This post is a follow-up to one I wrote last week (see the latter half of it) and also a response to a more recent post by David Walker. I certainly wouldn’t argue with David’s assertion that a Sydney-Brisbane Very Fast Train route is not likely to be remotely viable even in the medium term. Pessimistic “realism” about that route was the major premise of David’s post. The population of Brisbane/Gold Coast is only around half that of either Sydney or Melbourne and the terrain in between is much more challenging than that between Sydney and Melbourne, making construction costs significantly higher.
However, I think a Sydney-Canberra-Melbourne line is worth examining much more seriously. I certainly wouldn’t suggest (or support) construction without rigorous assessment and cost/benefit analysis by the Infrastructure Commission, but by my own rough “back of the envelope” calculations I don’t think the picture is anywhere near as negative as David Walker argues. The terrain is much more benign than Sydney-Brisbane for a start (except for the 100 kilometres or so between Campbelltown and Mittagong).
More importantly, close to 50% of Australia’s population live within 50 kilometres of the route I envisage, and the Sydney-Melbourne air route is already the fifth most heavily travelled in the world. The route I have in mind, including all intermediate stations en route (with current population of each intermediate city), is as follows:
|Badgerys Creek Airport|
That population (prospective passenger) base will have increased by around 13% by 2026 when I am assuming the line would be completed (to coincide with the opening of Badgerys Creek Airport).
Contrary to David’s claim that general expert opinion dismisses the viability of VFT in Australia, the most recent report under federal Infrastructure Department auspices in 2013 found:
Our first and most important conclusion is that high speed rail has the potential to be an integral part of Australia’s future.
The evidence is clear. It would build capacity and resilience into the major east coast transport networks, alleviate pressure on the busiest intercity air services, and thereby allow growth of international and new domestic aviation operations, and help diversify infrastructure investment into more energy efficient technology. More fundamentally, high speed rail would contribute to national productivity and open up greater opportunities for regional development, help shape transport planning for cities, and improve service provision, connectivity and accessibility.
Also see this fairly short article by an Australian-German academic.
The most common cost estimate for construction of a Sydney-Melbourne VFT line (including by David Walker) is around $50 billion (roughly equivalent to construction cost for the National Broadband Network). Debt servicing costs can therefore be expected to be about $1.5 billion per year on an ongoing basis once the line is complete.
Such a high speed rail link is in my view equally a “public good” whose value should be assessed on wider public interest grounds than those typically used by the Infrastructure Commission (including general environmental and greenhouse emission benefits (certainly once in operation – diverting traffic from air which almost unavoidably runs on fossil fuels to an electric-powered VFT line). I note David’s argument that greenhouse emissions will be increased during the construction phase, but that is true of ALL new development projects involving substantial construction (including a hydro power station, for example). If we accept the validity of this argument we would be obliged to stick with all our current technologies permanently irrespective of ongoing greenhouse emissions. Very convenient for the fossil fuel industry.
David also argues that air traffic won’t be reduced even once the VFT line is operating, because there is already unmet demand for air services (especially from Mascot due to the 11pm curfew) and luring some current Sydney-Melbourne passengers onto the train would merely open up slots for additional air services to other destinations that can’t currently fit at Mascot. While that might well be true, that in itself would be a strong indicator of significant additional economic activity overall generated by construction and operation of the VFT rail line. You can’t have it both ways.
Reduction of road traffic on the already heavily travelled Hume Highway would be another benefit, as would opening up opportunities for people to live in the intermediate cities and commute to Sydney or Melbourne. It’s especially relevant for Liverpool and Campbelltown near Sydney, from where many residents already commute to the CBD each day, often taking 90 minutes or more each direction. But commuting from Goulburn or Canberra to Sydney each day, or from Albury/Wodonga, Shepparton or Bendigo to Melbourne, would become an attractive option. David dismisses this advantage as “decentralisation” and asserts without analysis that urban densification of Melbourne and Sydney are preferred options. Large numbers of Sydney and Melbourne residents would strongly disagree, and the 2013 federal government report referred to earlier finds:
High speed rail has the potential to properly unite east with west, improving access to jobs, easing pressure on housing and reducing the time and cost of long commutes. It will free up much needed space for freight on road and rail network, and trigger further improvements to public transport networks by taking some of the pressure off the furthest reaching connections and freeing up resources for the remainder of the network. It would mean Newcastle, the Central Coast, the Southern Highlands and Canberra would all be within 30 minutes to an hour of the CBD, creating considerable opportunities for people to work in Sydney and live elsewhere.
Also see Meet the countryside commuters and Andrew Tallon, Urban Regeneration in the UK (Google Book extract citing lots of relevant research, especially critiques of “densification”). Densification as a compulsory imposition, irrespective of how a significant proportion of people actually want to live (as shown by their revealed choices) is a trendy concept that has irritated me for quite a few years, as illustrated by a 2005 post here at Troppo titled creative class wankery.
My revenue projections are based on the following:
- The VFT line would be constructed via Tullamarine Airport, which isn’t currently serviced by a rail line. It is assumed that the existing SkyBus service from Southern Cross Station to Tullamarine would be discontinued and replaced by trains travelling on the VFT line.
- The VFT line would also be constructed via Mascot (domestic and international) and Badgerys Creek airports, thereby linking and unifying air and high speed rail travel.
- Melbourne-Sydney VFT services would stop only at the airport stations and (perhaps) Canberra and would otherwise be non-stop services. That should achieve travel times of around 3 hours. There would be separate Melbourne-Canberra and Sydney-Canberra “all stations” services to provide flexible high speed travel opportunities for people travelling between intermediate centres and Sydney, Melbourne or Canberra. The entire south-eastern corner of Australia, containing half the country’s population, would be effectively integrated by such a service. You could quickly and conveniently travel anywhere within that region for (say) a weekend family gathering or a concert or theatre event in Sydney or Melbourne.
- Flexible airfare pricing makes it tricky to calculate an average for air travel on the routes with which a VFT service would compete. But a fairly random scan of Webjet suggests Sydney-Melbourne economy prices average around $150 one way, while Melbourne-Canberra and Sydney-Canberra prices are a bit higher than that despite the shorter distance. I envisage a price structure for the VFT service where Sydney-Melbourne prices would average $250 one way, Melbourne-Canberra and Sydney-Canberra around $150 and services to intermediate cities a bit less than that (say $120). A Sydney-Melbourne CBD-CBD price of $250 would actually be very attractive and competitive with air having regard to the cost of a taxi to the airport at both ends (or parking charges at one end and a taxi at the other).
- The federal government would impose a levy of $70 on each air ticket between Sydney’s Mascot Airport and Melbourne, and a levy of $50 on each air ticket between Sydney’s Mascot Airport and Canberra. The levy would have three objectives: (1) to generate revenue for the VFT line; (2) to create price signals to induce airlines to shift existing Sydney-Melbourne and Sydney-Canberra services to Badgerys Creek where feasible; (3) to open up additional landing slots at Mascot in view of the 11pm curfew.
- I assume that the airlines would be able to shift a significant number of existing flights affected by the levy to Badgerys Creek, thereby avoiding the levy. But they would still keep enough flights at Mascot to service people travelling to and from Sydney CBD and the eastern part of Sydney. My guesstimate is that 3 million passengers would still travel via Mascot with around 1 million using Badgerys creek instead.
- Given convenience and equal net travel time, the combination of avoiding expensive taxi fares and/or airport parking charges and the proposed ticket levy would also in fact mean that Sydney-Melbourne travel on the VFT service would actually be cheaper in overall terms than economy air travel. My guesstimate on those assumptions is that the VFT service would capture 50% of the Sydney-Melbourne air travel market. It is the fifth most heavily travelled air route in the world and last year carried a total of 8.65 million passengers. The revenue projections set out below assume that the VFT line would carry 4.3 million passengers Sydney-Melbourne each year.
- I also assume (without any real calculation) that the line would carry some 2 million passengers per year between intermediate cities (including Canberra) and Sydney-Melbourne at an average ticket price of $130. Given existing high air travel prices to Canberra and the additional $50 ticket levy it is reasonable to assume that the great majority of that market would be captured. I also assume that there would be a substantial daily commuter market for the VFT service, especially from Bendigo to Melbourne and Campbelltown/Liverpool to Sydney, if tickets are priced competitively.
- The federal government would also impose a “value-capture” levy once the line is complete and operational as follows: $50 per year for every household within 10 kilometres of the Sydney and Melbourne CBDs and each of the intermediate cities. My guesstimate is that this would be around 4 million households on Australia’s current population. That would generate $200 million per year. Similarly situated commercial properties (i.e. within 10 kilometres of a VFT station) would pay $400 per year. My guesstimate of the number of commercial premises subject to levy is 300,000 indicating revenue of $120 million per year from that source. In effect, both the foregoing are very modest hypothecated land taxes. Lastly, similarly situated businesses (irrespective of land ownership) would pay $200 per year. My guesstimate of numbers of affected businesses is 500,000, indicating revenue of $100 million per year from that source. Total value capture revenue would therefore be in the vicinity of $420 million per year.
VFT revenue projections
|REVENUE SOURCE||ANNUAL REVENUE ($)
|VFT tickets (Melbourne-Sydney)||1,075,000,000|
|VFT tickets (Melbourne-Tullamarine)(Skybus substitution)||150,000,000|
|VFT tickets (intermediate cities inc. Canberra)||260,000,000|
|Mascot/Melbourne or Canberra air ticket levy||220,000,000|
|Value-capture levy (see 9. Above)||420,000,000|
Contrary to claims of opponents (including David Walker), it seems to me that Melbourne-Sydney Very Fast Train service might well be viable to build and operate. It will cost around $50 billion to build, implying an annual debt servicing cost of around $1.5 billion. But revenue projections, including ticket revenue and an air-ticket levy plus a “value-capture” levy on properties and businesses which benefit from the VFT service, may well achieve total gross income of more than $2.1 billion, which should be more than enough to cover debt servicing and normal operational costs, possibly even leaving a modest net profit. Moreover, the above projections have been calculated on Australia’s current population and air travel numbers. Our population will be about 13% larger by 2026 at just over 27 million, rising to 36 million by 2050. You would expect a high proportion of those additional numbers would be living in Australia’s south-eastern corner, making a VFT service progressively more and more viable/profitable as time goes on.