Article: Train of thought that could lead to productivity gains

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Train of thought that could lead to productivity gains

Train of thought that could lead to productivity gains

    Mike Steketee
    From: The Australian
    August 27, 2011 12:00AM

WHAT good news that the stage version of Yes, Prime Minister, a hit on London's West End, is coming to Australia next year, given its eternal and universal political verities.

As Jonathan Lynn, co-creator of the original BBC TV series as well as the play, says, "we would write something and then politicians would go and do it".

If Lynn is looking for local material, he could tap into the rich vein of federal-state relations. Here is an area where the regular and profound government announcements are a complete contrast to the glacial rate of real progress.

Take last week, when Julia Gillard announced after the end of the Council of Australian Governments meeting "a major economic reform" -- agreements signed by her, the premiers and territory chief ministers to cut the regulations for heavy vehicles, maritime safety and rail safety.

She has a point: during the Howard years, the Productivity Commission calculated that improving productivity in areas such as energy, transport and infrastructure could increase national income by 2 per cent, about $26 billion in today's terms.

There is no doubt that taking the scythe to the thickets of overlapping, contradictory and plain unnecessary federal and state regulations has the potential to make the economy more productive -- something hard-pressed sectors such as manufacturing sorely need.

The idea is that the number of authorities regulating road, rail and maritime transport would be cut from 23 to three. In rail alone, seven safety regulators would be replaced by one and 46 pieces of legislation would be abolished, including seven rail safety acts, nine occupational health and safety acts and seven dangerous goods acts. That can make a real difference in running a business.

It is just that these things take time. In July 2009, Kevin Rudd, the great champion of the COAG process, announced agreement on the very same reforms, which he called "historic". Since then there has been progress of a kind. The agreement in 2009 has now been turned into formal intergovernmental agreements carrying the signatures of heads of government.

But that doesn't mean we're ready for the brave new world just yet. There are still details to be sorted out and this is where the Humphrey Applebys come into their own. In rail, NSW is talking about keeping its own regulatory system and delivering services to the national regulator.

Victoria does not want its metropolitan rail network to be part of the national system, meaning freight trains that have to use the metropolitan lines would have to follow two sets of rules. As Lance Hockridge, the head of QR National and chairman of the Australasian Railway Association, put it recently: "In a process which will be a standout for the Sir Humphrey Appleby award for services to regulatory reform, we seem to be inexorably spiralling towards snatching defeat from the jaws of victory".

Still, sometimes governments defy the Yes, Prime Minister script. With political leadership, such problems can be sorted out. The US has long had one rail safety administration, despite the complications of Washington dealing with 50 states. But it seems nowhere in the Australian federation does it take longer to achieve change than in rail. Everyone agreed standard gauge was a good idea, even before federation in 1901 but it took until 1995 to get there.

Federal and state governments agreed in 1996 on the need for "a cost-effective, nationally consistent approach to railway safety". There is a certain irresistible logic to it, considering that trains cross state borders. At least three full-scale reviews since 1999 have recommended a single national rail safety regulator. Now governments have given themselves another 17 months to get the new system operating but it would be wholly unsurprising if they missed the deadline.

There is a touch of Sir Humphrey, too, in the design of the carbon tax and emissions trading system as they apply to rail. According to the Bureau of Infrastructure, Transport and Regional Economics, heavy vehicles produce 11,382g of carbon dioxide per tonne for every 100km travelled, compared with 1661g for rail. Passenger rail similarly has a big advantage over cars when it comes to carbon emissions. Yet the government plans to exempt fuel for cars altogether from the carbon tax and has promised to leave out trucks for the first two years. As a result, the cost of rail relative to road will rise.

The reason is obvious: millions of motorists and thousands of truckies carry much more political clout than the handful of owners and operators of Australia's railways. Governments have been reluctant to implement National Transport Commission recommendations to increase interstate registration charges for heavy vehicles, which compete most directly with rail, so as to more fully reflect the cost of their road damage.

The carbon tax will not be a big impost for rail -- according to BITRE calculations, only 4c per tonne per 100km travelled. But the relative difference with road transport is significant, with heavy vehicles liable for an extra 29c on the same measure once they start paying the tax -- if the government does not cave into the truckies' demands to make the exemption permanent.

This is at a time governments finally are prepared to spend more money on rail -- a process started under the Howard government by John Anderson and accelerated under Labor by Anthony Albanese. It comes after a long period of under-investment that has seen the share of interstate, non-bulk freight carried by rail falling from 45 per cent to below 30 per cent in the past 40 years.

Rail has fared better in bulk commodities, particularly iron ore and coal. But despite the mining boom, road transport's share of total goods moved still increased from 19 per cent to 36 per cent over the same period.

With Australia's recent record of productivity growth a dismal one, transport offers some big opportunities. Australia is the most intensive user of road freight in the world, as measured on the basis of tonnes per kilometres per person, according to a Foreign Affairs Department study in 2008.

In 2006, road accidents caused 1602 fatalities and 31,204 injuries, compared with 38 fatalities and 135 injuries on trains. BITRE estimated the cost of road accidents at $17.85bn in 2006. According to a recent report commissioned by the Australasian Railway Association from Deloitte Access Economics, the cost per passenger kilometre travelled works out at 9.4c for road and 1.2c for rail.

BITRE calculated the cost of avoidable road congestion in capital cities at $9.4bn in 2005 and projected a rise to $20bn by 2020. For passenger travel, Deloitte Access says carbon emissions are 40 per cent lower on rail than road per kilometre travelled. According to a report last year from a Prime Minister's taskforce, Australia has the least energy-efficient road passenger transport of all member countries of the International Energy Agency. But rail made up only 3.8 per cent of passenger transport in 2007-08.

Australians' love affair with the car is not about to end but their choices can be influenced. Hockridge says there was a 27 per cent increase in urban passengers catching trains in the seven years to last year. The gridlock that has become Sydney traffic, even outside peak periods, and rising congestion in other cities suggest plenty of scope for further increases. A 2009 Australian Bureau of Statistics survey found three out of four people cited the lack of regular, reliable and timely services as the main reason for not commuting by public transport.