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Friday, 22 May 1970

The Commonwealth Railways Commissioner's report in June 1966 estimated the construction costs to be:

Additional rolling stock requirements were assessed as follows:


Passenger traffic would be accommodated in the existing Budd Rail Car fleet and other carriage stock of the Commonwealth Railways.

Additional revenue was estimated as follows:


Annual operating costs were expected to iata) $130,000 and depreciation would he fi 11.000 per annum. This left an excess of revenue over expenditure of $4)5,000 per annum, equivalent to a return on capital of about 6.2%.

In December 1969, the construction costs were re-estimated as follows:

Rolling stock requirements increased to cater for additional steel traffic were estimated as:


The cost of construction was $5,030,120 and the cost of rolling stock was $1,629,000. That work, on the basis of the estimated revenue of $656,000, disclosed an annual operating cost which was expected to total $130,000 and depreciation of $110,000 per annum. This left an excess of revenue over expenditure of $415,000 per annum, equivalent to a return on capital of about 6.2%. There is a qualification later in the report which says that these figures were dependent on the completion of the standardisation of the Adelaide-Port Pirie line. As I said earlier, completion of the Adelaide-Port Pirie line is important as far as this scheme is concerned and if the Commonwealth and South Australian governments had got together earlier and undertaken that job so as to blend the completion of it in with the general east-west standardisation scheme this line would have been operative at a much earlier date with a much lower capital cost than it will now incur and with a much better return on capital invested.

In order to give the comparative figures, the December 1969 report discloses that construction costs had increased from the figure I have just quoted of $5,030,120 to $5,759,000, an increase of 14.5%. The cost of rolling stock increased from $1,629,000 to $2,085,000- an increase of $456,000 or 27%. I know that the Minister will say that he had to order additional rolling stock; that is perfectly true. They still only required one diesel electric locomotive. The number of 75 feet flat top wagons was increased from 24 to 30. 1 want to deal with the actual costs of the freight wagons to show that even the cost of rolling stock has increased; the cost of the diesel electric locomotives - there are 2- has increased from $500,000 to $660,000 - an increase of $160,000. The cost of flat top wagons has also increased but as there was an increase in their number 1 will have to deal with each wagon. The increase per wagon was from $12,900 to $14,500. The cost of covered wagons increased from $350,000 to $440,000- an increase of $90,000. The number of open wagons increased from 20 to 25 and the cost of each additional wagon increased from $14,250 to $15,000. There were still only 2 guard vans required and their cost increased from $164,000 to $175,000- an increase of $11,000 for these 2 guard vans. So it can be seen from the figures that the delay in this project has cost the Commonwealth Railways dearly. If we accept the new figures the scheme will now cost $5,759,000 for track construction and $2,085,000 for rolling stock. All told there will be an increase of $196,000 in revenue. The report to the Minister states:

Additional steel traffic which had become available in 1968 was estimated to result in additional earnings of $196,000 per annum. Total revenue then became $852,000, offset by operating costs totalling $147,920 and depreciation of $140,000 per annum. The anticipated excess of revenue over expenditure thus became $564,000, about 7.2% of capital. 1 think that this railway could become as good a profit earning railway as any other railway in the Commonwealth. I am not talking about metropolitan railways. The Commonwealth Government has a case to answer for having delayed the decision to build this railway for so long. I have said this on a number of occasions, and I keep on repeating it because it is important. The Government should have done something about this earlier. It must have realised that the Broken Hill Pty Co. Ltd would expand its steel works at Whyalla. The company gave any amount of information indicating that it intended to expand. The Minister or the Commissioner of Commonwealth Railways had only to examine the procedures of this company at its 2 eastern steel plants at Newcastle and Port Kembla. Every night a train leaves beta steelworks with steel for interstate use. If one looks at the various costs of transport, one can see that road transport between Sydney and Adelaide costs 3.03c per ton mile, rail transport costs 2.76c per ton mile, and sea transport costs 1.19c per ton mile. It must be obvious to honourable members from these figures that sooner or later this company would transport its commodity to markets in the eastern and western States by rail rather than by ship. The availability of sea transport is rather spasmodic and would not provide a regular flow of steel to markets.

If rail transport is provided, as the Minister said in his second reading speech, there will be a freight train in and out of Whyalla every day. That will mean that this company can deliver steel anywhere in Australia within a matter of 36 hours. Direct delivery is important in the markets today. We know that the reliance upon warehouses has declined. All industries are concentrating on delivering from the factory to the customer and thus avoid building up huge stocks in warehouses as happened under the old concept of marketing. Today we know that carpet manufacturers in New Zealand send their carpets to Australia by aircraft, whereas at one time they sent them by ship. Biscuit manufacturers in New Zealand are also sending their products to Australia by air. As soon as the market demands these things they are put on the next plane and are delivered as quickly, and in fact in some cases probably more quickly, than if the company had a warehouse located in a capital city and had to deliver goods to a country market or even a city market.

It must have been obvious to Commonwealth Railways and to the Minister that Broken Hill Proprietary would wish to operate this system of marketing and that there would be a need for a railway at a very early date. This system of delivering directly to the consumer is not something new. Attention should have been given to it much sooner. Even on the figures I have just quoted from the 1966 report, it must be clear to everyone that the proposition was reasonably economic. In any case Commonwealth Railways and the Minister should have known that Whyalla would expand. Even forgetting about whether Broken Hill Proprietary would wish to carry its steel to its markets by rail, it must have been obvious to the Minister that Whyalla would expand at the rate at which it is expanding today. Every time one goes there one can see new houses going up and can see how the size of the steelworks has expanded and how the shipyard has grown.

The company gave any amount of indication to the Minister, who is responsible for shipping as well as railways, that it was to expand the size of its shipyard. A couple of years ago he received a request from the company for an interest free loan to expand the size of its slipways so that it could build bigger ships. This should have been a clear indication that the town of Whyalla would expand. Even if steel were not to he carried by railway to the Australia markets, the town of Whyalla had other reasons for wanting a railway. The report clearly sets out that the demand of the town for general goods is to the extent of S400.000 out of a total of $656,000. It should have been obvious that this item would expand. If a city is increasing in size, its demand for mail and parcel services, hardware and livestock will increase. So there was any amount of proof that a need for this railway existed long before its construction was approved.

There are a few other points in the Bill to which I would like to refer. As explained by the Minister, the Bill provides that this project shall not cost more than $7m. On the figures that the Minister made available to me, this figure should not be exceeded. The $7m is only for track construction, which is estimated to cost $5,759,000. So $7m should be a reasonably safe figure. I hope that the Minister will give us an assurance that if this $7m is not sufficient necessary legislation to approve further expenditure will be introduced and put through this Parliament in the same rapid and expeditious manner in which we put through a Bill earlier this year.

Mr Sinclair - Yes

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