As Scott Morrison announced $8.4 billion is to be spent on an inland freight rail linking Brisbane to Melbourne, Barnaby Joyce went purple with excitement.
But is it a boon or a boondoggle?
The proponent’s stated benefit-cost ratio (BCR) is 1.1. When wider economic benefits (WEBs) are included, the stated BCR rises marginally, but is still 1.1 when rounded.
Infrastructure Australia has identified a number of risks which could impact on the economic viability of the project. Factors such as a decrease in demand for Australia’s coal exports, weak oil prices, reduced demand for interstate freight, and upgrades to the Newell Highway, could adversely impact the economic case for Inland Rail.
The budget papers concede that, given the marginal nature of the BCR, an increase in project cost could have a significant impact on the final BCR.
“Project costs will not be finalised until procurements, alignment and reference designs are completed. The project is sensitive to increases in project cost and lower revenues from users, and these risks could decrease the returns on the Government’s investment in the project.”
The budget also included funding for a Regional Road Freight Corridor in NSW – New England Highway: $30.3 million, Princes Highway: $52.5 million, Mitchell Highway: $5.6 million, Newell Highway: $78.8 million. As stated by IA, these road upgrades lessen the projected benefit from inland rail.
The budget states that the inland rail project “will support 16,000 direct and indirect fulltime equivalent jobs at the peak of construction” and 600 jobs when operational. But have they considered the number of jobs that will be lost in the road freight industry? Or even those employed in road construction and maintenance as 7.5% of the total benefit comes from “Reduced lifecycle costs for infrastructure owners and operators on the road network as a result of lower freight volumes, with reduced maintenance costs and capital investments able to be deferred.”
All parties seem to be supporting this investment, but I suspect that has more to do with not being the one to upset the regional voters than through any actual comparison of the value with alternatives.
High speed rail has a similar BCR but has the advantage of facilitating decentralisation which would help with housing affordability, urban congestion, the high volume of air traffic between Melbourne and Sydney, and regional revitalisation. It would also, with less private traffic, free up existing rail lines and highways for freight.
This is definitely a win for the National Party but perhaps Barnaby had a more personal reason for his glee.
According to a map published on May 1, there will be a new section of rail built between Narromine and Narrabri.
“Approximately 307km of new track. This new track will reduce the overall journey time and complete one of the missing links between Melbourne, Adelaide, Perth and Brisbane.”
Serendipitously, this line will go through a little place called Gwabegar where Barnaby Joyce happens to own two neighbouring properties totalling 2400 acres.
When he bought them, the locals were bemused. A successful farmer and exporter from a nearby area said of the Joyce’s purchase; “This is scalded country. It could not support the number of animals that would be needed to make a return on investment. It is a strange buy, put it that way.”
Perhaps not so strange now.
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