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HSR High Speed Rail

Mar 15, 2016

Why are we still taking East Coast High Speed Rail seriously?

East Coast High Speed Rail is the boondoggle that just won't go away. Yet gunzels, rent-seekers and progressives stand side-by-side in wanting to squander $100 Billion on this folly

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Artist's rendering of a TGV-Type California High-Speed Rail trainset with livery
Artist’s rendering of a TGV-Type California High-Speed Rail trainset with livery

Last week the CEO of Beyond Zero Emissions (BZE), Stephen Bygrave, asked in the pages of The Guardian, Why are we still waiting for high-speed rail between Sydney, Melbourne and Brisbane?

(This) disruptive project is a must for Australia if it wants to join other developed economies in the 21st century. One simply cannot imagine an Australia, with populations in both Sydney and Melbourne of eight million, still relying on air, road and an ageing rail system.

Dr Bygrave’s main arguments for Melbourne-Sydney-Brisbane High Speed Rail (HSR) are:

  • It would only cost $84 Billion according to BZE’s analysis; the Australasian Railway Association (ARA) reckons it can be built for $68 Billion.
  • It would “radically” reduce emissions.
  • The investment community is crying out for infrastructure projects with safe returns.
  • HSR is a commercial proposition; the private sector can meet the majority of the costs.
  • Labor’s Anthony Albanese and the Liberal’s Andrew Robb support the idea.

The only independent expert study of HSR in Australia was the 2013 $20 million AECOM study commissioned by HSR booster Anthony Albanese himself when he was Minister for Transport. It concluded East Coast HSR would cost $114 Billion (P50) to $127 Billion (P90) to build (2012$$).

It could cover its operating costs but virtually all the cost of construction would ultimately have to come from Government. That’s an extraordinary sum of money; it’s five to six times larger than the Rudd Government’s $17 Billion GFC-busting BER program.

BZE and the ARA are both lobby groups so it’s no surprise they insist it could be built for a lot less. BZE is the same organisation that two years ago claimed Melbourne Metro could be built for $3 – 4 Billion when the acknowledged cost at the time was $9 Billion and is now $11 Billion nominal (see What does urban rail really cost to build?).

As Bent Flyvbjerg frequently reminds us, history says all the risk is on the other side; AECOM’s estimate is almost certainly bound to be too low (see Are cost estimates for transport projects reliable?).

If HSR really is a “commercial proposition” as Dr Bygrave contends, then let the investors show what they can do. Interested consortia have had plenty of time to put together a commercially robust proposal; HSR’s been evaluated numerous times over the last 30-40 years and AECOM’s final report was released on 11 April 2013 i.e. three years ago.

There’s nothing unusual about companies lobbying governments about HSR; they’ve been doing it for decades. There’s a huge pot of gold at stake and government – not investors – would likely end up carrying all or most of the considerable commercial risk.

Business knows from sweet experience that governments are suckers when it comes to glamorous infrastructure projects; that’s what a “safe return” means.

The claim that HSR would “radically reduce emissions” is important because it’s the main reason it attracts so much support from progressives. HSR just sounds right; it’s public transport, it looks like the sort of project good people should support.

But here’s the rub: the AECOM study found the total value of negative externalities, including emissions, pollution, noise and traffic congestion that would be avoided by HSR would amount, even at a 4% discount rate, to just $2 Billion over the 50 year life of the project. In fact, externalities only account for a mere 3% of the total estimated benefits.

That’s consistent with other large rail projects. I noted last week that externalities only account for 10% of the estimated benefits of building Melbourne Metro. The corresponding figure for Sydney’s CBD and eastern suburbs light rail project is 8%.

HSR would be such a ridiculously expensive way to reduce emissions compared to other options, it beggars belief that any progressive-minded organisation seriously concerned about climate change could propose it. It’s likely it would crowd out public funding of more cost-effective investments like renewable energy generation.

The overwhelming quantum of benefits from HSR (90%) would come in the form of slightly faster door-to-door trips for inter-capital business travellers and regional leisure travellers journeying to the capital cities. Since these are private benefits it’s reasonable to expect that if these groups value this benefit they – not taxpayers in general – should pay for it.

Look at it this way: if Airbus Industrie produced an expensive new aircraft that could reduce the door-to-door travel time from Brisbane to Melbourne by 5%, would progressives be pushing government to provide upwards of $100 Billion in public subsidies to airlines so they could buy it? Hardly; it would be taken for granted that those who get the benefit should pay for it.

But as I’ve said a number of times before, East Coast HSR is a boondoggle. It would consume vast amounts of public money to replace one form of public transport (airplanes) with another form of public transport (trains).

There are far better and more transformative ways that a progressive organisation like BZE could consider for spending $100 Billion or so of public funds e.g. improving public transport within our major cities, replacing coal-fired power generation with renewable energy, or building social housing.

Anthony Albanese and Andrew Robb are politicians so I don’t expect an objective assessment of East Coast HSR from them; but progressives should look beyond surface appeal when the stakes are this high.

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27 comments

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27 thoughts on “Why are we still taking East Coast High Speed Rail seriously?

  1. Socrates

    Good post Alan. HSR is a boondoggle (and I plan rail systems for a living!) Those who bother to check will find we use less than 10% of our transport oil consumption on air travel, and more than 30% on diesel trucks. So for anyone who cares about GHG emissions, we would be far better off upgrading the dilapidated interstate rail freight network to a decent standard, and getting freight trucks off interstate highways, than spending billions more on an expensive HSR that will do nothing about the freight problem.

    Economically we would get a better still return spending $5 to $10 billion in each capital city upgrading the capacity of the existing urban passenger rail systems. In Melbourne, we still don’t even have a modern signalling system, for a commuter network that moves 700,000 trips per day. As an embarrassing recent wheel wear problem shows, we do not even maintain what we already have properly, never mind building HSR.

  2. Jacob HSR

    AJH #25,

    Exactly. Alan makes no mention of population growth and no mention of how slow the Newcastle to Sydney train is.

    The Federal Tories want a bigger military industrial complex by raising defence spending to 2% of GDP.

    Is funding HSR that different to funding submarine factories?

  3. AJH

    We don’t need high-speed rail just yet. But we do need “acceptable speed rail”.

    From Newcastle (Hamilton) to Sydney takes about three hours. Driving takes under two, even with some traffic.

    Why the hell does a rail “express” service, with no traffic obstructions, take 50% longer than a car? That’s not how it’s meant to work.

    The train is travelling at 50-60km/h according to GPS readings for vast stretches of its journey. That journey now takes longer than the timetabled “Newcastle Flyer” steam service in the 1930s.

    It’s clear that the tracks need an upgrade to support faster speeds. Cars have moved on a long way since the 1930s, but the Newcastle-Sydney rail service has gone backwards.

  4. Peter Thornton

    https://infrastructure.gov.au/rail/trains/high_speed/pdf/ecvhst_scoping_study.pdf

    try this link – the one given in my post does not seem to work

  5. Jacob HSR

    Peter Thornton #20,

    Thanks for your post!

    I look forward to reading the Howard-era study.

  6. Alan Davies

    Michael M #21:

    Never responded. If BZE’s assumption – that travellers are prepared to pay much higher fares than AECOM assumed – is right then the test is whether or not investors are prepared to take on the project on a commercial basis. Remember, BZE’s contention is that HSR can generate enough revenue to pay for both its operating and capital costs.

    So far we’re seeing the usual rent-seeking because business knows politicians are pushovers when it comes to glamorous infrastructure and now both majors plus the Greens are on the HSR gravy train. However there’s been no indication investors are prepared to take on the enormous commercial risk inherent in East Coast HSR.

  7. Michael M

    Hi Alan,

    Did you receive further comment from AECOM or DIRD on the airfare estimates mentioned in a previous post? What is your feeling on how this may or may not influence the analysis?

    http://blogs.crikey.com.au/theurbanist/2014/04/23/bze-how-we-found-high-speed-rail-to-be-commercially-viable/

  8. Peter Thornton

    Alan,

    Thanks for your views on this subject – In large measure I agree. However you are not right that “The only independent expert study of HSR in Australia was the 2013 $20 million AECOM study commissioned by HSR booster Anthony Albanese himself when he was Minister for Transport.” Following the failure of the preferred bidder in the Sydney Canberra HSR tender to prove its case, the Howard Government commissioned the East Coast Very high Speed Train Study Stage 1 – I was the Project Director and lead Consultant for that work – which was the first time the issue had been looked at by Government and from the national interest perspective as opposed to responding to a proposal being pushed at Government. It still on the DIRD website – and nothing since has refuted its finding so far as I am aware. Had Minister Albanese read that report and simply escalated the pricing therein he could have saved $20 million! The costs therein are basically as reported in the AECOM report and that work cost less than 1 million in 2001!

    You may care to look at the downloads on my website which address HSR in Australia and also the recent evidence I gave to John Alexander’s committee looking at land value capture – and happy to discuss anytime.

    regards

    Peter Thornton

  9. P Malone

    As mentioned by other members, one of the main purposes of this project is to control the already out of control sprawl of Melbourne and Sydney. Having cities like Shepparton, Albury-Wodonga and Mittagong on the route would promote regional development, both financial and social. Plus, having Canberra an easy hop, skip and a jump away from Sydney would attract more talent to the capital.

  10. Rocket Rocket

    Surely if this project is so fantastically commercially viable as some people have been saying for years – then a private company would build it. That’s how capitalism works. And all the people who believe in its viability could invest in the float of said company and put their money where their mouth is.

    But instead, private enterprise stands with hands in pockets (firmly around own wallet) whistling a happy tune while waiting for the government to give them a big “handout” of taxpayers’ money.

  11. Raaraa

    I’ve been suggesting starting small, and building a high speed rail line from Sydney to Canberra Airport instead. Pair that with expanding the curfew-free Canberra Airport and extending that same line to an appropriate part of Canberra, and you won’t need a second airport in Sydney.

    A HSR train travelling at faster than 300 km/h would average a 1 hour journey from Sydney CBD to Canberra, the same amount of time it would currently take to get to Badgerys Creek by road.

    This could later be extended to Melbourne.

  12. Anthony Horan

    Finally some common sense!
    HSR will get people from Sydney to Melbourne in 3 to 4 hours (and that is non-stop without stopping at half a dozen places in between as is proposed with HSR), while it currently takes about 90 minutes by plane.
    The other question I have is what will be the price of tickets on HSR. Overseas the cost is comparable or more expensive than flying. I find the claim people will be able to commute
    The claim HSR will allow people to commute from regional centre is absurd if people have to pay $100 to $200 per day.

  13. Alan Davies

    The SMH reports today: New Melbourne-Sydney fast rail pitch to Malcolm Turnbull.

    Consolidated Land and Rail Australia is a Melbourne-based company with directors in Victoria and New South Wales that will make an “unsolicited offer” to the prime minister to better link the two cities. The company says on its sparse website that its offer will help “reshape Australia”…While Mr Alexander said Consolidated Land and Rail Australia was “involved in some very, very large projects and they are a most impressive assemblage of people”, company searches did not reveal any links to other major companies.

  14. Jacob HSR

    Nobody says why the existing SYD to ACT railway should be so bloody slow. Ditto the SYD to Newcastle railway.

    The ALP wants fibre to the home internet. So why should the railway be bloody slow.

  15. Adam Ford

    “The overwhelming quantum of benefits from HSR (90%) would come in the form of slightly faster door-to-door trips for inter-capital business travellers and regional leisure travellers journeying to the capital cities. Since these are private benefits it’s reasonable to expect that if these groups value this benefit they – not taxpayers in general – should pay for it.”
    Yep. What he said.

  16. Adam Ford

    Brilliant Alan.
    Just so happens I did me own blog on this recently … but I’ve suggested an alternative commuter network might stack up …
    http://bloodiedwombat.blogspot.com.au/2016/01/high-speed-rail-is-dumb-idea-for.html

  17. Austin M

    We only really just completed the first “interstate freeway” between our two biggest cities Sydney and Melbourne in 2013 which arguably started in the 60s. Taking around 60 years to build and only just completing our first interstate freeway between our 2 biggest cites and yet now there’s apparently enough demand for HSR along the whole east coast. Perhaps when we have a population that justifies a full interstate freeway network (yes even east to west) we might be able to start talking our first HSR. Working on finishing the Pacific Hwy in only 30years 90s to 20s is heading in the right direction but we still have a hell of allot more to do.
    LA to SanFran HSR by comparison is only just being started with a 2030 finish time and with continued debate. That system is also only going (600km as the crow flies 800km track in its initial phase) in an area with a population of approaching 40m or nearly double the entire pop of Australia. Melbourne to Brisbane will be more than double this distance and it may well be a century or more before we have a population that would meet similar justification metrics/criteria. Let’s focus on our more pressing infrastructure tasks.

  18. Rex Apocalyptoid

    Sadly, you have convinced me that this project in its present form should not be funded primarily by government, nor should the commercial risk be loaded onto the taxpayer. The only way that it could work commercially, it seems to me, is if a large number of medium sized regional cities were developed along the corridor in question. But part of the attraction of living in such inland regional cities would have to be easy connectivity and commuting distances to other cities and destinations, which seems like a chicken and egg situation to me. Safer to focus the infrastructure spending on the existing big cities, but again, won’t that just keep encouraging more of the same, bigger and bigger east coast megacities.

  19. Waffler

    The only way this will ever stack up is if we need to re-privatise airports and airlines and then make multi-billion Government investment decisions between air and rail. While the air industry is private and competitive, I am all for private rail competition and private investment & infrastructure providers feeling free to propose a fully-funded rail project. However, there is NO market failure that justifies investment by Gov’t.

    Even if it did justify Gov’t investment, you have to seriously question whether this is the next and best way to spend $100B. I’d rather support the millions of people moving around in our cities every day instead of spending taxpayers dollars on few business people and tourists traveling between cities now and then.

  20. Dylan Nicholson

    AD, I agree it’s not a great use of funds at this point in time, but it seems currently that almost no transport infrastructure project is (I’m finding it hard to even support the Melbourne Metro project given the stated goals and estimated economic benefit).
    But I’m not sure anybody has really figured out why regional development efforts in Australia so far having been, as you say, “underwhelming” – why, for instance, do we frequently laugh at and put down cities such as Adelaide or Canberra with smaller populations? What other countries in the world have that same mindset? If we could some how get over it and manage to grow at least 3 or 4 towns/cities between Melbourne and Sydney to a decent (~1-2M) size, HSR would surely become something seriously worth considering.

  21. Teddy

    Surely someone can come up with a project that doesn’t require a cent from the government (except the Chinese one), supported by 90-storey towers at every regional station along the way… The Greens are the biggest believers in HSR as a alternative to building any more airports, so they’ll support that for sure.(At least they say they believe in it…) I love the idea of bullet trains like the ones in Japan thundering along on overhead bridges through the Greens voting strongholds of Newtown and Marrickville, Brunswick and Northcote at 360kmph… Doesn’t everyone?

  22. Alan Davies

    Dylan Nicholson #5:

    There’s little prospect of HSR creating regional development but it’s prospects for creating regional sprawl are more promising (see Will HSR save the cities and develop the regions?). If we want to create regional commuter dormitories, we don’t need the sort of super-expensive trains that average 250 mph or more.

  23. Dylan Nicholson

    It’s been said before but the real power of HSR would be as part of a serious national attempt to take the growth pressure off Melbourne and Sydney and establish some genuine regional growth centres. I don’t have a big problem with Australia having a population of 50 mil within a few decades (in fact, it’s unrealistic to aim for much less given expected global population growth and the likely increasing desirability of living here relative to other places), but I do have a big problem with it virtually all being concentrated in 2 cities.

  24. Peter Darco

    ” What about synergies with freight routes”

    High speed freight trains!

    Just-in-time coal deliveries to Newcastle?

    Oh but the track build costs would be much higher to cope with the much heavier loads.

    How about canals? We can bring water from the Gulf down to Melbourne and coal as well.

  25. Alan Davies

    Jacob HSR #1:

    Low interest rates can be used to buy other things too. Still need to sort out the good projects from the bad.

    Matthew Thredgold #2
    :

    AECOM didn’t assume it had to be built in one hit; wouldn’t be fully done until 2065. Agree HSR might have application to specific, smaller projects but BZE is promoting full Melbourne-Brisbane route.

  26. Matthew Thredgold

    Why is everyone assuming that it all has to built in one hit?
    Why is everyone assuming it has to be high speed all the way from A to B? Why is there little thought about how it could enable Sydney to Badgery’s Creek or Tullamarine to Southern Cross? What about synergies with freight routes, such as Melbourne to Brisbane west of the range? What about regional centres just off the main route and reviving passenger rail on NSW countrylink services which are showing their age?
    What about new decentralised cities? Melbourne and Sydney are too big now. Where is the best place for funnelling growth?
    Writing it off as expensive and unnecessary seems awfully short sighted. Looking at it solely as a single high speed route also looks awfully short sighted.
    So come on Alan, lift your game.

  27. Jacob HSR

    Interest rates are at a 3000-year low.

    3rd world India took advantage of such a low interest rate and got a very soft loan from Japan to import Japanese bullet trains and build a high speed railway.

    There are more Mercedes sold in AUS every year than in IND.

    Why should the railway between SYD and MEL be pathetically slow.

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