It’s the water, stupid

Nicholas Gruen reckons the Darwin-Alice Springs railway is a “white elephant”. That’s certainly long been the prevailing view of a high proportion of southern politicians and bureaucrats.

In part it depends on how you define white elephant, I suppose. There would be a multitude of public infrastructure projects whose short-medium term economic cost-benefit analysis would be vastly superior to the Darwin-Alice railway. The Access Economics study undertaken shortly before construction began indicated it would be commercially viable, at least with the not inconsiderable investment of public funds in constructing the line. But it also showed that the economic return to taxpayers, though positive, was quite small, at least on the “base scenario” of just servicing local demand without any development of international freight “land-bridging” or stimulation of large new mining projects.

On the other hand, as far as I know the Darwin-Alice railway isn’t receiving (or entitled to receive) any ongoing public subsidies beyond the $600-700 million it received in construction subsidies (out of a total of around $1.2 billion), and the taxpayer gets the line back in 50 years or so, by which time it will certainly be still serviceable and profitable. It was a “BOOT” (build-own-operate-transfer) public-private project, which limits the extent of taxpayer financial exposure, unless the current operators go broke and government has to decide whether to go in and operate the line itself or let the investment be completely wasted by closing it down (as they eventually did with the old Darwin-Larrimah line which ceased operating in the 1970s and later got sold for scrap to the Japanese).

According to the operators, freight figures are currently well ahead of initial projections at this stage. And the Ghan passenger service has been much more successful than anyone imagined.

But maybe there are good reasons to fund a project like this despite unimpressive cost-benefit analysis.

The Territory is a major consumer of taxpayer funds and, in the absence of forced depopulation of the north (including its indigenous population which otherwise needs to be supplied and supported), it may make sense to construct infrastructure which enables it over time to develop a critical population and economic mass so that reliance on federal funding can be reduced and the local revenue base substantially increased.

But maybe there’s an even better reason. WATER. Sydney, Melbourne, Adelaide and Perth are rapidly running out of the stuff, in case you hadn’t noticed. State politicians are exploring increasingly desperate measures like extroardinarily expensive desalination plants just to keep their people supplied with enough water to drink and keep gardens reasonably green. And much of southern inland Australia looks like sinking into semi-permanent drought conditions. Is it all a result of global warming? It’s certainly looking increasingly like there has been a long term adverse change in rainfall patterns in much of southern Australia, with decent rain largely confined to the narrow coastal strip excluding existing urban water catchments.

Meanwhile, northern Australia, including north Queensland and the Kimberley, has extremely reliable and almost inexhaustible water supply. Unless the north-west monsoon fails (something global warming modellers don’t predict), that water supply is going to remain abundant and reliable. So why aren’t our politicians taking even more dramatic and extensive measures than the Darwin-Alice railway to boost northern development? It just doesn’t make sense to keep cramming more and more people and industry into Australia’s south-eastern corner when much of it is running out of water!

As well as abundant water supplies, the Top End of the NT (north of about Daly Waters) has plenty of reasonably fertile arable land, large quantities of minerals, abundant offshore natural gas supplies to fuel large-scale power generation to support a much larger population, and huge tidal variations which would allow massive tidal power generation (a renewable and greenhouse gas-free energy source).

And on top of all those potential advantages, we’re within spitting distance of Indonesia, Malaysia, Singapore and so on. Maybe physical proximity to markets isn’t anywhere near as important in this post-industrial age as it once was, but it shouldn’t be overlooked.

Until now, the lack of a freight railway and regular, competitive shipping services into Darwin have drastically hampered economic development. This has meant that it just doesn’t make sense for industry to locate here by comparison with the east coast, despite all those potential unrealised advantages. Moreover, one suspects those potential advantages might never be realised in the absence of government initiative. Large-scale infrastructure investment won’t be made by the private sector alone until the demand is there for it to make immediate economic sense (i.e. Nicholas Gruen’s point), but the demand can’t develop until the infrastructure exists. It’s a classic catch 22, and therefore a classic case for far-sighted government investment.

The Whitlam government attempted to stimulate regional development and decentralisation, but with very limited success. People preferred, and still prefer, to live in or near large coastal cities where the climate is temperate and services are abundant and cheap. But that situation isn’t going to continue as the southern half of the world’s driest continent rapidly runs out of water. The climate of Darwin, Cairns, Broome and so on is every bit as benign as Singapore, Jakarta, Kuala Lumpur or Bangkok, though certainly considerably steamier than Sydney or Melbourne for 6 months of the year. Future generations will look back in disbelief at the wilful collective myopia of an era when Australians stubbornly kept cramming themselves lemming-like into the semi-waterless southern parts of the continent while simultaneously begrudging any public investment in development of regions with plenty of water and other natural resources to support millions of people.