CHAIR (Mr Neville) —I declare open this public hearing of the House of Representatives Standing Committee on Transport and Regional Services on its inquiry into the integration of regional rail and road networks and their interface with the ports. This is the 22nd public hearing of this inquiry and, as part of an extensive program of public hearings and visits designed to gather information from people directly involved in the main issues of the inquiry, a further hearing will be held in Toowoomba tomorrow, where we will probe some of the inland issues of the road and rail transport networks. Today the committee will hear from the Queensland government, the Port of Brisbane Corporation and a number of other witnesses including mining companies and the like.

I welcome representatives of the Queensland government. The committee does not require you to give evidence on oath, but I remind you that these are proceedings of the federal parliament and, consequently, they warrant the same respect as proceedings of the House itself. It is customary to remind witnesses that the giving of false or misleading evidence is a serious matter and may be regarded as a contempt of the parliament. But, having said that, you are most welcome. Mr Hunt, would you like to give us a five- to seven-minute overview of your submission so we can spend most of the time on questions.

Mr Hunt —The Queensland government places a very high importance on facilitating domestic and international trade and is fully aware of the need for efficient and sustainable linkages between the various components of the state’s freight network. In fact the Queensland government underwrites much of the trade growth through its investment in rail, road and ports. The freight transport network plays an important role in the economic prosperity of Queensland and a large percentage of Queensland’s regional economy is based on the sale of bulk commodities generally moved through its ports.

In fact all of Queensland ports except Brisbane are net exporters, and many are dedicated solely to the exports of single commodities such as coal, bauxite and sugar. Although Queensland’s 16 ports are adequately served by existing road and rail links, increasing demand due to population growth and growth in export commodities has led to a growing number of incidences where capacity constraints have affected freight movements and trade opportunities—for example: increasing road haulage of bulk commodities to destinations served by rail; increasing congestion and conflict between heavy vehicles and passenger vehicles en route to and from ports and other parts of the network; limited windows for freight movement on rail due to passenger priority on some urban and inter-urban routes; and ancillary facilities, such as terminals and holding yards, coming under pressure from capacity increases and social and environmental constraints.

A number of Queensland ports are hosted by regional cities, and access to these ports is becoming a significant issue with local communities and the transport industry. Remedial infrastructure works in an urban environment are costly and impact greatly on local communities. In an environment of high import and export growth, a significant financial burden is being placed on the state to provide sufficient capacity and to safeguard options for future capacity increases on the network. Our submission to the inquiry in June 2005 was initially concerned that the AusLink initiative was preoccupied with discrete corridor studies and linkages to the major ports in Melbourne, Sydney, Brisbane and Fremantle. Since then, COAG has agreed to extend the AusLink corridor study process to include regional ports associated with the AusLink national network.

Despite this, the defined AusLink networks still represent a relatively small percentage of the infrastructure used to service Queensland ports. Therefore the bulk of the financial burden for providing connectivity between land based transport networks and the ports falls to state and local governments. If AusLink’s aim is to promote trade facilitation, then there are a number of infrastructure projects both within the defined AusLink network and the broader regional network in Queensland in which the Commonwealth could invest, such as the northern missing link on rail, the southern missing link, the southern infrastructure corridor into Brisbane, new access to the Port of Townsville and further stages of the Port of Brisbane motorway.

Part of the Australian government rationale for AusLink was recognition that the land transport network required substantially increased investment to meet current and future needs. It promised to move towards an integrated approach to transport infrastructure, planning and investment with a focus on the land transport network as a whole, which would naturally provide improved transport links across regional Australia leading to better land transport links between regional centres and our major cities. The Queensland government strongly supports this objective. However, there is little evidence to date that the AusLink processes advance these objectives in Queensland. Significantly, Commonwealth contributions amount to less than 10 per cent of the state’s total transport budget. The advent of AusLink has not yet changed its balance, but we remain hopeful.

CHAIR —I would like to compliment you on this submission. It is very good and I wish that the other states had been as cooperative.

Mr Hunt —Thank you. I acknowledge Mr Phipps, who did a large part of the work on that.

CHAIR —You have gone right to the nub of the problem—that, despite AusLink redefining the federal government’s attitude, there is still a lot of grey area around where state responsibility finishes and federal responsibility starts and where there might be joint ventures. I am just talking off the top of my head; we have not sat down and averaged these, but I get the feeling that nearly every port city in the country needs about $70 million in one form or another, either for bypasses, overpasses, duplication of rail links or ring-roads around towns to facilitate the better movement through those ports as the first priority and urban enhancement as another. Do you get that feeling? Mackay talked about it, Gladstone talks about it all the time, as do Newcastle and Port Kembla—not so much Port Hedland, but in a number of other Western Australian ports as well there seems to be this common thread that, as we have ramped up to new demands on us from resource-hungry overseas clients, our near urban infrastructure around port cities is not standing up to it.

Mr Hunt —That is right. I think one of the themes that we tried to bring out in our submission is our concern that the approach under AusLink is based on defined corridors. Particularly when you get to urban areas, the issue is how the network operates. We think that, generally, in the planning for transport we have to think about network approaches rather than just the individual links. That flows into all of our port issues. It is particularly an issue in the major cities. In Queensland we have issues in Brisbane, Gladstone and Townsville, which are directly on the line.

Mr Beattie —And Mackay.

Mr Hunt —Yes, and Mackay. The fact is that the hinterland for our ports is generally flowing to the west from the ports. The corridor that AusLink focuses on is the north-south corridor, and there is a mismatch between the two.

CHAIR —We are coming towards the end of our inquiry. Assuming that we wanted to make a recommendation, to what extent do you think the state would participate if we put up a program to facilitate better access to the ports or better urban facilities?

Mr Hunt —We would be very keen. We are coming to the end of a corridor study from Brisbane to Cairns, which we are doing cooperatively with DOTARS. One of the things that we have pushed quite strongly in that process is that, while it is a north-south corridor, we need to think carefully about the linkages into each of the ports that are adjacent to the corridor. We are doing that to an extent. We are keen to work with the corridor. One of the things we have tried to stress is that, whilst we have some issues with AusLink and the way it has been implemented, we have absolutely no agreement about the objectives of AusLink. There is very strong support for a coordinated approach to planning and investment in the transport system as a whole. I think the Queensland government would be quite happy to cooperate.

Mr Beattie —We certainly would be. We are in fact cooperating on every aspect of AusLink but, in particular, the corridor studies in Queensland. I guess the big issue is that if you are going to approach it from a corridor perspective you have to go beyond that and look at the total network. We see the AusLink network as a collection of corridors rather than a network that affects trade or freight movement generally. The big issue in our regional cities is with regard to the point you touched on about the use of the roads by both passengers and freight vehicles and the implications of heavy vehicles in urban areas: noise, safety, congestion and so on. So we would be more than happy to work towards that program. In fact in our submission we have listed a number of projects that would probably help to get the ball rolling.

CHAIR —The term Roads of National Importance has been dropped and AusLink has taken it over. It seems to me that there is a category of road that falls between a number of chairs that does not suit any pattern. Your response has been very heartening.

Mr HAASE —Obviously your response to the chair is predictable in that we would all like more funds to do the job. How would you advise us to come up with a recommended formula for the distribution of costs in relation to road infrastructure within states? Should it be a fifty-fifty deal? Or because it is traditionally a state role ought it be a 60-40 deal? Is this something you have given consideration to?

Mr Beattie —In the first instance, if we look at the AusLink network as opposed to the old national highways network, the state view is that the national government should go back to the position of fully funding the national highways. We make that point in our submission. That would be the first thing. A good example of that would be the Gateway Motorway, particularly with Australia TradeCoast and so on—which is a very big job being fully funded by the state. Here in Queensland we have an arrangement with local councils where we have set up what we call the roads alliance. It is the other end of the spectrum, but there are a lot of roads that are important regionally. We have tried to group local governments together and look at those roads of regional significance.

We are jointly funding the work on those roads. We are working together to prioritise the roads and to ask what is good for the region as opposed to an individual council. Every council gets its turn. They are all involved. It is a joint state government-local government initiative looking at that particular parcel of roads, which is quite similar to what you are talking about. But the group you are talking about is at a state and national level. We have the national highway, we have these major AusLink routes, but there are probably some big arterial roads or access roads from the west, which Dan was talking about, which are key roads that we really need to take a joint responsibility for. We would have negotiated. Under AusLink they talk about the national government making an assessment and an offer of a contribution. I think we need to work through that together. Off the top of my head I would not like to give you a formula but I know we can work it through.

Mr HAASE —It is very easy to recognise that it is a difficult dilemma. We tend to be reinventing the classification system of roads. It strikes me that the federal area of responsibility is in enlarging rather than diminishing. Conversely, of course, that indicates that the state area of responsibility is diminishing.

—The way we see that is that the federal area of interest has expanded considerably with AusLink but the federal area of responsibility has shrunk to nothing. The federal government is now saying it no longer has a road network that it is accountable for the condition of as it was under the national highway system. But it has an interest in the whole of the network. This is a simplification, I know, but it has taken the funding that once was devoted to the national highway network and has now said that it is available for the broader network. That in the end will leave holes in the national highway network that the state government is going to have to fill. That remains a major issue for us: the bucket of money is being spread more widely. The state has resisted so far but, in the end, somebody is going to have to come and fill in the areas where the Commonwealth previously had sole responsibility.

Mr HAASE —Is there any satisfaction for the states in the opportunity to prioritise sections of road that have not previously been covered by federal funding?

Mr Hunt —We are very interested in that, but I guess we are looking for new federal funding, not diversion of federal funding from a national highway that still needs significant investment.

Mr HAASE —One of the areas that is of particular importance to me, even though my area of responsibility does not venture into Queensland, is the Winton Road through to the border as part of the outback highway. Are you familiar with that?

Mr Hunt —The Matilda Highway, yes.

Mr HAASE —As of 2004, we have committed $10 million, to be matched by the states and territories, to upgrade the 10 major sections. Can you give us any report of what is happening on the Queensland side of the border in relation to that section of road? I accept readily that it is not part of this specific inquiry, but I just wondered if you could—

Mr Beattie —We can get some information for you.

Mr HAASE —That would be much appreciated because we just started the works in Western Australia and the Territory. We just released $7 million of funding for those, and I wonder what is happening in Queensland.

CHAIR —With all this expansion around ports, you say we need to define these AusLink corridors. The councils that we talk to do not argue that, because they have a resource-rich region or a big freight task, they should get preferential treatment. They never argue that, but they do argue that there are huge royalties coming out of minerals that have been exported and quite reasonable gains to state governments and private rail operators arising from the transport of that material. Although they do not argue that they should have some sort of preferential access to that, they do argue that what goes on around their town and region is central to the GDP of the state and the nation and it is not a reasonable proposition to ask the ratepayers—sometimes of comparatively small cities or only reasonable sized towns—to bear the burden of that infrastructure, which in normal circumstances they would not have to bear. What sort of formula should we put in place that at least makes those corridors to ports and arterial roads through towns that facilitate ports and things like that? How can we formularise it so that it at least remains cost-neutral to those towns? Gladstone is a case in point—not just because it is in my electorate. Newcastle is another example. How do we get a formula that does not disadvantage the ratepayers of that town?

Mr Hunt —I am not sure it is possible to get a formula. In terms of the royalties, I think you could make the same argument about the company tax that the companies pay. There is a massive contribution to the Commonwealth coffers from that. There is already major state investment in places like Gladstone. There is a huge amount of state investment into that area over the last couple of decades. But a whole lot of benefits flow to the local governments too. I am not sure I am answering your question.

Mr Beattie —I would argue that the vast majority of the major arterial roads and so on in regional centres—even here in Brisbane, the capital city—are state owned roads. We have about 34,000 kilometres of state controlled roads. That is much more as a percentage and actual kilometres than a lot of the other states. We spend more per capital on those state controlled roads than any other state, as far as I am aware. I guess I would say for a start that we control all those roads but we at a state level also have a very good relationship with local councils and the Local Government Association of Queensland. We work very closely with them. I understand the issue and I guess it applies at local, state and federal government levels. It is never enough. I have a background as an economist, and the first thing you learn is that there is never enough. We are all struggling. I think the ultimate game is to work together to get the best result out of the money we at all three levels of government can get our hands on. I guess that is the principle behind AusLink and that is why we support very strongly that principle of working together. I do not think there is a formula but I think if we work together we will probably get a better result for the dollars we have access to.

Ms BIRD —First of all, I just want to explore a little more the ‘passenger versus freight’ conflict, because we consistently hear this. Often programs will be focused on one or the other. For example, in our inquiry we are talking about the movement of freight, but they are so intrinsically connected that it is almost a false separation because in so many places we hear people saying that they have all the pressure—particularly political pressure—around passenger movement. People will always put pressure on you for roads and passenger rail and so forth. But, where there is a competition between them for the use, often there is almost a bottleneck created. I am from New South Wales, so in Sydney I am conscious of the number of freight trains that are limited as they come through the Sydney network, for example. I am wondering if you are experiencing the same thing here. Perhaps you can comment on what is the capacity for a greater separation of those movements?

Mr Beattie —Seeing as it is one of the major points I have put down, I should probably comment on it. The conflict between heavy vehicle movement in urban areas, passenger movement and the surrounding urban environment is a real issue. We have struck this access problem in every major regional port: Gladstone, Mackay and even here in Brisbane, with rail access. It is not so much now, but 20 years from now we will have the issue of conflict between passenger and freight movement on the existing port access rail. It is a major issue and we find there is community objection to heavy vehicle movements here in Brisbane, through what we call the Brisbane urban corridor, and in Mackay—even when looking at the solutions we are proposing to get to the port.

I guess the answer is that we have to look a lot further into the future by preserving corridors and have a much longer term view of what we need. Initially, I cannot see any way around it, other than that it will cost money to resume land and acquire the necessary corridors in those areas. But, somehow or other, we have to create some sort of buffer as best we can and limit the negative aspects, through policy application in particular.

CHAIR —We had a sort of national ports conference in Newcastle yesterday, in which we ran a seminar as part of this inquiry. It is interesting, Mr Beattie, that the point you make about the securing of corridors was a theme throughout that conference. It was not necessarily to build them tomorrow but to make sure the corridor was secured. It is pleasing to hear you come from the government perspective on that.

Mr Hunt —South-east Queensland has been one of focuses in the regional planning process that we have gone through relatively recently, and I mentioned the southern infrastructure corridor earlier, which is a corridor from the west of Brisbane through to the standard gauge line south of Brisbane that is focusing on preserving a long-term corridor there. It may not be built on for a long time, but—

CHAIR —You have done a lot of good ancillary work. When we did our last inquiry on roads here, you took us through all your new bus interchanges.

Mr Hunt —We are continuing to develop that.

CHAIR —It was almost like a dedicated train line.

Mr Hunt —That is basically the principle. It is more flexible than that.

CHAIR —Especially that southern corridor—it is very impressive.

Mr Hunt —At the moment further work is going on, bringing the northern busway further into the city. There is planning work going on for a northern busway into the northern suburbs and for an eastern busway. Construction will start before too long on a link to Green Bridge, which is being built by the council. The other point on the corridors is that, particularly in urban areas, we can look at preserving the corridors in the long term for interurban freight or intercity freight, but there will still be the major issue of managing conflicts between passenger and freight in the distribution task within the cities. In economic terms, that is a very major part of the freight task overall. That is a network management issue, and we cannot just think about the freight part and the passenger part separately. We have to manage that as a network, and I think that is a critical part of the problem we are facing. Again, that is a difficulty with the AusLink process.

Ms BIRD —Basically you are saying that it is the management of the sharing of infrastructure that is an issue. Is it unrealistic, perhaps, to expect a duplication-separation type of arrangement?

Mr Hunt —It may be possible in some parts of the network. In rail we can try to keep some separation for that. On road, we are strongly encouraging through traffic to use the Logan and Gateway motorways to access the Port of Brisbane, rather than going along the Brisbane urban corridor—the Kessels Road route.

Ms BIRD —The problem with roads, of course, is that every time you improve them for passenger movement it just encourages freight onto them and then the passengers are unhappy again, aren’t they?

Mr Hunt —And vice versa; when you improve it for freight movement, the passengers will use it as well.

Mr Phipps —The southern infrastructure corridor, which was mentioned earlier, is really about separating passengers and freight. We have never built a freight line, except for the coal network, in Queensland. But this is building a whole new corridor because a lot of our population is forecast to move to the western part of the city, therefore increasing demand for passenger rail and further limiting freight travel through to the Port of Brisbane.

Ms BIRD —Have you got limitations on your rail movement at the moment, in terms of the hours that freight can use it?

Mr Phipps —Morning and afternoon peaks are generally out of bounds for freight. You can sneak a train through occasionally, but it is rare.

Ms BIRD —That is certainly what we heard in Sydney—that that is quite a bottleneck for some of—

Mr Hunt —That will get harder over time in Brisbane, too, because we are growing very fast.

CHAIR —Could we move onto another subject? It impacts on a lot of things and we will be talking about it tomorrow in Toowoomba. The Toowoomba Range seems to be the flashpoint for a number of projects. Obviously the population of the Downs—and Toowoomba in particular—is going to get bigger. If the inland rail is ever going to work effectively, the Toowoomba Range access is going to be vital. In your submission I think you use a figure of just under $600 million. Is that the all-up cost of doing that?

Mr Hunt —That figure is probably fairly dated now. No doubt it is considerably more than that.

CHAIR —Could you give us a bit of an overview of how you see the Toowoomba Range link going? We will go out there tomorrow and everyone will be hot for this inland railway link from Melbourne to Toowoomba and perhaps on through the western line and up through Wandoan and so on to Moura. Those things may end up going in parallel, but it seems to me—as I said before—that this is the touchstone to all that sort of thing happening. How might this inquiry facilitate that? What are the main problems? We heard in earlier days—for example, in our last inquiry—the idea of a new road and rail corridor down from Toowoomba. But in more recent times I understand that has been looked at as two separate things. Can you give us the flavour of where you are on that and what might be needed to accelerate that thing?

Mr Hunt —We have identified a corridor for both road and rail down the Toowoomba Range. I understand that in parts that is joint and parts of it are separate because of the different needs of the different modes. On the road side—Ken might comment on this—I think the Commonwealth has committed $10 million fairly recently towards the planning and feasibility study of the road part of that. Part of that feasibility process will be drilling a pilot tunnel to determine the geotechnics for the tunnel as a whole. Do you want to talk more about the road side, Ken?

Mr Beattie —I guess the only comment I would make is that it is early days now and I certainly would not commit to any figure for the cost of the Toowoomba Range crossing. I think we are talking about a road of over 40 kilometres through range country. Until the more detailed planning studies are done, it would be a very courageous man who would give anything like a firm cost for it. To support what Dan has said, it is very strongly supported by the local council. I am sure if you go to Toowoomba you will be strongly encouraged by the local council. We are working together with them and the Commonwealth, obviously, in the planning stage.

CHAIR —Let me say this about this committee: we do not want to publish a report that is just a wish list. That is why we are probing you. We would like to put down on paper some sort of reality. If you take the argument at present—and you would be familiar with this from your rail side—the east-west rail corridor is taking 80 per cent of the freight task. The north-south corridor used to take about 12 per cent. As I understand it, under ARTC it is moving up in the 17 to 20 per cent range. We are told that it will not go beyond about 30 per cent—35 per cent at the outside. So if we are going to get these semitrailers off the road between Melbourne, Sydney and Brisbane, then there is going to have to be another rail corridor in the near to medium future. It seems to me that the Toowoomba Range is pivotal in getting momentum into that project. That is why we wanted to hear your views on how that might be facilitated. Is there a case for Commonwealth seed funding of the Toowoomba Range, with that in mind?

Mr Phipps —From a rail perspective, we are running up against capacity constraints on the Toowoomba Range.

CHAIR —Even now, on narrow gauge?

Mr Phipps —Yes. It is a very old alignment, as you would appreciate. We cannot run very large trains down there. There is growing interest from mining companies who have coal deposits on the downs and want to export coal. Several mines up there are either opening up or ramping up capacity to capitalise on higher export prices. The grain industry, when it has a good season, takes a lot of the corridor’s capacity as well. Plus we have our general freight trains, which run up and down.

CHAIR —Assuming you did the rail corridor, you would do it in two gauges: narrow and standard?

Mr Phipps —We would certainly make provision for standard until we knew when the inland rail link was likely to happen and which route it would take: from the west down to Brisbane—or if it would come to Brisbane at all.

Mr Hunt —There are two scenarios for the upgrade: one is inland rail, which may well drive the Toowoomba Range crossing as part of that project. If it did not happen, the issue would be the carriage of coal from the Darling Downs to an export port. That is the issue that is pushing the capacity constraints at the moment and that is also being addressed as part of the southern missing link rail study. So the choices are to actually build a new rail corridor to Brisbane or look at Gladstone as the source. Looking at Gladstone also has some potential advantages in opening up other coal precincts between the Chinchilla area and Gladstone.

CHAIR —Where would the coal go if it came down the Toowoomba Range?

Mr Hunt —If it goes down the Toowoomba Range, it has to go through Brisbane and come out of Brisbane.

CHAIR —It would need a coal loading facility.

Mr Hunt —There is already a coal export facility in Brisbane that I think exports around five million tonnes a year. It is a relatively small one in terms of the other Queensland ports, but it has been operating at that level for quite a long time: the last 10 or 20 years.

Mr Phipps —We are prepared to increase that to 15 million tonnes a year if we can get the rail capacity.

Mr Hunt —But the decision is really between Brisbane and Gladstone. I do not know what the costs are for either of them, off the top of my head, but it is distance versus complexity in terms of the Toowoomba Range crossing. I think, even in inland rail terms, the Toowoomba Range crossing is similar in the estimated cost to the rest of the inland rail from Toowoomba South. It is a massive project in terms of cost and complexity.

CHAIR —How far advanced is the state government on the other half of that concept of going from Toowoomba to Gladstone through Miles, Wandoan, Moura et cetera?

Mr Hunt —There is a study under way into the southern missing link, as we are calling it, which is linking that Miles-Wandoan area into the system at Theodore. Do you want to talk about where we are going with that?

Mr Phipps —Queensland Rail have been involved in planning that corridor for many years. I am not sure how close they are to an actual feasibility study, but I know that work is progressing on that at the moment.

CHAIR —We have heard that there are at least five coal mines along that route.

Mr Hunt —Potential ones. I think Xstrata have been showing a fair amount of interest. They have mines on the northern end of that link, closer to Theodore.

Mr Phipps —They have a lot of ATPs—authorities to prospect—in the area. As you say, the figure might be five or it might be more, but it is a fairly long haul, especially for coal coming out of the Darling Downs to head up to Gladstone for export. It would be one of the longest hauls in Australia, certainly for steaming coal.

CHAIR —There would be some merit in putting some of it through the Port of Brisbane?

Mr Phipps —Economically. Then the other side of that is that there are issues with the Port of Brisbane too, as the coal has to go through the Brisbane suburbs—

CHAIR —The urban corridors.

Mr Phipps —and that is an issue in itself as well. So this is not a simple issue.

Mr HAASE —I am wondering what is that distance that you are talking of that is perhaps too great a distance for coal.

Mr Phipps —It is in the order of 500 kilometres. As I said, that is a very long haul for steaming coal. I think some of the coking coal can easily sustain long hauls at the moment, given the high prices.

CHAIR —That might not always be the case.

Mr Phipps —That is right.

Mr HAASE —But I believe coal is an abundant commodity.

Mr Hunt —Yes. It is an abundant commodity.

Mr HAASE —I was going to ask—and it goes to the value of the commodity, of course—is there any hint of preparedness from corporate Queensland for tripartite funding of infrastructure?

Mr Hunt —I think the coal network in Queensland is largely funded by the industry, ultimately. QR may invest in it, but it has users that pay to use that system. It is a fully commercial network. I think industry pretty much pays its way.

Mr HAASE —Would capital involvement be rare in Queensland? I am familiar with the Pilbara, in Western Australian, where rail infrastructure is built by the companies involved. I would think it is a rarity in Queensland.

Mr Hunt —I think it is rare because it is largely common user infrastructure in Queensland. The Western Australian mines are different in that they tend to have discrete mining areas going to a port and most of the lines are single-user lines.

Mr HAASE —You would be aware that situation is very much in the spotlight presently.

Mr Hunt —Yes, but Queensland has grown up with the development of an excellent coal rail system. There were capital contributions from the companies early on to get the system started. It is now funded by QR and paid for by freight rates. Industry is certainly paying its way on that system. I suspect industry may well argue that it is more than paying its way on that system. It is a publicly owned and common-user system operated commercially.

Mr HAASE —This committee will have greater opportunity today to gauge the opinion of industry but, from the Queensland government’s perspective, what is the level of contentment with the rail infrastructure among industry today?

Mr Hunt —I suspect that at the moment there may be issues in terms of capacity that are related to the rate of expansion of the coal industry in the last couple of years, because it has boomed with price. That has pushed capacity in some areas. Is that fair to say, Renny?

Mr Phipps —Yes, in the Blackwater system in particular.

Mr Hunt —There is the issue that there is actually investment coming to address those needs. We would argue that QR has invested in accordance with the expectations expressed by its customers. We may be up against a capacity constraint in some areas at the moment but I suspect that is also reflected in the mines themselves in terms of there being a different rate of ability to meet capacity increases.

Mr HAASE —How do you deal with the—and the word ‘clamouring’ comes to mind—requests from industry for improved infrastructure? What process of analysis do you use to prioritise one commercial demand from another when it comes to state infrastructure investment?

Mr Hunt —The easiest thing to use is this: what commitment is industry prepared to make in terms of committing to use the infrastructure once it is constructed and to meet the costs of it through those user agreements? The ports and QR will all seek to sign industry up to long-term commitments to use the infrastructure that they are asking for. In times when demand is very high, I think that industry is very happy to sign up to those. In times when things are a bit tighter there is less willingness to sign up to long-term contracts for expansion.

Mr HAASE —I refer to the nature of those long-term usage contracts. Are they on a take or pay basis?

Mr Hunt —In general, yes.

Mr HAASE —So you would say that such expansion and prioritisation can be commercially driven and that if industry is prepared to enter into the agreements then the states will find the financial resources to build?

Mr Hunt —That is my view, and over time I think that has been borne out by the experience in Queensland.

Mr HAASE —Could you tell us a little about Queensland Rail’s point of view on intermodal hubs. That is something that we have not yet discussed this morning.

CHAIR —We should preface our remarks on this by saying that we had the original concept that these were going to be at places like Shepparton, Parkes—where we got a real towelling about them yesterday—Moree and Toowoomba. But the evidence we received in Port Kembla and Newcastle seems to be about a need for freight hubs on the eastern side, rather than on the western side, of the divide.

Mr HAASE —Yes. It is a topic that this committee is concerning itself with. I think it is an important part of the study. We have heard some opinions that suggest that these hubs ought to be absolutely commercially driven, that where there is a demand from the operators the operators will identify them and push for them and that that is not the case at present. I think the suggestion is that we might be getting a little ahead of ourselves in our fascination with intermodal hubs in that they are expensive. We understand that every time you offload and reload a commodity that adds to the cost of it. What do you see as the role, now and in the future, for intermodal hubs?

Mr Hunt —I might ask Renny to comment in a second. One thing that I think is a core government role—it is the same with the corridors—is identifying and preserving the sites for those intermodal hubs. Development of them may well be a commercial issue for both road and rail freight carriers. But actually finding the sites for those things can be as difficult as identifying the corridors themselves, because they need a fair bit of land and they need it in strategic locations. Renny might comment specifically on some of the issues. I will preface that by saying that this will be Queensland Transport’s view. If you want QR’s view you will need to talk to QR. They are independent.

Mr HAASE —I accept that I am generalising with the term, so it is about the Queensland government in its association with rail planning.

Mr Hunt —That is fine.

Mr Phipps —Last year we undertook what we called the ‘South East Queensland Inter-modal Freight Terminal Study’ to look at the issues that you have just raised. There seemed to be a growing demand for intermodal freight facilities. We have two in Brisbane—the Acacia Ridge terminal and the Brisbane Multimodal Terminal at the Port of Brisbane. Both of those facilities probably have sufficient capacity for the next five to 10 years, as far as we can ascertain, but after that you will probably need a third or fourth terminal. In the south-east Queensland region we have identified some sites as being potentially suitable for a large intermodal, multi-user facility—one to the west and one to the south of Brisbane. The things we find you need for freight terminals are obviously good access road and rail. We also need a good catchment for freight which is close by. That is why putting freight terminals in distant parts without a catchment is fraught and industry are telling us that they want to be closer to where the freight is, because once freight is on a truck it will stay on a truck. If it has to go 100 kilometres to get to a terminal, it is cheaper to keep it on the truck, as you say.

There is a lot of commercial interest in the development of multimodal terminals at the moment. We are seeing interest from P&O, which has a plan to roll out terminals in each state. There are plenty of other interested parties. We are also seeing a resurgence in what is being called rail connected warehousing, which is not really a multi-user terminal in the true sense of the word but goes back to the old days of having sidings beside industrial areas that can use rail—so rail is not really used as a multimodal distribution point but the freight comes in on rail and is consumed within 500 metres of the siding. Those two elements seem to be working in tandem at the moment, if we can believe what we are hearing from the private sector.

Mr HAASE —Do you believe that the creation of intermodal facilities ought to be driven by the demand of business—that is, commercial demand—or do you believe it should be dictated by government in order to facilitate solutions to perhaps other acquisition of corridor, duplication of corridor or grade separation costs? Do you see where I am going? We may say, ‘Let commercial interests drive it,’ and that will happen when the corporates can make a quid. They will say, ‘Right; we want a facility here, and we will break loads and repack.’ But ought not governments say, ‘No, we can save on the cost of infrastructure in the form of corridors, acquisitions and that sort of thing, and we will dictate that commerce unloads and reloads freight so as to facilitate an express or whatever’? Just where should the mix be?

Mr Hunt —I guess what I am trying to say is that getting the land for a major intermodal terminal can be just as hard as finding the corridors themselves, and we need to coordinate with the acquisition or protection of the corridors. Renny noted that we have identified potential sites, possibly still with some community issues, to the south of Brisbane and certainly to the west of Brisbane. Protecting those sites for the future is the first thing that the government has to make sure it does.

Mr HAASE —That can be costly, can’t it?

Mr Hunt —Yes, that can be costly. When it comes to developing them there may well be a need for someone to come in and undertake some seed funding, which will have some risk associated with it to get it used. One of the features of the freight industry is its dispersed users.

CHAIR —Could it be a joint federal-state thing?

Mr Hunt —It could well be a joint federal-state thing. We would certainly welcome federal government involvement in that sort of area.

CHAIR —So you are saying that the state government provides an area like an industrial park and secures that—

Mr Hunt —We are certainly doing that as part of our planning for the south-east.

CHAIR —and the state government also makes land available to the commercial people, but you think some seed funding is needed upfront to get that off the ground.

Mr Hunt —It may well be needed when it is time.

Mr Phipps —Seed funding would be useful to develop business cases that we could use to encourage industry to invest. As Mr Hunt said, the real thing is to have the land available and then you can decide whether you are going to let the private sector develop it for commercial ends or whether for some environmental or other sustainability issue the state should build it and encourage its use by a variety of policy measures or whatever. Ideally, we would obviously like the private sector to take the risk and the reward on new terminals.

Mr Beattie —Renny mentioned policy. Everything in transport planning is a balance between passenger and freight or between modes or between environmental needs and urban needs and so on. I would argue that the location of any intermodal hub would have to be strongly influenced by the commercial need, and you would take that into consideration. A government, through policy means, should have an influence on not only where it is but how it is used and how access to and from that hub—in particular, access through urban areas—is controlled. There has been an underestimation of the influence of policy on managing the transport network in that regard.

CHAIR —The other four mainland states have trouble with grain lines to various degrees. Western Australia is tackling it at present, and New South Wales has a lot of challenges, as have South Australia and Victoria. You are a bit luckier here in the sense that you have these main arterial lines going east-west. What is the Queensland government doing to try to preserve the integrity of the grain lines?

Mr Phipps —That is mainly a matter for negotiation between QR and its grain customers. They are still negotiating on price for the coming season, as I understand it.

CHAIR —Is the state government putting any subsidy into those grain lines?

Mr Hunt —One thing the Queensland government does which I do not think the other state governments do is have a CSO contract with Queensland Rail for infrastructure across the state. The state government puts in around $200 million a year into below rail infrastructure basically to keep the state’s rail system at the condition it is in. It is not major funds for expansion, but it provides a base to keep the infrastructure there across the state. Some of that will go into the main line, but significant parts of it go into the east-west lines to make sure that we keep that base infrastructure there for rail.

CHAIR —That is seen as the community service obligation?

Mr Hunt —Yes, that is right.

CHAIR —That is interesting. We are looking for a model to make a recommendation.

Mr Hunt —We have done a lot of work on that over the last few years.

CHAIR —Can you give us a short paper on that?

Mr Hunt —Yes, we are happy to.

CHAIR —Grain lines are something that we really have to grapple with.

Mr Hunt —Certainly the way we have approached it has not been an approach about subsidising any particular commodity; it has been a decision taken by the state that the state wants to have the rail network remain across the state, and to make sure that happens we will put some level of base funding in to keep that infrastructure there.

CHAIR —So the condition never slips?

Mr Hunt —The objective is to try to ensure that the condition does not slip. That is a major thing for Queensland, and we have kept that investment up. That is again part of our concern about AusLink—that Queensland has 20 per cent of the rail network in this country but gets around half a per cent of the AusLink rail funding. The reason for that is that we have kept the system in reasonable condition in Queensland but we feel that we are now penalised by the Commonwealth because of the good management of the system.

CHAIR —Did you say that you only get half a per cent?

Mr Phipps —We get about $7 million.

CHAIR —Out of a pool of what?

Mr Phipps —Something like $1 billion.

Mr Hunt —That is part of our feeling about AusLink—that we are not seeing a change in multimodal funding in terms of what Queensland gets out of AusLink. We are seeing drips of money coming in in terms of rail. But we will certainly give you a paper about the below rail infrastructure contracts.

CHAIR —With an emphasis on grain lines, if you would not mind. Thank you very much for your evidence today. It has been very enlightening and you have been very frank, which we appreciate. We trust we can come back to you if we need more information.

[9.51 am]