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A pox on rail fanatics

By Brendan O'Reilly - posted Friday, 23 April 2021


The project indeed turned out to be an economic disaster. After failing to make a profit and later being placed in voluntary administration, FreightLink agreed to sell its ownership of the rail link in May 2008. The line is now owned by the US railroad company Genesee & Wyoming Inc, which purchased it for a mere A$334 million.

We are now seeing a repeat of this disaster with the current Inland Rail project.

Inland Rail is a 1700km freight rail network that will connect Melbourne and Brisbane via Albury, Parkes, Narromine, Narrabri. North Star, and the Darling Downs. The Australian Government (spanning the Gillard, Turnbull and Morrison eras) committed $9.3 billion in grant and equity funding. While the project will utilise many existing rail routes, one third will be a new route carved through state- and privately-owned land. The project is widely regarded as a huge pork-barrel to the National Party and its inland NSW electorates, though there are farmers who oppose the project and its impact on their properties.

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Infrastructure Australia gave the project an equivocal cost-benefit assessment. It said that:

...the proponent's stated benefit-cost ratio is 1.1 using a 7 per cent discount rate" but also identified "a number of risks which could impact on the economic viability of the project. Factors such as a decrease in demand for Australia's coal exports, weak oil prices, reduced demand for interstate freight, and upgrades to the Newell Highway, could adversely impact the economic case for Inland Rail.

The Bureau of Transport and Communications Economics in an analysis published in 1996 concluded that:

…from our limited analysis, the proposed inland railway emerges as an investment of uncertain economic merit….Also unclear from our results is whether the inland railway makes more economic sense than investing a similar amount in the existing coastal railway.

The project is due for completion in 2026, and large operating losses due to high capital costs and insufficient traffic are a near certainty.

Victoria's Regional Fast Rail Project, implemented by the Bracks government is another dud. It commenced in the early 2000s with the aim of significantly cutting the passenger rail travel times between various regional centres to Melbourne. The initial costing put the project at $80 million. It eventually cost $750 million and was completed in 2009. Rather than shave travel times, in a number of cases it is claimed that it now takes longer to get to Melbourne.

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There are many relatively recent passenger rail projects across the country, some of which [eg Gold Coast Light Rail, (Perth) Northern Suburbs Transit System] seem to function well. In addition, both Sydney and Melbourne are implementing a plethora of new rail projects (eg Melbourne and Sydney Metros, Melbourne Airport Rail) with other big projects (eg Melbourne's $50-100 billion Suburban Rail Loop) proposed. The jury is still out on the cost-benefits of these projects, with huge sums of money being involved.

The NSW government's handlingo of Sydney's controversial light rail line has been heavily criticised by its Auditor-General, who has highlighted failures in reporting the true cost of the project that has now hit $3.1 billion.

One of the more contentious light rail projects is that in Canberra.

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About the Author

Brendan O’Reilly is a retired commonwealth public servant with a background in economics and accounting. He is currently pursuing private business interests.

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