Just when it looked like the Federal Government’s $20 million East Coast High Speed Rail (HSR) phase 2 feasibility study had been left on the shelf, The Australian Greens put it back on the table this week.
The Greens are promising to spend $1.23 billion to establish a High Speed Rail Authority. The new agency would draw up the business case for the proposed HSR line, obtain regulatory approvals, secure “ownership of routes”, and prepare a comprehensive EIS.
Greens MP Adam Bandt said at a media conference on Tuesday (see exhibit) that Australia is the only continent apart from Antarctica without HSR. It would be “nation and planet building” and would “solve some of the biggest problems Australia is facing as a growing country”. He says it’ll create 200,000 jobs.
The political appeal of HSR for The Greens is obvious. For most progressives rail is automatically a good idea – a no-brainer. The Greens committed to HSR long ago; indeed, the feasibility study was done at the party’s behest as a condition of support for the Gillard government.
Of course the 200,000 jobs claim is blatant politicking – if the money weren’t spent on HSR it would be spent on something else that created much the same number of jobs (but 200,000?! Really?) That’s not the key issue though. The real worry is that HSR in Australia would be a massive boondoggle and wouldn’t advance a progressive agenda.
It’s worth revisiting my earlier discussion of the phase 2 report (Would High Speed Rail really make Australia better off?). I reported back in April that the feasibility study estimated it would cost $114 billion to build the east coast network. Most of that (around $100 billion) would have to be paid for by taxpayers with no hope of getting the money back.
That’s a monumental sum. It’s more than six times larger than the $17 billion the Rudd government spent on the Building the Education Revolution (BER), even though that was an emergency program to bolster the nation against the unprecedented 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 ultimately make a 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’d have to be enormous benefits to warrant that sort of unparalleled public expenditure. There’d have to be a huge reduction in negative externalities like greenhouse gas emissions to justify such an extraordinary outlay of public funds.
But there’s the rub. While the feasibility study says the total benefits would equal the costs (Fn 1), the estimated net value of the benefits from externalities over the 50 year appraisal period is just $2 billion.
In fact externalities only account for a mere 3% of the total estimated benefits.
Almost all the economic benefits come in the form of savings in travel time. The largest group of beneficiaries numerically would be leisure travellers who journey between regional centres and capital cities.
But the time savings that count most are those made by business travellers journeying between capital cities. Although they would only number around a third of HSR users, their time is valued at a much higher rate than the more populous leisure travellers. Their time savings accordingly make a disproportionately large contribution to the value of the overall benefits.
The Greens don’t explain why taxpayers should subsidise business travellers so they can save time. If the saving is so valuable to business travellers, they should pay the full cost of constructing the line.
Nor do The Greens explain why taxpayers should divert circa $100 billion from other public purposes to replace a largely privately funded and competitive inter-city aviation industry with another form of public transport. There’s no explanation of why it would be good policy to use public funds to replace plane seats on inter-capital routes with train seats.
And The Greens don’t explain why taxpayers should spend such an extraordinary sum in order to gift east coast regional leisure travellers with a faster trip to the big smoke. There’s no economy or “planet” transforming change here – these are country leisure travellers!
Here’s a thought experiment I proposed in an earlier article: Suppose Boeing released an amazing but expensive new plane that could cut 15 minutes off the flying time from Sydney to Melbourne or Brisbane. Would there be anything like the same level of enthusiasm for public subsidy?
Would there be comparable pressure to provide $100 billion or more in public subsidies to the airlines so they could update their fleets with the new planes? I think it would be taken for granted that those who get the benefit should pay for it.
The feasibility study says HSR won’t deliver net economic benefits from regional development. The Joint study on aviation capacity for the Sydney Region concluded it won’t obviate the need for a second airport in Sydney.
As I’ve said a number of times before, HSR in Australia would be a boondoggle. The fact that countries like Spain have extensive HSR systems doesn’t make the case that it would work in Australian conditions; if anything they provide a cautionary tale about poor financial management (See High Speed Rail: if they’ve got it, shouldn’t we?).
High Speed Rail should not be part of a progressive agenda in Australia. There are far better and more transformative ways that an extraordinary sum like $100 billion could be spent on infrastructure: e.g. improving public transport within our major cities; replacing coal-fired power generation with renewable energy.
East Coast HSR would be corporate welfare, rural pork-barrelling and greenwashing. It would just suck public funds away from projects which could actually make a real environmental, social and economic difference.
(Fn 1) The Greens say they’ll implement the Accelerated Program set out in the feasibility study which would see Sydney-Melbourne connected five years earlier ( i.e. by 2035) than with the recommended program. However the feasibility study notes that “bringing the program forward would reduce the economic benefits, primarily because the market volumes would be lower when operations began.” This doesn’t appear to be acknowledged by The Greens.
(Fn 2) The Greens claim a Benefit Cost Ratio of 2.3 but that’s misleading. It’s based on a discount rate of 4%, which is acceptable for social facilities like schools and hospitals but not for transport projects. The appropriate discount rate is 7%, which the feasibility study says gives a BCA of 1.0. i.e. the benefits equal the cost. As noted above, those benefits are mainly time savings for capital city business and regional leisure travellers.