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HSR High Speed Rail

Apr 12, 2016

Is High Speed Rail our National Boondoggle?

The Prime Minister's embrace of east coast High Speed Rail and his spinning of value capture removes any doubt he's just as cynical and opportunistic as Labor and the Greens

Excerpt from S01, E03, Very Fast Turnover, Utopia by Working Dog Productions
Excerpt from S01, E03, Very Fast Turnover, Utopia by Working Dog Productions. More excerpts below

The Turnbull Government is expected to join with Labor and the Greens shortly to promote Australia’s perennial National Boondoggle, a High Speed Rail (HSR) service along Australia’s east coast from Melbourne to Brisbane.

The Government’s contribution to this show of unity is to suggest the $100 Billion plus project could largely be paid for by the sorcery of value-capture (see here, here and here).

Naturally the putatively progressive forces of Australian politics didn’t find much wrong with the Prime Minister’s latest transport enthusiasm.

All Opposition Leader Bill Shorten could come up with was a mild complaint that the Prime Minister is “clutching at straws” to avoid being branded a “do-nothing” leader ahead of this year’s election.

The response from Australian Greens spokesperson for transport and infrastructure, Senator Janet Rice, was even more lacklustre. Ms Rice said “we need to see some real commitment by Mr Turnbull, not just another pre-election grab at a headline”.

It’s no surprise they didn’t question the wisdom of east coast HSR. After all, Labor and the Greens have been guzzling the HSR Kool-Aid for years. Now Malcolm Turnbull’s crashed their party.

If you’ve watched series one, episode three, Very Fast Turnover, of Utopia (Dreamland in the UK and US) you’ll already know how ready cynical politicians are to promote the fantasy of east coast HSR to their gullible supporters (selected excerpts below).

It’s a political prop. But to take it seriously for just a moment, here’s a brief summary of the key problems with east coast HSR (see Why are we still taking east coast high speed rail seriously?):

  • It would cost taxpayers a generation’s worth of public infrastructure funding and thereby deny a large number of far, far more socially useful projects.
  • The environmental benefit would be marginal at best. It would be one of the most expensive ways imaginable of reducing carbon emissions.
  • The major beneficiaries of this public largesse would be business travellers who can and should pay their own way.
  • There’s little sense in using public funds to replace one form of public transport (airplanes) with another (trains) along Australia’s east coast.
  • Nor is there much sense in using public funds to largely eliminate a competitive industry (aviation) so that a monopoly industry (HSR) can potentially dominate east coast travel.
  • There’s little regional development benefit from shifting urban sprawl from the outer suburbs of the major cities to the outer suburbs of regional centres.

Mr Turnbull’s emphasis on value capture is almost as problematic. He likes to imply it’s some sort of overlooked hollow log overflowing with private sector funding. The suggestion is HSR will cost taxpayers hardly anything; or as Government MP John Alexander said yesterday, “we can have our cake and eat it too”!

It’s important to understand that value capture isn’t some remarkably clever or magical way of getting business to finance east coast HSR. It’s not some alchemy that Mr Turnbull knows because of his business background.

It’s an idea that’s been around for ages and is fraught with practical and political difficulties because the “capture” bit requires the government to levy a tax on any increase in land value that might result from HSR.

It’s a con because it’s only ever likely to make a very small contribution to the capital cost of HSR (see Is value capture the silver bullet for funding infrastructure?).

Even the Government’s independent adviser, Infrastructure Australia, acknowledges value capture has a limited role:

Value capture is a potentially useful source of incremental funding alongside conventional user charges and taxpayer allocations. Even a small percentage of total project cost recovered from beneficial land holders can make a marked difference to the funding case for an investment.

While it would be small, revenue from value capture would be tax-payers dollars, not private sector dollars as the Government would have us believe. It could be used for any purpose e.g. urban public transport, education. Value capture is best thought of as a small but general source of revenue, not one tied to a specific project.

It’s a real pity Labor and the Greens supported east coast HSR uncritically rather than making the effort to educate their supporter base about what an utterly stupid and regressive idea it is. Now all parties are locked into the National Boondoggle.

_________

Selected extracts from S01 E03, Very Fast Turnover, of the brilliant Utopia, made by Working Dog Productions and shown on ABC TV. Characters are Tony (CEO of the Nation Building Authority), Jim (Ministerial Adviser) and Rhonda (Head of Comms at the NBA):

Tony: People have been trying to get a very fast train up in this country for nearly 50 years.

Jim: Well, that’s all the more reason to keep going.

Tony: And it hasn’t got up. What does that tell you?

Jim: We lack vision.

Tony: Or else it simply won’t work.

***

Tony: I know you’re really keen, but I just don’t think we can make a very fast train work.

Jim: Really?

Tony: The numbers just don’t stack up.

Jim: You’ve gotta look beyond the numbers. Vision, Tony!

Tony: Jim, I…

Jim: If we’d listened to the bean-counters, we never would have built the Snowy.

Tony: The Snowy was a white elephant!

Jim: Are you kidding me? The Snowy forged this nation!

Tony: But I don’t think it’s ever turned a profit.

Jim: Stop it. I’m not even gonna listen to that.

Tony: Environmentally it was a disaster!

Jim: Hydroelectricity! I did a project on that at school!

Tony: It supplies, like, less than 1% of the grid.

Jim: Well, what about everything else the Snowy’s given us? That mini-series.

Tony: Jim, they’re white elephants, just like the very fast train. The numbers don’t stack up!

Jim: So, you’ve looked into it.

Tony: Everyone’s looked into it. There’s been, like, ten feasibility studies in the last few decades.

Jim: What does that tell you? Stop doing feasibility studies!

Tony: Exactly!

Jim: And what happens next?

Tony: Nothing. If the study says it stinks, we stop.

Jim: You can’t stop now. You wouldn’t believe the reaction this is getting.

Tony: You haven’t made an announcement?

Jim: Of course not.

Tony: But an announcement hasn’t been written?

Jim: Drafted.

Tony: Jim!

Jim: The PM’s very keen.

Tony: You’ve told the prime minister?!

Jim: The backbenchers are restless. Seriously, he’s gotta come up with some sort of 30-year vision in the next three weeks, or it’s…

Tony: Gone?

Jim: Oh, he’s back!

***

Tony: Look, even with the craziest of assumptions – petrol at $7 a litre, airfares tripled, a congestion tax in all the capital cities… The numbers still don’t stack up. There’s no silver bullet.

Jim: Actually, that’s a really good name.

***

Jim: There must be something we can announce!

Tony: Yeah, well, we can’t announce a feasibility study.

Jim: Are you sure?

Tony: Or a scoping study.

Jim: What’s that?

Tony: It’s the same thing, only thicker with graphs and diagrams.

Jim: That sounds good.

Tony: It’s only going to tell us what we know – a very fast train won’t work.

Jim: We won’t know that until the report’s finished.

Tony: We know that now.

Jim: Not officially, and they don’t know that we know.

Tony: Who’s ‘they’?

Jim: The naysayers!

Tony: But they know we know they know we know.

Jim: What? Can we just move this thing forward? (Speaks indistinctly)

Tony:If you opened your mouth, I might…

Jim: Until the election.

Tony: Oh! Sorry. Oh. I get it. Alright… Yes! I haven’t said anything yet.

Jim: Just being supportive.

Tony: We announce that we’re going to set up an authority.

Jim: An authority!

Tony: The Federal High-Speed Rail Authority, the FHSR.

Jim: The FHSR. What do they do?

Tony: Well, what we’re doing, but over a longer time frame.

Jim: And they’ll be within your…

Tony: They’ll be within yours! I can supply some staff – they won’t last long – but it’ll be a stand-alone authority, and they do a targeted study.

Jim: Brilliant.

Tony: And they have to look at acquiring the pieces of land that will secure the rail corridor, but over a long time frame, so it’s virtually meaningless.

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9 thoughts on “Is High Speed Rail our National Boondoggle?

  1. Peter

    There is also another thing.

    Planes travel at 2 to 3 times faster than trains. Their routes can be changed easily if they become unviable.

    Faster trains pushing speed records will not significantly improve travel times because the time savings are not linear as speeds are increased. Speed = Distance/Time, which implies that the faster the train becomes, the less additional time savings it makes.

    1000 km trip

    100 km/hour – 10 hours
    200 km/hour – 5 hours (save 5 hours)
    400 km/hour – 2.5 hours (save 2.5 hours – doubled the speed but got half the time saving now)
    800 km/hour – 1.25 hours (doubled speed again, but make a quarter time saving of original 5 hours time saving)

    Engineering costs rise extremely fast as speeds are doubled, and the additional time saving benefits fall quickly.

  2. Peter

    $100 billion hey?

    The Australian Government spends around $450 billion per year in operations. HSR would consume 20% of national income on one project.

    Value capture is also unlikely to fund HSR. The high speed comes from long station spacing, so HSR has fewer stations than say a LRT or Metro project to have value capture around stations.

  3. drsmithy

    Instead of focussing on inter-capital HSR white elephants which will almost certainly never be competitive with flying, why aren’t we building high-ish speed rail to regional centres ?

    A TGV from Brisbane to Sydney would be of marginal utility at best, even if price competitive with flying, but a $10-15, 30-40 minute train from the Sunshine Coast to Brisbane would change my life.

  4. Oz (Horst) Kayak

    Land acquisition for a HSR corridor must go ahead ASAP. The corridor will become the best rail trial available for high speed cyclists in our world. Just imagine the gold medal time trials for MPs to and from Canberra.

  5. Jacob HSR

    Alan #3,

    Japan is giving a very low interest rate to India to build a 500km long HSR.

    0·1% interest and a moratorium on repayments up to 15 years.

    They or China would offer a very low rate to AUS also.

    Japan normally gives an interest rate of 1.5% for slow metro rail.

    What is the point of having a very slow railway between SYD and ACT.

  6. Heavy Rail

    I seem to remember that the previous HSR study required 10% of Australia’s population to use it every day, and the BCR was based on a discount rate of 4%, but it did exclude commuter benefits for each major city.

  7. Alan Davies

    Jacob HSR #2:

    Negative gearing is completely irrelevant to the arguments for and against HSR.

    But at least note that negative gearing costs the budget around $4 Billion p.a. That’s no more (it’s probably less) than the borrowings would be on the $114 – $129 Billion required to build HSR.

  8. Jacob HSR

    As usual, no mention of why the existing railway should be so slow.

    Negative gearing costs way more than HSR would.

    What is the cost of not building HSR – more motorway widening, a 3rd SYD airport, more road deaths, more rip-off airport charges.

  9. Bill Morton

    The Fast Train is amazing. Last time I saw figures, to cover operating costs a significant proportion of the Melbourne population would need to use it each day to travel to Sydney, paying more than cheap plane fares and taking longer.

    As for value capture, that is a valid approach. What it means is that the local government revalues all the properties along the route and then the federal government taxes all the owners on the imputed increased value. Many would be forced to sell to pay the tax.