Kwinana could be made operational within a decade, around the time
Fremantle reaches capacity, for around the same amount of investment currently committed
to the Freight Link by the Commonwealth government.
5.36
The committee
commends the City of Kwinana for its development of the Indian Ocean Gateway
proposal, which included wide consultation, thorough planning, and sound
economic modelling. While the committee understands that there are some significant
implementation issues to be worked through in the proposal, particularly around
transport between ports, it considers that the proposal for a second port at
Kwinana is fundamentally sound, and that the Indian Ocean Gateway plan demonstrates
a willingness by Kwinana to take a leadership and advocacy role, not only for
the city itself, but also for surrounding areas and Western Australia more
generally.
Recommendation
4
5.37
The committee
recommends that the Commonwealth work with Infrastructure Australia and the
Western Australian government to identify rail and traffic management
strategies to expedite freight movement around the current Fremantle Port
facilities.
Recommendation
5
5.38
The committee
recommends that the Commonwealth Department of Infrastructure and Transport
consider undertaking a full analysis of the costs and benefits of investing in
a second port at Kwinana, as outlined by the City of Kwinana's Indian Ocean
Gateway proposal.
Recommendation
6
5.39
The committee
recommends that Infrastructure Australia assess the City of Kwinana's Indian
Ocean Gateway proposal for inclusion on its Infrastructure Priority List.
The need for more
effective Commonwealth infrastructure planning
5.40
The committee
has concerns that the Perth Freight Link is indicative of a more widespread
systemic problem in the Commonwealth's development and planning of Australia's
infrastructure.
5.41
At the last
election, the Coalition committed to work with the states and territories to
develop infrastructure that best suits their need to boost productivity and
assure the best economic returns from Commonwealth investment. This was made
clear in the 2013 election campaign, in which the Hon Tony Abbott, then leader
of the opposition, made the following commitment:
...we will
do much more than just deliver infrastructure. We will ensure better
infrastructure planning, more rigorous and transparent assessments of
taxpayer-funded projects, and develop a much firmer and clearer infrastructure
plan for Australia’s future.
The
Coalition will strengthen the role of Infrastructure Australia, to create a
more transparent, accountable and effective adviser on infrastructure projects
and policies.[6]
5.42
To do this,
the Coalition committed to:
...require all Commonwealth
infrastructure expenditure exceeding $100 million to be subject to
analysis by Infrastructure Australia to test cost-effectiveness and financial
viability.[7]
5.43
Quite
clearly, this has not been done in the case of the decision to fund the Perth
Freight Link. The Coalition government, first under Mr Abbott, and now under Mr
Turnbull, have failed to match their actions with their rhetoric.
5.44
The Freight
Link debacle is another example of poor judgement in infrastructure planning
and implementation that has beset the Abbott-Turnbull administration, alongside
the East-West Link in Victoria and the WestConnex motorway in Sydney.
5.45
The
Auditor-General has already undertaken and published a highly critical review
of the Abbott Government's reckless decision to commit $3 billion of public
funding to Melbourne's disastrous East-West Link.[8] The committee considers it
timely that the Auditor-General consider a further formal investigation of the
systemic failure of the Commonwealth's planning and assessment of transport
infrastructure, including the decision to fund the Perth Freight Link Project.
Recommendation
7
5.46
The committee
recommends that the Auditor-General undertake a formal investigation into the systemic
failure of the Commonwealth's planning and assessment of road and freight
transport infrastructure, including the decision to fund the Perth Freight Link
project.
Senator Glenn Sterle
Chair
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