From a 1985 study published by the Federal Government. Click to see chronology of studies back to 1946

To cut straight to the chase, the ‘correct’ answer is $15 billion. Or at least that’s the widely accepted estimate.

It’s cited in this 2010 story quoting the Chairman of Infrastructure Partnerships Australia, Mark Birrell; in this 2011 interview with former Deputy PM and rail enthusiast, Tim Fischer; and more recently in this submission by the Australian Airports Association to the Federal and NSW government’s Joint Study on Aviation Capacity in the Sydney Region.

But where the hell did this figure come from? How accurate and reliable is it? Was it estimated by a technically skilled and independent body?

Thanks to the diligent research of one of The Urbanist’s many smart readers, I can tell you that $15 billion figure first appeared in a 2010 report by industry lobby group, Infrastructure Partnerships Australia (IPA), titled A realistic pathway to very fast trains. This impressive-looking report says (p 48):

In 1999, the cost for the second Sydney airport was reported to be in the region of $6 billion to $8 billion. A more recent media article said the cost of building a second Sydney airport had inflated to $15 billion.

That “recent media article” appears to be the real source. But here’s the interesting bit – the report says it’s an article titled, Do The Numbers Support The Very Fast Train?, published by The Melbourne Urbanist, on 3 May 2010.

Now I was flabbergasted to read that because I know the said Melbourne Urbanist rather well – after all, I am he (or at least I was up until three weeks ago when I came across to Crikey and shortened my moniker to The Urbanist). I can therefore tell you with the utmost authority that The Melbourne Urbanist did not estimate the cost of a second Sydney airport to be $15 billion. In fact The Melbourne Urbanist never attempted to estimate the cost. Period.

This is what I actually said in that post on Very Fast Trains (VFTs, also known as HSR, for High Speed Rail) back on 3 May 2010:

The cost of a second Sydney airport at Badgery’s Creek was estimated at between $6 to 8 billion dollars in 1999.  Clearly the viability of a VFT will be greatly influenced by how much a new airport and associated transport links cost. If it were to cost around $15 billion and emit similar levels of GHG during construction then a VFT would be competitive on the assumptions I’ve made here.

Cleary, my figure of $15 Billion wasn’t an estimate of what it would cost to build a second airport; rather, it was an estimate of what it would need to cost in order to make high speed rail between Sydney and Melbourne viable. I was referring to the fact that the lower the cost of a second airport, the less likely it is the numbers would stack up for High Speed Rail.

The IPA report goes on in the very next sentence to say that “industry analysts have confirmed for Infrastructure Partnerships Australia that $15 billion is a reasonable estimate of the cost of building a second Sydney airport”. The reader who alerted me to this issue takes the view – and I’m inclined to agree – that this probably amounted to no more than a chat around the IPA office, or maybe a phone call or two. The giveaway is that the IPA references my article, but not the “industry analysts”.

So the $15 billion figure has no standing whatsoever and should be ignored. It sounds to me like it would probably be in the ball park (and that’s perhaps why no one’s questioned its provenance), but if so that would be entirely coincidental.

As to my estimate that a new airport would need to cost at least $15 billion to make HSR viable, that’s now out-dated. The Federal Government’s current study puts the cost of providing HSR between Sydney and Melbourne at around double my deliberately conservative estimate (which was a mere $30 billion). Hence the cost of a second Sydney airport will very likely need to be even higher to make HSR viable.

The broader issue here is that figures will be invented if none exist. That can sometimes be politically convenient, but the NSW and Federal governments would do a great service to public discussion if they were to put aside their nervousness and produce at least some broadbrush estimates to fill the evident vacuum.

You’ve got to wonder how many other public debates are underpinned by dodgy numbers. It would be easy to say the media should’ve uncovered this mistake, but that would be unreasonable – this is expert stuff that journalists can’t always be expected to be across. Governments and experts in the relevant field are the ones who should be asking the questions.

What is the What?!!! Wau, Southern Sudan

There’s a long history of rent-seeking in Australia over major projects. Business puts a lot of effort into lobbying government and the media to subsidise projects the private sector wouldn’t otherwise touch with a bargepole.

So when IPA (Infrastructure Partnerships Australia) – the nation’s peak infrastructure lobby group – releases a new study calling for land to be reserved for a High Speed Rail (HSR) service from Brisbane to Melbourne, I don’t immediately assume it’s an impartial assessment.

However that didn’t bother The Age, which ran the story as the lead on the front page of Saturday’s issue. The paper reports that AECOM, who prepared the study jointly with IPA, was involved in France’s TGV and Britain’s HS2 HSR projects.

The Chairman of IPA, Mark Birrell, is also on the board of Infrastructure Australia, the body established under legislation to advise the Federal Minister on infrastructure needs and priorities.

No, rather than assume the report is impartial, I thank the angel of small mercies that the only promise on the table from the Greens and Labor is for a $20 million feasibility study of HSR. There may be a thousand more welfare-enhancing ways that $20 million could be spent, but it will well and truly have earned its keep if it leads to the right decision on what could be a $40 – $80 billion investment in HSR.

I’m not going to reiterate the many and varied problems I see with HSR, since I’ve covered them before (see here, here, and here, ). What I do want to address however is the way the planned feasibility study will be conducted.

It must be kept in mind that this study is about government’s role in HSR and how much it’s prepared to pay directly or via the tax system. Private investors have already done or will do their own analyses. So the study has to be objective and managed at arm’s length from any parties with a potential pecuniary interest.

In my view the study should be managed directly by the Minister’s Department. An advisory committee specially constituted for the study with expertise drawn from disinterested parties could be helpful, but the most useful thing would be a transparent process. Drawing some inspiration from the Government 2.0 idea, all briefs, scoping papers and technical reports should be made public from draft to final stage and subject to an ongoing process of on-line inspection, comment and debate.

There’re also some technical issues specific to this proposal that need to be addressed. The study should (not exhaustive):

• Examine the impact of HSR on existing industries. In particular, how would consumers be better off with a monopoly train operator replacing a competitive airline industry with four major operators servicing the east coast? And how would HSR affect competition within the airline industry and the ability of airlines to provide regional air services elsewhere in the country?
• Account for carbon emitted during construction and evaluate the estimated savings in operating emissions against the cost of abating it in other ways. It should show how expenditure on such a massive scale justifies emissions savings on the Sydney-Melbourne route that could be offset in other ways for less than $50 million p.a.
• Define the mechanism by which HSR could attract high value jobs away from capital cities to regional areas, rather than simply assuming it will happen
• Assess what impact HSR will have on small country towns located within the ambit of larger regional centres served by stations – will the life be sucked out of them?
• Examine the extent to which HSR would promote sprawl by making regional cities located close to capital cities viable commuter dormitories. What effect would this have on the distances that residents located in these satellites drive by car, especially on weekends?
• Evaluate the assumption that all travellers want to depart from the CBD. For example, what proportion of (high-fare) business travellers begin or end their trip from home compared to those who embark from the CBD?
• Explain why lower security arrangements when boarding HSR compared to planes is sustainable in the longer term. Why would terrorists exempt HSR?
• The extent to which reductions in traffic congestion in places like the Sydney-Newcastle corridor can be achieved by providing HSR and, if so, over what period can they be maintained before they’re swallowed up by latent demand?
• Determine at an early stage the level of explicit and implicit subsidies, if any, provided to European and Asian HSR operations and the value of extrapolating from their successes in light of the distances between major cities in Australia and the relatively sparse distribution of significant regional centres
• Calculate the cost imposed on urban commuter services, urban freight services and country and interstate train services if priority within major urban services is given to HSR

Finally, the best case for HSR will probably lie in its potential to provide a better option than construction of a second Sydney airport. Hence that aspect will demand very close attention.