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HSR High Speed Rail

Apr 12, 2013

Would high speed rail really make Australia better off?

Australians love the idea of high speed rail but the report released yesterday for public consultation by the federal government shows it would be a very poor way of spending public money

Alan Davies — Editor of The Urbanist

Alan Davies

Editor of The Urbanist

HSR share of combined HSR/air travel market, comparing the final model forecast for 2035 with international evidence (source: DoIT Phase 2 HSR report)

The process has taken two years, but Anthony Albanese eventually released the second and final report of the Commonwealth’s $20 million study on east coast High Speed Rail (HSR) yesterday.

It would take till 2040 to get started in the key Sydney-Melbourne corridor and capture half the air travel market. The headline finding however is the truly breathtaking cost of construction.

The study estimates it would cost $114 billion to build the east cost network, most of which (at least $98 billion) would have to be paid for by taxpayers with no hope of getting the money back.

That’s a phenomenal sum. It’s more than six times larger than the $17 billion the Rudd government spent on the Building the Education Revolution (BER) program. That was an emergency program to bolster the economy against the threat of the GFC.

It’s getting on towards three times the cost of Labor’s NBN scheme. There’s a crucial difference though – the NBN is designed to recoup the $37 billion outlay and to ultimately make a small profit.

In fact HSR might cost even more. The $114 billion figure is the P50 estimate. The P90 estimate is $127 billion i.e. “in 90 per cent of simulations, total construction costs are expected to be less than $127 billion”.

There would of course be the inevitable political pressure to widen the scope of the project. Canberra and the Gold Coast might not be satisfied with the envisaged spur lines. Larger regional centres would invariably push for services to stop nearby.

The study says HSR will at least earn enough revenue to pay its operating and asset renewal costs. If so, that would put it in rarefied company among public operators of scheduled public transport services in Australia.

The critical assumption is ticket prices are pitched at the same level as current air fares and can be maintained at that level. That’s got to be a big risk, especially for trips between regional centres and capital cities.

Still, while the up-front cost of building HSR would be massive, whether it would be worth it depends on the scale and nature of the benefits it would provide.

If it were to deliver the sort of transformative leap in productivity, living standards and social mobility provided by (say) the introduction of universal education more than a hundred years ago it would doubtless be money well spent.

But the study shows the benefits are modest relative to the cost. Even with hopeful assumptions about the share of patronage it could win away from aviation, the benefits would only equal the cost.

They increase to double the cost if a more optimistic 4% discount rate is assumed instead of 7%. That’s an arguable assumption but it’s the composition of the benefits that I think is most telling.

Many observers know HSR will cost a staggering amount but think lower emissions, pollution and congestion would more than justify the outlay.

What I think will surprise many readers is the net value of all externalities summed over the 50 year appraisal period at a 4% discount rate is just $2 billion. Externalities only account for 3% of total benefits.

Almost all the economic benefits come in the form of user benefits, especially savings in travel time. The largest group of beneficiaries would be leisure travellers who journey between regional centres and capital cities.

But the time savings that count most in the economic evaluation are those made by business travellers journeying between capital cities.

Although they would only comprise around a third of HSR users, their time is valued at a much higher rate than the more populous leisure travellers so their time savings make a big contribution to the overall benefits.

That’s surprising. In their recent study, the Greens (unabashed HSR boosters) argued HSR would offer no time savings over air for inter-capital business travellers.

The report doesn’t measure the regional development impacts of HSR, arguing they’re too uncertain. In some cases they might also be negative e.g. small towns might lose out to regional centres served by HSR.

What others call regional development I think should more properly be labelled regional sprawl. Give people faster transport and they’ll take the opportunity to live further away in bigger houses, especially if it’s heavily subsidised.

Some argue HSR would obviate the need for a second Sydney airport, but the Joint study on aviation capacity in the Sydney region contended another airport is still needed. It concluded that “HSR will not provide the services to fully address the growth of international and domestic peak business traffic and the limits on aviation capacity”.

Australia already has a pretty efficient and competitive aviation industry. Yet the proposition implicit in HSR is that we should spend an enormous amount of public money to replace airplane seats with train seats i.e. to substitute a subsidised form of public transport for a (mostly) privately funded one.

All the capital costs and around one third of operating costs of public transport in Australian cities is paid for by government. But that’s not the case with interstate and regional air travel – it’s largely profitable and priced at market rates.

There’s no good reason why we should spend huge sums of public money to change that in order to gift regional leisure travellers and capital city business travellers with faster trips. Not only is the warrant doubtful but even if taxpayers believe these groups warrant assistance, it would be an extraordinarily expensive way of providing it.

I wonder if there’d be anything like the same level of enthusiasm for public subsidy if Boeing (say) released a new plane that could cut 15 or even 30 minutes off the flying time from Sydney to Melbourne or Brisbane.

Would there be comparable pressure to provide $100 billion or more in public subsidies to update the nation’s fleet of planes? I think it would be taken for granted that not only would those who get the benefit be prepared to pay for it, but they should pay for it.

As I’ve said a number of times before, HSR is a boondoggle. There are far better and more transformative ways we could spend an extraordinary sum like $100 billion: for example on improving public transport in our major cities, or on replacing coal-fired power generation with renewable energy.

I’ve had a good look at the overview document (43 pages) but I’ve only skimmed the full report (516 pages). I’ll have a closer look at the details and no doubt revisit this fascinating issue again shortly, especially since Mr Albanese is inviting public comment until 30 June.

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15 thoughts on “Would high speed rail really make Australia better off?

  1. Dudley Horscroft

    Cud Chewer pretty well gets it right. I recall that the first VFT proposal required curves with a minimum 9000 m radius. The second set a minimum radius of 7000 m, as 9000 m radius was not needed. Tilting can reduce the required curve radius further, and this reduces cost. Bridges are cheaper than tunnels, I doubt that the route has been optimised so that the split between bridges and tunnels cannot be improved.

    Access to Sydney does not need to be via a very lengthy tunnel. The East Hills line has been quadruplicated so expresses can use the outer tracks. These can, or should, be aligned so that 200 km/h can be maintained (this is the speed of the 40 year old HST 125 diesels in the UK – the basis for the slower XPTs here! The benefits of going to 300 km/h may not justify the lengthy tunnels, but given the width of the railway reserve it is plausible speeds considerably more than 200 km/h could be maintained on this line. The last few miles into Sydney – a single track tunnel is all that is needed – what frequency service are you talking about? Of course, if you are looking at the Second Harbour Crossing for suburban services it would be easy to fit in the VFT between suburban services, with the former getting its own track asap once outside the tunnel (single track for the VFT between the two suburban platforms, cross platform interchange to both).

    But where it is considered desirable to remove curves on the existing lines, it would also be desirable, if possible, to do so by using alignments which would be on the future VFT route. One section is from Hexham north to Stroud, where a near straight line could replace the curly route via Dungog. This, even with the current trains, could take 45 minutes off Sydney Brisbane time, improving the end to end time for freight services and departure and arrival times.

    Much of the Sydney-Melbourne line had curves added to reduce gradients so the weak steam locos of that era could haul the heavy goods trains of those days up the hills. This is an area where the line could be straightened, with benefits to goods and passenger trains. Only recently a spiral was put in to help trains climbing the hill!

  2. cud chewer

    When arguing about the cost-benefit of high speed rail it is good to have a credible and trustworthy model of both the cost and benefits.

    Sadly, the HSR Phase 2 report only has done one of those.

    Its costings are based on assumptions that lend themselves to every form of over-design and cost-inflation possible.

    The costing process is flawed in many ways.

    1. The basic physical assumptions are flawed. And in particular the acceptable minimum horizontal curves. The references in the report point back to standards that are based on past practice and not on present trends. They’ve used as a basic assumption that horizontal curves should have a minimum radius of 7,285m where in fact half that radius is possible with little more than tilting suspension. That alone accounts for a number of expensive routing decisions.

    2. The a-priori assumption of cut and fill construction methodology. But absolutely no consideration was given to more cost effective construction techniques which can be found in present engineering practice.

    3. The assumption, which underlies point 2 and that is heavy rail vehicles. Again, what they’ve done is import standards that were developed to codify past practice, on overseas railways where mixed use was unavoidable. We’re building a brand new, passenger only service and yet the report says nothing about how this can be taken advantage of in terms of less massive structures.

    4. Ancillary assumptions. Such as making the Sydney station a terminal station which multiplies its cost. Neglecting to consider a through station for Sydney with a lower cost fast connecting service providing the last 5 minutes to the CBD. A decision that would have reduced the tunneling needed by many Km.

    5. Failing to consider the option of reduced speed in a few short sections that would save a lot of cost, traded off with higher speeds (higher than 350Km/hr) in straight sections.

    7. The Woolongong debacle. Where they wrote off Woolongong by costing it as if it had to be a through station. Which would naturally bring about the cost effects and other consequences described in the report. But not once mentioning, let alone modelling, a spur line for Woolongong. Even stranger considering they then opted for a spur for the GC. How a spur line for Woolongong could not have been thought of let alone even mentioned is a mystery.

    8. Costing inputs for tunneling that are pretty much ad hoc and whilst the Phase 1 report attempted to justify the tunneling costs by using well chosen anecdotes, the Phase 2 report dodges this issue entirely and merely refers off hand to “industry sources”.

    Look, what we have is is a credible patronage model and a half decent first-draft of a route.

    What we don’t have is the cost-benefit analysis that would depend on a deeper understanding of the physical assumptions, construction method and other factors that affect the cost.

    What we need now is for the whole issue to be handed back to engineers whose task is not to write another cost benefit/route study but instead to go back to basics and come up with means to reduce the cost to a fraction of that assumed in this report.

    I’ll stick my neck out. With properly designed vehicles, lower mass structures, modular, pre-fab viaduct structures (basically lifted into place one section at a time) and some more thought put into exactly where you do need speed, this entire project should come in at a quarter of the cost.

    Happy to go into more technical detail if you wish. I’m just here to prick people into realising that its pointless having this debate if the basic physics, engineering and costing hasn’t been anywhere near settled.

  3. Professor Tournesol

    London-Paris by HSR is roughly time equivalent to making the trip by plane once you factor in travel to and from the airports, security etc. Most of the London – Paris business travel is via train though, it’s far more convenient, comfortable, less hassle and much easier to work on the train during the trip. Some of the assumptions accepted in this article don’t bear up to actual use patterns.

  4. MikeL

    I thought the whole point of building HSR is to diversify our options. Right now you catch a plane or you drive. Both of those depend on methods of burning fossil fuels that are less efficient than the power plants which might generate electricity for HSR. Should anything happen to drive oil prices up globally, rail travel will weather the increase more robustly.

  5. Alan Davies

    Smith John #10:

    Nicely and succinctly put.

  6. Smith John

    Surely the following statements –
    – the economic benefit cost ratio is 2.3: 1
    – user benefits are 97% of total benefits
    – it would not be viable without government support

    – cannot be all true.

    If the benefit cost ratio is so great, and the benefits are almost all private, private investors should be able to harness the benefits to pay for the project.

  7. Krammer56

    On top of all those very sound arguments for not building this I awlays get back to this: is this the most important thing we have to spend $114B on??

    How about fixing urban public transport instead ??(sorry Tony Abbott, but you are simply wrong!!). Or maybe a few hundred hosptials or thousand schools or buying Holden and maintainingg a car industry for the benefit of Australia not GM in the USA, or lots of other much better ideas.

    Every time some interest group trots out one of these massive multi-billion dollar projects (a la Doncaster Rail, Airport Link, EW tunnels) lots of people jump up and down and demand one of them right now – but which one (if any) do we really need first?.

  8. Socrates

    I agree HSR makes no sense. It is barely economic iin UK, despite shotter distances and higher populations. I am pleased with the report, and that the consultants didnt try to oversell thia project that would be a waste of money.

  9. Alan Davies

    duke the lost engine #6:

    I’m saying it would be a boondoggle given what we know now. But in a few generations, who knows? Perhaps as you say HSR will make more sense 50 years from now but lots of other things will have changed too and it might make even less sense. I agree though that there’s value in thinking more seriously about HSR, which presumably is what this study is about.

    Reserving the land at Badgerys Creek for a SSA was a no-brainer at the time. Doing likewise for HSR along the Brisbane-Sydney-Melbourne corridor however is questionable unless it can be shown there’s a constraint on aviation capacity that can’t be addressed at lower net cost.

  10. duke the lost engine

    Alan, indeed all evidence is that HSR in the foreseeable future would be a boondoggle.

    But what about in a few generations time? By 2060 our real GDP will likely be around what Germany’s is now (assuming 2.5% growth pa), mainly concentrated along the east coast. Of course, our big cities will still be 1000km apart; it might come down to relative energy costs.

    It’s very difficult to predict that far out, but it seems to me that while committing to HSR now would be extreme folly, starting to think about it more seriously might be worthwhile (just like starting to think about Sydney’s second airport in the 1970s might still turn out to have been worthwhile…)

    Granted ‘HSR in a few generations (maybe?)’ is not as catchy as ‘HSR now!’

  11. Russ

    Alan, I am not sure what your point is? The NBN is a worthwhile project, albeit with significant uncertainties.

    A Sydney-Melbourne HSR might be worthwhile – 2.3 is quite reasonable, Brisbane-Sydney is 1.5 – with probably even more uncertainties. Earlier studies have had negative financial returns, this study does not. The assumptions matter, including things like route and service levels, future investment, scalability and life-time (is 50 years appropriate? A plane lasts 50 years, a rail reserve/tunnel might last 200). Some of those assumptions are still odd: setting an urban design guideline for 250km/h significantly increasing the tunnelling requirements. The biggest assumption though is that there is no increase in air capacity.

    Hence my third point. At some point state/federal governments are going to have to sink a lot of capital into long distance travel and the urban amenities to support it. It would be nice if it was planned out instead of every party going off in their own direction.

  12. Alan Davies

    Bernard Keane has just put up an article on this topic at Crikey, High speed rail just doesn’t add up – time to move on. I like this line: “We already have a highly competitive, efficient transport network between Brisbane, Melbourne, Sydney and Canberra — called airlines. There is no market failure for government to address here”.

  13. Alan Davies

    Russ #2:

    On your second point. The real financial IRR for the Sydney-Melbourne leg is 1.0% versus 0.8% for the entire network. The economic IRR for the Sydney-Melbourne route is 7.8% vs 7.6% for the complete network, and the BCR is 2.3 vs 2.0 (it’s 0.9 for Sydney-Canberra).

    $50 billion for Sydney-Melbourne is still three times the BER and more than the NBN. The NBN is (a) national and (b) designed to recover its costs from users.

  14. Scott

    Whenever I hear people advocating HSV in Australia, I always think of that Simpsons episode regarding the Monorail in Sproingfield…
    Hopefully this report will end the hope of HSR in Australia. The plane is a superior form of transport, and with the advent of low cost airlines, readily accessible for business and leisure traveler alike.
    Lets all move on.

  15. Russ

    A few random thoughts from reading:

    – As reflected in the graph above, the economic modelling now projects over half the derived benefits from inter-city business users, as opposed to regional travellers in earlier studies. setting up a competitive express route made a big difference to the net benefits. And to the projected need for additional air capacity.

    – The $114b over 45 years is a little misleading. The $50b over 20 years for the Sydney-Melbourne route is much better value. Given the time-frames concerned and the projected air demand, the HSR is also likely to be in lieu of a third Sydney airport, not a second.

    – Making assessments on a project specific basis has arrived at two very different documents for airport and HSR, and a narrow base of options. Given the overlap they really ought to have been tabled as an east-coast travel and regional growth strategy.