Budget funds ambitious regional freight project

UPDATED 9pm: DEPUTY Prime Minister Barnaby Joyce has lived up to his forecast of “something big” on the $10 billion inland rail project in this year’s federal budget.

But what is the inland rail, and what does it mean for regional Australians?

The project was first considered by parliament in 1902, and the ambitious project has bubbled away on the back burner ever since.

For the first time, it will link the east coast’s major ports and freight hubs, running from Melbourne to Brisbane via Toowoomba, Moree, Wagga Wagga as well as Parkes - where it links to rail line into Perth.

The budget, released today, has committed $8b to the inland rail, following a modest allocation in last year’s budget, with just $594 million going towards field studies and public consultation.

The project fits with the Coalition government’s infrastructure agenda, particularly the Nationals’ decentralisation drive for regional industry and growth.

Regional communities and the farm sector stand to share in significant gains, but as with any major infrastructure development, there will be challenges along the way.

Currently, trucks carry the bulk of freight between Melbourne to Brisbane on a road network groaning under an increasing load.

Road freight already battles significant traffic congestion and city curfews. According to projected figures from Infrastructure Australia, the land freight task between Melbourne and Brisbane will grow from 5 million tonnes in 2016 to 13mt in 2050.

While the more efficient east-west freight corridor carries about 80 per cent of freight on rail, just 20pc moves via tracks going north-south on the east coast. Between 30 to 40 per cent of the value of a tonne of grain is consumed by freight costs.

Rail is needed to cut the pressure.

Agriculture will benefit from efficiencies in freight movements, and cost savings, particularly bulk grain.

The inland rail, by linking the east coast’s major ports, would introduce competition for farmers’ produce among export facilities in Melbourne, Brisbane, Newcastle and Sydney for the first time.

Rabobank reported that inefficient storage and logistics can cost east coast growers as much $57 a tonne.

The variable cost of Australia grain exports (which includes logistics) are $6 more than in the U.S.

Infrastructure Australia, an independent advisory to government, lists inland rail as a priority project.

It said the main benefits would be in operating cost savings, shorter transit times, improved reliability and safety improvements, which would help the agriculture, resources and manufacturing sectors. 

The inland rail will encourage development of intermodal facilities across the east coast supply chain, creating jobs, reducing truck traffic through towns, relieving stress on roads, and boosting farm gate profits.

New freight hubs, which are already in place at Albury, Wagga and Parkes in NSW as well as Toowoomba and Bromelton in Queensland, would add scale to the supply chain.

The facilities are designed to take smaller parcels of freight and redistribute it efficiently.

Consumer goods and commodities are received in bulk and sent out into the surrounding area.

Conversely, farmers produce from up country is consolidated and transported in containers or in bulk to port.

Intermodal hubs, linked by the inland rail to cheaper and efficient lines to export ports, could open the door to fresh investment in regional manufacturing, where land is cheaper and easier to come by.

This could also include cold supply chain goods such as beef or dairy.

Construction is expected to start by 2018 and create a peak of 16,000 jobs over a 10 year build.

A significant question hung over how the inland rail was funded.

The commitment of public funds today should put some fears to rest.

Last year’s funding included $3.8 million for studies into potential funding models.

Broadly, government had to choose between selecting a private company to build and operate the network, or the public purse.

Last year, NSW Farmers president Derek Schoen expressed concern that a privately-run network could reduce the benefits of freight efficiencies slugging farmers and logistics operators with access charges.

“The project must be delivered with open access to provide good competitive tension so farmers can access rail at reasonable prices,” Mr Scheon said.

Another key benefit, increased investment in rickety up-country lines, many of which haven’t seen investment for many decades, hinges on how government incentivises third parties such as state governments and private companies, to invest in up-country rail links to the main line.

Consultation on the rail route have already caused controversy, with landholders in northern NSW and Queensland in particular criticising the proposed options and potential erosion and impacts to floodplains.

In December 2015, Newcastle Agri Terminal organised the longest grain train to haul wheat to port in Australia, which rivalled the coal industry’s heaviest efforts.

The 1.3km long train hauled grain from North West NSW to port to demonstrate the potential of a beefed up network, such as the inland rail could deliver.

Approval was sought for a 2.5 tonne per axle load increase for the up country track which saved growers $1.30/t.