THE GROWTH AND REVIVAL OF
RAIL FREIGHT IN VICTORIA
AdvocAcy pAper prepAred for the
victoriAn freight And Logistics counciL feBruAry 2010
Victorian Freight and Logistics counciL
this paper aims to explore the renaissance of interest in rail freight
in victoria. the focus is on rail freight investment and operations as a
complementary mode with other modes in servicing goods movement.
The Victorian Freight and Logistics Council (VFLC) has commissioned the development of this
report to highlight the successes of freight movements in Victoria when road and rail combine
together to achieve outcomes for freight customers.
the paper aims to detail:
1. Recent public and private sector investment in rail infrastructure, facilities, systems
2. How and why rail works for customers (actual case studies);
3. The changing culture and technology of rail supply;
4. How rail performs in terms of energy and greenhouse emissions;
5. How customers perceive rail can improve, based on real experience; and
6. How rail and road complement each other.
Some commentary on the difficulties associated with the use of rail will also be provided. However,
the aim of this paper is not to focus and examine everything that is still a problem, or still needs
improvement. This is not a “glass half empty” paper. This paper aims to look at the revival of rail
transport. There is a “glass half full” story to be told, and this paper aims to focus on that story. 1
In a few years time maybe a rail freight story can be told about a glass nearly full to the brim.
In summary, the principal orientation of this paper is on the revival and improvement of the rail
freight sector and on freight which utilises rail focused intermodal facilities.
An intermodal facility is any infrastructure which facilitates storage, distribution and freight
exchange between differing transport modes. For example, using road transport to bring freight
to a central area to load to rail is “intermodal”. Using a port facility to discharge rail freight and
then load the freight onto a ship is “intermodal”. Container freight, bulk freight (e.g. grain) and
break bulk (e.g. steel) all commonly use intermodal facilities. Some analysts confine “intermodal”
to discussion of container facilities only, however “intermodal” is by definition any freight task that
utilises more than one transport mode.
This paper was prepared with the assistance of Sampraz Limited.
1. Intro and methodology .............................................................................7
2. The wider Victorian rail freight system ..................................................8
3. Government development policies for rail and
intermodal systems .................................................................................9
4. Recent public and private sector investment in rail
infrastructure, facilities, systems and equipment ..............................10
5. How and why rail works for customers ...............................................14
6. The changing culture and technology of rail supply ...........................18
7. How rail performs in terms of energy
and greenhouse emissions ...................................................................20
8. How customers perceive rail can improve,
based on real experience ......................................................................24
9. Difficulties associated with the use of rail ...........................................25
10. How rail and road complement each other.........................................26
11. The broad economic benefit of freighting by rail ................................28
Tables and Figures
T1 How rail investment can be recognised to
achieve economic growth benefits .......................................................30
T2 How the benefits of rail are distributed spatially ................................31
M1 Victorian Network Map ..........................................................................32
M2 Rail Sector Classification and Upgrading ............................................33
rail transport of freight is undergoing a significant revival of its
fortunes. previously starved of investment for a long period of time,
rail is now seeing significant investment at a government level and
at the private level. the Australian rail track corporation (Artc) is
undertaking major investment in the national intercapital rail track
corridors. the victorian government has invested major capital since
repurchase of the broad gauge track. in total over $1.2 billion has
been invested in under wheel track and rail operations in victoria.
Business has also invested substantially in rail related activities,
particularly in intermodal hubs and the associated distribution
centres. current and proposed investment exceeds $3 billion.
At the national level rail investment is typically Overall or total volumes have tended to hold
focused on the iron ore and coal export steady for rail over time, but rail has missed out
markets. Despite being short haul, rail is much on participating in the large growth of the total
more successful than road transport for these freight task.
markets and movement tasks. Victoria does not
Heavy congestion costs, greenhouse emissions
have major heavy commodity export tasks like
and higher accident rates are now creating a
NSW, QLD and WA, rather Victoria is the centre
climate for re-consideration of rail as a co-
of the national container import and export task,
modal solution alongside road. That said, the
warehousing and both the aggregation and
4 profits from road transport are still typically
distribution of goods across Australia. Victoria
higher than the profits from rail transport, so
is the logistics heartland of Australia.
it seems likely that road related congestion,
For a good number of these tasks road is greenhouse and accident costs will increase
more flexible and adaptable than rail, and the further in Victoria.
road market share has grown accordingly.
The key societal and practical task for the
However, rail has a major role to play in a
renaissance of rail is how to ensure that the
number of these market segments and has
profits from rail freight transport are higher
a crucial role to play in the future. There
than the profits from road freight transport.
firstly has to be sufficient re-investment in
the rail network and operating systems to It is beyond the scope of this paper to comment
ensure that rail performs to expectations on the methods by which this may be achieved.
and customer requirements. Rather, this paper seeks to look at the public
and private investment on rail related freight
This re-investment task is substantial and
activities for the wider Victorian region and
much work remains to overcome the deficits
provide some examples of where customers
of expenditure. For example, the Federal
use rail to help achieve business success.
Government allocated $43 billion for the
national road networks between 1975 and 2001, Rail freight can only be a success where all
but only $2 billion was allocated for rail. It is modes integrate cleverly to achieve good
not hard to see why rail’s market share has outcomes for the supply chain requirements of
declined in many areas. Rail currently holds business and society. Support and enthusiasm
a 15% market share for interstate freight (5 for the use of rail freight is there – it’s time to
million tonnes per annum) and a similar share make it happen.
for inter-regional freight within Victoria.
A key question pondered by many in the freight
sector relates to strong forecast growth – is The System
there a better way to maintain current supply Three interconnecting systems comprise the
chain and economic activity while allowing for Victorian rail freight system. Each requires
strong future growth? select planning and investment strategies and
Rail transport would seem to hold the potential each has a future role in goods movement in
to be a significant part of the solution. The the State.
need to take practical steps to address global The ARTC manages 1,213 km of interstate
climate change – to reduce the carbon intensity high capacity standard gauge rail, the metro
of our economic systems – adds to the appeal system comprises 400km of urban network
of increasing the level of rail freight usage in which the freight system utilises in part, and
our economy. the inter-regional rail system is predominantly
The supply chain sector of the Australian broad gauge with 3,278 km on non urban rail
economy – road freight, rail freight, air freight network franchised to V/Line.
and shipping, along with the people and
systems within businesses that deal with the Key Findings:
supply chain, account for 15 % of all economic
activity. Achieving this level of activity with a Government Policies
better balance of modal use and environmental The Victorian Government now has
outcomes is a very important challenge for all some planning and investment frameworks
of us. Governments and private enterprise are around rail freight, with an intermodal
now re-investing in rail. Much more can be strategy imminent.
done and achieved. This paper aims in a small
way to point to some of the successes. Nationally, the Australian Government is
developing a National Intermodal Strategy
To look at successes does not deny the very and national regulatory framework.
substantial difficulties that rail still faces.
Timeliness and reliability – particularly in the These developments support a more certain
north-south, east coast corridor to Sydney and policy environment for private investors.
Brisbane, remain major hurdles. The ARTC has
a strong investment program occurring to help
overcome these difficulties; the aim is to grow 5
the north-south trade to a total of 10 million For every 1 dollar invested by government,
tonnes per year. the private sector has invested 2 dollars to
complement the public sector investment.
Within regional Victoria the main hurdle
relates to the critical need to standardise the Another $800 million in new private sector
broad gauge freight network and have access investment is underway.
charges similar to ARTC mainline charges. Specialised suppliers of rail forwarding, new
Having a standardised network with good rail operators and intermodal hub investors
train running speeds and competitive axle are emerging.
loadings will make a major difference to rail
The market offering is improving.
freight activities. Once this standardisation is
completed, the rail freight task should be able
to demonstrate substantial growth. summary of Private sector rail
Regional areas 790
Melbourne intermodal 800
Melbourne portside 370
Rail operations 350
Future planned expenditure 800
Total current plus future 3110
Rail is Working for Customers Difficulties Associated with Rail
Rail offers a 3PL option which has set Rigid cut off times can assist in driving
timeframes and windows for port delivery. discipline into your supply chain and suppliers.
Rail can provide high capacity movements Procedures that appear antiquated are being
for bulk products. modernised and made nationally consistent.
Heavy containers lend themselves to a Limited choices mean customers and
rail solution. rail suppliers need to work closely to drive
On-site, value-added logistics combined with
a rail-road choice can future-proof supply Customers using rail need strong
chain investment. commitment to the arrangement, but this
can deliver benefits.
Rail forwarders able to optimise the rail
containers can deliver lower costs for line
haul tasks. Road and Rail Complement through
Changing Culture and Technology Intermodal hubs are the key interface
in Rail via which road and rail complement the
respective strengths of each mode.
The rail system now has a number of private
operators – the old ways are changing. Rail works best on the heavy, longer haul
tasks. Typically road focuses on the shorter
More flexibility means better operations.
haul, time sensitive tasks and moving freight
Labour relations and appropriate staffing to, or from intermodal hubs.
flexibility have improved dramatically.
Specialised regional hubs can be developed
A number of operations have modern fuel for $12 million. Large hubs may require
efficient and reliable train fleets. $200 million or more including land and
Modern communications technology is extensive warehousing.
starting to make a real difference.
Broad Economic Benefits of Freighting
6 by Rail
Energy and Greenhouse Emissions
Assessing the economic and societal benefits
Rail’s lower emission and energy consumption
of rail investment may require a model that
profile makes it ideal to substitute road
effectively takes into account –
haulage for inter-capital tasks.
• The “lumpy” nature of rail infrastructure
By using rail for journeys over 300 kilometres,
a shipper can save more than one third of fuel
costs and generate 40% less greenhouse gas • The progressive capacity unlocked by
per container. staged upgrades and the cumulative
nature of benefit streams accruing from
Higher productivity vehicles will build scale to
be replaced by trains where rail is available.
• The broader social and environmental
Improvements Desired by Customers
• The spatial distribution of benefits across
Customers want hassle free, cost effective,
local, regional and national jurisdictions.
on-time delivery of their supply chain
Hassle free is never truly achieved by any
transport mode, but rail can perform strongly
in terms of timely and cost effective meeting
of supply chain needs.
Good management of the warehousing and
intermodal facilities is a key part of this, along
with a disciplined and focused rail operator.
1. intro & MethodoLogy
Rail freight transport in the wider Victorian The rail infrastructure base for both regional
region has experienced a very mixed history and interstate operations is improving following
over the past 20 years. For much of this recent government investment and re-
period the network was starved of capital as investment. This is providing a more sustainable
major improvements to the road networks base for customers and rail operators. There
received priority. During the last 10 years is a real enthusiasm to reinvigorate rail freight,
privatisation of rail has also been implemented. particularly as the challenges of reducing
Operations remain privatised, but the under greenhouse emissions become more pressing.
wheel investment and operational control of Less road congestion and accidents and other
many aspects of the network is back in the amenity benefits for people also strongly flow
public domain. There has been a progressive from a range of rail freight solutions.
realisation that road transport cannot, or should
not be the sole mode of reliance for freight. Rail
must play its proportionate role in key freight
tasks and investment must be made which
allows this to occur.
preparation of this paper involved –
1. refining the scope with vfLc and progressive review with the
vfLc’s infrastructure Working group;
2. progressive development of a comprehensive discussion template
3. discussions and interviews with a considerable number of
4. review of a wide range of reports and data along with materials
provided by vfLc
5. Web based research and general research
6. economic review and work with dr robert noakes
2. the Wider victoriAn rAiL
three interconnecting systems comprise the victorian rail freight
system. each requires select planning and investment strategies and
each has a future role in goods movement in the state.
interstate Freight task
The westwards system to Adelaide and Perth The interstate freight task (5 million tonnes
and the northern system to Sydney and Brisbane per year) is evenly balanced with the
comprise the major interstate corridors. This inter-regional task (also around 5 million
standard gauge system is managed by the tonnes per year).
Australian Rail Track Corporation (ARTC) under
Unlike some interstate systems, there is no
long term leases. The ARTC manages 1,213 km
large iron ore or coal requirement to underpin
of track in Victoria, which also includes some
the rail freight task in Victoria.
other standard gauge sections.
Intermodal terminals are necessary for the
The inter-regional rail system is predominantly
rail freight function. These terminals utilise
broad gauge with 3,278 km of non urban
road to accumulate freight at one end and
rail network – franchised to V/Line. V/Line
typically utilise road once again to distribute
manages the under wheel infrastructure and
freight at the other end. Typically, major
train pathways for freight as well as operating
warehouse and distribution centre functions
regional passenger services.
are undertaken in association with these
facilities. Road and rail need to work in a
Metro cooperative and complementary fashion for
The metro system comprises 400 km of urban these supply chain functions.
network with MTM operating the passenger
service from December 2009. Rail freight
utilises portions of the urban network for the
3. governMent deveLopMent poLicies
for rAiL And interModAL systeMs
the victorian government now has some planning and investment
frameworks around rail freight, with an intermodal strategy imminent.
nationally, the Australian government is developing a national
intermodal strategy and national regulatory framework.
these developments support a more certain policy environment for
A substantial body of strategic and policy • National Transport Links
work has been undertaken at both the Growing Victoria’s Economy
national and State level in terms of guiding Victoria’s Infrastructure Australia rail bids
the development of the road and rail transport
systems in Victoria, along with ports and • ntc studies
relevant intermodal hubs. Rail Productivity, Intermodal Capacity and
of particular relevance to this rail focused Supply Chain Performance Pilot
study are the following:
The VFLC biennial publication Freight Forward
• national transport Plan is also very pertinent.
National market, national regulation,
• Victorian Transport Plan 9
Major rail projects for passenger/urban
congestion, response to Eddington
• Freight Futures and Port Futures
Victorian Freight Network Strategy
4. recent puBLic And privAte
sector investMent in rAiL
systeMs And equipMent
for every 1 dollar invested by government, the private sector has
invested 2 dollars to complement the public sector investment.
Another $800 million in new private sector investment is underway.
specialised suppliers of rail forwarding, new rail operators and
intermodal hub investors are emerging.
the market offering is improving.
The Victorian and Australian Governments have supported the rail freight sector in Victoria with
a total investment in the order of $1.2 billion. This encompasses recent expenditure such as the
repurchase of the broad gauge network, upgrade of the Mildura line, commitment to upgrade gold
and silver grain lines, the dual track standardisation of the Melbourne – Sydney line from Seymour
to Albury and a range of other key rail initiatives and upgrading. There is also a very large historical
investment in rail infrastructure in the wider Victorian region.
the following provides more detail of this investment.
10 public sector investment in rail
standard gauge intercapital regional Fast rail
Main Line While this program was focused on passenger
Major investments in dual tracking (Seymour movements between Melbourne and regional
to Albury), in passing loops, train running/ centres, the rail upgrades do permit improved
signalling and in resleepering to improve axle freight running. However, better pathing access
loadings and running speeds. for freight is required.
repurchase of the Broad Port access
gauge network Road over-passes and new rail track for much
This was a vital pre-condition for the improved operations and port access.
continuation of the rail revival program.
Broad gauge standardisation
regional rail revival in This program has recommenced with the
Broad gauge scheduled standardisation of the Seymour to
Led by the Mildura line upgrade and revival, Albury and Oaklands to Benalla lines.
this will return running speeds and axle loads
to reasonable levels. This program is being intermodal hubs
followed by gold and silver line upgrades to Provision of support and funding to allow the
the grain networks. better development of intermodal hubs and
greenfield developments as may be required
to facilitate freight onto rail.
private sector investment in rail
The private sector has significant capital Cost or value estimates summarised in
committed to the rail freight sector in Victoria. this section are necessarily broad brush. A
Work to date suggests that this investment combination is used between estimates put
exceeds $2.3 billion. For example, a regional forward by the rail and intermodal operators
intermodal container hub providing hardstand themselves, and further estimates undertaken
areas, warehousing, container packing and a by the author of this paper. A much more
range of other key services would typically need detailed evaluation could be made if additional
a capital investment in the order of $20 million resources were devoted to the task. Typically
to reach reasonable efficiencies and economies the question posed to the operators was this:
of scale. “If you were to replace, or relocate the core
facilities you currently have in place – how much
In terms of the structure of rail investment,
capital would you need to expend?” By definition
the largest single value is the land and rail
this is a broad brush approach. A balance sheet,
infrastructure (track and equipment) resident
analyst or share market valuation would often
on that land. This investment is overwhelmingly
yield quite different answers.
owned by State and Federal governments
through various agencies. Like the road system,
the values would be very large. Privately owned summary of Private sector rail
rail track tends to be in the form of a limited oriented investments
number of yards and short sidings. Most sidings
and yards are publicly owned.
Regional areas 790
Stabling and maintenance facilities for
both locomotives and wagons are a major Melbourne intermodal 800
component of rail operations, as is a wide range Melbourne portside 370
of track maintenance machinery. Rail operations 350
Signalling and train control systems represent Total 2310
a large total investment. Private rail operators Future planned expenditure 800
must mesh with these systems, which can vary
Total current plus future 3110
across Australia. For intermodal operators the
largest systems investment lies in the complex 11
stock control, tracking and scheduling systems.
Equipment needs vary significantly across
the private sector intermodal investments,
depending on the products handled. Heavy duty
container moving and reach stacking equipment
are large expense items. Container loading
and unloading equipment is often specialised
and costly. Bulk product systems require high
capacity elevating equipment and frequently
utilise expensive over rail bin storage.
regional intermodal Facilities – inter-capital intermodal
$790 million This is the largest rail freight investment and
As previously noted, intermodal refers to any principally utilises both interstate facilities at
arrangement where more than one mode one end and wider Melbourne region facilities
of transport is used to perform a particular in Victoria. The wider Melbourne region
supply chain and logistics task. In relation intermodal facilities are typically large scale and
to rail freight, intermodal primarily relates capital intensive. Altona/Laverton and Dynon
to the necessary road task in accumulating precincts feature strongly here. Significant
products to a rail hub, and then the distribution efforts are underway to separate the port-
of products at the receiving hub. For export related import/export rail freight trade from the
pathways, this receiving hub is typically the domestic and interstate rail freight activities.
export terminal and associated yards and
facilities. Intermodal facilities are often focused rail operations – $350 million
on the container trades, but are equally relevant
The locomotive and wagon fleet servicing
for bulk trades like grain.
the interstate and regional trade is extensive.
There are ten container focused intermodal Specialist wagons have an important role
facilities in the wider Victorian region with a to play in much of this trade but container
regular and solid trade. Typically they have wagons dominate. Interstate train consists
significant warehousing facilities and commonly are frequently 1.5 km in length. The Victorian
support surrounding areas and businesses up proportionate share of rail running facilities
to a 100 km radius. Frequently such facilities alone (locos and wagons) exceeds $350 million.
are 300 km or more in rail distance from
Melbourne. Melbourne Port side – $370 million
A regional intermodal container hub providing The Port of Melbourne itself is the single largest
hardstand areas, warehousing, container intermodal facility in South East Australia,
packing and a range of other key services would supporting rail, shipping and road transport.
typically generate a capital investment in the
Where non government ship loading facilities
order of $20 – $30 million to reach reasonable
and terminals are present to fully or partially
efficiencies and economies of scale. Facilities
service rail operations (exports and imports),
with less warehousing can still perform
12 then a proportionate estimate needs to be made
effectively, but with a lesser capital requirement
of the capital value. The proportionate share is
– maybe $10 to $12 million. Significant
estimated to exceed $370 million.
practical and financial support for development
of intermodal facilities has been provided by Containers and bulk products dominate in this
the Victorian Government through Regional rail handling task.
In addition to container focused facilities,
there are over 30 major intermodal bulk grain
handling facilities. These facilities can receive
grain all year round, provide major warehousing
and storage and can load to rail rapidly.
Regional port facilities are a further significant
component of the intermodal picture with
Geelong, Portland and Westernport providing
intermodal facilities for a range of commodities.
The estimated capital value of the rail focused
component of these regional intermodal
facilities exceeds $790 million.
Wider Melbourne intermodal –
As noted, the intercapital intermodal facilities The substantial majority of freight moved in
are large scale and capital intensive. Some the wider Melbourne area does not fall into any
facilities are owned and operated by the state, of these categories. There is a large category
others are leased to private enterprise. Some of freight which does not readily lend itself
of these facilities are multi purpose – they are to rail movement or operations. It needs to
set up in a dual mode to service regional trains be accepted that a wide range of freighting
plus interstate/intercapital and potentially some tasks will always be better performed by road
urban hub movements as well. transport.
A number of wider Melbourne rail and Notwithstanding this, there is a strong case for
intermodal hub facilities have been constructed perusing metro rail movement of containers.
and some further facilities are planned. Substantial policy and implementation study
Warehousing and distribution is a key or work is underway in relation to the metro hub
critical element of such facilities. At the concept, including the use of electric freight
moment the owners of these facilities are shuttle trains on the broad gauge network.
building movement volumes up by utilising These operations may mimic passenger
road transport. When volumes exceed 100,000 services.
standard container movements per annum
There is a strong potential for future growth of
(TEU’s), then it is expected that rail operations
wider Melbourne intermodal facilities – even
will be viable.
if initially they are road based. Substantial
The value of the various non government expenditure on warehouse and distribution
rail connected intermodal hubs in the wider centre activities could easily exceed $800 million
Melbourne region exceeds $800 million. Land in these domains.
and warehousing is a substantial component of
It needs to be remembered that wider
Melbourne intermodal facilities primarily
support movements to and from the Port of
Melbourne, to regional intermodal facilities, and 13
to interstate/ intercapital intermodal facilities.
5. hoW And Why rAiL Works
rail offers a 3pL option which has set timeframes and windows for
rail can provide high capacity movements for bulk products.
heavy containers lend themselves to a rail solution.
on-site, value-added logistics combined with a rail-road choice can
future-proof supply chain investment.
rail forwarders able to optimise the rail containers can deliver lower
costs for line haul tasks.
The Heinz Company provides a good case study Case example –
in how rail can assist in the provision of a high
service and efficient distribution network. The
export of dried milk products
major national distribution centre for Heinz is Warrnambool has an intermodal hub providing
on site at the SCT intermodal complex at Altona. logistics solutions for the milk products export
Some of the input products for the Heinz lines industry. Dried milk products in bagged and
come from New Zealand and are imported palleted form produce heavy weight containers.
through the Melbourne container port facilities. A Patrick Portlink train operates six days a
The containers are moved by road to the Altona week delivering empty food grade containers
distribution centre. All Perth bound product to Warnambool and returning with loaded
then forms part of the SCT train services to WA. containers ready for export.
A whole range of other products for different There is a significant amount of private capital
clients also form part of such freight trains to invested in the bulk warehousing systems. This
Perth using an array of specialised wagons. capital cost does not have to be carried on the
From Melbourne to Adelaide the train is books of the milk processing companies and a
typically 1.5 kilometres in length, and added to benefit is achieved by all parties.
in Adelaide to make it usually 1.8 km in length
The intermodal hub operator provides a full
and weighing over 6,000 tonnes.
suite of services focused on warehousing,
Agricultural based exports from the wider storage and container loading for all the milk
Victorian region have held up well during the product companies based in Warrnambool.
current world economic downturn. Those costs and problems are taken off
Patrick Portlink is a part of the Asciano Group the companies shoulders and they know that
that is focused on delivering containers their export markets will be reliably serviced
efficiently to ports and central hubs. Efficient by this supply chain. They can focus on the
rail services to regional centres are a core production and marketing aspects of their
part of this task. It is worthwhile looking more business, confident in the knowledge that
closely at how this works for several of the the export supply chain side of their operations
regional intermodal hubs. is being well attended to.
Warrnambool cheese and Case example –
Butter Factory export of wine from Australia
The Warrnambool Cheese and Butter Factory
is one of three major producers of export australian Vintage Ltd
milk based products in the highly productive
Australian Vintage Limited produces and
Warrnambool district. As noted, a feature of
exports wine from the North West of Victoria to
the supply chain arrangements in this area
the demanding markets in Europe, primarily
is the use of warehouse facilities which are
to the UK. The company uses the intermodal
coordinated and organised through the local
facilities at Merbein near Mildura.
Wakefield Transport runs the intermodal hub.
“We find the local intermodal
Full length trains depart for Melbourne three
arrangements for storing, packing times a week to service the wine, fruit and other
and export of our products to be most agricultural based sectors of the Mildura region.
beneficial and quite cost effective. The
specialist warehouse alongside of the “Our winery is located near Mildura in the
intermodal facility supplies all our heart of the sunshine country in North
warehousing and storage needs for the Western Victoria. We have a great export
dried milk powders that we produce business and because of this we need to
for export. This same warehouse also handle the export of 2,000 containers of
stores dried milk powder for other wine each year, primarily to the UK.
manufacturers in the area, providing Warehouse space is limited at the winery,
economies of scale and scope in this so we lease two warehouses from
warehousing function. Storing products Wakefield’s intermodal terminal. Our staff
off site like this ensures high quality, undertake the loading of both 20’ and 40’
cost effective storage. containers in an exacting manner. Product
The dairy industry and the associated condition on arrival in the UK is critical,
milk products industry typically goes and doing our own packing allows us
through substantial highs and lows over total control.
the medium term. Profiting from the Our intermodal operator is highly 15
highs and surviving the lows is quite a professional at container handling, so
challenge. Independent off site intermodal we know that loading onto the train to
storage works well for us in this Melbourne will be done well and everything
fluctuating business environment. will work as planned to meet our required
Packing of containers is done to the sailings with the shipping lines. Trains can
various export orders and requirements. obtain access to the ports even when road
access is congested, so we know that the
Typically one train per day is dispatched correct containers will get onto each ship.
to the Port of Melbourne, so we know that
our supply chain export requirement will The total system is competitive with road,
be met with a minimum of fuss. I would but we have better control and less hassle
encourage other logistics managers to by using the intermodal rail option. I would
consider the benefits of using rail and encourage other logistics mangers to
intermodal facilities as a component of look at the control and benefits of using
their supply chain solutions.” intermodal terminals and rail to handle
their export containers. Having warehouses
Maria Gerritsen, Logistics Coordinator,
Warrnambool Cheese and Butter
as part of the intermodal terminal is a
significant plus – it can save you time,
worry and money. In addition you don’t
have to worry about trucks arriving late at
night and demanding a quick turnaround.”
Steve Fallon – Export and Logistics Manager,
Australian Vintage Ltd
Case example – movement “AWB is a major customer for rail freight
of grain for domestic and services and we use a range of rail
international customers providers across Australia. In South East
Australia we provide many of the services
from our in-house freight group which
aWB Limited I lead. We are currently operating four
AWB Ltd is a major domestic buyer and trader train consists along the east coast of
of grain, as well as being a major exporter. AWB Australia. We move our train services to
requires highly effective freight services. As a wherever the organisational requirement
major customer of road and rail freight services,
AWB has a diverse range of transport needs.
AWB does use road to supplement the
“One of the key challenges in maintaining
movement tasks as required, but rail
and servicing key international customers
provides the core of the movement
is the ability to quickly and efficiently move
services. AWB has recently commissioned
grain from up country to port in order to
the construction of 84 standard gauge
meet customer shipping requirements.
bulk grain wagons in China. These are
The deregulated environment has put now in service and allow us to operate
more pressure on this aspect given the two high efficiency bulk freight services
multiple entities shipping out of any given utilising these new wagons.
port in any month. AWB has found that
Within Victoria these wagons operate
rail is the most reliable, cost effective
on any standard gauge line section,
and efficient means of performing this
so haulage from the AWB Dimboola
task. By accessing the rail that our freight
intermodal facility to export, or domestic
group has secured, we are well placed to
customers, is straightforward.
ensure we can move the large volumes
required for our customers shipping in In a similar manner, AWB is looking
the 2 – 3 week time windows that are forward to the commissioning of the
available at port. newly standardised line section running
from Benalla to Oaklands. AWB has
16 In addition to servicing export customers
a major intermodal grain facility at
with rail, we have also successfully
Oaklands and we will now be able to
delivered large quantities of feed grain to
operate this very effectively.
the Victorian domestic market in recent
low production years in Victoria. This Running grain from our NSW intermodal
grain has been moved from northern hubs to Victorian destinations is a similar
NSW and was delivered to Melbourne on straightforward task.
rail, as this represented the best transport Better rainfall is promising improved
mode to move large volumes of grain at harvests in Central and North Western
a competitive freight cost.” Victoria. Our intention is to commission
Mitchell Morison – General Manager a broad gauge train to operate from
Commodities, AWB our intermodal facilities on the broad
Rail offers the capacity to move large
volumes of product quickly, and this
very much suits our business needs. I
would strongly recommend that logistics
managers look closely at the benefits
that intermodal hubs and rail can offer”
Matt Watt – Freight Manager, AWB
grainFlow common questions from
GrainFlow manages the intermodal facilities for Logistics Managers on rail
AWB Ltd with 22 intermodal facilities in total, and intermodal
with 5 major intermodal facilities focused on the
Victorian rail freight network. In addition to the all important question of cost
in comparison to other modes, the following are
“Like many industries, the grain industry typical questions asked by customers:
requires an efficient supply chain that
• Service frequency
incorporates large warehouse and
distribution centres that can efficiently • Transit times
and effectively interface with transport • Recovery plans in the circumstance of a
carriers to move product to market. The service interruption
AWB GrainFlow centres were established
• Capacity available
to do just that.
• Who else can offer a comparable service
Grain is accumulated into our intermodal in the event of service failure or price
hubs by road transport at peak rates pressures? Will the supplier provide
during harvest periods. Our large scale road backup service in the event of rail
storages hold and assemble the product service failure?
lines of grain. When our customers
• Is the government going to continue its
require an export shipment we move
support for freight on rail? Government is
the grain to port as efficiently and cost currently providing a drought relief subsidy.
effectively as possible. High capacity, What will happen when it ceases?
efficient rail loading infrastructure is
• Why is there not a bigger discount for
essential to achieving this goal. We can
fully load a 2,500 tonne train in under two
hours and so achieve a fast turnaround • How reliable is the hook and pull supplier?
for our rail carriers. Moving 50,000 tonnes • Can I get my empties picked up the same day
of product from our country sites to port the train departs Melbourne? (regional hub)
in 2 – 3 weeks is quite achievable when
• Why can’t you leave later to avoid the need to
using rail. It is far more difficult to achieve send some containers by road?
this volume reliably, with the required
responsiveness and flexibility, using • Why can’t we have a daily service like road?
road transport. • Why do they have two drivers for one train?
(Deadman switch explained)
In summary, we use road transport to
accumulate the product and then use • Why can’t you mix bulk and break bulk with
rail to move it reliably, quickly and cost containers to make our freight cheaper?
effectively to market. The combination of
the two transport modes with an efficient
interface in the middle, works brilliantly.”
Andrew Gregor – Manager, GrainFlow
6. the chAnging cuLture And
technoLogy of rAiL suppLy
• the rail system now has a number of private operators –
the old ways are changing.
• More flexibility means better operations.
• Labour relations and appropriate staffing flexibility have
• some operators have modern train fleets – more reliable and
• Modern communications technology is starting to make
a real difference.
increase in private operators – increased flexibility leading to
the old ways are changing better operations
A dramatically increased focus on service Increased labour flexibility means that higher
has developed since more rail operators have utilisation can be achieved from the expensive
entered the market. In turn this has required fixed assets. It is now feasible to invest in
a dramatic improvement in labour flexibility new wagons because the increased annual
in order to achieve this increased focus on throughput allows a positive business case to
service in a cost effective manner. Many users, be made for such investment. Wider fields of
freight forwarders and intermodal operators operations, potentially spanning a number of
18 are now contracting trains on a take or pay states, means that assts are not stranded if
basis – this enables a better selection on the there is a downturn in one of the
amount of service versus the cost of market segments
For example, Patrick Port Link is achieving Labour relations and
strongly focused outcomes for its rail clients. appropriate staffing
El Zorro is similarly achieving good flexibility New entrant operators such as El Zorro have
and outcomes for AWB bulk grain movements. been able to negotiate very effective labour
Pacific National is revising and enhancing its relations with their staff. Multi state operations
rail freight offering for container, bulk and and the training that goes with such operations
break bulk customers. are the norm. SCT has long had highly effective
staffing and operations for the Melbourne to
New safe working systems are also being
rolled out in many areas.
Modern train fleets – more reliable Modern communications technology
and fuel efficient Very significant investments are now being
SCT is a shining example of the benefits that made by under wheel rail providers to
can be gained from a modern fleet of improve train control and signalling. ARTC
locomotives and specialised wagons. Good is progressively rolling out new 3G signalling
service, high reliability and good fuel efficiency and control systems to dramatically improve
are achieved as result of this. AWB investment in the functioning of its network. Significant
new bulk wagons for grain haulage is a further investments are also being made by V/Line.
example of the capacity and reliability benefits to Strong ICT systems and technology
be gained from new rolling stock. Rolling stock 19
improvement are also being achieved by freight
leasing firms have developed strongly to provide forwarders, intermodal operators and rail
such benefits to many parties. operators. Better customer service and much
The potential for electric operation of an improved supply chain information and general
urban focused Metropolitan Freight Terminal function are being achieved.
Network (MFTN) for Melbourne is under
7. hoW rAiL perforMs in
terMs of energy And
rail’s lower emission and energy consumption profile makes it ideal
to substitute road haulage for inter-capital tasks
By using rail for journeys over 300 kilometres, a shipper can save
more than one third of fuel costs and generate 40% less greenhouse
gas per container.
higher productivity vehicles will build scale to be replaced by trains
where rail is available.
Transport in Australia is going to need to In any comparative analysis of the broader
undertake a significant change in focus, economic efficiency of road versus rail
direction and operations in order to reduce the versus sea for freight transport, the concept
carbon intensity of both current operations and of economic efficiency needs to reflect (i)
future growth. Road transport will continue to financial, (ii) social, and (iii) environmental
generate productivity gains and to tackle energy costs. Historically, only the narrower financial
consumption and emission generation; however costs associated with inputs of fuel, labour,
the sheer size of the transport task indicates capital and services were included in direct
scope for additional modes to supply. Rail has operating cost estimation. From a public
a key role to play in this transition to a lower sector perspective (local, State and Federal
carbon lifestyle and economy. jurisdictions), all three cost components
comprising the Triple Bottom Line (TBL) need
Rail transport typically generates significant
to be estimated.
savings in total fuel used and energy expended
to perform typical transport functions. For In particular, emissions costs need to be
example, a typical train running between directly compared to fuel consumption costs
Melbourne and Sydney will use 45,000 litres less and labour rates. By including emissions costs,
fuel and generate 135 tonnes less greenhouse the total efficiency of modes is more clearly
gasses than the 145 road haul semi trailers that evident and mode diversions of freight become
would otherwise be needed to perform the task. more significant. The importance of rail relative
to road is more clearly recognisable with a
B Doubles and higher productivity vehicles
(HPVs) use less trips to complete the task,
are more fuel efficient and generate less
CO2 than 6 axle articulated trucks, but are
still a long way short of the rail efficiency
figures. Fuel consumption can be twice that
consumed compared to rail for the equivalent
end-to-end task. Using more rail capability for
goods transport in Australia is a key path and
requirement for the future.
A. financial costs (fuel) B. social costs
(time costs of Labour)
direct Fuel costs1 to transfer one An important aspect of freight cost movements
20’ teu (container) are time costs associated with labour
i. Long distance (1,500-1,600 km) 2 requirements. AustRoads (and Vic Roads) road
travel time costs are based on ABS Average
ii. By road $7903
Weekly Earnings. However, these costs include
(24 hours elapsed time)
PAYE tax components. The following time costs
iii. By rail $4474 reflect 2009/ABS data, net of taxes and inclusive
(40 hours elapsed time) of superannuation contributions by employees
iv. By sea $1185 and industry-based time costs, for transport-
(5 days) related activities.
i. short distance (300 km – 350 km) $ per hour
• By road $1466 a. road transport driver costs
(direct operating) • Rigid trucks (urban-based) 22.90
• By rail $867 • Articulated trucks
(excluding idling time) (inter-urban, urban-rural)
b. rail transport drivers
• By sea $248
(24 hour pro-rated)
(excludes at berth idling)
• Inter-urban/rural network 28.60
[All fuel costs are based on (a) US$72 per barrel
or $1.40 per litre of diesel for road, $0.97 per c. sea freight (daily prorata)
litre for rail and (b) bunker fuel oil for shipping • Captain/First Mate 55.40
of $420 per tonne]. • Ordinary Seamen 29.00
In both (i) and (ii), the direct fuel costs are a
These values of time are appropriate for
key part of the total operating costs. They
application to transport investment appraisals
exclude all fuel consumption costs associated
where delay times represent significant
with the transport to/from the collection point
penalties. Conversely, job creation allowing 21
of the TEU. Due to the fixed steel shell of the
for additional freight movement by mode
typical TEU, utilisation of B-Doubles with three
involve social benefits of different magnitudes,
TEU-equivalent volumes per truck using ‘soft/
depending on the specific mode.
pull down’ sides has been excluded. Hence,
the cost of road transport is at the ‘high’ end of
the fuel cost range. However, in the context of
the contestable market for freight over 300-350
km and above, direct fuel cost comparisons
between road, rail and sea must reflect use of
1 estimated financial cost of diesel as derived from all direct operating costs. assumes a fuel cost of us$72 per barrel.
2 Based on a route leg of 1,600 km.
3 Based on trucking cost for a truck carrying 2 teus equivalent (for a major australian trucking company); 48 litres per hour
of diesel at $1.40 per litre.
4 Based on estimated direct fuel costs for a 48-teu unit train (2 locomotives); 14 litres per km and $0.97 per litre. includes
rail locomotive idling time.
5 Based on utilisation of a 200 teu container vessel (11 tonne per day bunker fuel consumption at $420 per tonne).
6 assumes that over a distance of < 350 km, an average of 2 teus can be carried by road (with backloading). assumes a
direct time of 3.75 to 4 hours.
7 assumes an elapsed time period of 7.5 to 8 hours, with 48 teu per unit train.
8 assumes a direct short-sea voyage of 22 hours (0.92 days) with 200 teu per voyage.
c. environmental costs a. road Freight Movements
(1 teu) (300 km)
A fundamental environmental issue emerging
with land and sea transport of freight relates $ Cost
to the broader economic externality costs
i. small truck (1 teu or less)
associated with ‘fuel burn’ emissions and
[assumes 60,000 km per year]
related climate change effects.
• 5.4 tonnes of CO2 per annum
At issue for the freight transport sector is how
to cost this externality. The precise nature of • Average cost of $25 per
Australia’s greenhouse gas emissions policy tonne to 2015/16; 135.00
framework has yet to be determined. However, $40 per tonne after 2016/17
based on data from the Commonwealth reflects indexation 216.0
Government Office of Climate Change and the • Average emissions cost
Office of Sustainability Victoria in Victoria, a per km per 1 TEU to 2015/16 0.23
range of indicative environmental costs can • Average emissions cost per
be considered in relation to alternative freight 300 km per TEU to 2015/16 69.00
ii. Articulated truck (2 teus)
[assumes 60,000 km per year]
• 9.1 tonnes of CO2 per year
• Average emissions cost
of $25 per tonne to 2015/16 227.50
• Average emissions cost
of $40 per tonne after 2016/17
[reflects indexation] 364.00
• Average cost per km 0.36
for 2 TEUs 0.18
• Average cost per 300 km for 108.00
2 TEUs 54.00
b. rail Freight Movements d. summary of total triple
(1 teu) (300 km) Bottom Line (tBL) costs for
transport of 1 teu9
For 300-350 Km
i. 48 teu freight train
• 142 litres per km
• 24 tonnes of of CO2 per year
Economic (Energy) [per TEU] 146.00
• Average km per year of
90,000/240 km per day Social (per hour) 24.50
• Average TEUs of 17,520 per year Environmental (per TEU) 54.00
ii. Average emissions cost (b) rail:
per km per teu 0.07 Economic (Energy) [per TEU] 125.00
iii.Average emissions cost
Social (per hour) 36.00 to 48.0010
per 300 km per teu 21.00
Environmental (per TEU) 21.00
c. sea Freight Movement Economic (Energy) [per TEU] 22.00
(1 teu) (300 km) Social (per hour) 29.00 to 55.0011
Environmental (per TEU) 24.00
i. 200 teu shipment
(260 teu capacity)
• 500 litres per hour of bunker
fuel for 22 hours
• Average km per year of 216,000
(conversion from knots)
• Average of 64,000 TEUs per year
(320 voyage days) 23
ii. Average emissions cost
per km for 1 teu 0.08
iii. Average emissions cost
per 300 km-teu 24.00
9 does not cover the full economic costs by mode (i.e. does not cover the capital and maintenance costs of the assets, and
related insurance/service costs. these would be highest on a teu basis for road, than for rail or sea).
10 additional costs per hour related to crewing ‘doubles’ for part shifts.
11 $55 refers to captain; $29 for First Mate certificate rating.
8. hoW custoMers perceive
rAiL cAn iMprove, BAsed on
customers want hassle free, cost effective, on-time delivery of their
supply chain requirements.
hassle free is never truly achieved by any transport mode, but rail
can perform strongly in terms of timely and cost effective meeting of
supply chain needs.
good management of the warehousing and intermodal facilities is a
key part of this, along with a disciplined and focused rail operator.
There is widespread desire among end For example, the Melbourne Perth rail
customers and supply chain participants to corridor now has a relatively good standard of
increase the level of rail usage for the transport infrastructure. New locomotives, wagons and
of goods and materials in Australia. This desire technology have been developed or adopted for
is also shared by the wider Australian population. the corridor. An improving modal market share
People are looking for ways to ease traffic has led to strong economies of scale. Services to
congestion, traffic incidents and reduce general end customers are delivered in a timely manner.
pollutants and greenhouse gas emissions. Rail is The regulatory coverage of the task has been
seen to provide a key opportunity or mechanism progressively improved and ARTC management
for achieving these ends. has simplified the task for operators.
24 The core aspects of any sustained improvement Further infrastructure improvements are
in any transport mode are high quality planned (more concrete sleeper sections,
infrastructure and a high rate of adoption of new rail) as well as technology improvements
new technology. The basis of world competitive (signalling systems based around GPS and 3G
performance exists when this is combined communications). In short, the corridor is in
with strong economies of scale, timely good shape and getting better.
performance of the task and a supportive
each of the major rail tasks or corridors
needs to be evaluated against these criteria:
1. High quality infrastructure
2. A high rate of adoption of new technology.
3. Strong economies of scale
4. Timely performance of the task
5. A regulatory environment that supports
and encourages (doesn’t hinder)
9. difficuLties AssociAted
With the use of rAiL
rigid cut off times can assist in driving discipline into your supply
chain and suppliers.
procedures that appear antiquated are being modernised and made
Limited choices mean customers and rail suppliers need to work
closely to drive service levels.
customers using rail need strong commitment to the arrangement,
but this can deliver benefits.
Each mode of transport has its inherent Large steps are now being taken by both public
strengths and weaknesses. In addition, each and private rail companies to evolve into a
comes with its own history and cultural norms. modern, innovative service-focused logistics
service. However, patience and perseverance
Supply chain managers used to the choice or
is required to get the best out of a rail solution.
responsiveness of road transport often struggle
While the system is less flexible at the outset,
for a while to cope with the more structured
it can deliver high levels of structure which
approach required for rail. It also needs to be
assist in execution and generate higher levels
recognised that rail has an inherent tendency
of certainty once the system is adopted.
towards monopoly market characteristics.
Economies of scale are crucial for rail and there Those who do have the patience to adapt can be
is often only one operator servicing a particular rewarded with good cost and service outcomes. 25
area or region.
There is also the issue of cultural history,
which can often be perceived as rigidity in staff
and people issues, unions and labour relations.
All state rail systems were state monopolies
until 10 years ago. Infrastructure investment
went increasingly towards road as the dominant
mode. Rail became somewhat ossified in terms
of planning and infrastructure investment,
regulation and cultural practices.
10. hoW rAiL And roAd
coMpLeMent eAch other
Rail plays a vital part in sustaining the “Intermodal” is frequently crucial for rail to
competitive advantage of Australian industry. be able to play a role in Australian societal
This factor is most crucial in the high intensity transport needs. The only time this is not true
heavy haul industries such a coal and iron is in some major mining operations where rail
ore. However the same is significantly true takes the product directly from mine site to
for a wide range of other industry sectors – port. For virtually all other traffics, rail requires
rail is important to keep Australian industry pick up and delivery to customers by road.
competitive. Heavy haul agricultural produce Fundamentally, rail cannot survive without road.
(milk powder, wine, fruit, and grain) is an
The converse is frequently valid as well. Road
example where rail plays a strong role. The
would greatly struggle to achieve all required
capacity to move large volumes quickly is a very
transport tasks if rail did not exist. Current
important part of the Australian export effort
road infrastructure is a finite resource. Fuel is
and rail is particularly suited to this task.
expensive. Driver shortages have meant that
However, other important needs must also operators are frequently struggling to keep all
be met. Products must be delivered on time, required vehicles operating. Congestion and
in good condition, and the transport charges delays at key points of the road network would
must be cost effective. The costs effectiveness increase substantially – hindering all users.
must apply to small lots as well as large
The scenario of higher productivity vehicles
consignments. Road has a particular advantage
establishing the scale required for rail to “take
in many distribution tasks – retail distribution is
over” the linehaul task is evident on tasks
just one example. Small lot distribution is also
such as the Melbourne-Sydney inter-capital
a particular strength of road. The “just in time”
demands of modern distribution practice can
often only be met by road transport.
A picture is therefore emerging of certain
transport tasks which are better served by rail,
and other transport tasks which are better
served by road. The two modes can compete
with one another on a limited range of traffics,
but often their role is complementary.
This complementary nature of the two modes is
the basis of “intermodal” supply chains. The two
modes working together can achieve more than
the individual modes in their own right.
road and rail complement The following illustrates a potential capital
through intermodal hubs expenditure program for a regional hub.
The growth and expansion of rail requires $
the growth and expansion of intermodal hubs.
As previously outlined, effective rail transport
typically relies on road cartage at both the Rail sidings and connections 2,000,000
origination and destination ends of the rail Highway interconnection 500,000
journey. In turn this requires highly effective Internal roads and hardstand 1,500,000
Metropolitan hubs are typically a great deal handling equipment
broader in scale and scope, involving a wider Services 300,000
range of activities than regional hubs, which
Office, ICT and systems 400,000
have a predominance of export functions.
A metropolitan hub can vary from a simpler Planning approvals 200,000
smaller design and land area footprint, to Other 500,000
a very large hub with considerable land to Total 12,000,000
allow extensive expansion of warehouse and
distribution centre activities. A smaller hub
would typically require the expenditure of
around $40 million of capital, a large hub
with extensive land and warehousing would
commonly involve the investment of $250
million or greater. Much of this expenditure
would be privately made by the parties 27
building the warehousing and distribution
Medium sized regional facilities would
commonly involve a capital expenditure of
$10 to $12 million. Larger facilities would
be in the order of $20 to $30 million. Once
again, much of this additional capital is
required for the warehousing and both the
aggregation and distribution centre activities.
11. the BroAd econoMic
Benefit of freighting
Assessing the economic and societal benefits of rail investment may
require a model that effectively takes into account –
• the “lumpy” nature of rail infrastructure investment;
• the progressive capacity unlocked by staged upgrades and the
cumulative nature of benefit streams accruing from early upgrades;
• the broader social and environmental benefits; and
• the spatial distribution of benefits across local, regional and
It is important to be able to recognise the Important considerations in reviewing the
fundamental strength of the relationship appropriateness of public sector infrastructure
between rail upgrading as a form of national investment such as standard gauge rail
infrastructure investment and economic upgrading include:
growth. Economic growth at the local, regional
(i) The relative narrowness of the scope of
and state level from rail modernisation
cost-benefit analysis (CBA) conducted for
(improved speed, increased rail unit productivity,
rail appraisals. Traditional CBA techniques
improved safety/reduced derailments) can be
are required to focus only on direct,
expected due to the existence of a number of
28 quantifiable benefits and costs. Broader
issues of the distribution of benefits, or the
(i) Availability of both private and other range of secondary or multiplier effects
public sector investment funds to further often are largely ignored;
utilise the rail investment (new industrial,
(ii) In rail infrastructure investments, a
residential and service precincts);
significant proportion of the capital
(ii) A well trained labour market to support investment is irreversible. They become
economic activity (manufacturing, trade sunk costs. This is largely due to:
and logistics chains); and
a. the use of the land corridor for the
(iii) Supportive political/governance factors right-of-way; and
(legal, organisational and institutional
b. the legal and political commitments
policies and procedures in place, to further
involved, once the investment is made.
utilise and promote the rail investment).
(iii) Rail investment is a typically lumpy (iv) Rail investment to upgrade specific
investment. It is possible only to complete sections of an existing rail corridor
specific engineering components. Thus, the represents a ‘linked’ investment, with
capacity improvement, which is a stepped the benefits of the upgrading being
increase. At the beginning, the capacity distributed through the remainder of the
can well exceed demand. Optimisation origin-destination link. The benefits of the
of the investment decision thus requires initial upgrade thus pass through to all
additional or secondary benefits (such as subsequent upgrading, as a cumulative
local or regional employment, induced investment gain. This has important
investment in manufacturing, service implications for supply chain management
industries or residential development) to and in planning the progressive upgrading
justify the initial rail upgrading decision; and of long distance rail corridors. The full
estimation of the benefits of any later
or final links which have been upgraded
thus becomes most important, in terms
of reporting the public benefits of the
upgrading. It is possible to underestimate
the economic contribution of the upgrading
of earlier components, when examining
the benefits of more recent upgrading.
TABLE 1: hoW rAiL investMent
cAn Be recognised to Achieve
econoMic groWth Benefits
table 1 provides a summary of how rail (ii) multi-criteria analyses (MCAs)
investment can be highlighted or recognised
(iii) impact statements (IS)
to achieve a broad range of economic growth
impacts. It is important to recognise that (iv) accounting-based analyses
the benefits of rail upgrading need to be a. total cost analysis
captured and reported in both cost-benefit
analyses and in broader complementary b. project life cycle analysis
economic development appraisals. These can c. financial statements of costs
be completed by a range of approaches. It is and revenues
possible to consider all rail investment appraisal
approaches in four separate categories: Each of these different approaches is relevant
for recognising the economic development
(i) benefit-cost comparisons (including effects of rail infrastructure projects.
Traditional cost-benefit analysis
• Identification of user transport benefits (savings in time, costs of delivery, convenience, safety)
• Costs of investment (savings in maintenance costs, increased productivity)
Complementary economic development appraisals
• Value adding for the local/regional economies
– Employment gains (incomes skills)
– Welfare expenditure savings
– Productivity increases (time, energy)
– Improvements in environmental conditions
› Reduced CO2 emissions
› Reduced noise
› Limitations to amenity value losses (no additional losses of open space)
› Sustainability outcomes become accepted targets for growth
• Network/multiplier effects
– Generation of second-order economic impacts (second and third tier economic
– Utilisation of previously underutilised infrastructure and private/public assets
– Stimulus to additional local area growth and investment with population in-migration
and small-scale investment
– Increased land values and rents
– Improved levels of social equity and upgrading of social infrastructure
TABLE 2: hoW the
Benefits of rAiL Are
table 2 – provides a listing of how rail investment benefits have been distributed spatially, in
terms of various economic variables across local, regional/state and national jurisdictions. The
distribution of the impacts is considerable. Many are frequently overlooked when discussing the
economic gains of rail infrastructure investment within Australia, involving the standard gauge
and broad gauge rail assets.
Economic Factor Local Level Regional/State Level National Level
• Economic growth • Employment gains • Changes to • Increased public
and development accessibility sector performance
effects (taxation revenue)
improvements • Changes to industrial/
manufacturing/service • Debt servicing
• Skill upgrading
• Savings in welfare
• In-migration/limited output
• Changes to housing
• Reduced income
and retail balances
• Economic • Increased local • Spatial relocation • Agglomeration of
investment output revenue/expenditure investment
agglomeration • Welfare
• Increased State GSP improvements
• Service hierarchy
payments across borders
• Increased land • Increased GDP
• Increased GST/other
values and service output
state revenues 31
• New education/
• Scale and nature • Increase in the • New rail links • New interstate rail
of transport value of local links
• Upgraded existing links
infrastructure infrastructure assets
• Savings in energy
investment • New intermodal
• Improvements in levels
• Improvements in
standards of rail • Limitation/elimination
assets of safety issues
• Contributions to
• Upgrading of • Additional intermodal
logistics and supply investment
productivity of road
and service assets
New South Wales
New South Wales Narrandera
Sea Lake Deniliquin
Donald Korong Vale
Korong Vale Shepparton
St Arnaud Benalla
MAP 1: victoriAn
Mt Gambier Bairnsdale
0 25 50km
ARTC interstate network
V/Line passenger rail
Department of Infrastructure Freight only network
Policy and Intergovernmental Relations Division
Mapping and Design Services
File No: G:\...\Cadd\FL&M\Misc\FLM01_048.wor
Date: 24 July 2007
New South Wales
Ouyen Piangil Moulamein
Manangatang Wagga Wagga
South Sea Lake Deniliquin ACT
Australia Hopetoun Woomelang
Donald Korong Vale Shepparton
St Arnaud Inglewood
Eaglehawk 0 25 50km
MAP 2: rAiL sector
Moolort Maldon Jcn
Mt Gambier Hamilton Bairnsdale
Sale “Platinum” rail lines
Traralgon “Gold” rail lines
“Silver” rail lines
Leongatha “Bronze” rail lines
ARTC interstate network
Department of Infrastructure V/Line passenger rail
Policy and Intergovernmental Relations Division
Mapping and Design Services
Freight only network
File No: G:\...\Cadd\FL&M\Misc\FLM01_048B.eps
cLAssificAtion And upgrAding
Date: 1 December 2007