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Government and industry reform in road and rail conference



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The Hon. Bob Brown MP

Transport and Communications Office o f the Minister for Land Transport

Parliament House Canberra ACT 2600

ADDRESS BY THE HON. BOB BROWN, MP

MINISTER FOR LAND TRANSPORT

TO THE

"GOVT. AND INDUSTRY REFORM IN ROAD AND RAIL" CONFERENCE

BOULEVARD HOTEL, SYDNEY, 21 OCTOBER 1991

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Thank you for the opportunity to open this Conference on

Government and Industry Reform in road and rail.

The land transport sector is at a crucial time in its

development. Major changes to the management of both road

and rail sectors were agreed between the Commonwealth and

the States at the July Special Premiers' Conference.

As delegates to this Conference, you represent a wide

spectrum of the transport sector - as regulators, industry

representatives, providers of transport infrastructure and

as transport users.

No doubt, you all have particular perspectives of where you

see yourselves in this process of change, and over the next

two days you will be hearing from a range of speakers with

a wide experience in the land transport field, giving you

their views on road and rail reform.

From my perspective at a national level, I would like to

outline where I see land transport reform headed.

Reforms announced at the Special Premiers' Conference

recognised that a national integrated approach to land

transport was needed.

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The Federal Government, along with the States and the road

and rail industries, are setting the framework for

fundamental changes to land transport over the next five

years.

The existing fragmented, State based systems in both road

and rail have been unable to deliver progressive and

consistent operating conditions. They have lacked a strong

national focus.

This has hampered our ability to move goods across

Australia efficiently and added to distribution costs.

This is a constraint on the efficiency of transport and its

client industries.

The Federal Government realised the need to turn this

situation around, if land transport is to realise its

potential to contribute to improving Australia's economic

performance. I think this view is also shared by the

States, most participants in the road and rail industries

and virtually all their clients.

We in Government are not underestimating the difficulty of

the task. However, I believe that transport reform is

necessary to enable Australia to compete effectively on

world markets.

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We have seen many industries, some of which are major

transport users, forced to reform because of the

international markets on which they compete.

Both Governments and service industries such as transport

have an obligation to ensure that all possible measures are

taken to reduce their contribution to the costs of

production and delivery.

Reform in land transport is difficult, because of the size

and diversity of the task, but it is clearly worthwhile.

According to the Industry Commission, reform of land

transport could increase GDP by over $6 billion.

These benefits could be realised through improved provision

of rail services and better pricing and tendering in the

provision of roads. Both Governments and the private

sector have a role in this process - Governments in

creating a competitive environment, and the private sector

as a service provider.

As an industry, road transport is recognised as relatively

efficient. However, it is a large industry, accounting for

around 4 per cent of GDP. On this scale, even small

improvements generate benefits throughout the economy.

The reforms announced at the Special Premiers' Conference

set the context for achieving this growth.

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The Federal Government recognises that both road and rail

have a part to play in the process of achieving a more

efficient land transport sector. Our aim is to promote an

integrated transport system with each mode carrying the

type of traffic best suited to it.

Three main elements underpin the land transport reform

strategy

- rail reform, with the main focus on establishing the

National Rail Corporation;

- reform of road use charging, regulation and

registration for heavy vehicles through the creation of

a National Road Transport Commission, and

- redefinition of the road funding roles of the three

tiers of Government to improve accountability for the

investment decisions on roads infrastructure.

RAIL REFORM

Rail inefficiency is well-known. However, the Federal

Government is serious about tackling this problem. Rail

has a strong future, provided it can operate efficiently.

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The Industry Commission in its draft report on Rail

Transport, released in April this year, estimated that

improving rail’s efficiency could generate $4 billion in

GDP.

The stakes are too high in our current economic climate to

ignore this potential for sustained economic growth.

Quality of service is one of the major problems

contributing to rail's poor performance. Terminals are

inadequate. Work and management practices need modernising

and improvements in the reliability of service are

required.

Rail services need to be more effectively marketed and

rational investment programs developed.

I am optimistic that the National Rail Corporation (NRC)

will be able to reverse the historical decline of

interstate rail freight services.

Under the Agreement establishing the NRC, signed by the

Commonwealth and all mainland States, except South

Australia, all interstate freight operations will be

brought under one national management structure.

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South Australia proposes to sign the Agreement after a

range of issues are resolved with the Commonwealth on the

Railway Transfer Agreement.

The NRC is to operate as a commercial company, paying all

relevant business taxes and charges. It is only on this

basis that it will offer fair and open competition to

interstate road transport. The road transport industry is

already highly competitive. The NRC will be simply another

competitor in the field of interstate freight.

It is intended that the NRC will commence actual rail

operations early in 1992, beginning with marketing and

terminal operations.

Governments agreed that the NRC will provide access on a

commercial basis to its track and terminals. Terminal

operations may also involve the private sector. As a fully

commercial operation the NRC will be able to let contracts

for goods and services on the open market.

Under the terms of the Agreement, the NRC is expected to

break even within three years and be totally self

supporting after five.

There will opportunities for private investment in

interstate rail freight, once the NRC begins to trade

profitably.

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I am also optimistic that the lessons learned in Australian

rail from the NRC will generate pressure for reform of

intrastate rail services.

There are some signals that Premiers are interested in

taking this issue up at a national level at the next

Premiers' Conference in November. Interstate passenger

services have been identified as one area in which

substantial early gains could be made with appropriate

reform of management and operational structures.

The establishment of the NRC represents the first time that

Australia has had a single commercial enterprise

responsible for interstate rail freight.

It has taken 90 years since Federation, but the action

taken signifies an important development in the overall

reform of Australia's rail industry and of land transport

in general.

ROAD TRANSPORT

Reform of road transport represents the second element in

the land transport reform package.

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For the first time we will have a simple national

arrangement. It will replace the current nine

administrative systems that have failed to provide an

adequate decision-making structure for a national industry.

Interstate road transport operations have suffered because

of a lack of uniformity in regulations and charging.

Separate State and Territory regulations have prevented

some vehicles from crossing State borders because what has

been legal in one State has not always been legal in

another. Charges have been lower in some places than in

others, causing operators to "shop around" for the cheapest

registration available.

Not only is this a problem for the road transport industry,

but it affects all Australians. Almost everything we buy

has at some point been transported by road.

Governments have found it necessary to create a new

institutional structure, through establishing the National

Road Transport Commission, to achieve a single national

focus that is needed for road transport.

It is worth outlining the decisions taken on road transport

reform because there has been a fair degree of misinformed

discussion in the public.

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Three main changes were agreed by all Heads of Government,

other than the Chief Minister of the Northern Territory

- first, a national registration scheme for vehicles over

4.5 tonnes, which will link existing state registries

and replace the Federal Interstate Registration Scheme;

- second, to establish a nationally uniform code of

technical and operating regulations; and

- third, nationally consistent road charges to fully

recover the road costs that can be attributed to these

vehicles.

The Northern Territory has agreed to mirror the regulatory

proposals in legislation to ensure nationally uniform

regulations.

NATIONAL ROAD TRANSPORT COMMISSION

The National Commission is the institutional focus giving

effect to the Special Premiers' Conference decisions on

road transport. There will be one single legal and

institutional framework for the new system.

The Commission and national regulations will be established

under Commonwealth law adopted by the States.

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As its main objective, the Commission is to simplify and

unify the myriad of heavy vehicle regulations.

The Commission's responsibilities are to include:

- the development of all technical and operating

standards, rules and procedures for driver licensing

and vehicle registration and regulation;

- refining principles for developing all heavy vehicle

road use charges and proposing levels of charges; and

- fostering innovation and the simplification of

regulations, industry self regulation and the timely

introduction of international developments in heavy

vehicle regulations.

Taking a national approach to regulations and operating

standards will reduce administrative and compliance costs

for the industry and manufacturers. Where the Commission

recommends regional variations, these will be implemented

under State law.

The new system will also encourage new developments to be

implemented on a consistent national basis, as a way of

enhancing the efficiency of the industry.

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Innovations will be trialled by the Commission to ensure

that the benefits of new developments are passed on to the

industry on a safe, national basis.

B-Doubles and road trains will also be able to operate

under nationally consistent conditions. I announced last

year that Commonwealth legislation would be amended to

provide for the introduction of B-Doubles under the Federal

Interstate Registration Scheme.

B-Doubles provide an opportunity to improve Australia1s

trade position by reducing transport costs. AUSTROADS has

estimated that the wider use of B-Doubles will result in an

annual reduction in transport costs in the order of $200-

$300 million.

The introduction of B-Doubles under the Federal Interstate

Registration Scheme is expected to be finalised in the next

few weeks, but it has already proved a significant boost to

the industry by encouraging the wider use of these vehicles

across other jurisdictions.

The end result of these changes will be uniform regulations

and charges, which will eliminate anomolies and contribute

greatly towards a more efficient road transport industry.

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Products will be shipped from producers to markets within

and across state borders with greater efficiency,

reliability and reduced delays.

The Commission will be established as an independent

statutory authority, with three Commissioners who are

responsible to Governments through a Ministerial Council.

The Ministerial Council met for the first time in early

October and decided that the Commission would be located in

Melbourne from early 1992. To ensure that progress is made

on regulation and charging issues, an interim Commission

has been set up. Legislation formalising the Commission is

expected to pass through Parliament in the current

sittings.

As part of its Charter the Commission is also required to

consult extensively with industry, governments and the

other road users.

ROAD USE CHARGING

Road use charging has probably been the most contentious

aspect of the land transport reform proposals. It has also

generated the greatest amount of misinformed debate.

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In perspective, the charging proposals are less significant

than the institutional reforms of road and rail.

No specific charges were endorsed by Heads of Government.

Principles for developing charges were however, agreed.

These aim to

- fully recover the costs of road use

- achieve a balance between simplicity, equity and

efficiency, and

- achieve national consistency.

Charges are to be implemented no later than 1 January 1993,

and be phased-in to achieve full cost recovery for each

vehicle class by 1 July 1995. Road trains are to acheive

full cost recovery by 1 July 2000.

The Commission will be responsible for developing the new

charges. One of their first tasks is to recommend a

schedule of charges to the Ministerial Council by March

1992.

Governments agreed that the charging structure should

comprise

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t

- a designated component of the existing Commonwealth

diesel fuel excise (work by officials indicated that

the fuel charge could be around 15 cents per litre,

designated as a road use charge from the existing

Federal excise);

- a mass distance charge for those vehicles whose fuel

charges do not cover the costs of road use;

- an administrative charge (about $10-$20) to cover

transaction costs, and

- possibly an access fee of around $200-$300 for vehicles

not paying mass distance charges, to ease the

transition to the national system.

Mass distance charges will be calculated for each vehicle

class based on the average annual travel by that class.

After 1 July 1995, the Commission and the road transport

industry will need to decide whether to move to a system of

charges based on actual distance travelled.

Work to date suggests most vehicles will pay less under the

national scheme. Other vehicles will pay more to reflect

the greater use they make of the road system.

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Work by officials indicated that a national mass distance

charge for a six-axle articulated truck registered at 42.5

tonnes could be around $7000-$8000. For a B-Double sr

operating to 59 tonnes, the could be around $12 000 - A $13000, which is equivalent to the current charges applying

in NSW and Victoria.

Vehicles registering at a lower nominated mass could expect

to pay less.

The other element of the charging proposals is the zonal

system. Heads of Government agreed to two charging zones;

Zone A will comprise NSW, Victoria, Tasmania and the ACT.

Zone B includes Queensland, Western Australia and South

Australia.

The Commission will examine the evidence of road costs in

the zones and make a decision on the case for difference

charges. Vehicles operating across zonal boundaries will

pay a fee to ensure it is operating on the same financial

basis as the operates with whom they are competing. Two

charging zones is a significant advance on nine different

regimes.

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The overall aim of the charging system is not to raise more

revenue from the road transport industry or to induce a

modal shift to rail, but to ensure that different vehicles

operating in different regions pay the charges which

reflect their use of the roads.

The new system clearly distinguishes between the taxes and

charges for road use paid by the industry.

In future taxes and charges will vary independently; taxes

with budgetary decisions and road use charges with the

level of road expenditure.

This makes governments more accountable for their

investment decisions on the road network.

These measures are intended to improve the efficiency and

equity of road transport operations on a national basis.

POSSIBLE EXTENSION TO LIGHT VEHICLES

At the July Premiers' Conference officials were asked to

report in November on the feasibility and desirability of

extending the national scheme to all vehicles.

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This is an extremely complex issue, involving financial

relations between each level of Government and other

regulatory and charging issues, similar to those considered

for heavy vehicles.

A national scheme covering all vehicles could lead to

significant administrative savings and revenue raised from

charges would be sufficient to fully fund road expenditure.

At this level, it would provide an opportunity to achieve

full transparency and accountability between charging and

road funding.

ROAD FUNDING

With change now underway in road use charging and vehicle

regulation, the next area for reform is road funding.

The three levels of Government spend a total of about $5

billion annually on roads. That is a massive investment in

infrastructure. There is plenty of room for improved

efficiency in how these funds are spent and the returns to

the community from this expenditure.

Interest is focussing on the need for

- clearer responsibilities between levels of Government

to improve accountability;

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- more transparent funding arrangements so that

Governments' priorities are open to scrutiny; and

- greater efficiency in the delivery of programs by

Governments and in the management of the road system by

State road authorities.

It is in the latter area that there is greatest potential

to contribute to economic growth by more efficient

provision and management of our roads infrastructure.

The Commonwealth is leading reform in these areas. Over

the last year the Commonwealth has ceased to provide block

grants under its road funding programs to the States and

Local Government for roads which are their responsibility.

The Commonwealth now concentrates funding on roads which

are nationally significant, recognising that investment

decisions on other road projects should be made by the most

appropriate level of Government. _

This process will be taken further in the context of the

Special Premiers' Conference reforms when the Federal

Government will shortly announce a national road network

for which it will take full funding responsibility from 1

July 1993. This will remove remaining areas of shared

funding responsibility with the States.

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A remaining area of overlap is the blurring of road funding

responsibilities between State and Local Government. BuckĀ­

passing of responsibility for individual roads will remain

the order of the day until these two tiers of Government

achieve a clear separation in their roads responsibilities

and develop a greater commitment to improved

accountability.

The level of Government setting priorities and providing

funding will be under increasing pressure to deliver road

improvements on time and on budget.

As the Federal Government moves to assume total

responsibility for a defined national network from 1 July

1993 we will look carefully at whether current arrangements

with State road authorities best provide for the efficient

delivery of our program.

In its report on Road Use Charging and Vehicle Regulation,

the Inter-State Commission considered that micro-economic

reforms could be advanced by bringing the performance of

road authorities under greater scrutiny.

The Federal Government is looking at ways of managing its

program which will provide its construction agents with a

real incentive to offer a competitive product.

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There is a need for the States, and the Commonwealth

through its funding role, to address the need to expose

road authorities to greater competitive pressures.

In Australia there has been minimal private sector

investment in roads, largely because of light traffic

volumes and the size of the road network.

When there was little or no private sector expertise in

road building and design, it was appropriate that these

functions were provided by the public sector. It is no

longer appropriate that public sector organisations hold a

monopoly over functions which can be subjected to greater

competition, particularly when such large amounts of public

funds are involved.

In the past, Governments were not generally receptive to

the idea of toll roads. However, this has changed. A

number of States are progressing innovative developments in

this area.

The Federal Government has yet to be approached by any

organisation with proposals for private sector investment

on any of the roads for which the Commonwealth has full

responsibility.

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I am aware that there is interest by the private sector in

the approach that the Federal Government might take to

investment in this area, particularly in relation to

taxation treatment.

In the absence of specific proposals, the Federal

Government has not given detailed consideration to these

issues. This is not to say that the Federal Government

does not wish to encourage innovative proposals by the

private sector for the development of national roads

infrastructure. Any proposals will be received with strong

interest and assessed on their merits.

CONCLUSION

The framework for land transport reform announced at the

Special Premiers' Conference acknowledges the importance of

vital, competitive road and rail sectors in contributing to

Australia's economic growth.

I am optimistic that we can move towards a national

approach for interstate rail freight under the management

of the National Rail Corporation.

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The reforms to heavy vehicle regulation, road use charging

and revised road funding responsibilities between levels of

government offer the potential for improved provision and

management of the roads infrastructure and the more

efficient movement of road transport across Australia's

road network.

Together these changes will provide more rational decisionĀ­

making on land transport management, investment and its

future development.

It will be a test of Governments' resolve and the transport

industry's maturity to see these changes implemented

successfully during the next few years.