COMMENT: The mother of all infrastructure projects has been stifled by the self-interest of two major industries, the jealousies and suspicions that plague our federal system, and a lack of will in Canberra, Peter Knight writes.
Infrastructure is the buzzword in political and economic debate in the second decade of the 21st century. Tony Abbott wants to be the ‘Infrastructure Prime Minister’. State budgets in recent weeks have announced big projects to spark flagging economies and boost jobs. This is all good news and good policy.
High Speed Rail (HSR) connecting the eastern seaboard cities of Melbourne, Canberra, Sydney and Brisbane is feasible, practical and profitable today. It can be done for around $30 billion, about a quarter of the cost estimated on old paradigms in 2013. And it can be done in less than seven years, not the 30 to 35 years previously suggested.
HSR could be the 21st century equivalent of the Snowy Mountains Scheme, and it would need little or no direct Government funding.
Vast cost savings could be made by laying tracks in trenches rather than tunnels near the cities and building housing over new inner-city land created by the trenches. Profitability of the system could be ensured by building a Fast Freight Rail (FFR) parallel to the HSR line.
This would halve the cost and delivery time of freight between Melbourne, Sydney and Brisbane. FFR would lift productivity and international competitiveness. It would end the isolation of the major cities caused by high freight costs.
The HSR/FFR project would best be accomplished by a private consortium rather than government. Government guarantee of private finance would ensure the project would proceed. This guarantee would be a contingent liability, not an increase in Government debt.
Australia has a population now large enough to support the project. The HSR/FFR project would aid budget recovery, spread non-mining investment along the east coast, create thousands of jobs and stimulate the economy.
Population is likely to double in the coming decades. Congestion will grow out of hand. HSR reduces congestion and maintains liveability by distributing more people into the regions.
HSR would mean fewer people living in major cities and more in regional cities within 30-60 minutes commuting time of the CBDs at speeds of up to 350km/h.
The project would build low-density housing over 30km of 100m-wide trenches into and out of Brisbane, Sydney and Melbourne. This would create 21 square km of free inner-city land. There would be huge value capture.
Many more people would live close to rail stations in easy walking distance for access to shops, public facilities and jobs instead of in poorly served new outer fringe suburbs.
When the first railway was conceived 200 years ago in England, it was blocked by powerful landed canal owners and stagecoach owners. Eventually this was overcome and an Act was passed enabling the first railway to be built for the 30 miles from Liverpool to Manchester. It was inaugurated on 15 September 1830. In the following 10 years, 1775 miles of track was built by hand with pick and shovel, horse and cart. Railways then drove the Industrial Revolution and economic development.
HSR/FFR would do the same. Together they would increase innovation, productivity, competitiveness and growth. Today, HSR/FFR are opposed by airlines and truck owners.
The main thing holding back development of HSR/FFR, besides competitors, is the Government’s risk aversion, which comes in the face of a historic level of business risk aversion and caution, which is slowing economic recovery.
The Government does not want to increase debt even for a profitable, economic Government infrastructure project.
A Government guarantee would be a contingent liability that would be unlikely to be exercised because of the profitability of the project and the incentive for government to do everything possible to make it work. There would be little or no direct cost to government.
The HSR/FFR project would give a huge stimulus to the economy when it needs it. Many of the adjustments necessary to bring the budget back to balance could be made with less pain with the economy growing at above trend for some years. The project would moderate the next recession without much extra debt or lower interest rates being needed.
In the national interest, the Government should guarantee private finance, and bring together the best minds, management and companies in the country in a private consortium to undertake a commercial feasibility study. It is justified now.
The aim is to grow liveability and prosperity while the population doubles.
The technology is well-known. It was first introduced in Japan 50 years ago. There is vast experience in its application around the world. HSR is an economic game-changer waiting to happen. Australia needs to think big and act smart.
Peter Knight is a former senior manage at BHP and a former Reserve Bank economist. He has studied high-speed rail for 20 years and is the author of a new book, High Speed Rail for Australia-Now.
