There’s no shortage of advocates arguing we should rebuild the economy and society ‘on the other side’ of the pandemic with whatever solution they’re convinced is the right one.
So it’s really no surprise Federal Labor is selling east coast High Speed Rail (HSR) as an ‘economic game-changer’ to drive post-pandemic recovery:
Labor has called on the government to invest in a high-speed rail link down Australia’s eastern seaboard, arguing the major infrastructure scheme will create jobs and boost regional areas as the nation looks to recover from the economic crisis.
It’s certainly true that construction of HSR would inject a huge sum into the economy. Indeed, the sheer scale of public funding required to build HSR is mind-boggling; it’s likely to be north of $200 billion.
The 2013 study undertaken by Labor and the Greens estimated the capital cost for 1,750 km at $114 – $127 billion (that’s a ‘b’) and made it clear virtually all of that would have to come from the public purse. But we know it’s near-certain the cost would be much higher because early scoping studies like this invariably grossly under-estimate the cost, largely due to optimism bias (see Why do the worst infrastructure projects get built? and Are cost estimates for transport projects reliable?).
The official budget (not a mere estimate) for the UK’s 530 km HS2 project skyrocketed from £33 billion in 2012 to £56 in 2015 and £88 billion in 2019. The latest estimate in February 2020 puts the cost at up to £106 billion. The cost of building California HSR was initially estimated at US$33 billion in 2008; by 2018 it had escalated to US$63.2 – US$98.1 billion.
Spending in the order of $200 billion or more on East Coast HSR might well be good politics from Labor’s point of view, but it’s poor policy in terms of the immediate issue of economic recovery. Why?
- It would take a long time to get started. This is a complex project with little work done on implementation matters like land acquisition, testing, design and procurement. Under an ideal scenario it might take five years to make a substantial start, but it’s likely to be many more.
- The economic benefits that justify construction in the first place (such as they are) wouldn’t flow for 10-15 years if things go really well, but it would probably take more than 20 years before they flowed on a substantial scale.
Lest anyone think I’m too pessimistic, note the Labor/Greens HSR feasibility study concluded:
International experience of large infrastructure developments shows that approximately ten years could be required for planning, consultation and environmental approvals, and five years for reconstruction and procurement activities.
The study anticipated (in 2013) that construction of the line between Sydney and Melbourne could commence by 2027 and be completed by 2040, with the Sydney-Canberra leg operational by 2035.
In any event, East Coast HSR was always an unconvincing idea even under a pre-pandemic scenario. There’s a number of reasons for this:
First, the economic benefits are modest relative to the monumental outlay. This isn’t a “transformative” or “nation building” project as its boosters insist. How could it be when the majority of the estimated benefits would come from what planes already do i.e. move travellers between Brisbane, Sydney and Melbourne?
There’s already a regular public transport service operating on this route. It’s got adequate capacity and scope to scale up in line with demand. Importantly, it’s a competitive market with four major operators i.e. Qantas, Tiger, Jetstar and Virgin. Virgin/Tiger might collapse in the near future, but if so, history strongly suggests someone else will step into the breach, perhaps acquiring the necessary infrastructure for a song.
Second, the various external benefits attributed to East Coast HSR, like regional development and reduced emissions, are relatively minor, accounting collectively for just three per cent (yes, 3%) of the total benefits, according to the Labor/Greens feasibility study. .
The study couldn’t find any net benefits from regional development. Heavily subsidised HSR fares from somewhere like Shepparton to Melbourne (notwithstanding that air fares aren’t subsidised!) wouldn’t shift high-paying jobs from the capital cities to the regions. Rather, they’d just promote regional sprawl by creating remote dormitory suburbs for city centre workers.
After allowing for additional emissions from construction, operation and induced demand, East Coast HSR would yield estimated net savings of 1.1 Mt CO2-e p.a. averaged over 50 years. That compares with current total emissions from the transport sector of around 100 Mt CO2-e p.a. and around 535 Mt CO2-e p.a. from all sources. Given the estimated cost of construction it would be an extraordinarily expensive way of addressing climate change i.e. around $3,600 per tonne of CO2-e avoided (see also So high speed rail would increase carbon emissions?).
That scale of subsidy would have a much larger impact on emissions if it were instead used to fund renewable power generation. The Bloomberg New Energy Finance energy outlook estimates the cost of making 92% of generation in Australia from renewable sources by 2050 is less than $200 billion!
Third, the great bulk of benefits – about 90% – would manifest as reduced travel time. The majority of that saving would be captured by inter-capital business travellers who, for example, would shave 15 minutes off what’s currently a three-hour Melbourne CBD to Sydney CBD trip by air. If this benefit is so valuable, why shouldn’t business travellers pay for building HSR rather than be subsidised from the public purse?
Fourth, one of the key arguments for East Coast HSR was that it might obviate or delay the need to build a costly second airport in Sydney. That argument’s no longer relevant. Construction of Nancy-Bird Walton Airport at Badgerys Creek started on September 2018, with completion scheduled for December 2026.
There are far better and more transformative ways we could spend an extraordinary sum like $200 billion: for example, on improving public transport in our major cities, or on replacing coal-fired power generation with renewable energy. There are many others.
It’s time for those who romanticise East Coast HSR as “nation-building” to take a cold shower. HSR would deliver nothing like the huge increase in speed that trains in the 19th century, and subsequently planes in the post-war era, brought to east coast inter-capital travel.