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High speed rail on Australia’s east coast

About half of Australia’s population live in the east coast cities of Brisbane, Sydney, Canberra and Melbourne – it is well more than half if people living at points adjacent to this corridor are included.  The most recent proposal for a high speed rail (HSR) link has been predictably debunked by government officials and the press alike.  One positive feature of such a link is the way it would help reduce carbon emissions by reducing air traffic and car traffic along this corridor. It would also help the establishment of larger satellite cities along the corridor that would reduce the congestion, pollution population pressures on it.

I would like to see a decent cost-benefit study which accounts for such benefits.  We cannot continue to debunk every long-term infrastructure investment project simply on the grounds that it is too expensive.

Some of commentary on the current HSR proposal is misguided.  In today’s AFR the ACCC’s Rod Sims rules out its economics on the grounds that you can now get $150 flights from Sydney to Melbourne. This comment relates to a project whose values will stretch to at least the end of the century when cheap aircraft fuels may not be available and when climate change will be a binding issue.  It is true that private returns will be low but that is obviously because many of the benefits of HSR are external. The current proposal however does yield net present value benefits of $101.3b.  (They also quote a low internal rate of return measure which is inappropriate as a guide to project selection). Of course many of the benefits of HSR will not accrue to private investors or to operators of the HSR service.  The comments that government would need to fund a large part of the project is correct but trite – of course it will given the non-private social benefits generated.

The current proposal’s cost-benefit analysis is unconvincing.

  • Airfares are supposed to remain the same or to possibly fall as a consequence of competition from HSR.
  • Aviation remains the primary means of transport for long distance trips – growth in demand for aviation from Sydney will double by 2035.
  • The only external benefits generated are from reduced road congestion and accidents and these amount to $1.2b.
  • The HSR  is supposed to contribute net to Greenhouse gas emissions although they would be small.  Of course it need not be positive at all if the electricity sector is rationalised to be low carbon. This seems a much harder Greenhouse gas saving to effect in aviation. Displacing polluting planes with non-polluting rail would greatly strengthen the economic case for HSR.   (The report dismisses this saving by saying that displacement of trips from Sydney Airport by because of HSR would be offset by increased aviation demands from destinations outside Sydney that would arise because of growing congestion at Sydney airport).

I don’t think this report addresses adequately the environmental benefits of HSR as an environmentally sustainable way of linking up the main interstate travel plans of half of the Australian population.

5 comments to High speed rail on Australia’s east coast

  • conrad

    You can already get airfares for half that price if you take Tiger or Jetstar, so that would make the comparison even worse. Alternatively, if it really did distribute the populations between Melbourne and Sydney more that would certainly be good, and probably the biggest benefit in my books since it would save billions on infrastructure and congestion costs in the big cities.

    Given this, I have a much simpler suggestion based on my observations from working in France, where people really do move to smaller cities and just commute to Paris every day, which is that we could just start with HSR between Sydney-Wollongong-Newcastle, Melbourne-Geelong-Ballarat, and Brisbane-Gold coast.

    These would be vastly cheaper and would allow people to live in these smaller cities and commute every day (some people already do this). The time travelled between them would probably only be about 15 minutes, and that would be far better than many suburban lines. If this worked really well, one could contemplate extending them to other places slowly.

  • Jim Rose

    I grew up a a small town, so I do not have this facination city people have with buses and trains, and the need for other people for travel on them rather than use their cars.

    btw, I take the bus to work and took a 14 year break from owning a car. I did this because it was cheap and practical in the specific cities where I lived.

  • Sir Henry Casingbroke

    This is a top shelf type of project being envisaged. As such it is pie in the sky and will never happen because it is pitched as an ambit excuse not to build it. If anyone is serious, that is, because with current ideological mindset ruling in Canberra and most of the states there is a reluctance for governments to fund any large projects. This is a topic deserving its own blog topic so I won’t develop it further here. I take the point Harry that even at the inflated price it is still a worthwhile exercise in economic terms but in my view the fed govt should do what is practical and feasible and do it now. A program presented by a railway engineer of vast experience supports this view on ABC RN’s Ockham’s Razor and is worth a listen.

    So here’s some advice to Albo (and his successor after the election). Don’t try to compete on speed with aircraft on a 900km route (Syd-Melb) or 1000km (Syd- Gold Coast-Brisb). Vast majority of HSR routes in the world are less than 400km per route. Very few of these routes break even. Hence what is viable in our case is a serious upgrade of existing lines which has to be done for freight anyway, otherwise the semis and B doubles (and now B triples) will tear the roads to shreds every two years or so, hence it makes economic sense from the taxpayer’s point of view.

    New rolling stock and locomotives would run on the upgraded track with new technology such as the Alstom Pendolino tilting train. This would cut the Melbourne Sydney time down to 6-7 hours without ridiculous investment of what is being proposed.The upgrade of the rail corridor should be done incrementally, including electrification in stages, concrete sleepers, smoothing of curves, grade separation, and so on. The Alstom Pendolino will get up to 200km/h on existing upgraded track, 250km/h on new duplicated new sections. Sydney to Newcastle should get an new duplicate track for starters.

    This suggestion would improve passenger travel times and make freight by rail competitive to get the behemoths off the roads. And it could be done in 4-6 years for about $20b.

    Final point. What is being planned, a driven steel wheel on steel rail will be obsolete in 50 years’ time. Already, linear induction motor technology is the coming tech for trains. I don’t mean levitation or anything like that. This is still a wheel on rail but the wheels are not driven, the train is pulled along by electromagnetic forces from a reaction rail laid in the middle between the rails. This makes for a vastly lighter train, requiring vastly less power and hence contributing to the economy of its operation, not to mention green issues.

  • hc

    Some good comments there JR. Most of the big infrastructure projects (NBN, road, road, water) involve large social benefits that would not be captured by private firms that delivered such services. A railway for example would provide communication and interaction benefits and provide incentives to shift away from congested cities. These are real benefits to an economist but not to those who wrongly assess only private benefits. Some of the increase in land values along a railway might be appropriated by a government.

    Large infrastructure projects are not popular because only private benefits are being considered by government.

  • Peter Rickwood

    I don’t understand your support for the HSR. The most recent study did value the easier-to-quantify social benefits (avoided congestion, greenhouse), but these are insignificant next to the main benefits, which are private benefits to travellers, so not something a government should subsidise. I guess from your post that you think that other social benefits (communication/interaction benefits, a shift away from cities) must be very large, but these sound very difficult to quantify, and I’d be interested to know if you have even a back-of-envelope idea of the value of those? Given all the in-vogue talk about agglomeration economies in recent years, it seems conceivable (though I personally don’t believe it) that a shift away from cities would be an economic negative….

    I do think value capture has a much bigger role to play in making HSR stack up. I did some simple sums, and it seems plausible you could recoup a decent chunk of the capital cost if you went in for value recapture in a big way. See here if you want details.

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