If there was one phrase that was said in every session of AusRAIL Live & On Demand, it would be “never waste a good crisis” and in the final discussion of the three-day program, focus turned to exactly how rail would come out of 2020 and implement the lessons learnt during COVID-19. Read more
The Australasian Railway Association (ARA) has published a rail construction tendering guide that provides advice to governments to streamline procurement for rail construction. Read more
The Victorian government has confirmed $1.48 billion to locally build 100 modern, accessible trams to replace A and Z class rollingstock. Read more
The dichotomy between building trains in Australia or overseas ignores the opportunities for procurement reform that would keep Australia competitive, writes Australasian Railway Association CEO Caroline Wilkie.
In recent months we have seen two very different approaches to rail procurement in Australia.
In New South Wales, the state government welcomed new rollingstock onto the network, after importing trains from overseas.
Meanwhile, in Victoria, the state government confirmed the order of the next tranche of V/Line trains, to be manufactured at Bombardier’s Dandenong facility.
As one state looked to promote local jobs in its own backyard, the other claimed doing so wasn’t really an option.
The truth is, both procurement processes highlight some of the challenges the industry is facing.
The NSW government’s erroneous claims that is wasn’t realistic to build trains in Australia were understandably met with disappointment from the industry.
We have – and always have had – a strong rail manufacturing industry in Australia.
We can be proud of our $2.4 billion rollingstock manufacturing and repair industry with capability and experience across the country.
Companies like Alstom, Bombardier, Downer, and UGL are leading the way in Australia, with over 900 businesses involved in rail manufacturing and supply nationally.
The industry can design, manufacture, maintain, and repair rollingstock to the highest standards, with capability in Cardiff and Broadmeadow in NSW; Dandenong, Ballarat and Newport in Victoria; Maryborough in Queensland; and East Perth in WA.
Metropolitan Sydney and Melbourne are the largest centres of rollingstock maintenance and repairs in Australia, and two of the three largest non-capital city employment bases for the industry nationally are in Newcastle and Lake Macquarie.
But the sector lacks the scale of its international counterparts and is hamstrung by the procurement processes that exist across the country.
While contract awards like those in Victoria do create jobs and support local businesses, more needs to be done to support the long- term health of the sector.
Victoria, like most state governments, applies local content requirements at the state level.
It is not hard to see why governments are prone to favouring a state-first procurement policy when awarding these contracts.
Research conducted by the ARA this year found that while the average business spends about twice their wages cost on intermediary inputs, the rollingstock manufacturing
and repair industry spends five times their wages cost.
It is understandable that governments believe keeping manufacturing in their state will realise these flow-on benefits and maximise the jobs and economic benefits generated from their investment.
But in practice, it really means there are fewer and fewer chances for the industry to win work, create jobs and support innovation and growth.
It means the team working on rollingstock in Victoria might not meet the local content requirements set by NSW, Queensland, or WA.
If the same team wanted to bid for a very similar contract outside of Victoria, they might need to have facilities and people located in the state where they are bidding.
For many companies, that kind of duplication – often for a single contract – is impractical, expensive, and difficult to manage.
Even if they do choose to establish a local presence, the costs can be prohibitive not just because of the need to be local, but because different states may favour different specifications to achieve the same outcome in their tender process.
In the end, this creates layer upon layer of complexity that drives up costs, makes it hard for rail manufacturers to work across jurisdictions and erodes the size of the project pipeline Australian businesses can work towards.
A national approach to rail procurement is the only solution.
We need an approach that recognises our manufacturing industry can only grow and scale up if we treat the whole of Australia as one single market.
We need to ask industry to deliver an outcome or solve a problem, rather than specify the individual components that must be used, even if they are not the best choice available.
We must consider the whole of life costs of an asset, and the additional economic and sustainability benefits our industry can deliver, rather than choose options that are cheap to produce but could cost much more to maintain.
If we take these simple steps, the industry will have greater certainty, increase its investment and training, and have access to a bigger project pipeline.
They will achieve new efficiencies and forge innovation that will make a difference for the industry and the people that rely upon it.
Ultimately, rail manufacturing will grow and increase its competitiveness, providing more jobs and opportunity than is possible right now.
We were heartened to hear NSW Minister for Transport and Roads, Andrew Constance confirm that he is willing to work on the issue with other state governments.
With more rail contractors and manufacturers looking to increase their use of Australian suppliers in the wake of COVID-19, there is no better time to act than now.
We look forward to working with Constance and his counterparts across the country to deliver better outcomes for the industry and the economy.
A future train line to the Melbourne airport will utilise the under-construction Melbourne Metro tunnel, Prime Minister Scott Morrison and Victorian Premier Daniel Andrews confirmed on Saturday.
The route was confirmed along with a start date for construction and a forecast completion date of 2029. Read more
The value of the rail sector to Australia’s economy has grown by 14 per cent, as shown in a new report from Deloitte Access Economics, on behalf of the Australasian Railway Association (ARA).
From 2016 to 2019, the Australian rail industry grew by $3.7 billion. Today, the rail industry contributes $30bn to the Australian economy, 1.5 per cent of the national total.
Freight and logistics groups have called out the NSW government’s undermining of its own mode share target for containers carried by rail into Port Botany.
The Australian Logistics Council (ALC), Freight on Rail Group of Australia (FORG), Freight and Trade Alliance (FTA), and the Australasian Railway Association (ARA) along with individual port rail freight operators are questioning the wisdom of allowing more high productivity vehicles on Sydney’s roads.
“By incentivising HPVs, government is perversely derailing their own policy to grow rail’s mode share target – at a time when Sydneysiders want safer roads and less traffic congestion and vehicle emissions,” said ALC board member and Qube managing director Maurice James.
The NSW government has been issuing permits for high productivity vehicles to access the Sydney road network and major motorways such as WestConnex. By allowing trucks which can carry two containers to travel within Sydney, this reduces the competitiveness of rail for the metro import container market.
The NSW government has set itself the goal of having 28 per cent of the container trade through Port Botany being handled by rail by 2021, however just 17.6 per cent is currently hauled by rail.
Instead of having each mode compliment each other, with rail for longer distances and trucks for the first and last mile, road transport was monopolising container traffic, with impacts on the local community, said FORG chair and Pacific National CEO Dean Dalla Valle
“Today, many HPVs are doing ‘every mile’ of the freight task in Sydney, placing heightened pressure on traffic congestion, road safety and vehicle emissions,” he said.
Dalla Valle advocated for a measure such as the Western Australian government’s Port of Fremantle container incentive scheme was needed in NSW.
“Prior to introduction of the incentive scheme at the Port of Fremantle in 2006-07, rail mode share was a meagre two per cent. The scheme underpinned growth of rail’s mode share which is now above 20 per cent – the highest in the country,” said Dalla Valle.
Director of the FTA and secretariat to the Australian Peak Shippers Association Paul Zalai said that governments should encourage importers to use rail services.
“Governments must maximise port assets and manage our trade gateways through incentivisation of rail usage for imports to metropolitan sites and importantly, streamlined connectivity to regional areas to cost effectively reach export markets.”
ARA CEO Caroline Wilkie said communities would be feeling the brunt of the lack of rail transport.
“The balance has tipped so far we run the risk of Sydney’s roads being over-run with trucks unless there is urgent action to use more rail.”
To make the most of infrastructure investments, the playing field for rail freight needs to be evened out, writes Caroline Wilkie, CEO of the ARA.
The confirmation of funding for the Port of Melbourne direct rail line to South Dandenong in August was welcome news for business, industry, and residents in the region.
The direct rail connection to the port forms part of the wider Port Rail Shuttle Network and will make it easier and more cost effective for businesses to access port facilities.
The Federal and Victorian government funding will deliver tangible benefits to businesses in Dandenong’s manufacturing sector and improve the efficiency of port operations.
Ultimately, the project will also take 100,000 trucks off the road, helping give local residents their city back in the process.
In the same month, the NSW government fast tracked approvals for the Botany Rail Duplication and the Cabramatta Rail Loop, putting its support behind greater use of rail within its freight network.
The projects will not only deliver this critical new infrastructure to meet the state’s freight needs but will take 54 trucks off busy city roads with every additional freight train travelling on the Botany line.
That will make a crucial difference as the Port of Botany’s freight task increases by 77 per cent in the 20 years to 2036.
As Minister for Regional Transport and Roads Paul Toole observed when announcing the approvals, these new connections are so important because the more freight is moved on rail, the less congestion there is with fewer trucks on the roads.
These projects are great examples of the difference rail freight can make, and why continued investment is essential to the continued liveability of our cities and towns.
But while the benefits of projects like these are obvious, more needs to be done to ensure the rail sector can meet our increasing freight needs.
While Australia’s freight task is growing – and will continue to grow – the role rail freight plays in meeting this demand has actually declined.
Recent years have seen the rail industry’s share of the freight task eroded by policy settings that favour other modes of transport and frustrate investment in the sector.
As a result, less than one per cent of freight travelling between Sydney and Melbourne is moved by rail – a far cry from the 40 per cent share the rail network maintained in the 1970s.
While the vast expanses of the country have seen east- west connections hold up better, rail freight’s modal share has started to slip there too, with rail now carrying just 54 per cent of the freight task across the Nullarbor.
It is hard to reconcile the declining role of rail freight at a time where the sector needs more capacity than ever before.
Part of the problem is how we price rail freight when compared to road.
While getting trucks off the roads remains a focus in these busy and often congested urban areas, heavy vehicle road reform has simply not progressed.
So, while rail freight access charges are based on maintaining and operating the infrastructure it requires, the road freight industry is not expected to fully cover the cost of maintaining and operating the roads it uses.
As we hear more about the importance of easing congestion, the sustainability benefits of using more rail services and the value of creating city precincts that make it easier for residents to get around, favourable pricing models for road freight is increasingly difficult to reconcile.
We must have a level playing field for all to ensure rail freight can grow to support the increasing demand for freight across the country.
This, together with harmonisation of standards across the country, could enliven the rail freight sector again and ensure it is ready to support the growth of our economy over time.
After all, the industry has shown how much can be achieved under the right settings.
Australia was the first country to move to fully autonomous freight trains when the mining sector adopted the technology to service iron ore mines in the Pilbara.
This capability has become a hallmark of mining in the region and the significant benefits the industry delivers to the broader economy.
Use of rail for bulk commodities has increased, bucking the trend of the broader sector.
With a level playing field and certainty of standards across the country, there is no telling what additional benefits further innovation in the sector could deliver.
But first, we need to get the basics right so that rail freight can compete equally and fairly.
After all, we cannot allow new investment in rail infrastructure that busts road congestion in our cities to be eroded by a policy environment that only encourages business and industry back to the roads in the end.
When the Rail Manufacturing CRC closed its doors earlier this year, it spelled an end to dedicated rail innovation and technology funding in Australia.
While the loss has been felt deeply by the industry, the fact is the CRC’s significant gains were achieved against all odds.
A new report commissioned by the ARA has found rail innovation is in decline in Australia, and urgent changes are needed if the $155 billion in rail investment to come over the next 15 years is to deliver a truly modern, responsive and innovative rail network.
The report found rail patents are falling in a market where a lack of national focus and certainty, and wrongfooted procurement processes, have created a culture where innovation is simply not encouraged – and at times impossible to progress.
It has called for urgent action to establish rail innovation as a national priority and clearly articulated the need for a single Australian rail market that replaces state specific approaches with national local content policies.
As the federal government highlights the importance of manufacturing to help create Australia’s path out of recession, there is a real opportunity for Australian rail to embrace innovation and play a greater role in the $362 billion global rail technology market.
To do that, we need a national approach that provides certainty and longevity for the industry.
For all the benefits the Rail Manufacturing CRC delivered, the lack of continued funding beyond its term and relatively low level of public investment compared to international models saw the opportunity under-utilised.
Only 63 cents of private investment on national projects were secured for every $1 of CRC funding.
By contrast, the UK Rail Research and Innovation Network attracts $2 for every dollar of public funding, and Japan brings in 20 times its public funding from the private sector.
They achieve those results because the policy settings are right, the long term commitment is there and the focus on rail innovation recognises the invaluable role of both the public and private sectors working together.
A national approach, tied to clear commitments to invest in research, would help achieve that here in Australia.
The ARA has long advocated for a single Australian rail market to give the industry the scale it needs to invest, grow and innovate.
The report makes it clear that is more important than ever as we look to the future.
Current state procurement processes not only create inconsistent local content policies – making it hard to create true centres for innovation – but they focus on the up front capital costs in making their purchasing decisions.
That means innovations that requires investment up front in order to save time, money and boost efficiency over the life of a project or asset often don’t get to see the light of day.
Public procurement processes also err on the side of caution, calling for like-for-like replacement in many cases.
The private sector may have better, faster, or cheaper ways of delivering on requirements, but these conditions prevent them from being put forward.
Overall, these conditions create a risk averse culture that dampens the willingness of the sector to try new things.
And that is ultimately to our detriment.
Australia has great capability in the rail sector and could lead the world on rail innovation if the conditions were right.
The world-first use of autonomous heavy haul trains by the resources sector in the Pilbara is evidence of that.
Australia’s manufacturing sector features some of the industry’s brightest minds. But their big ideas are more likely to be sent overseas than developed here.
With only one per cent of rail patent submissions coming from Australia in 2019, the only way is up.
This next phase of rail investment is a chance to modernise and innovate like never before.
It is a chance to build new skills and capability in Australia to create jobs and opportunity for the next generation of rail workers.
All we need to do is take action and make rail innovation a priority for all of us.
Finding the fast track for innovation in the Australasian rail industry is available here.