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Infrastructure Australia NATIONAL FREIGHT NETWORK PLAN - RTBU

VIEWS: 6 PAGES: 45

									INFRASTRUCTURE AUSTRALIA


NATIONAL FREIGHT NETWORK PLAN




     RTBU SUBMISSION
                       March 2010
National Freight Network Plan - Rail Tram and Bus Union Submission



Table of Contents
  Executive Summary..................................................................................................... 3
  Introduction ................................................................................................................. 5
     Background: the RTBU ........................................................................................... 5
     Seismic change under way ....................................................................................... 5
     A time for reappraisal of rails strategic directions .................................................... 6
  Scope of the network ................................................................................................... 8
     Substantial change has occurred in the ownership of the rail freight network ........... 8
     Ownership in a state of flux ..................................................................................... 8
     Other Networks ....................................................................................................... 9
     The rise of rail networks as part of supply chains ..................................................... 9
     Pressures for grain branch line closures ................................................................. 10
     Rail passenger and freight conflicts........................................................................ 11
     Intermodal traffic: an immediate and key priority .................................................. 11
  Freight use and priorities ........................................................................................... 13
     ARTC demand forecasts bullish............................................................................. 13
     A note of warning .................................................................................................. 14
     Rails weaknesses in the intermodal chain ............................................................... 14
     New thinking: Co-modal........................................................................................ 14
     Grain Supply Chain: a system requiring coordination and long term planning ........ 15
     Regional networks area not homogenous ............................................................... 15
  Operating and infrastructure standards ....................................................................... 16
     Technical Standards Setting ................................................................................... 16
     Competency and Qualifications standards .............................................................. 16
     Network Rule changes ........................................................................................... 16
     Supervision of standards ........................................................................................ 16
     Infrastructure Standards: a variety of issues .......................................................... 17
     Many instances of private sector managers failing to maintain the assets ............... 17
     Regular investment: a case study ........................................................................... 18
     Supply chain investment coordination required ...................................................... 18
     Interoperability ...................................................................................................... 19
     Further harmonisation of standards ........................................................................ 19
  Ownership and Control .............................................................................................. 20
  Planning Regimes ...................................................................................................... 22
     Significant changes to Planning are under way ...................................................... 23
  Regulatory responsibilities......................................................................................... 25
     NTC Report and Regulatory Issues ........................................................................ 25
     The NTC Report: safety and environmental regulations. ........................................ 26
     Need for an Inquiry into rates of return on railway assets ....................................... 26
  Chain of Responsibility (COR) .................................................................................. 27
     Example: Chain of Responsibility - Overloading ................................................... 27
  Safe Payments ........................................................................................................... 28
  Financing including Cost Recovery and Funding ....................................................... 29
     Cost recovery......................................................................................................... 29
     Funding ................................................................................................................. 30


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National Freight Network Plan - Rail Tram and Bus Union Submission

    Historic levels of Road and Rail funding. ............................................................... 30
    New Federal Government – New transport directions ............................................ 30
    2009 Federal Budget .............................................................................................. 31
  From AusLink to Nation Building Program ............................................................... 31
    The case for change in financing Australia’s infrastructure needs .......................... 33
    Bernie Fraser’s foreword continues to resonate ...................................................... 34
    Executive Summary of the Report ......................................................................... 34
    The need for increased infrastructure investment ................................................... 34
    Lack of innovation in Australia in relation to infrastructure funding and financing. 35
    Financial imbalance ............................................................................................... 35
    Legal barriers......................................................................................................... 36
    Underdeveloped capital markets ............................................................................ 36
    Conservative ideology ........................................................................................... 36
    Tax Issues .............................................................................................................. 37
    Some alternative strategies..................................................................................... 37
    Government special bonds ..................................................................................... 37
    Dedicated Infrastructure funds ............................................................................... 37
    One option is for Government to act as facilitator .................................................. 38
  Other issues ............................................................................................................... 39
    Skill Development ................................................................................................. 39
    Environment and congestion .................................................................................. 42
    Market based solutions in transport insufficient to tackle climate change ............... 43
    Energy Efficiency. ................................................................................................. 44




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National Freight Network Plan - Rail Tram and Bus Union Submission


Executive Summary
The RTBU submission supports the development and implementation of a national
freight net work plan and argues that a new way of thinking will be required to
move from the current system to based on modal silos , characterized by disparate
plans ,differing policies and objectives, conflicts and lack of coordination between
the public and private sectors and between the three tiers of government.

 The adoption by ATC of a national transport policy framework, “ a new beginning”
foreshadowed ten priority issues that represented the key areas that would require
fundamental reform .These are the challenges we as a nation face in moving towards
a national freight network.

The RTBU submission outlines the current policy frameworks for rail in the areas of
regulation, national competition policy, investment and recent experiences in
ownership and control The Union argues there is deep malaise in a key number of
rail freight markets particularly the intrastate wheat and non bulk markets and the
primarily intermodal, interstate non bulk market.

The RTBU argues the explosive growth of bulk rail transport masks wider rail
freights system issues which has been characterised by private sector failures,
legacy issues, lack of planning and coordination in supply chains. The RTBU argues
for a fundamental reappraisal of rails role in these markets and the development of
action plans in the context of a focus on the role of all supply chain participants.

The RTBU submission notes that in the move to a national freight network the
institutional and policy frameworks will need to change. The Union argues there is a
need to develop a national rail plan within the context of a national freight network.

The adoption by COAG of a national road reform plan and the focus on creating
national B double and B triple networks and the pursuit of substantial road freight
productivity increases through performance based standards and high performance
vehicle networks underlines next generation thinking about road freight. Similarly,
the adoption of a national ports and shipping policy reflects a focus on guiding
substantial change for this mode.

The backbone of roads domination in many transport markets over the last
generation has been because of the substantial and continuing investment at the
national level for both construction and maintenance .This includes an expanding
national highway system and increasing responsibility for regional and local roads
due to vertical fiscal imbalance within our political federation. Rail freight
investment in contrast, has been episodic, lacking in long term financial
commitment and vision.




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National Freight Network Plan - Rail Tram and Bus Union Submission

The RTBU submission examines the history of national land transport funding and
estimates that over a thirty year period the allocation of funds to road and rail
freight has favored road by a multiple of 18:1.

The RTBU argues this is the product of a silo policy approach to rail and road
transport which was addressed only at the margins by the AusLink corridor
strategies. The underlying premise has been competiton between road and rail in a
transport market which exhibits multiple market failures.

The RTBU submission examines rails role in the intermodal chain, the long term
planning and reenergizing of the mainline network and the many obstacles that are
being faced. These include land use, lack of coordination, conflicts with rail
passenger networks, the planning issues at multiple levels and the challenges posed
by congestion in our major cities.

The RTBU paper calls for the establishment of new institutional structures to
address the multiplicity of issues if a successful long term intermodal strategy is to
be implemented.

The RTBU submission argues that the rail industry has not been well served by
national competiton policy which has created instability, a high turnover in rail
business businesses ownership and a lack of coordination between above and below
rail operators and other participant s in the supply chain. The regulation of rail
assets, the RTBU argues, has resulted in insufficient returns for rail track managers
in many markets and this should be addressed.

The RTBU submission highlights the need for new polices to be adopted for data
collection in freight transport and new transparency laws for the supply of
information by both public and private companies.

The RTBU submission argues that the development of national freight network plan
should be based on the application of chain of responsibility laws, national
approaches to compliance and enforcement and fair returns for labour including the
introduction of safe payments legislation for the road freight industry.

The RTBU notes that the operating standards adopted for the road industry have
been in a constant state of change due to the emphasis and institutional support for
productivity increases. This same zeal should be applied to rails axle loadings,
transit times and infrastructure standards to meet the freight demands of the future.

The RTBU submission details a number of issues which should be integral
components of a national freight plan without which a national plan would be
severely diminished, if not fatally flawed. These include the need for detailed plans
for skills and workforce planning, and the adoption of specific targets, time frames
and mitigation measures to address the crucial role that transport can play in
moving to low carbon, energy efficient economy.


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National Freight Network Plan - Rail Tram and Bus Union Submission


Introduction
Background: the RTBU
The RTBU is a national industrial union of 33,000 members operating in all states
and territories. It covers all occupations in the rail, tram and public bus industries.
The major occupational groupings include drivers, train controllers, station staff,
customer service, track and infrastructure, rolling stock, administrative and
supervisory.

Seismic change under way
The epicentre of change has been the 2008 National Transport Plan and the various
ATC working groups that have been established to provide policy focus and drive
change.

The institutional environment has been altered by the establishment, by legislation,
of Infrastructure Australia and the creation of the Building Australia Fund. The
primarily road transport orientated transport funding vehicle AusLink has been
rebadged as the Nation Building Fund.

The Building Australia Fund, a sovereign wealth fund, is in Australia’s case, the
product of essentially the surge in revenues generated by the resources boom. It is a
key foundation for addressing past infrastructure neglect and planning for the
future.

The IA priorities list offers a scoping of the nature of the infrastructure challenge
and the analysis underpinning it.

The reprioritization of the transport agenda by the national government is
symbolized by the reemergence of providing significant funding for urban public
transport. Hitherto funding had been denied because it was deemed to be a state
responsibility. Australia was the only country in the OECD without national
government involvement and funding for urban public transport.

The recent announcement by the Prime Minister of linking urban development and
planning over the long term is a paradigm shift as was the announcement by the
Transport and Infrastructure Minister of the development of a national cities policy.

There have been two major modal inquiries by the national parliament into the
maritime and airline industries, a review of the National Transport Commission,
decisions to create two national regulators a heavy vehicle regulator and a national
rail safety regulator. A follow up review of some issues impacting on rail level
crossing safety was undertaken by the national parliament. Funding for transport
research has been dramatically increased, albeit from a low base. The national
government has imitated two inquires into rail grain freight, one in WA and the
other in NSW.


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National Freight Network Plan - Rail Tram and Bus Union Submission

The work of IA and state governments as represented by the Victorian Freight
Futures Transport Plan and new Victorian integrated transport legislation are
symbolic of the magnitude of change underway in transport policy and priorities.

A time for reappraisal of rails strategic directions
For the railway industry the development of a national freight network plan is an
opportunity to examine the strengths and weaknesses of the rail industry and their
connection and relationships with other transport systems and networks.

      In the railway industry intense structural change has been a feature of the
       last twenty years with privatisation of freight networks in some jurisdictions,
       vertical separation of infrastructure and operations in others, particularly on
       the interstate rail network and the emergence of dominant operators who
       are highly geared or subject to privatisation.

       In the application of national competiton policy the significant force driving
       policy was that the future of rail freight lay in competiton between rail
       freight operators and that private sector ownership would drive productivity
       and an expanding rail sector.

       During this period rail passenger networks have been separated from freight
       operations and remain, except for Victoria, in the public sector.

       A stocktake of these experiences, the RTBU argues, is a necessary element of
       the development of a national freight network plan.

      A silo approach, focusing on mode specific issues or parts of networks at the
       national level has seen the national government fund significant elements of
       the road network for a generation including national, arterial, regional and
       local roads. National rail investment until recently has been on the periphery.

      Structural change at the national and international level has seen the
       emergence of vertically integrated transport companies wielding
       considerable market power. The role of private sector investment is a crucial
       issue for in the restructured rail industry as there has been a decided
       reluctance by the private sector to invest.

      The continuing importance of legacy issues for rail infrastructure is an
       important issue. This is exemplified by analysis of rail grain networks and the
       rail component of intermodal supply chains and in particular the interstate
       rail network.

      The dominating economic issue for Australia has been the resources boom
       and this has been reflected in the rail industry in investment levels, the task
       undertaken and all of which exhibit growth rates which have been explosive.


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National Freight Network Plan - Rail Tram and Bus Union Submission

       This growth masks the long term decline of rail in a number of markets.
       Some attention has been paid at a national level to bottlenecks in the coal
       supply chain as queues of ships make for sensationalist reporting.


      The connectivity between urban rail networks and rail freight and the bottle
       necks that are created is an issue that needs to be addressed.

      Transport Infrastructure pricing is a matter which needs to be substantially
       altered to take into account changes in, externalities, mass/distance, time of
       day and location charging and the adoption of a commercial framework for
       road network.




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National Freight Network Plan - Rail Tram and Bus Union Submission



Scope of the network
The RTBU submission will focus in this part of the submission on the rail industry
and its supply chains. There is an interconnection between the bus and tram sectors
in the urban environment and road freight vehicles in terms of congestion and
prioritisation issues e.g. exclusive reservations for trams and bus priority lanes.

Substantial change has occurred in the ownership of the rail freight network.

The owners and mangers of the components of the railway network include
     ARTC interstate mainlines and some significant regional lines including the
      Hunter Valley coal lines. ARTC has recently acquired though a lease, the
      standard gauge line from the NSW /Queensland border to Acacia Ridge
     WestNet (Babcock and Brown Infrastructure,( recently restructured to
      Prime Infrastructure )
     The Tasmanian Government who owns the vertically integrated Tasmanian
      rail network,
     The Victorian Government through V Line, the non metro and non interstate
      mainline network ,
     Genesee and Wyoming( a small US regional operator) operates a number of
      regional lines in SA including the Eyre Peninsula network,
     Rail Infrastructure Corporation: the non ARTC regional rail network in NSW
     FreightLink the Tarcoola to Darwin line and
     QR, the Queensland network.
     The Leigh Creek rail line in South Australia is controlled by Flinders Power

The RTBU recommends the above freight networks and lines by included in a
national freight network plan.

The fragmented ownership and control of the Australian rail network has
ramifications in a number of areas which will be further explored in this submission.
For example, the national land transport network funded through the former
AusLink and now Building Australia Program does not include a number of the rail
lines and networks referred to and an ad hoc approach though the off network
category has been adopted to funding regional rail.

The fragmented ownership has implications for the coordination of investment,
adoption of technology and market strategies.


Ownership in a state of flux
The ownership of the component parts of the network is not settled. The
Queensland Government announced in 2009 that it would privatise its freight
business as a vertically integrated company. This has caused a storm of protest from
coal companies looking at their own self interest rather than the future of the rail


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National Freight Network Plan - Rail Tram and Bus Union Submission

business. This is an important policy issue in a supply chain sense as resource
industry market and political power is pressuring the future of Australia’s most
successful rail freight business.

The financial commentariat have focused on alleged monopoly market power that
goes with track ownership, blithely ignoring the role of the economic regulator and t
on rail competition which exists and the poor rates on return received by the
current operator on substantial below rail investment

In the same year FreightLink has gone into administration with a recent
announcement it would be put on the sale block.

Tasmania became the second government, with substantial federal government
financial support, to resume ownership from the private sector, after previously
relinquishing ownership to the federal government in 1978.There has been recent
debate as to whether the WA Government should resume ownership of the
2300kms of the regional grain rail network, no doubt prompted by the current
impasse over future investment and maintenance and recent developments in other
states.

The RTBU recommends that given the fragmented ownership of Australia’s
rail lines and networks, which include both public and private sector owners,
that a national freight network plan includes a stocktake of the current rail
infrastructure, the publication of the investment plans and maintenance
strategies of all rail infrastructure owners/maintainers.


Other Networks
In addition there are a number of extensive rail networks which are privately
owned, foremost among these is the Pilbara railways which given its significance to
the WA state and national economy should be included in a national freight network
plan. Others systems include the extensive rail operations operated in conjunction
with the steel industry particularly at Whyalla and Port Kembla. The latter two
whilst operated by major rail operators under a contract arrangement should not be
included in the scope of the national rail freight network. The same position we
believe applies to the extensive cane rail network in Queensland.


The rise of rail networks as part of supply chains
A key feature of rail freight networks has been their integration into supply chains
as concentration of ownership occurs across Australian industry whether it is in
retailing, the grain industry, automotive, steel or resources sector etc. This is a
global phenomenon. The RTBU argues this has significant implications for a national
freight network plan and how coordination and sources of investment between the
public and private sectors should be realized.



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National Freight Network Plan - Rail Tram and Bus Union Submission



In July 2008 transport ministers identified 12 key supply chains which are of
national significance: coal, iron ore, livestock and meat, copper, grain, seafood,
processed foods, wine, forestry, automotive, petroleum and general freight
(including containers). The NTC subsequently instigated pilot studies into
intermodal transport, livestock, and grain and coal supply chains.

The NTC defined a supply chain as the system of organizations, people, management
practices, technology, activities, information and resources involved in moving a
product or service from supplier to customer.

Within the rail industry both horizontal and vertical integration is occurring. The
temporary Tolls/Patrick’s consortium was the most prominent example of vertical
integration spanning vessels, ports, railway networks, rail operations, road freight
and ancillary activities. The subsequent spin off; Asciano has retreated from the
earlier scope of the business to mainly ports and railway operations, concentrating
especially on the coal sector where higher commercial returns can be made.

This raises important issues about community service obligations, maintenance of
assets and planning by private sector owners or lessees of railways assets. Very
little data is publicly available. Data constraints have featured in many transport
investigations and inquiries in recent years, reflecting poor coordination between
governments, lack of a centralised agency and the private sector arguing
information is commercial in confidence.

The RTBU recommends that a national freight network plan addresses these
issues; expands the scope of data collection, that it be undertaken by BTIRE
and that the private sector provision of information be mandated.

The churn in rail ownership raises a number of questions about return on assets,
short term investment horizons and the lack of technical innovation in a number of
areas of the business, particularly those under private sector ownership.

Pressures for grain branch line closures
The scope of these rail networks could come under intense pressure in the near
future. One study commissioned by the NTC into the grain supply chain 1suggested
some 2757 kilometres of grain branch lines should be closed. (NSW 975, Victoria
782, WA 798, Queensland 220). Other studies 2 3 have made quite different
recommendations, although some rationalisation forms a component of their action
plans or findings.


1
    SD&D :Pilot Supply Chain Studies-Grain Lines and Livestock, Stage 2 Final Report ,NTC ,Feb 2009
2
    NSW Freight Grain Review: Australian Government, September 2009
3
    Strategic Grain Network Committee,F.Affleck(,Report to Minister, Jan 2010


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National Freight Network Plan - Rail Tram and Bus Union Submission

Rail passenger and freight conflicts
An important issue in considering the scope of the network is the shared train paths
between passenger and freight traffics in may areas of the network including urban
areas.

Given the surge in passengers in many urban networks and the demands for extra
services the conflict will only get worse in a number of states. Increases in urban
public transport are also a key measure in abating congestion and assisting road
freight transport. The problems with the short north in the Sydney urban network is
the number one priority issue for the north south intermodal corridor and has been
recognized by IA as a priority issue.

The issue of train paths also extends to regional areas where east coast states
operate extensive regional passenger services.

Intermodal traffic: an immediate and key priority

A substantial component of the rail network in Australia is the interstate rail
network. Intermodal rail market share has had three decades of continuous decline
and is now a relatively small share of the non bulk freight market. For example, in
the late 1960’s rails share of the Melbourne Sydney market was 40% and today it
less than 10%.

There is a sense of urgency in the need to address and adopt turnaround strategies
and ARTC has given this considerable attention. Rail freight terminals are an
integral element of intermodal traffic and supply chains and are key components of
the rail freight network. Their location, ownership and functions are key issues for a
national freight network plan.




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National Freight Network Plan - Rail Tram and Bus Union Submission




                                       12
National Freight Network Plan - Rail Tram and Bus Union Submission



Freight use and priorities
A range of reports have commented on the explosive growth that is anticipated in
transport demand and the pressures these will place on the freight network. The
NTC report 4 estimated the freight task would double between 2005 and 2020. The
Victorian Government Report Freight Futures5 noted freight handled by the
Victorian freight and logistics industry had grown by approximately 5% pa between
1995 and 2005,that road trucks carry 89% of the task in tonnes , and that over the
same period the road fleet,LCV’s,rigids and articulated trucks increased by 31% to
605,898 vehicles.

By comparison and contrast rails intrastate and interstate GTK over the same period
declined. For example, in Victoria intrastate rail freight declined by 20%. B Doubles
have increased over 20 years throughout Australia from zero to 120,000 in 2006
with 41% in Victoria. The Victorian report supported the next generation high
performance freight vehicles (HPFVs) which it is envisaged will be “ especially useful
for port related container transfers and many other applications, including some
regional commodities”. 6

The same report in relation to rail modal share targets noted the Eddington reports
comments concerning reevaluation of the Governments rail /port modal share
target of 30% of freight from and to all Victorian ports to rail by 2010 as it could not
be met. The report made a general commitment to increasing the volumes of freight
between the Port of Melbourne and freight terminals. No specific targets are
mentioned nor the means by which the objective would be achieved. A similar
experience has occurred in NSW with the movement of containers by rail to and
from the Port of Botany. The evidence from the Victorian report suggests that most
of the planning is being directed to a road based, high performance freight vehicle
strategy and in particular Direction 7, the high performance freight network.

The RTBU recommends that a significant modal share target for the railing of
containers to and from the key ports in Australia’s capital cites be adopted in a
national freight plan and the planning to achieve these objectives be
undertaken.


ARTC demand forecasts bullish

An ARTC strategy document7 indicated that “recent shifts in road/rail cost relativities
are expected to result in a large increase in rails general market share”. ARTC
modeled a number of growth scenarios for intermodal freight, low, medium and

4
  NTC Twice the Task.Feb 2006
5
  Victorian Government Freight Futures: Victorian Freight Futures Strategy.
6
  Ibid, p
7
  ARTC 2008-2024: Interstate and Hunter Valley Rail Infrastructure Strategy, June 2008.


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National Freight Network Plan - Rail Tram and Bus Union Submission

high for the periods 2004/5,2009/10 and 2017/18. According to ARTC the notable
feature of this data is the significant increase in market share captured by rail .Even
under the low scenario rail is achieving market shares of 30 to 40% for Melbourne-
Sydney, Sydney-Brisbane and Sydney-Adelaide and well over 80% for Melbourne –
Brisbane. These forecasts were made pre GFC and we are unaware of its impacts on
the projections made.

The ARTC report, reflecting the China/resource boom cycle, was absolutely bullish
about the coal tonnages with projections increasing from 133mt in 2009 to over 278
mt in 2024.This mirrors the Queensland coal chain predictions, the iron ore in
industry in North West Australia and the new Oakajee development in the mid north
of WA.

A note of warning
The explosive growth in coal tonnages forecasts will need to be tempered by the
implementation of increasingly stringent climate change goals which, although they
are going through a post Copenhagen hiatus, will in the medium and long term
assume significant importance for the coal supply chain. Many governments,
including the Australian Government, have adopted a policy position of reducing
greenhouse gas emissions by 60% by 2050.

Rails weaknesses in the intermodal chain
A consultants report for the NTC 8 on the intermodal supply chain outlined a
number of deficiencies including

       A lack of long term vision
       Poor landside access to terminals
       Poor rail line haul performance
       Inadequate capital investment and
       An inability of supply chain participants to consistently co-ordinate to
        optomise efficiency.

The value of the markets affected was estimated to be $22b.

New thinking: Co-modal
The consultants report argued that the supply chain theme leads to a concept called
“Co modal’ whereby the issues of planning of cities and regions are included in
decision making. It argues that if intermodal transport is to be effective it needs to
be thought of as a mode in its own right “it cannot be defined in terms of single parts
of the chain –terminals, rail lines, distribution centres or container parks. It is a system
that must be reflected in management, in commercial arrangements and in terms of
policy and in land use planning.”9

8 Booz &Co Capacity Constraints& Supply Chain Performance Intermodal: final Report –Towards Co-
modalism, NTC.Jan.2009.
9 Ibid,p19




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National Freight Network Plan - Rail Tram and Bus Union Submission



The report referred to European experience expressed in an EU review that “blind
competiton between transport modes should be turned into co-modality using better
logistics chains and related technologies.”10


Grain Supply Chain: a system requiring coordination and long term planning

A variety of reports have been recently produced for the rail freight grain sector.
These include the Victorian Fisher review, three reviews in WA, one in NSW and an
NTC sponsored examination of the grain and livestock supply chain. All have noted
the decline in rail markets share in each of the states considered due to a range of
issues.

Solutions offered are many and varied. They range from a slash and burn
prescription by the NTC commissioned report to a more measured response from
the NSW grain freight task force established by the Federal Government. The
various recommendations from the reports will be discussed in another area of this
submission.

The RTBU recommends that a national approach should be taken to the grain
supply chain given its importance to the national economy, the emergence of
companies with significant market power in the supply chain and the need for
coordination of many issues.

Regional networks area not homogenous
A real weakness of the current analysis of networks has been the lumping of
regional rail in to a homogenous category. This is partly due to view that it is
dominated by grain traffics. This overlooks the significance for the states concerned
of, for example, the regional rail markets in Tasmania and Queensland which need
separate analysis to grain supply chains and have their own issues.




10
     Ibid p19


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National Freight Network Plan - Rail Tram and Bus Union Submission


Operating and infrastructure standards
Operating standards in the rail industry have been established for both safe working
and engineering. Standards are set for rail transport operators and rail
infrastructure owners. These have been codified in AS standards which in many
jurisdictions were included as part of rail safety legislation.


Technical Standards Setting

The setting of technical standards within the rail industry has been formalized
through the development of an industry setting standards body, the ARA subsidiary,
RISSB. It has been accredited by Standards Australia to develop industry technical
standards. Government funding has assisted the development of the various
technical standards.


Competency and Qualifications standards
Transport and logistics industry worker competency and qualification standards
have been established by the transport industry training body, the Transport and
Logistics Industry Skills Council. It is tasked to produce and maintain competencies
and qualifications. The Federal Governments Rail Safety Model legislation includes a
provision that competencies and qualifications shall be reference to the Australian
Quality Training Framework. Unfortunately not all jurisdictions have followed the
model bill. This has obvious ramifications for mobility of workers and undermines
national vocational initiatives.


Network Rule changes
Each network owner has network rules concerning the operation of trains over
their network. Instances have arisen whereby there has been unilateral action by
one network owner to implement rule changes without consultation with other
network operators. Such an occurrence in NSW initiated action by the rail safety
regulator to have inserted in the rail safety act consultative processes for changes to
network rules and if necessary mediation by the rail safety regulator.


Supervision of standards

 A potential grey area concerning rolling stock standards and their interface with
infrastructure standards could emerge. In a vertically integrated rail system this is
not an issue but there is amongst some track owners the view responsibility for fit
for purpose rolling stock entering the network should be the responsibility of the
rolling stock manager. They argue they do not have the resources not is it their core
function to ensure rolling stock are fit for purpose. Similarly rail safety regulators


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National Freight Network Plan - Rail Tram and Bus Union Submission

argue it is the responsibility of rolling stock owners. Economic pressures on small
rollingstock owners in particular could make this a problem in the future.

Infrastructure Standards: a variety of issues
The quality of rail infrastructure is the product of a number of issues with legacy
issues, quantum and regularity of investment, application and/or deferral of
maintenance plans and the adoption of asset management plan key issues for
consideration.

The quality of railway infrastructure varies enormously within Australia. At one end
the heavy haul railways of the North West and the narrow gauge coal operation of
QR are at the forefront of world’s best practice railways. Along the continuum of
standards of networks there are a range of networks in which the limitations
imposed by 19th century engineering standards are evident in relation to track
alignment, curves and gradients, maximum axle loads, competitive transit times and
length of trains.

Some branch line infrastructure has barely changed since it was laid, low rail
weight, non welded track, timber sleepers with little ballast and timber bridges.
These characteristics determine the rolling stock, its tonnages and speed with
generally lightly powered rolling stock and smaller trailing loads.

A characteristic of a number of regional railways has been the consistent failure to
apply a consistent asset management and replacement regime. This coupled with
privatisation has been disastrous for these railway systems. Incoming private sector
managers have either wanted to sweat the assets to make quick returns or have
undergone corporate change and have quit markets because of higher profits to be
made elsewhere or because of tight margins due to competitive conditions or
drought have deferred the preventative maintenance which is required.

Many instances of private sector managers failing to maintain the assets

There have been a number of clear failures by private sector mangers to maintain
rail infrastructure assets. The regional railways in Tasmania and Victoria are clear
examples of private sector failure with governments stepping in and funding modest
investment programs.

In WA the problem goes back to the original privatisation which required a decision
to be made by government to commit to maintaining the grain branch line network.
The solutions have to address community concerns over losing services, increasing
numbers of trucks and deteriorating roads.




                                          17
National Freight Network Plan - Rail Tram and Bus Union Submission

Regular investment: a case study

An example of a regional rail infrastructure which has had continuity of funding to
enable maintenance and in some areas improvement the asset by the adoption of a
seven year plan to convert wooden sleepers to steel and wooden bridges to concrete
is the regional network owned by the NSW Government. It consists of some
3000kms of lines of which a third are grain branch lines. However four branch line
closures have occurred in 2009 where little or no demand for the services existed.

The findings of the Federal Governments Grain Freight Task Force, which has not as
yet been responded to by the NSW Government, are illustrative of the problems
faced by regional railways and the potential solutions.

Overall the report was optimistic about the future of the grain lines. It
recommended a modest capital upgrading program, an MOU between the grain
industry and government to improve the grain handling and storage system, the
consideration of train pathing issues into Newcastle, the future of grain handling at
the Port of Newcastle and the creation of a strategic grain road network.

The 18 recommendations of the report include short, medium and long term
strategies and reflect the structural change in the wheat industry, privatisation of
grain handling facilities, deregulation of the single wheat desk, changing markets
and climate change issues .The recommendations underlined the importance of a
grain supply chain approach.

Supply chain investment coordination required

The strategic plan of ARTC is an example of upgrading a19th century rail
infrastructure over a twenty year time span and what this means for changing
infrastructure standards. It is linked to achieving significant growth on the north
south corridor in particular, through cost reductions, improved reliability and
transit times.

The point needs to be made that improving infrastructure standards by ARTC does
not necessarily translate into complimentary investment by above rail operators.
Financial difficulties for the largest private operator and the uncertainty concerning
the privatisation of QR does not automatically generate the required level of
investment in above rail assets. The Greiner and O’Donnell reports were important
signposts for supply chain coordination problems and potential solutions.

The role of private sector investment, coordination between major components of
supply chains is a key issue to be addressed. The “missing link” rail link joining
Queensland coalfields, the differences between the coal producers and QR is an
example of the coordination problems that exist and need for these to be addressed
in a national freight network plan.


                                          18
National Freight Network Plan - Rail Tram and Bus Union Submission

Interoperability
A key component of improving rail infrastructure quality is the application of
technology. One key investment strategy by ARTC is the application of an Automatic
Train Management System which has both productivity, through increased capacity,
and safety benefits. ARTC have chosen an American system.

In NSW the urban rail operator, RailCorp, for safety reasons linked to
recommendations of a Special Commission of Inquiry, is adopting a European ATMS
system. Trials are currently underway.

Interoperability issues between the two systems may arise. The RTBU understands
that the ATC Safety sub committee, the RSP& RG, will be examining this issue. In the
view of the Union there is a role for government, after all it is taxpayers who are
funding the projects, to look at such major step advances in technology to ensure
compatibility, in order to avoid duplication of efforts and to realize economies of
scale.

The RTBU notes that governments in many overseas counties have played an
interventionist role in the rail industry ,both in advocating for and in the nature of
the technology to be adopted.

Another aspect of the ATMS is the convergence of technology across modes and into
supply chains. The Victorian Parliamentary Road Safety Committee11 noted the
advances in ITS and GPS technology and the possibility of their application to
improve rail and road level crossing safety, the biggest safety risk for the Australian
rail industry.


Further harmonisation of standards

A significant issue for infrastructure standards is the standards adopted by the rail
and road industries at level crossings. A key step forward was the inclusion in the
national rail safety legislation of a requirement for road and rail managers to
produce an interface plan to manage safety risks at road and rail crossings.

The rail industry has developed AS1742 to apply at level crossings. Its application is
not compulsory for all track maintainers neither is there any requirement of road
managers to apply its standards to the road aspects of crossings. The rail industry
has pointed to the failure of coordination between road authorities when making
decisions concerning the introduction of B Double and B Triple networks and their
impacts e.g. sighting and stopping distances at rail level crossings.




11   Victorian Parliament: Road Safety Committee: Inquiry into safety at rail level crossings. Dec 2008.


                                                    19
National Freight Network Plan - Rail Tram and Bus Union Submission


Ownership and Control
The policy drivers of the 1990’s were deregulation, privatisation and the application
of national competiton policy. In the railway industry this was translated to
arguments for separating operations from infrastructure and on rail competiton.

The application of these policies by state and federal governments were not
consistent, uncoordinated and have led to unintended outcomes. It is time for a
reappraisal of the policy lessons to be learnt from the experiences of the last fifteen
years. The application of these polices reminds us of earlier decisions by states to
build different rail gauges.

Some jurisdictions initially retained vertically integrated enterprises e.g. Tasmania
and, South Australian and Victorian regional.

NSW separated infrastructure and operations in both urban and non urban regional
railways, established an infrastructure corporation and a separate access provider.
The profitable public sector freight operator was privatised and formed a
component of the short lived Tolls /Patrick’s joint venture, a five year agreement
was reached for the new operator to continue the same level of service on the NSW
branch lines. Fifteen years later the urban rail operator is integrated following two
major rail safety inquiries, ARTC controls the interstate and Hunter Valley corridors
and the regional infrastructure remains publicly controlled and the major rail
operator has severely downgraded it s involvement in the rail grain freight secotr.

A measure of competiton exists for rail operators in the Hunter Valley but the
incumbent retains the overwhelming majority of the tonnage .In these types of
markets the incumbent operator, as QR has also shown in Queensland, has many
advantages. This is not unusual in industries characterised by large capital
investments.

However PN a major above rail operator has all but abandoned their role in the
grain industry and some aspects of their intermodal operations. As a highly geared
company they remain vulnerable to further turmoil. The epic corporate battle
between Tolls and Patrick’s immobilized the company for two years.


The RTBU argues the policy positions are far from settled. The major world railways
remain overwhelmingly in the public sector; China, Russia and India and are
vertically integrated.

The major privately owned privately railways in the world, the two majors in
Canada and the class 1 railroads in the US are vertically integrated. There are a
range of operational, investment and technical reasons why vertical integration is
the preferred model world wide and further attention needs to be given to



                                           20
National Freight Network Plan - Rail Tram and Bus Union Submission

ownership and control issues. These issues are the current battle lines in the
privatisation of QR.

The decision by the Queensland Government to privatise QR as a vertically
integrated freight company has been opposed by unions and many sections of the
community .The economic rationale adopted by the Queensland Government has
been shown to be threadbare.12 The major coal companies are strongly opposing the
sale of the company as a vertically integrated business.

In other sections of this paper the Union has argued that a number of issues remain
to be addressed as a consequence of the experiences of the application of national
competition policies to the Australian rail, industry and decisions made to privatise
government business enterprises .For many rail markets there has been subsequent
corporate turmoil, lack of investment and coordination and the need for
government to reassess the direction of the business and intervene in a number of
rail markets.




12See :B and C Walker: Briefing paper: Queensland Asset Sell off, Budget Black Holes, Borrowings and
Credit ratings, November 2009


                                                21
National Freight Network Plan - Rail Tram and Bus Union Submission



Planning Regimes
A couple of recent news articles are illustrative of the problems encountered in
planning.

1. Southern Freight line stalls. It was reported that ARTC has stopped working on
the Southern Sydney freight line while it sorts out several planning deficiencies and
cost overruns which will delay completion of the line for two years. Issues included
changes to the RailCorp signaling system, the route needing to be redesigned to
minimize impact on the Glenfield rubbish tip and the need for more extensive
services relocation.13

2. Moorebank terminal. State and Federal Governments have been talking about
the need for a terminal that links trains and trucks since at least 2005 to help move
the increasing amount of freight flowing through Sydney’s ports. Both the Howard
Government and the then Labour opposition promised work on the terminal before
the last lection and the project was recommended by Infrastructure Australia. It was
reported that talks between the Departments of Defense and Infrastructure have
bogged down over how much it will cost the army to relocate.14

A range of reports have commented on the importance of the relationship between
the freight network and the planning system. They reveal that unless decisive
measures are undertaken, already stretched transport networks, especially in urban
areas, would be stretched beyond capacity.

The NTC Freight Rail Productivity Review15 in relation to policy, planning and
investment characterised the key issues as

            Government objectives are not always aligned or proritised

            Further coordination of planning and investment by industry and
             government may be necessary. The issues of long term planning,
             interconnection of passenger and freight rail, land use and transport
             planning and multi modal impacts were highlighted.

The Report regarded policy, planning and investment as a high priority and to be
carried out at a national level. The RTBU supports this prioritisation and the
recommendations for implementation which focused on

        Coordinated transport objectives across all levels of governments, and
         government owned corporations.


13 Sydney Morning Herald “Planning snags halt rail project”, November 3 2009.
14 Sydney Morning Herald “Dogs of war caught up in scrap over freight terminals”. 3rd March 2010.
15 NTC: Freight Rail Productivity Review: Final Position Paper. August 2009.




                                                22
National Freight Network Plan - Rail Tram and Bus Union Submission



      A long term freight strategy to undertake coordinated planning across
       governments and encourage private investment in infrastructure. The RTBU
       argues this should be taken the next step to include the private sector. For
       example the majority of freight above rail operations is privately owned and
       their investment plans need to be coordinated with government and
       privately owned track managers.

      Identifying existing strategic terminals and planning for future strategic
       terminal needs. The RTBU notes that sharp differences exist between
       industry participants as to whether this planning should be accompanied by
       a national strategic terminals access regime. The concept that a national
       terminal access regime will lead to greater on rail line haul competiton is an
       untested assumption which underlines some of this discussion about
       terminal access and is far from proven in our view. Reports from the RTBU
       operations members indicate that safety issues have arisen in multi user
       terminals because of lack of coordination between the terminal manager and
       above rail operators.


      Industry led coordination along the supply chain although the RTBU argues
       there is no one size fits all approach and given the number of participants
       and complexity of issues in some supply chains e.g. grain chain, coordination
       should be facilitated by government with government arbitrating, where
       required.

The NTC Report argued the process of planning should build on rather than replace
existing planning work undertaken by the states. The RTBU noted earlier the work
undertaken by the supply chain projects and in particular the recommendation by
consultants that a specific co modal supply chain planning and implementation
structure be established. This type of recommendation was made by the NSW
Auditor General in a 2007 report.

The RTBU recommends that given the importance of intermodal strategies,
community concerns about congestion, predicted freight activity increases,
the problems of siting new terminals, the need to develop specific intermodal
to port rail operational plans and resolving passenger and freight rail conflicts
that further work should be undertaken on the proposal to establish a specific
co modal supply chain planning and implementation structure.


Significant changes to Planning are under way
The pace of development s within the last year has been game changing. The
establishment of Infrastructure Australia and its May 2009 report National




                                         23
National Freight Network Plan - Rail Tram and Bus Union Submission

Infrastructure Priorities defined a framework based of nine key infrastructure
challenges.

The Victorian Government has set the pace for state governments with its strategic
planning and investment frameworks which include the Victorian Transport Plan,
Melbourne @5 million, Freight Futures and Port Futures.

The momentum for further changes to planning was outlined by the Prime Minster
in his October 2009 policy statement on future planning needs in our major cities.

The speech emphasized the need for national leadership in the planning of the
future of Australian cities underlining productivity, fairness and sustainability. The
PM proposed to establish a Council of Australian Governments Task force in
partnership with states and territories and for the development of national criteria
for the future strategic planning of our major cities. The Federal Government would
consider linking all future infrastructures spending to compliance with these
criteria.

The linking of federal investment to specific criteria is not an unusual phenomenon
in countries with federal political structures. See for example, the US Transport
Equity Act.

The RTBU recommends to this Inquiry the linking of national planning and
strategic investment to specific criteria.




                                          24
National Freight Network Plan - Rail Tram and Bus Union Submission


Regulatory responsibilities
There are a number of regulatory responsibilities in the federal and state
jurisdictions impacting on rail transport which reflect a variety of economic, safety
and social issues. A consistent economic theme pursued by COAG has been the
argument for the need to promote national regulatory responses in a number of
areas in order to create a seamless national economy.

A current fashion pursued by both industry and government is to argue that “ red
tape” and the “burden of regulation” have to be reduced or eliminated. Such claims
are easily made and roll off the tongue and or/keyboard. The RTBU argues that
these claims need to be carefully srutinised.

One example of such claim was the regulatory burden allegedly imposed by state
based rail safety regulators. The RIS undertaken by the NTC and the consultants
report prepared by the employers organisation revealed that that the regulatory
costs were “modest”. This is not surprising given the very small cross state border
operations undertaken in the rail industry.


NTC Report and Regulatory Issues
The NTC Freight Rail Productivity Report outlined a number of points under
Economic Regulation and market structure.

1. It was argued that vertical separation of low volume rail lines is not necessarily
optimal and that reintegration under private sector control should be considered by
jurisdictions. The evidence of the private sector operations in these markets, over
the last 10 years, has shown a number of failures by the private sector .The RTBU
argues that Australian and international experience does not support reintegration
into privatised entities. Recent actions by a number of state governments go in the
opposite direction.

2. Varying rail access and pricing regulation across states increased the regulatory
burden. There is very little evidence that the regulatory burden is significant and as
noted in the NTC summary “this issue is not seen as an immediate priority for
improving productivity in the freight rail sector.”

3. Inconsistent access to strategic intermodal terminals. The RTBU argues that there
are greater priorities in intermodal transport and more work need to be done
before steps are taken to develop a regulatory model to apply to strategically
important terminals.




                                          25
National Freight Network Plan - Rail Tram and Bus Union Submission

The NTC Report: safety and environmental regulations.
The NTC Report said there was little evidence that environmental regulations are a
significant issue for the rail industry. It recommendation that “industry should work
with environmental Ministers to improve the environmental regulation where industry
considers it imposes an undue cost”.16 While no such evidence has been produced any
changes to environmental regulations should only be undertaken after a public
inquiry and all viewpoints are considered.

Need for an Inquiry into rates of return on railway assets

The RTBU argues the ability of rail companies to earn an effective rate of return on
infrastructure assets, for example in Queensland in the coal infrastructure area, and
the role of private sector investment and coordination in the investment plans of the
rail supply chain participants is a significant issue and should be investigated. There
is evidence that QR does not earn sufficient returns on its infrastructure assets.
ARTC has argued similarly for its operations and the low rates of return.

In response to a union questions about this matter the Queensland Treasury said “
when the regulator is determining the return a business can earn , the rate of return is
set so the business can expect to have its investment returned and earn a reasonable
risk adjusted return on the funds invested.
There is an argument amongst many infrastructure providers that this return is
insufficient to encourage investment in regulated assets. Regulated assets are
generally low risk assets.”17


One aspect of the problem is the failure to get the big coal companies to commit to
the missing link project, an important component of the Goonyella to Abbot Point
project. They are arguing that the commercial model being proposed is unfair. The
project has been delayed for two years. Our examination of the rates of return for
coal companies over the last ten years reveals super profits have been earnt and the
Government should be examining ways and means for the community to share in
this economic bonanza.

ARTC in its submission to IA outlined the difficulties of investment coordination
between above and below rail operators, the domination of the rail intermodal
market by three companies, the long period of uncertainty arising from ownership
Issues, the largest operators preference for investing in coal assets and the
possibility of their investment in intermodal assets not coming to fruition.




16Op cit p vi.
17Government written response to specific questions asked by union representatives following
discussions on 15 October 2009.


                                               26
National Freight Network Plan - Rail Tram and Bus Union Submission

 The point was made that both above and below rail assets are long term
investments. Investments in locomotives are thirty year investments and many of
the interstate locomotive fleet is greater than 30 years old.

As to investment financing options ARTC argues that given the current risk and
reward framework of its business it was difficult to envision the introduction of
third parties into the financing of new assets.


Chain of Responsibility (COR)

A key issue for land transport has been multiple market and regulatory failures in
road freight over a sustained period of time. The actions of Government over the last
five years have begun to address gross market distortions and regulatory failure.
There remains a long way to go.

In 2005, a model Road Transport (Compliance and Enforcement) Bill was
developed, a key feature of which is the chain of responsibility provision. It
extended the general duty for offences to all parties involved in the consignment,
packing, unloading and receiving of road freight. The new laws included improved
enforcement and investigative powers, risk based categorization of offences (minor,
substantial and severe) and a wider range of sanctions and penalties.


Example: Chain of Responsibility - Overloading

A transport industry newsletter18 reported that GrainCorp was facing fines of
$18.23 m over 332 alleged breaches of NSW COR laws - the largest case ever
mounted against a consignor. In each count the RTA alleges GrainCorp was negligent
in receiving 332 severely overloaded trucks during the 2005 grain harvest. The RTA
investigation disclosed the high frequency and extent of vehicle overloading.

Over 9,800 potential offences were found in a 72 hour period, resulting in several
hundred prosecutions. Many offences that have or will be prosecuted are

         Type –one road trains operating at gross masses between 120.7 tonnes and
          125.6 tonnes or between 192 and 198 percent of the legal entitlement

         B-doubles operating at gross masses between 78.3 tonnes and 81 tonnes-or
          between 141 and 151 percent of the legal entitlement

         Rigid three axle trucks detected with gross masses between 29.14 and 30.76
          tonnes –or between 157 and 184 per cent of the legal entitlement.


18   Australian Transport News, October 2007


                                               27
National Freight Network Plan - Rail Tram and Bus Union Submission



The RTBU argues these overloading practices severely distort the grain transport
market and are a prevalent practice. The RTBU argues there is a need to assess the
origin/destination of illegal road freight movements, (including by type of road) the
tonnages and ntk’s involved, the cost to the various categories of road affected by
these activities, an estimate of their impact on the split between road and rail
transport on each branch rail line and the tonnage received in silos on branch lines
compared to major sub terminals and super silos.

The RTBU argues that the technology exists in the form of digital tachographs,
mandatory weighing devices at unloading sites combined with ITS and IAP to
effectively regulate overloading practices and effectively implement COR laws.

Safe Payments
An important development in addressing safety in the road transport industry has
been the campaign to introduce safe payments19.The NTC report said “despite
continuing efforts and reforms undertaken by state, territory and commonwealth
governments, safety outcomes in the road freight industry are still not at an
acceptable level.”

Following an ATC request two NTC commissioned experts concluded “the
overwhelming weight of evidence indicates that commercial industrial practices
affecting road transport play a direct and significant role in causing hazardous
practices”. The NTC report noted heavy vehicle driver fatigue and speeding
legislation addressed some of the underlying causes of on road behavior “ however
further reforms are needed to address the underlying economic factors which create
an incentive for, or encourage, unsafe on road practices. A system of safe payments
would be an important step in further driving those parties up the chain of
responsibility to address those incentive factors…. A level that enabled operators and
those who they employed to secure a return sufficient so as not to encourage
hazardous driving practices or other compromises in regard to safety”…..it “would lock
in the benefits of previous chain of responsibility reforms”.

The NTC recommended “that ATC endorse the establishment of a national scheme for
setting minimum safe rates covering both employees and owner drivers in the heavy
vehicle industry.”

The RTBU recommends that this Review ensure that C of R issues including
safe payments, overloading and fatigue are part of the development of a
national freight network plan.




19
  NTC: Safe Payments: Addressing the underlying causes of unsafe practices in the road transport industry.
October 2008.


                                                   28
National Freight Network Plan - Rail Tram and Bus Union Submission


Financing including Cost Recovery and Funding
Cost recovery
The RTBU argues there are a number of shortcomings with pricing across road and
rail freight transport and that rail has been disadvantaged by the approach adopted
for road user pricing.

There are different cost recovery models between the road and rail industries with
the PAYGO system not recovering full costs from heavy vehicles. For example, fuel
charges are used as an inaccurate approximation for distance charging, the PAYGO
systems allocates costs based on use and ignore costs of construction directly
related to heavy vehicle use and externalities are not factored into the pricing
regime.20

The Productivity Commission and the NTC found that bigger trucks are cross
subsidized by smaller trucks by $168m pa and that “ B Doubles have benefited
significantly from higher road spending particularly around ports ,grain silos etc” and
the number of B Doubles has increased by 267% to 9564 since 2000.21

The NTC 2007 Heavy Vehicle Determination recommendations were accepted by
ATC and some issues concerning cross subsidization were addressed. The
Productivity Commission Report said that the NTC charging methodology “is
conservative by international standards.”

The current heavy vehicle charging system under which vehicles pay the same
changes regardless of the mass carried ,distance traveled, time of day or location of
the vehicle disadvantages rail in the longer distances markets, in particular where
intense rail and road competiton exists, for example in intermodal freight.

The COAG 2007 road reform plan aims to address the mass /distance/location
issues.

The RTBU recommends that there should be a greater commitment by
government to a time frame for using technology to deliver direct heavy
vehicle road user charging based on mass, location, time of day and distance
and externalities and that this be part of a national freight network plan.


The introduction of a proposed Carbon Pollution Reduction Scheme would
internalize the GGE costs of both road and rail. The Federal Governments proposed

20 P.Laird Revised Land Freight External Costs in Australia, Australian Land Transport Research
Forum 2005.The paper refers to a long list of Australian studies and gave particular attention to 6
external costs of road and rail(accidents, air pollution, noise in capital , GGE, road congestion metro
only and road under recovery from articulated trucks)
21 NTC Fact Sheet. A quick guide to heavy vehicle charges, February 2008.




                                                   29
National Freight Network Plan - Rail Tram and Bus Union Submission

scheme acts against the rail freight industry as fuel taxes for heavy vehicles will be
cut on a cent for cent basis to offset the first year of the scheme, after which it will be
reviewed. The history of taxes and charges for the road freight industry suggests its
removal will not be easy. There is no economic rationale for the discrimination
against the rail industry.


Funding

Historic levels of Road and Rail funding.

1. In the 25 years to 1999 the Commonwealth spent $32 b on roads of which $18b
was for the national highway system. In 1974 the Federal Government established a
national highway system and assumed financial responsibility. In the same period it
spent $1.2b on railways.

2. The AusLink land transport funding package was introduced in 2004/05.The
concepts underlying the program were an advance on the previous ad hoc land
transport funding arrangements.

For the 5 year period to 2008/09 AusLink national network projects allocations was
$9.7b. $1.5b was for road maintenance and $8b for road and rail projects of which
14 % was designated for rail projects. This was an increase on historic levels but
roads continued to dominate funding.

 The AusLink funding package has a number of other categories in addition to
national network projects. They are essentially road only projects e.g. roads to
recovery, strategic regional roads and the black spot road safety program.


New Federal Government – New transport directions

The emphasis by the federal government on building infrastructure to provide the
base for future growth has been a consistent policy direction. In transport this has
been underpinned by the National Transport Plan adopted by ATC in February
2008. The centerpiece of infrastructure development is the Building Australia Fund
and the establishment of Infrastructure Australia.

Significant additional funds were provided to rail in a number of announcements.
The Government provided major equity injections for ARTC which will result in a
$2.3b investment plan.

The RTBU recommends that this Review support a reformulation of the
frameworks for the funding of strategic regional transport to allow for the
formulation of new regional transport policies which include regional
railways. This will require strategic alliances of participants in the grain


                                            30
National Freight Network Plan - Rail Tram and Bus Union Submission

supply chain, local councils or combinations of councils and the state and
federal governments.


2009 Federal Budget
The Government committed a new $8.5b of expenditure to road, metropolitan rail
and ports in response to Infrastructure Australia’s priority list of critical projects.
The funds will be drawn from the Building Australia Fund which stood originally at
$20b.

Of the $8.5b, $3.4 b will go to roads, $4.6 b to urban rail and $389m to ports. The
budget also provided some funds to six projects in the pipeline including $20m for a
feasibility study of Brisbane’s proposed inner city rail project.

The budget released IA’s priority list of a pipeline of 28 projects that had potential
but required further work. IA said it was not convinced that public investment in
ports and airports was justified because the private sector was wiling to invest if the
right governance and market framework were in place.

On top of the money drawn from the BAF the Government also tapped the existing
nation building program that replaced the Howard Governments AusLink to help
the states to deliver several big projects more quickly.


From AusLink to Nation Building Program
The AusLink program has been changed by legislation to the Nation Building
Program. Many of the categories of funding are similar to AusLink, though the
breakdown by program has changed and new components have been introduced.

The components of the Nation Building program include
    National network construction
    National network maintenance
    Roads to Recovery
    Black Spot
    Heavy vehicle program
    Off network projects and
    boom gates for rail crossings

Beginning with the last projects first the boom gates for rail crossings project. This
is the first initiative undertaken in this area by a Federal Government.$150m is
provided to the states and NT for 2008 and 2009-10.

The off network projects provides funds to state, territory and local governments
for road, rail and intermodal projects not situated on the national network. Nation
Building Program funding for off network projects is $692.7m.over 5 years. In a


                                           31
National Freight Network Plan - Rail Tram and Bus Union Submission

historical sense there is significant allocation for regional freight rail funding with
$135m earmarked for grain rail upgrading in WA and $71m for freight rail in
Tasmania. The WA grain rail funding has not been allocated as yet due to differences
between the parties.

The heavy vehicle program is aimed at delivering safety and productivity outcomes
for the heavy vehicle industry through the provision of $70m over the 4 years
2008/09 to 20011-12.

The Black Spot program is aimed at reducing the risk of road crashes. $30m was
allocated in 2008/09 and $60m in 2009/10.This is on top of the doubling of funding
for 2008/09 from $50m to $110m.

The Roads to Recovery funds are distributed to local councils. From 2009 to2013-14
allocations for the program are $350m in 2009/10 and $1.75b in over the period
2009/10 to 2013-14.

The Nation Building projects are structured slightly differently to the AusLink
categories .They essentially cover the former national network projects and off
network projects are similar to the AusLink strategic regional projects although now
there is a significant rail component.

Budget 2009/10: Nation Building Program 2008/9 to 2013/14 ($m)

Category of    NSW       Victoria QLD           WA        SA         NT          ACT
funding
Continuing
Projects        521.5     236.7      788.1       51.2       82.3          21.3
New
Projects       6024      2470.7     4604        1464       888.7      275.5       37.5
Total          6555.5               5392.1      1515.2     971.1      296.8       37.5
Road
Maintenance     698.3      304       547        325.9      243.2      121.9        2.9
Major Infra
Projects       2161      3265       1245        575        748         50
Total
Funding        8882.7    6276       7208.1      2416.1    1860.1      474.7       40.5


Notes
1. The continuing projects rail projects included NSW Port Botany rail links$42.6;
Victoria $100.15m; intermodal $20m

2. For new projects rail received: NSW $840m freight upgrade between Sydney and
Newcastle; Moorebank intermodal $300m, Port Botany road/rail access$150m;


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National Freight Network Plan - Rail Tram and Bus Union Submission

Victoria $50m, intermodal $76m.New projects also included off network projects:
WA grain lines $135m; Tasmania$70.1m

3. For major infrastructure projects funded from the Building Australia Fund the
total funding in response to the IA infrastructure priority list was $8.5b

4.To obtain a back of the envelope calculation of the total funding spend which is
road and rail freight orientated the major infrastructure projects funded by the BAF
have been excluded, this includes the Hunter Expressway and Ipswich Motorway.

The rail freight projects for the budget totaled $1.3b comprising rail boom gates,
network-new projects and continuing projects.

The road projects which advantage both road passenger and freight totaled $20.8b.

5. To obtain an approximate understanding of the history road and rail investment
for the Federal Government over the last generation the RTBU has calculated that
for the period 1974 to 1999 and the two AusLink/Nation Building Program funding
periods 2004 to 2014 road received $32b, $9b and$20.8b respectively: total $61.8b
This compares to rail spending over the period $1.2b, $0.7b and $1.3b respectively:
total $3.2b. This represents a spending ratio in favor of roads of approximately 18.8
to 1.


The case for change in financing Australia’s infrastructure needs

In 2005 a group of unions including the Rail, Tram and Bus Union commissioned
Strategic Economics to prepare a report on the case for change.22

Fortunately there has been a considerable change since the production of the
Report. Of the nine recommendations made in the report several have been adopted
including changes to institutional arrangements as represented by the creation of
the Building Australia Fund , the establishment of Infrastructure Australia, the Major
cities unit within the federal department of infrastructure and the adoption of the a
new framework of significantly increasing public transport investment in Australia’s
major cities.

The publications of Infrastructure Australia and other body’s shows there is a long
list of infrastructure projects that require funding. Because raising these funds
remains a burning issue we have summarized a number of the arguments and
recommendations which continue to be relevant in finding solutions to funding
infrastructure.


22
  Financing Our Future: the case for change in financing Australia’s infrastructure needs. Strategic
Economics, 2005.


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National Freight Network Plan - Rail Tram and Bus Union Submission

Bernie Fraser’s foreword continues to resonate
The ex head of the Reserve Bank and one of Australia’s respected economists briefly
outlined the reasons why there were so many problems in so many areas including,
energy, water, transport, housing, education and health.

Mr. Fraser pointed to the fact that capital availability as such has not been the
problem: additional loan and revenue funds could have been raised for
infrastructure projects if federal and state governments have been so inclined.

He argued some innovative public funding instruments which have been adopted
overseas should be considered along with greater recourse to superannuation
savings. The relatively small take up by Australian by Australian superannuation
funds of investment in infrastructure, particularly given the hammering on returns
due to the GFC is an issue which needs to be pursed by Government.

Executive Summary of the Report
The basic community view remains that we need to put more resources into public
infrastructure but don’t know how this can be achieved.

The traditional mechanism for financing public infrastructure was through
government debt borrowings supported by taxation. A range of studies have shown
that the benefits of government debt financing have been confirmed due to the low
cost of borrowings and linking costs over time to the flow of benefits. (Despite the
global financial crisis and the stimulus package and infrastructure program of the
Rudd Government Australia debt as a percentage of gross domestic product remains
very small by international standards.

The Union report argues there needs to be a stronger commitment from the three
tiers of government to address our major infrastructure challenges.

The Report argued that there are a range of innovative financing techniques that
could increase investment in infrastructure and the efficiency by which it is
managed.

The need for increased infrastructure investment
How can it be that, at a time when we have never been as wealthy as a society, we
have such a struggle paying for the infrastructure and their services that underpin
our prosperity?23

There are a number of factors driving demand for new infrastructure and their
services.




23
     John Kenneth Galbraith, the Affluent Society, New America Library, 1958.


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National Freight Network Plan - Rail Tram and Bus Union Submission

Firstly, there is the challenge of globalisation. The growing inter relationship
between Australia and the global economy has resulted in rapid increases in the
international movement of goods, people and information. This puts pressure on
our ports, airports, land transport infrastructure and telecommunications. The work
of IA has begun to give more developed understanding of these issues.

Secondly, demographic changes, including the forecast doubling of older
Australians, the desire by senior government figures to see an Australian
population of 35m by 2049 and the sea change shift of people to lifestyle regions is
putting increased pressure on our health care system, cities and our regional
infrastructure.

Thirdly, advanced economies are being transformed into knowledge based
economies where the basis of wealth and job creation is being driven by knowledge.
This has particular implications for growth of Australia’s cites.

Finally, the growing alarm about climate change is driving many countries to
transform ageing and environmentally harmful transport and energy infrastructure
and develop new infrastructure e.g. renewables and these are based on the
principles of sustainable development

There is a growing recognition by Australian Governments at federal, state and local
government level that we have to make significant investments in infrastructures
stimulate productivity and economic development.

The institutional changes of the BAF and Infrastructure Australia combined with the
last federal budget have begun the turnaround. How we continue to address the
“infrastructure gap” between what we need and what we have and crucially on a
continuing, sustainable basis is the policy area where we need to focus policy
attention of all three tiers of government.

Local government has had little say in how to address infrastructure gaps. They are
constrained from borrowing and from rate caps imposed by state governments,
councils are experiencing long term declines in local infrastructure.


Lack of innovation in Australia in relation to infrastructure funding and
financing
Five issues have been identified as to why there is less innovation and less supply of
investment capital available in Australia.

Financial imbalance
The historic imbalance between local, state and federal government which has
centralized most fundraising capacity in the Commonwealth. The states have
become dependent on block grant allocations and specific program funding and now



                                          35
National Freight Network Plan - Rail Tram and Bus Union Submission

over 50% of their revenues come from the Commonwealth. A continuation of this
trend will see states as a branch office of the Commonwealth.


Legal barriers
 Moving to greater financial innovation will require addressing legal barriers which
range form the impact of the income Tax Act to state government limitations on
local government borrowings under local government legislation.

In the private sector barriers limit the capacity to invest other than in a prescribed
way the most significant example of which the limitation on superannuation funds
to take into account anything but the rate of return on investments.

Underdeveloped capital markets
In part because of a historically growing tax base government has not actively
pursued alternative financing strategies for infrastructure. For many years
Australia’s past major infrastructure projects were funded with overseas capital.
The mining boom pre GFC saw the creation of the Building Australia Fund.
Further recent statements reveal a growing debate about changes to public policy
and more innovative financing.

One suggestion is from the Australian Council of Trade Unions who is arguing for
the establishment of a national infrastructure financing corporation that would use
the backing of the Commonwealth to lever better deals with the private sector. Such
a corporation could include private equity particularly with a pooled
superannuation vehicle or it could issue retail bonds.

Another proposal was from the Chair of BHP Billiton24 D.Argus who pointed to the
capital shortfalls in Australia which were being funded from outside Australia and
this threatened Australia’s long term future by undermining Australia’s ownership
of the underlying assets.

One suggested way forward is the deepening of Australia’s corporate bond market
by the creation of resource industry or specific resource industry bonds. This would
be part of a tax structure that gives Australian investors and superannuation funds a
particular reason to commit long term funds to resource development projects.

Conservative ideology
The GFC has seen many national governments including the Australian government
argue budget deficits and borrowing should fluctuate according to the economic
cycle. This projects a longer term vision and moves away from the conservative
argument that government should not run deficits.


24
  M.Maiden: Radical idea on how to develop resources cake and eat it too. Sydney Morning Herald
,23 October 2009


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National Freight Network Plan - Rail Tram and Bus Union Submission

Debt, in itself is not the problem. It is rather a question of whether such debt is used
productively or unproductively.


Tax Issues
The reference here is to negative gearing which was intended to increase the level of
private investment in the private rental market. This raises the question as to
whether tax incentives may be better employed in encouraging more productive
investment such as infrastructure. There is a clear need for a comprehensive review
of the current tax regime so as to affect greater levels of investment into key
infrastructure projects.

The prioritising of national, state and local infrastructure funding is needed. What is
needed across all three levels of government, and IA has shown the way, is

1. Mechanisms to determine what are strategically important investments at a
national, regional and local level
2. A robust, comprehensive and transparent method of cost benefit test that could
be applied to such identified projects
3. Faciliative intermediaries that can efficiently and creatively determine the
optimum methods of funding such projects
4. Creation of dedicated public infrastructure intermediaries able to draw in
wholesale and retail funds as required by projects

Some alternative strategies
To significantly increase investment in pubic infrastructure investment immediate
consideration should be given to the following.

Government special bonds
There are no reasons why special bond issue can’t be made to fund specific
infrastructure. This is common practice in a range of overseas countries where a
range of investors want low risk, long term, secure funding sources.

Dedicated Infrastructure funds
Governments are able to create dedicated infrastructure funds that are tailored to
the strategic needs of communities.

On a small scale the Canadian experience with community bond corporations has
seen the proliferation of hundreds of community bond corporations to fund local
business infrastructure initiatives. Projects once assessed by the regional
government are guaranteed. None have failed and in all cases the principal of the
bond issue has been returned to investors.

On a larger sectoral basis a special investment vehicle could be created to meet long
term needs e.g. Green fund, a Transport Development Fund or Health fund.


                                           37
National Freight Network Plan - Rail Tram and Bus Union Submission

One option is for Government to act as facilitator
Statutory initiatives
Rather than governments themselves undertaking borrowings another method is
the establishment of specialized statutory authorities to facilitate market
performance and to address market shortcomings.

Intergovernmental leaseback arrangements
Lease arrangements are a common mechanism to mange debt over the life of an
asset. It is common in the private sector and could be extended to the public sector.
Partnerships could be created between federal, state and local governments with
one tier of government owning the asset and leasing the asset to an operating
partner. Varying the partnership shares could accommodate cost sharing and
adjusting payment schedules to reflect each partner’s responsibilities.




                                          38
National Freight Network Plan - Rail Tram and Bus Union Submission


Other issues
Skill Development
The RTBU argues that the skills required and productivity increases available to
both construct, operate and maintain a national freight network are a key ingredient
of a network plan.

A variety of reports from parliamentary inquiries, research and industry
organizations have highlighted the need to plan for the future taking into account a
range of factors. The aging of the Australian population and the above industry age
of the transport and logistics work force pose major issues for future productivity
increases.

An ARA Report concluded that due to the changing face of the rail workforce “a crisis
was looming” with the risk of the rail industry having significant net outflows of
workers over the next 5 to 10 years is very high”25.It also reported that for a number
of years there has been a reluctance among rail operators to invest in training for
fear that the qualified employee will be poached before a return on the training
investment is realized. The predominant strategy of operators is to buy the skills
required, rather than grow them. Recent activity by one major operator in offering a
$10k bonus to sign on suggests this issue remains a live one for the rail industry.

The Transport and Logistics Centre on its web site www.talc.com.au outlines the
following as key workforce challenges for the transport and logistics workforce
     Aging demographic
     Much reduced school leaver population to 2020
     Low levels of recruitment of young people
     Low participation rates of women
     Low participation rates of the indigenous population
     58% of workforce have no post school educational qualifications
     Low completion rates in vocational training
     Less than 20% have higher education qualifications
     Less completion rates in vocational training
     Current and emerging shortages of skills
     Globalisaton of the labour market
     Low levels of innovation compared to other sectors
     Poor structural linkages between modes
     Lack of national leadership on skills question
     Lack of data on workforce planning

A range of action and projects have been initiated to address these issues. The
industry training body for the Transport and Logistics industry, the Transport and

25   ARA: the Changing Face of Rail: Executive Summary p2 2006.


                                                 39
National Freight Network Plan - Rail Tram and Bus Union Submission

Logistics Industry Skills Council has pursued a widened role to address the types of
problems identified. They include a range of collaborative research activities over
the next 12 months. In addition TLISC has established the Transport Research
Education Consortium.

Work being undertaken by TLISC includes a recently concluded collaborative
project with the Queensland Government to examine the capacity of transport and
logistics workers to transfer and apply their skills across a range of related
occupations.

A critical aspect of this work was to highlight where a persons/industries
investment in skills development could enable a person to move between and across
occupations “in a environment where skills shortages and skills surplus are driven by
external factors it is critical that workers have a clear understanding of where their
skills can be best applied across a range of jobs or job roles both within and across
associated industries.” 26

For rail workers this is a key issue. For example, rail infrastructure workers have
traditionally been viewed as having few recognized and transferable skills. The
industry has set about developing and applying TILSC training packages to this
component of the workforce. Progress has been slow with Certificate 111
qualifications yet to be endorsed. However many enterprises now have career paths
underpinned by competencies and qualifications.

In many regional areas the skills developed by infrastructure workers are
transferable to the civil and constructions and mining industries. Occupational
mobility assisted by recognized and portable qualifications is an important issue.

The role of women in the transport and logistics workforce is an increasing focus of
attention by unions and employers. Public sector enterprises including RailCorp
have led the way in the rail industry with a number of programs.

A recent paper 27 published by the group Women in Supply Chains (WIS) has called
on the transport and logistics industry to adopt a diversified workforce and a
culture that accepts women in the workforce .While looking at the education and
training of women in the sector the paper also investigates options to attract women
into the industry.

The paper examines issues such as women’s lower share of discretionary payments,
industrial and occupational segregation and family friendly workplaces. The paper
made 14 recommendations for companies in the sector to ensure that women are
able to compete equally for employment, promotion and retention.


26
     TILSC web site
27
     Making women visible -the Unseen Gender in Transport and Logistics Feb 2010.


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National Freight Network Plan - Rail Tram and Bus Union Submission

Another example of the rail industry being pro active was the ARA report into
indigenous employment.28 In addressing a looming skills shortage a workforce
development strategy to employ target groups of employees, including indigenous
Australians, has been adopted.

The ARA report outlined a number of options by which organizations can increase
the number of indigenous Australians in their businesses. These included
Development of Reconciliation Action Plans; Engagement of Indigenous Coordinator
/Advisor; Employment of indigenous apprentices and trainees, Pre employment
programs, Development of cross cultural awareness package, Employment of
Indigenous university students as cadets, and corporate leaders for indigenous
employment and extend indigenous employment strategies to multi sector
corporation’s rail divisions.

The above projects are but a few examples of innovative projects to address skills
shortages in the transport and logistics industry. In response to the question what
can Government do the current federal government has adopted a range of policies
and actions to encourage change.

The TALC website includes a presentation as to “What Can Government Do” and
includes the following;
     Plan for a future workforce
     Regulate accreditation and skills
     Facilitate recruitment and retention strategies
     Encourage employers to take up traineeships
     Coordinate agencies of government to best effect
     Assist existing groups to accelerate outcomes
     Engage with industry to provide leadership
     Include all Australians : especially women, regional and remote centres and
       indigenous communities

The Australian Government has undertaken massive amounts of expenditure in
transport infrastructure.

The RTBU recommends this investment should include industry action plans
around skills and workforce development issues.

The NTC Freight Rail Productivity Review provided a one page analysis of problems
in recruiting, training and utilising labour in the industry. No fresh insights were
made, and the work of the ATC sub committee was referred to. According to the NTC
analysis “the issue is of low significance, given the limited role for government
intervention” and “that consultation with industry supported this view”. The example


28
     ARA/BCA: Options for Increasing Indigenous Employment in the Rail Industry,2008


                                                   41
National Freight Network Plan - Rail Tram and Bus Union Submission

was given of perhaps the smallest rail operator operating in the sector and a general
conclusion that the rail industry faced the same problems as general industry.


The RTBU disagrees with these comments and argues that the issue of recruitment,
training and utilisation of labour for the transport sector is a priority issue.

The RTBU elsewhere in this submission noted that the assessment of competence
provisions of the national model bill were not being implemented in a number of
jurisdictions. Nor has any work been done on how organizations are meeting the
three year transition period for the adoption of the assessment of competence
provisions in those jurisdictions which have adopted the model bill provisions.

The RTBU notes that the COAG decision of 2007 to implement a national train driver
licensing scheme has not been finalized.

The ATC in late 200929 released a draft strategic action plan for workforce planning
and skills in the transport and logistics sector. It covered five themes: collaboration
and coordination, skills supply and labour market, education, training and
qualifications, careers and safety and security.

The draft noted emerging industry issues and opportunities included the
development of green jobs, the impacts of COAG’s regulatory reform agenda,
technological innovaton, globalisation and the shift from a modal focus to a supply
chain focus. These are issues which have been constant themes in the RTBU national
freight network plan submission. The Strategic Action Plan lists twelve strategic
focus areas under which actions can be developed to assist industry to respond to
these issues and ensure its workforce has the capability to meet these challenges
and opportunities.


Environment and congestion
In terms of reference for the National Freight Network Plan do not include these
issues. The RTBU argues that these issues must be included if long term planning
and investment decision making is going to make sense.

Attempts to pass carbon reduction legislation have been temporarily thwarted as
have efforts aimed at global agreements as expressed in the Copenhagen endeavors.
These are temporary setbacks. The RTBU argues that environmental and congestion
issues are at the heart of a national freight network plan. Government
announcements, policy and enquiries have outlined these. 30

29 ATC Transport and Logistics: National Workforce Planning and Skills: Strategic Action Plan,
October 2009.
30 National Transport Policy Framework: A New Beginning: February 2008; Garnaut Climate Change

Review-Issues paper –forum 5, Transport Planning and the Built Environment, White Paper. Prime


                                              42
National Freight Network Plan - Rail Tram and Bus Union Submission



The RTBU argues that the given the importance of greenhouse gas emissions in the
transport sector , the fact that transport is the fastest growing emitter, that a new
direction to achieve major change in transport greenhouse gases is required and
this will require new transport policies. These the RTBU argues will have to include
a substantial modal shift to rail.31

The RTBU recommends that this Inquiry should adopt polices which include
the modeling of what combination of modal shift policies would see a
substantial change from road to rail for freight transport, including urban rail
shuttles from ports and intermodal freight terminals and from road passenger
transport to public transport which also impacts on the mobility of road heavy
vehicle movements in urban areas.


Market based solutions in transport insufficient to tackle climate change
The RTBU in its paper to the Garnaut review argued that market based solutions to
sustainable transport were insufficient and that Australia was world leading in
urban congestion as % of GDP.

Furthermore, the enormity of the task in reducing transport emissions in Australia
will require a paradigm shift in the nations approach to the reduction of transport
emissions. The RTBU notes that until recently Australia has focused almost
exclusively on the road transport industry as a means of addressing lower emission
opportunities in transport.

A CRC paper32 argues that to achieve a low carbon economy
    sharp reductions in transport emissions are necessary and that this requires
      going beyond emissions trading to a new generation of transport policies
    that a modal shift form road to rail will have large economic ,social and
      environmental benefits
    carbon prices are necessary but not sufficient; other policies are required to
      support the massive private and public investment implied
    Higher social returns and lower emissions, will accrue from transforming rail




Ministers paper Building a Big Australia: Future Planning needs of our major cities October 09 and paper
by Minister Albanese….as late as 2006 COAG was arguing that state governments were responsible for
urban public transport responses to congestion. (COAG “Review of Urban congestion trends, impacts and
solutions”.
31
   See RTBU Submission to the Garnaut Climate Change Review, April 2008 and CRC for Rail Innovation:
Transforming rail: a key element in Australia’s low polluting future: Final Report January, 2009.
32




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National Freight Network Plan - Rail Tram and Bus Union Submission

Energy Efficiency.
The Siamese twin of discussion about climate change is the future of energy policy,
the imminent nature of peak oil, the price of fuel, the expansion of renewable
energies, the impacts for Australia’s balance of payments and the energy efficiency
of various forms of transport. Energy is a must include issue in developing a national
freight network plan.

The RTBU recommends that in developing a National Freight Plan options be
developed which include additional climate change mitigation measures that
go beyond a reliance on the market, action plans that substantially increase
rail’s share of the national freight task because of climate change and energy
efficiency considerations and that the economic, social and environmental
benefits of these policies be outlined.




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