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Thursday, 26 February 1987
Page: 771

Mr McARTHUR(11.21) —Along with the shadow Minister for Transport, the honourable member for Murray (Mr Lloyd), I have much pleasure in supporting the Australian National Railways Commission Amendment Bill 1987. I support the objectives and the aims as set out in the Bill and the general attitudes and approach by Australian National.

Australia's large land mass is envied by the rest of the world. But that same land mass has brought with it one of our major disadvantages-that of distance. Railways were seen as a means of bridging that barrier of distance. Consequently, they have played a significant role in the economic, social, political and historical life of Australia and the progress of this country. Economically, they allowed for the growth and development of towns and farming areas that otherwise would have been slower to occur. Socially, they brought sparsely settled areas and Australian pioneers closer together. Politically, they caused politicians to campaign on the platform of `railways and progress'. This political angle has also caused many of the problems we are trying to confront today. Railways sprung up within State boundaries with no national co-ordination. Tracks of different sizes and routes in uneconomic areas are a manifestation of these political pork barrelling campaigns.

Australian National demonstrates an economic approach to long haul traffic-that is, heavy goods on good tracks being carried over long distances. According to the annual report, the bulk commodities of wheat, coal, iron ore and other heavy goods carried by Australian National help in terms of profitability. With a quick turn-round, railways around Australia can be profitable in a long haul situation. I think a very important aspect of the operations of Australian National is that it sets a benchmark of performance for State rail authorities. I will refer later to those authorities, which, of course, have an abysmal record of loss, inefficiency and ineptitude. The State rail authorities around Australia have incurred something like $2.5 billion worth of losses. On the other hand, the Bill before the House provides for the profit motive by proposing another service for Australian National. I note that private contractors with commercial attitudes will be employed to provide this service. I commend the Bill for promoting this sort of attitude.

In 1977 the Fraser Government changed the approach of Australian National by bringing about a more commercial outlook. In 1987 Australian National was given a decade in which to achieve a break-even position of financial performance for its commercial business operations. The General Manager of the Commission, Dr Williams, reaffirmed the commitment to this goal and has predicted that, given a favourable economic climate, Australian National can be expected to achieve its target by 1988-89. This is a far cry from our State rail authorities which are looking at ever increasing losses. Dr Williams's views were reinforced and supported by the Chairman of the Australian National Railways Commission, Mr Marks, who in his annual report stated:

1985-86 was another good year for Australian National, in which almost all key performance targets were matched or bettered. Barring any prolonged reversal in Australia's domestic economy, the way is clear for AN to achieve its long-term goal of break-even on commercial services before the end of this decade.

According to the 1985-86 annual report of the Commission, the deficit for the year ended 30 June 1986 was reduced by a further $14.3m, from $83m in 1984-85 to nearly $70m in 1985-86, representing a reduction of 17.1 per cent. This result was close to $11.1m better than the deficit budgeted by the Commission itself and approved by the Minister for Transport (Mr Peter Morris). The result is all the more pleasing when one considers that only four years ago AN had recorded its highest ever loss of $106m.

The overall result reflects the sound commercial practices pursued by the management of AN. Indeed, as a result of the Australian National Railways Commission Act of 1983, AN is charged with the task of becoming a commercially orientated business operation, the parameters of which the amendment currently before the House seeks to extend. I am delighted, as a member of this side of the House, to support that sort of attitude and approach. Australian National's performance in the last financial year reflected not only an increase in earnings-up 11 per cent on 1984-85-but also a continued tight rein on cost levels, credit control and supply management. Indicative of the success of the Commission's business-like approach to its operations is that, despite a 13 per cent increase in traffic tasks, total working expenditure was up by only 6.9 per cent over last year.

In general, the Commission is independent of direction from the Federal Government. However, where the Minister believes it is in the public interest, he may give directions in writing to the Commission. Where in such cases the Commission can satisfy him that it has suffered financial detriment, it may be reimbursed by the Commonwealth by an amount determined by the Minister. The General Manager of AN, Dr Williams, in talking about this aspect of Australian National's operation, said:

Consistent with the policies of successive Federal governments, AN's planning has assumed that support from taxpayers for commercial transport services is unjustified. Losses will continue to occur in AN only where they are explicitly mandated and financially supported by governments for recognised social or other objectives.

Early in the 1985-86 financial year, following discussions with AN the Minister directed the Commission to continue operating the Government railway system in Tasmania, Tasrail, at least until June 1988. At the same time he committed the Federal Government to provide revenue supplements totalling $52.4m and further interest bearing loans were made available to assist with permanent rehabilitation. The condition of Tasmanian railways when AN gained control in 1978 was very poor. Substantial progress has been made in rectifying this situation and losses incurred by AN in Tasmania have been reduced in real terms by 37 per cent since that time. The chairman of the Commission, Mr Marks, reports that deficits will continue to decrease but Federal revenue supplements will be needed at least for another decade.

Submissions have been made for all of AN's passenger services to become a `community service obligation'. These are regarded as non-commercial business activities by AN, with losses from this area amounting to some $30m in 1985-86. Where AN can obtain specific revenue supplements to meet losses incurred, services will be maintained. AN is continuing measures to improve service quality and efficiency, and where such revenue supplements will not be available, service rationalisation to minimise losses is proceeding as quickly as constraints will allow. I am delighted to see that approach. I think State governments should be looking carefully at their operations and following this lead.

It is pleasing indeed to note that, with the exception of Tasmania, AN operates in an environment of totally open competition with other modes of transport. I think it is important, in terms of the current debate, to identify some of the management and operational practices which assist in the apparent success of AN. Australian National's marketing strategy focuses on improving reliability, extending the scope and competitiveness of intermodal freight services, and improving or sustaining AN's market share of grain and other bulk commodities. AN has an excellent relationship with the farming community and, through successive grain agreements, has sought to improve the efficiency and competitiveness of transport for this key export crop. Corporate strategies have included: Improving the quality and reliability of all services; continuing staff attrition, assisted where necessary by voluntary incentive schemes; other cost reduction measures; the extension of computerised information systems for operational, financial and marketing management; upgrading and rationalisation of assets; and improving the revenue yield from certain critical traffics, especially in Tasmania.

In line with the restructuring of AN's freight business management and the computerisation of systems for costing, pricing and planning, mainland wagon-load freight is now segmented into four business groups: Rural products, intermodal, metals and non-rural bulk, and automotive and general freight. In conjunction with the grain authorities, AN is assessing alternative grain handling, transport and marketing strategies, with a view to reducing total costs to growers. The future location of deep-sea port facilities in South Australia will be important in determining the outcome of AN's assessment.

The revenue from grain remained constant at $19.1m in 1985-86, which I believe is indicative of AN's operational departure from what one has come to expect from government railways. This was due to the improvement made to its freight services with the increase in its grain hopper fleet of 24 by the ingenious conversion of surplus covered vans. All too often State railways and innovation are seen as contradictory terms.

I would like to turn to some of the other States and compare their rail operations with AN. In examining the operations and functions of AN, especially with regard to the proposed changes to the functions to that body contained in the amendment before the House, it is of vital importance to gain an insight into the problems and the drain on the public purse posed by other State-operated railways. In my home State of Victoria the transport system is in a state of collapse. It is losing $1,270 per minute. The Cain Government has promised a value for money system but a major analysis of government documents by the Kennett Liberal Opposition has shown the truth to be an expensive story of ministerial mismanagement, escalating debt, waste, feather-bedding and a total failure of the system. After four years of Cain Government propaganda and expenditure of over $1.5 billion on capital, Victoria has a worse transport service that is deteriorating steadily, with the community being saddled with horrendous bills that will take years to pay off. The public transport system in Victoria is losing $1.830m every day. Honourable members should think about that cost. The cost of the public transport deficit for employed person in Victoria has doubled since 1981-82 and is running at $380 per annum.

Despite increases in fares and freight rates, revenue is not keeping pace with cost increases. The Cain Government, therefore, is funding the transport deficit by borrowing at interest and the amount and proportion of borrowings have increased greatly. In 1981-82 borrowings comprised nearly 60 per cent of a capital expenditure of $182m. Last year, borrowings constituted 91 per cent of a capital expenditure of $462m. The use of capital funds to cover operating costs has been criticised by the Auditor-General in Victoria.

In order to evaluate AN's freight service performance, it is enlightening to view the performance of the Victorian Government's transport system. In one three-month period last year, industrial action by V-Line State Transport Authority employees cost freight revenue $10m. Such is the disruption and cost of industrial action in that State that the General Manager for Freight Services was moved to say:

We're losing customers hand over fist . . . because we can't give them a reliable service.

In New South Wales it is estimated that that rail service will lose $1 billion in 1986-87. In passing, I observe that the Japanese railway system has now taken strong action to reduce its feather-bedding arrangements and to reduce its staffing. It was regarded as one of the best railways in the world. However, it, too, has had to reduce staff numbers and a number of its feather-bedded operations in the hope that it might break even as we are hoping that AN will do. Finally, I wish to refer to a small railway operation in the electorate of Corangamite.

Mr Tim Fischer —Point Lonsdale, Queenscliff.

Mr McARTHUR —The Queenscliff-Bellarine railway, which the honourable member for Farrer is aware of, provides a very good tourist facility. It reminds young people of the role of steam railways in developing Australia.

Mr Tim Fischer —It is narrow gauge.

Mr McARTHUR —That narrow gauge railway is being maintained and repaired by workers from the Steam Preservation Society. They do this in a voluntary capacity over the weekends and provide a very valuable tourist facility during the holiday periods. I am delighted to be able to report to the House that they had a very successful season over the recent summer period. They play a very important role in clearly demonstrating what railways were like historically, the sort of contribution that steam made to the development of Australia and the way in which Australia was able to transport its heavy commodities.

I support the Bill. I support the attitude of the AN. I hope that it achieves a break-even point when it says it will. I commend the management approach and the way in which it provides a basis for comparison with other State instrumentalities. Those State railways are of great concern, losing $2.5 billion in any one financial year, which further adds to Australia's debts, overall inefficiencies, and current economic problems.