Keynote address delivered by Pacific National’s Chief Operating Officer, Patrick O’Donnell to the Australasian Railway Association (ARA) Rail Freight Conference
Thursday, 20 October 2022
Time to get Australian freight back on track
At times, Australians have a habit of mistaking their luck for intelligence.
We are blessed to live in a commodity-rich country. As an island continent, we are also fortunate to be shielded from an array of biosecurity threats.
Our geography and natural attributes form the bedrock of our economic growth and prosperity. They also safeguard the working fundamentals of our national supply chain.
It’s why we pridefully call Australia the ‘Lucky Country’. But pride tends to come before a fall.
In the face of Covid-induced global supply chain disruptions, volatile markets, historic levels of government debt, and a changing climate, Australian governments can no longer remain complacent about enhancing the resilience of our freight infrastructure. If they do – Australia’s future standard of living will almost certainly be derailed.
The global pandemic put the spotlight on the criticality of supply chains.
The sight of supermarket shelves stripped bare of toilet paper and pasta struck genuine fear into many Australian households. It dominated news bulletins, social media, and discussions around the kitchen table.
While the Covid crisis shone a bright light on our strengths as a sector, it also exposed some glaring weaknesses.
A major strength of rail during the height of the pandemic was its ability to haul large volumes of freight across state borders safety and efficiency without the need to deploy tens of thousands of drivers each week like the trucking sector.
However, a key weakness exposed during the pandemic was the health of our rail networks.
After decades of government underfunding, many sections of our interstate and regional railways were shown to be lacking resilience. This then creates freight bottlenecks and poor connectivity to crucial facilities like ports.
Today, the physical condition of many of our railways has resulted in some regions experiencing a high percentage of export grain being transported by trucks.
The Murray Basin – the ‘bread bowl of Victoria’ – is a prime example of this trend, so it’s pleasing to see the Andrew’s Government has renewed its focus on upgrading this critical regional rail network.
Rail lines which warp in the summer heat because of old steel, or bend due to rotten timber sleepers, or sag under foul ballast, or are regularly topped by floodwaters, create disruptions and delays which hurt Australian businesses.
If a grain train misses a departure window of an international cargo vessel, the loss to a regional exporter is in the tens of thousands of dollars.
Such shortfalls in revenue compound rapidly, damaging our nation’s terms of trade in the global marketplace. They also damage our reputation in the eyes of international customers and investors.
A resilient rail freight network enables Australian export industries to quickly seize market share in boom times and squeeze out profits in lean times.
Australian exporters are uniquely placed to help reduce global food shortages (notably grain), but this opportunity is being hampered by the state of our supply chain infrastructure.
This was keenly felt in the first half of this year when we saw major disruptions and closures to rail freight networks due to inclement weather.
In fairness, flooding was severe across many regions, but the sheer scale and magnitude of damage clearly highlighted the vulnerability of our existing rail networks.
And according to forecasts by climate scientists, such weather events are set to occur more frequently in the future – hence, the clock is ticking to build more resilience into our railways.
What does greater rail resilience look like?
Our networks require more duplication, more crossing loops, more staging areas, more and longer rail sidings, not to mention larger culverts to handle larger volumes of future floodwaters. Such infrastructure allows quicker operational recovery when natural disasters occur.
Deeper integration of technology into our daily operations, including ARTC’s Advanced Train Management System (ATMS), will also boost safety and productivity on our rail networks.
Australians prefer real trains, not road trains, hauling bulk freight over large distances.
It’s safer, cheaper, and better for the environment than transporting millions of tonnes of freight by truck. However, businesses need the certainty of reliable railways to synchronise with the rest of the supply chain.
Unreliable rail infrastructure saps confidence from freight forwarders who require ‘delivery in full and on time’ to meet the exacting demands of their customers.
Financial institutions and investors – not to mention consumers – are also sensitive to the ESG credentials and performance of freight and logistics companies. They see great merit in more freight being hauled by rail.
Make no mistake, in a post-Covid global economy, those nations which establish safe and resilient rail freight networks will win the race to a prosperous and sustainable future.
While Australian governments support the idea of shifting more freight to rail, the reality is volumes moved on trains along key interstate transport corridors are embarrassingly low.
Today, a mere two per cent of freight is transported by trains between Sydney and Melbourne – the busiest freight corridor by volume in the country. The result is a conveyor belt of more than 700,000 B-double return truck trips each year on the Hume Highway.
Pacific National estimates increasing the rail freight share between Melbourne and Sydney to 50 per cent would help save multiple lives and $300 million in road accident costs on the Hume Highway each year.
Annual vehicle emissions along the highway would be reduced by more than 400,000 tonnes.
Likewise, only three per cent of freight is now railed between Sydney and Brisbane and less than 13 per cent of containerised freight, to and from Australia’s second largest port, at Botany in Sydney, is now hauled by freight trains.
Even the critical Melbourne-Brisbane transport corridor has a rail mode share of less than 30 percent.
Its important people don’t fall for the myth that rail can’t compete with road freight when it comes to haulage distances of less than 1,000 kilometres.
There are countless examples around the world, notably in North America and Europe, of rail freight more than holding its own with road freight at much shorter distances.
Another consequence of more freight being transported by trucks is that taxpayers and ratepayers are forking out more money to repair and maintain roads and highways.
All this results in added costs creeping into the national supply chain which are ultimately paid for by Australian families at the supermarket checkout. This adds to the pain they are feeling from inflation and rising interest rates.
The reality is rail freight companies like Pacific National pay ‘full freight’ to network managers – many government-owned – to access regional and interstate rail lines to haul goods and commodities.
In contrast, except for tolled urban motorways, truckies operate on upgraded roads and highways substantially funded through the public purse.
This is not an attack on the trucking industry – a close working relationship exists between our sectors – but rather an appeal for a ‘fair go’ for rail freight.
You often hear the phrase Australian rail freight networks are in ‘managed decline’.
Benchmarked against companies from around the world, Australian above rail operators are some of the best in the business, but the condition of the underlying infrastructure has started to let us and our customers down.
Each year, billions in grant funding is hardcoded in federal and state government budgets to improve roads and highways, which then spurs on greater access for bigger and heavier trucks.
Meanwhile, rail freight must pinch and scrape for every cent. This creates a vicious cycle since private companies and funds are denied confidence to ramp-up investment.
As a classic case in point, at a time when the ‘umbilical cord of steel track’ linking the eastern and western seaboards was cut to shreds in more than a dozen locations by flash flooding, the previous federal government was promoting a $678 million budget allocation to establish a new sealed superhighway across the continent – from Townsville to Perth, via Alice Springs.
Don’t get me wrong, we have nothing against new superhighways per se, but this project occupies a much lower priority in the nation’s infrastructure arsenal than upgrading the existing Trans-Australian Railway.
Just imagine the outrage if the Pacific, Hume, Newell, Great Western, Princes, Bruce, or Eyre highways had been closed to road freight movements for almost a month.
Above rail operators like Pacific National appreciated the huge efforts of ARTC to quickly repair the track, but we were disappointed the government of the day gave little thought to build greater resilience into this critical freight corridor.
As opposed to using this crisis to provide additional funding to upgrade this corridor, the then government went on another tangent by attempting to relax coastal shipping rules.
Relaxing coastal trading regulations will merely create an uneven playing field between domestic-based land freight operations – which must comply with Australian safety and labour laws – and international shipping lines largely free from such obligations.
There are also broader structural issues at play in our sector. For example, government business enterprises and state-owned corporations which act as rail infrastructure managers are at times caught between a rock and hard place regarding commercial outcomes and the greater good of the national supply chain.
These RIMs are legislated to focus on commercial gains, while government shareholders tend to give little consideration to the many beneficial externalities of rail freight.
What’s even more perplexing is rail freight offers governments a ready-made solution to help achieve emission reduction targets.
Depending on the terrain and the goods and commodities being hauled, rail freight is up to eight times more efficient in reducing emissions then road transport.
North America, Europe, and Asia are looking to rail freight to help decarbonise hard to abate transport networks, while Australian governments are largely silent on the opportunity.
Pacific National has been heartened by a newfound desire within the federal department – now lead by Jim Betts – to engage more closely with our sector.
In the last three decades as our sector underwent large-scale privatisation, a knowledge and understanding gap developed between government departments and private operators. This situation must not be allowed to continue – we must work together to close the gap.
Nor can central agencies continue to essentially outsource policy formulation to rail infrastructure managers. The likes of ARTC already have enough on their plate, including converting PSRs into TSRs into NSRs.
(Permanent Speed Restrictions – Temporary Speed Restrictions – No Speed Restrictions).
I congratulate ARTC for working closely with our sector in recent months to help identify and fix numerous speed restrictions, notably on the critical rail corridor between Melbourne and Brisbane.
And why is this work by ARTC and above rail operators so important?
With major upgrades to the Newell Highway in recent years, including a series of heavy vehicle bypasses, the New South Wales Government has granted greater access to High Productivity Vehicles, making road freight even more efficient along this transport corridor.
The reliability of rail freight is paramount to our customers – our sector can no longer afford numerous speed restrictions putting a brake on transit times.
As an aside, although Pacific National continues to be a very vocal public supporter of the future Melbourne-Brisbane Inland Rail, we don’t want this project continuing to monopolise political discussions in our sector at the expense of existing networks and much needed policy reforms.
We welcome the federal government’s review into this project which will hopefully help to get Inland Rail back on track in terms of cost and timing.
Such has been the frustration around broader productivity and policy issues, the Freight on Rail Group and ARA lobbied for a review into rail freight by the Australasian Centre for Rail Innovation.
We sincerely thank ACRI chair and former Deputy Prime Minister John Anderson and his CEO Rob Moffat for their continued championing of our sector.
Soon to be released, the ACRI review will be the first of its kind in our sector, covering everything from modal share along key transport corridors, infrastructure and planning requirements, rail safety initiatives, and policy settings which need to be either refined or reformed.
It will provide governments with a great reference document on the challenges and opportunities in our sector.
It’s also pleasing to see the National Transport Commission starting to take a more active interest in rail freight, notably in the crucial area of interoperability – or more to the point, the lack of harmonisation in our sector.
For instance, in some states, the likes of Pacific National must hold up to four access agreements to operate a single regional service to port.
We must also contend with a myriad of different engineering standards for rollingstock between RIMs.
And don’t even get me started on the differences in fatigue management and driver training accreditation between states.
In the meantime, Pacific National is putting its money where its mouth is to help drive greater safety and productivity outcomes in our sector.
In recent years, we have initiated a series of major investments and initiatives totalling more than $750 million to deliver what matters for our intermodal and regional customers. This includes:
In terms of future intermodals, Pacific National believes private capital is best placed to deliver multi-user terminals, while governments should focus on helping to enhance network resilience and support enabling infrastructure for new terminals.
And finally, to help address the skills shortage in our sector, Pacific National has continued to invest heavily in driver training schools, with up to 400 new freight crew coming onboard in the last three years.
But private investment will only flow if the case for rail freight, including its role in reducing emissions, is better understood, and appreciated by government.
Prior to the pandemic, freight was largely out of sight, out of mind.
Today, disruptions in the national supply chain can put many voters on edge.
They are now less forgiving at the ballot box of governments which fail to protect freight infrastructure.
For the sake of this country, it’s time to get Australian freight back on track.
ENDS
