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Standing Committee on Infrastructure, Transport and Cities
Role of transport connectivity in stimulating development and economic activity

ASKEW, Mr Tim, City Revitalisation Coordinator, Newcastle City Council

CHIKAROVSKI, Ms Kerry Anne, Registered Government Relations Consultant, Spacecon Pty Ltd

DOY, Mr Jonathan, Partner, Tax Advisory, Crowe Horwath (Australia) Pty Ltd

HARKINS, Mr Jeremy, Founder, ineni Realtime; Smart Cities Consultant, Spacecon Pty Ltd

LEE, Dr Chyi Lin, Associate Professor, Western Sydney University

MOORE, Mr John, Chief Executive Officer, Forrester Cohen International Group Limited

MOUNAS, Mr Andrew, Adviser, Spacecon Pty Ltd

SHIN, Mr Raphael, Managing Director, Spacecon Pty Ltd

CHAIR: Welcome. Do you have any comment to make about the capacity in which you appear?

Mr Moore : I am a consultant with Spacecon on general information.

CHAIR: Thank you. Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I now invite you to make an opening statement, and then we will proceed to discussion.

Ms Chikarovski : On behalf of the Spacecon consortium, can I first of all thank the committee for giving us this opportunity. I understand that you are getting close to the end of your deliberations, so we very much appreciate your time. I also have to extend an apology from the Ministry of Land, Infrastructure and Transport. It was the intention of the Korean government that representatives of that ministry were to appear before you today. Unfortunately, there has been an extended rail strike in Korea—and by 'extended' I mean we are now up to 30-something days—and, as a consequence of that, bureaucrats from the ministry are required to remain in Korea to try and resolve that dispute. However, the ministry have forwarded their presentation to Spacecon and asked them to present it on their behalf.

What we intend to do today is make a number of presentations to you. One will be a technical presentation, which will be offered by Andrew Mounas, which will talk about the technologies and experience of the Korean technology. We will then talk to you about smart cities, which will be done by Jeremy Harkins. We will further go on to the infrastructure methodology and how you would fund such a fast train. That will be done by John Moore. Jonathan Doy will talk about the tax implications, and Chyi Lin Lee will talk about value capture, which I understand is one of the key issues for the committee.

Let me just say very briefly that the reason I am involved in this is that some 20 years ago, sitting in this parliament, I had a number of propositions put to me about very fast trains. I think it is fair to say that the level of scepticism about a very fast train extends from that period of time because there have been a number of propositions put to both state and federal parliaments over that time. When the Spacecon consortium came to see me, I expressed that same scepticism and explained to them some of the issues that I thought a very fast train between Sydney and Newcastle—which is the particular project they were looking at at the time—would involve, which included environmental problems, problems with communities, all sorts of things. They have gone away and done a considerable amount of work, and I think that some of their solutions are more than innovative, but they also reflect the times, insofar as people now are looking for solutions to urban overcrowding, looking for ways in which we can open up the spaces between our cities and make them far more valuable in terms of the building structures around them, and also make them more affordable so people can live within a reasonable time of Sydney, Melbourne, Canberra and, indeed, Brisbane.

We are here today to present the Korean technology—the technology which has been proven in Korea—from government consortia in Korea which have built these technologies and have now operated them for some time. With those opening statements, I would like to hand over to Andrew, who will talk to you about the technology. We have provided you with a hard copy of what Andrew is going to talk about, and he will take you through the first part of that, which is about the Korean technology. Chair, we appreciate your indulgence for allowing us to film this, because the Korean government would like to see how this presentation has gone. So, again, thanks, Chair and the committee.

Mr Mounas : Obviously that puts a little bit of pressure on trying to get their presentation right. Again, just picking up from what Kerry said, I am filling in to give the presentation that the Koreans have put forward to us—this is the Korea Rail Network Authority. There is some background there on who the Korea Rail Network Authority are. I will not run through that, but they are obviously quite a substantial organisation. They are like Australia. They have split themselves up into below-the-rail and above-the-rail. They have an operational side, and they have a below-rail side as well. That is pretty standard now throughout Australia—for example, in Australia companies like Brookfield Rail et cetera own the below-rail, and the above-rail is operated by independent operators like Pacific National, QR or Aurizon et cetera—so it is a very similar sort of set up, in terms of infrastructure and outsourcing of the transport system.

There are quite a number of engineers and technical experts in there. Their core business these days is the high-speed rail. That is their solution to their high-density population issues. They still have conventional rail. When I take you through this presentation, you will see that what the Koreans have done is they have had a journey on the technology. They started with conventional rail, which is very much like what we have here in Australia, and then they have gone up to what they call semi-high-speed rail—you will see the acronym, MTX, in there, and then you will see the acronym, KTX, which refers to the high-speed rail. So they have had this journey since the early 2000s, but in 2004 they had their first high-speed rail.

The advantage with the Koreans is that they have quite a large R&D capability behind them. So whilst they implemented the high-speed rail in 2004 they have incrementally improved it and integrated research with practical learnings from it to come to a technology that is now proven, reliable and robust. So this is one of the great advantages of the Korean technology. It is tried and proven. I note there are some other technologies that are coming to the fore. One could argue that we should be looking at these new technologies—and that is correct—but what the Koreans have tried to do is futureproof their existing technologies by incrementally building on them and increasing speeds. So the semi-high-speed rail was up to about 200 kilometres per hour. The proposal here is to go up to 350 kilometres per hour.

You may be aware there have been unsolicited proposals to come up with a high-speed rail between Sydney and Newcastle. But the idea is to work with government and incorporate the futureproofing of the designs by allowing for higher speeds—for example, when you are designing railways one of the key aspects is the turning circles, the radius, so the faster you go the bigger the radius. As part of the thinking, they were designed to cater for future higher speeds but implement the current tried and proven technologies, which would be at 350 kilometres per hour. The 500 kilometres per hour and the 600 kilometres per hour are in formulation now, and I have been informed there is progress on that. So they are putting tried and proven technologies in now and then incrementally increasing them to achieve the higher speeds and the higher technologies—and that is not just through the rail lines; that is also through their IT platform.

A key part of rail safety is the communication systems. There are two aspects to the communication system: the first is the actual communications to the control centre—and the centre is the actual fail-safe devices that occur to stop any sort of major accident occurring. If there is an issue, things automatically shut down or slow down or whatever. That technology is also being incrementally improved based on tried and proven previous experience with R&D. So that is a little snapshot of the approach the Koreans have taken. It is a systematic, progressive, forward-looking approach, managing risk as you go forward.

There are three primary high-speed rail lines in the existing rail network in Korea, cumulatively about 600 kilometres, with desired speeds of 350 kilometres per hour. Again, that is the current technology they have implemented. There is a map there on page 3 that shows them emulating from Seoul heading south at two of the major cities. In addition to that they assist other countries in implementing technologies, in terms of construction experience, engineering experience et cetera. They have quite a big presence in Asia, and they are now spreading to some of the other countries in Africa as well.

How did they develop the HSR network? Again, I have sort of touched on that by highlighting the rail lines they have implemented—the 600 kilometres. There are three rail lines: the Gyeongbu HSR phases 1 and 2; the Honam HSR and the Seoul metropolitan HSR. The idea is to have the cities connected within 90 minutes, so that is virtually from the north part of Korea to the south part of Korea within an hour and a half. I already touched on the MTX, which is a semi-high-speed rail, how that was the precursor to the high-speed rail and how there was a seamless transition from the MTX to the high-speed rail through their forward planning. There are some details on the projects. They are quite substantial projects.

The first high-speed rail in Korea was in 2004. That was of the order of $19 billion. The second phase opened in 2010. The more recent one was last year, with another $10 billion, 183 kilometre project. The distance is similar to what we are speaking about, in terms of Sydney to Newcastle—about 140-odd kilometres. Then there was the high-speed rail project in Seoul, which is largely underground, largely in tunnels. There is a bit of a history there about the upgrade from the lower-speed rail line—from 90, to 140, up to 250 kilometres. Like I said, eventually the target is to get up to the 400-500 kilometres—what did you say, Raphael?

Mr Shin : Five hundred and seventy.

Mr Mounas : Five hundred and seventy is on the table at the moment. In terms—

Ms Chikarovski : May I just interrupt you for one second. I am remiss in that I did not introduce Mr Raphael Shin, who is in fact the CEO and chair of Spacecon. Mr Shin would like Andrew to present, but occasionally, when there is a question that Mr Shin needs to answer, he would appreciate the opportunity to do that. My apologies that I did not do that earlier—sorry, Raphael.

Mr Mounas : Just to add to that, Kerry: Raphael is actually the key driver and the vision for this project. The three different projects that we spoke about were the Seoul metro—again, there are a lot of the similarities to what we are trying to do with Newcastle. Between Sydney and Newcastle we are proposing underground tunnelling all the way through. Kerry touched on the environmental impacts. The idea is: very little environmental impact, very little impact on existing infrastructure, out of the way—so, it is plus, plus, plus. It gets over any sort of congestion issue, particularly coming into Sydney.

The Seoul underground railway is 50 kilometres, three stations, and it is in operation and has been for a number of years and it is 55 metres deep—so they are the concepts. At each station, there will be lifts and all that to take you up to the surface, but there will be basically underground cities as well as an underground hinterland over the top of that. Again, this is in existence and obviously the Koreans would invite members to come over and have a look at this existing operation, because it will have a lot of similarities with what the Korean Spacecon consortium is proposing. And you would imagine that in Seoul the congestion is a bit higher than in Sydney.

The next page, page 11, just demonstrates how they have integrated the MTX, which is the semi-high-speed rail, with the high-speed rail. They have the semi-high-speed and the high-speed operating in the same tunnel. The thinking behind all this is: you can have these grand plans, but they must be economic, so you need to work your infrastructure hard. So, instead of duplicating tunnels, they share the tunnels to the point where the capacity is exceeded, and then you build a new tunnel. The sizing of the tunnels is optimised to make sure it is as small as possible within the safety constraints—the bigger the tunnel, the bigger the cost, the more earth to be moved, the more tunnelling. I am an engineer originally, and we are accused of building the grandest plans, but it has got to be economic. This is what they are coming from. They are coming from a close integration between the business side, the economics, and the actual physical costs, to try to get up with a solution that is economic and achievable. We have had a history of now 30 years of previous high-speed rails that have not got up because of economics. This is about trying to find the right formula to make this project happen.

There is some history there. I will not touch on the financing. In Korea it was a different financing structure. That is going to be touched on later in the presentation, so I will leave that alone. The next phase is pretty standard for project management. It just runs through what you do through the planning, design, construction and operation stages. There are detailed plans that sit behind that, and we will not touch on them here, but obviously at each stage there is a close integration with the stakeholders—who include government, business, local business, council and residents—trying to find solutions that are win-win. For example, with councils, part of this proposal is having the development rights around each of these stations, but it is working with council to actually provide areas that council can develop for their facilities, for community facilities—schools et cetera. A total integrated approach is what the Koreans are wanting to put forward, so that the impact on the community, on the environment, is minimised and the economic benefit is maximised, not just for the consortium but also for the community and the flow-on benefits.

I will not go through each of the stages. I think Australia is catching up with the rest of the world in terms of tunnelling. There is quite a bit of tunnelling here in Sydney, as you know, with the Lane Cove Tunnel et cetera. And obviously we are a big mining nation, so you would not be surprised to hear there are thousands of kilometres of underground tunnels out in the outback, with all our mining ventures. But the cost of tunnelling has come down, and it has become quite automated. There are a number of videos that the guys can show you on tunnel-boring machines. John Holland, for example, have done some successful tunnels here, and so have a number of other companies. The actual technology in tunnels—the risk side of it is reduced.

Again, we talked about optimising the cross-section to reduce costs. There is a diagram that John will show a little bit later on the cross-section of the tunnel. It is a multiuse tunnel. It has got rail and vehicles in there, so it does not just address the rail problems; it also addresses traffic congestion problems. Through simulation, they have managed to keep the tunnels down to a smaller size. You can imagine you have got this bullet train coming down a tunnel and there is a pressure wave in front of it. Over years of experience, they have managed to address that and pressure-alleviate the tunnelling and stop things like ear-popping in tunnels. Some of the early high-speed trains were quite uncomfortable, through movement, pressure on your ears et cetera. Since 2004, they have incrementally addressed those problems, so now the level of comfort can be virtually guaranteed in these high-speed trains. It is not just about having a train that can go quickly; it is also about having comfort in the train, and some of the newer technologies may not have the practical experience the Korean technology has.

Then there are some details about the tunnelling methods. These days it is relatively standard: it is tunnel-boring machines with precast concrete units sliding in behind the tunnel. As you tunnel, precast concrete units come in, lock in and you move forward. It is very a safe, stable operation. In terms of bridge building, there are a number of methods of bridge building which the company will select depending on the environment and the geography. In this case, because it is tunnelling, there are going to be virtually no bridges. There might be some at the entry and exit, but virtually no bridges.

Ms Chikarovski : Just to clarify: that is, if we are talking about Sydney to Newcastle.

Mr Mounas : That is a good point. For Sydney to Newcastle, it is totally tunnel but, if this technology was adopted, there would be tunnelling but not as much, say, going from Sydney to Melbourne and there would be the need for a number of bridges. Again, they will be conventional design bridges.

One of the beauties of the technology of rail welding is that it is not that different to the way we install rail now. My history has been in not just metropolitan rail but also heavy-gauge rail in Western Australia on iron ore projects. With this sort of technology, where the rails are seamless, continuous rails—I am not sure if some of the old-timers here would remember the old clickety, clickety-click rails, because the rails were bolted together. However, these days they are fusion welded together, and there is no noise. For high-speed rail, that is essential. Again, they use this thermit fusion-type welding where they take the two metals, bring them together and, because they are hot, they fuse together. You do not see necessarily a weld there for most of them. There is some welding but very little. Normally, it is just bringing them together and they join. Again, that technology is used in Australia, so there is very little risk with that being adopted in this technology.

Turnouts refer to where the rail line turns out, and the ability to install these turnouts is prefabricated. You just drop them in and off they go. If you look at the normal rails around Australia, they are all on sleepers. These ones are going to be on post-tensioned stressed concrete, so they will just be dropped in. It will be compacted ground, and the sleepers and the rail would just be dropped in as one unit, and it is a precast slab. There is no potential for movement, and that is illustrated on page 26. The company has a patented fastening system for fastening these rails. It has been tried and proven a number of times.

I have already touched on the rail technology as it has been developed, but one of the key components, going onto page 29, is the signalling communications. As I mentioned before, that is progressively being improved over time. It covers signalling, communications and the power side of it. One of the novel things on the power side is that Spacecon is very active in pursuing green energies—biomass technologies, in particular, so taking wood waste, organic waste and chicken litter, burning it to create power and then feeding it back into the system. One of their proposals is to try to make this as green as possible by utilising other ancillary technologies to generate the power required for the rail. A part of their offering, Spacecon are bringing some of that technology into this as well. The impact on existing power infrastructure for this rail line will be minimal, because the aim is to generate their own power. Part of smart cities—I will not steal anyone else's thunder on smart cities—is generating your own power from waste, capturing CO2 emissions and reconverting them into other products.

Some of their wireless technology is state-of-the-art. They are now up to the fourth generation. Again, through the iterative process and R&D, they are now developing and improving on wireless technology. I will not go into that in a lot of detail. The last bit of the equation is the maintenance centres—having high-quality fast maintenance centres where the trains can come in and be turned around quickly and put back out on the track. The key to this technology is that in the rail industry we talk about reliability and availability. The reliability is when I put the train on the track and it keeps going. The other point is availability—how often the train is available. That is a function of how often it takes to actually maintain the train. So, if it goes down, how quickly can you get it back on the track. What this technology brings is the high reliability and high availability, based on these years of experience in ironing out the problems. Some of the newer technologies that are coming out do not have that luxury of the reliability and availability.

We can provide a lot more technical information on each aspect of this technology, for closer due diligence. But this just provides a high-level snapshot of what I think the Koreans were trying to express in this presentation.

Ms Chikarovski : I will ask Mr Jeremy Harkins to speak, because he is going to speak about the smart cities, which is his expertise.

Mr Harkins : I am from a company named ineni Realtime, a local company started about four years ago in Sydney. It is still fairly small but is growing fairly rapidly. What I am going to give a presentation on to you today is basically interfacing smart cities, not necessarily the systems that run smart cities in the background, but how end users actually interface with all of the data that we have to deal with on a daily basis. That should give some context.

We create 3-D interfaces. This is all about intuitive controls and user experiences, so this is aimed at the entire swathe of users of any system, from someone on the ground, say, a cleaner who has a job to do, all the way up to an executive or a minister who has to make live decisions quickly on very little information.

What that comes down to is something like this: information overload. This is what we are currently dealing with in our smart cities. We have a massive amount of information. As an example, what I am showing you now is a dashboard for a wind farm. It gives you a sense of all of the controls needed just to operate a single facility. When you start taking more facilities, such as transport, power, energy and waste management and add that into the system you end up with a massive amount of data that can become quite difficult to engage with. So it is about reducing that complexity to something very intuitive for us to interface with and control—something more like what I am showing you now—through our mobile devices, because that is where we actually spend a lot of our time these days.

Of course, this is also about future technologies. Part of what we do is think about the future of the environments we create. Virtual reality is a new fad that has come out, but it is actually all heading towards this augmented reality, this idea that there is this pervasive virtual world existing in tandem with the real world. This allows us to interact with data in a fluid why. For instance, in this image I am showing you now—this is Microsoft HoloLens—you can see that he has his recipes up on the wall, and his TV, which he has placed on the wall and which will actually follow him around if he moves. So it is about access to information.

How we do this is actually through game technology. Game technology can seem like it might be for kids, but realistically it is a very powerful platform that allows us to achieve a lot of information. I always relate this back to two 12-year-old kids, one in Australia and one in Sweden, playing a video game. They have to interact instantly. If we replaced those kids with professionals, we actually have the same technology model. So that is the concept behind it.

There are lots of reasons we use game technology, but there are two very specific ones. One is cross-platform capability. This is about getting it out to everyone's devices—their PC, their Mac, their iPhone, their Android—any device the gaming industry, by default, has to engage with. This means that, before anyone else, games actually engage with new technology first, and that leads on to future hardware. Future hardware comes out and sometimes it is disruptive. Sometimes it actually changes the systems that we are already using very significantly and it makes technology redundant. By engaging with gaming platforms we can actually keep ourselves relevant and, as the new technology comes out, we can interrelate it back to existing and past environments.

A good example of this is one project we did a few years ago. A 14-year-old boy in Sweden actually solved how to get virtual reality working before anyone else. When the Oculus Rift came out, he had it working within about 24 hours, shared it with the broader open data community and, within about 48 hours, we had actually backlogged all of our existing content with this new hardware. It is a very agile approach to both technology and systems. A lot of this will make a lot more sense when I show the demonstrations. This is a good example, I guess, of heritage in cases of this. When we think about smart cities, we are not only talking about new developments; we are talking about existing developments. This is actually a very old church in Sydney, at a prominent ladies college. We created this environment, which is almost the realistic representation of a real space, and overlaid all of the existing electrical diagrams so maintenance could better operate this quite old but very historically significant facility.

We can take that to new developments such as the high-speed rail. Visual content is a must in terms of getting these projects across the line. We have to understand how they work and we have to see it before we actually commit to them, otherwise we get many problems—not only through the design processes but into construction and into maintenance as well. This was an image of the proposed high-speed rail and this is a cross-section of that same tunnel. We would create this into a virtual environment, which allows us to get value across every stage of its development: the design stage, the construction stage and the maintenance stage.

How we do this is this concept of the duality of real time. Real-time data is all around us. It is something we deal with on a daily basis. When we are making a bank transfer, our banks need to know instantly that we have made that transfer so we cannot make the same transfer twice. The data side we are actually really good at; it is the experience side that we are not so good at. How do we convey this to, say, a million users or five million users or even one very specific, important user? That is where the visual approach comes in and starts making a lot of sense.

A part of this is also this idea of BIM. Building information modelling is a new concept—or it is actually about a 30-year-old concept, but it is getting a lot of traction in recent years because it is a more efficient and better way to build and construct buildings. We are integrating that BIM data to make it relevant to maintenance. So how can we pass the design-and-construct information down through the line and make it a valuable asset for the entire life? This is all about getting efficiencies and business processes which allow us to make better decisions at every stage of the design development. Part of this is this concept of metadata. With everything we do, there is a single piece of data associated, or multiple pieces of data. BIM is a classic example. We need to tie that together into a single metadata model which allows us to utilise it across different systems, both proprietary and open. This will make a lot of sense when you see the concepts.

This is about linking this value chain. Traditionally if you look at the construction-and-development industry and infrastructure, all of these different departments exist, kind of, in silos. The bid team do not really talk to the design team; the design team do not talk to the marketers; and the marketers do not even know who the operations people are. It is really about pulling these all into one common environment which allows everyone to get benefits from everyone else's previous work. Specifically at the moment we are concentrating on both the marketing phase and the operational phase.

Marketing is a vital tool to convey this information to the population and to key stakeholders. They have massive budgets but it is used once or twice only for very specific purposes. By utilising that budget and creating a virtual asset we can pass it off to the operational team so they can gain value from that same information.

This is all about a visual approach to spatial interaction. It is about getting better project outcomes by the end. I am going to show you a quick case study now so it makes a lot more sense. About three years ago, when we were a very young company, we were engaged in Barangaroo. Lendlease engaged us for what they called their open building systems integration. Their open building systems integration is an approach where they combine all of the pieces of software used to run the development. In these international towers that you see here, there are going to be about 30 pieces of software running the building. That is anything from the lighting systems, the air conditioning systems, security management, CCTV to parking—almost anything you can imagine. They all have their own pieces of software and their own operational needs.

By combining them into a single platform, we can start getting better business efficiencies. We can know that that air conditioner is broken because of a power surge in the power system, which we are monitoring at a different time. What this leads to is predictive maintenance. Predictive maintenance means that we can create better outcomes from a building, not only for the building owners but also for the tenants. So everyone gets benefit from the efficiency that is created.

As part of that, we came in at the visual front end. When you are dealing with that much information, you go back to that first comment I made about information overload. A dashboard for these buildings is a very powerful dashboard, but it takes about two to three months to learn, and to get real efficiencies out of the buildings takes probably six months to a year of really understanding how things are operating and pulling those efficiencies together. So what we do is we take all the design documentation and engineering drawings and pull them together into a common environment. This allows us to not only represent the buildings for design and construction but hand them off to the operations people so they can better operate their facilities.

You will see the level of detail this model goes down to when I zoom in here. It is pretty much from bolt level out to city level. In creating this environment, we took lidar scan data of the city, which is accurate to about 12½ centimetres. So we can look at things like sun shadowing and see how a new development will affect the overall city at a given time of day or year. We took the engineering drawings from multiple contractors, architects, engineers, electrical engineers, plumbers and so forth and combined them all into a single environment.

For the techy people out there, or the people who understand technology, the amount of information in this environment is the equivalent of about 600 million polygons, on average. In the construction software they use to design these buildings, they can get to about one million polygons. So this is 600 times more powerful, and this is largely because of this gaming technology I was talking about before.

If we fly into one of the levels, you will see that it goes all the way down to office detail, essentially. We can start getting efficiencies at multiple levels of the environment, to the point where the imagery you are seeing out of the window in this environment is the actual imagery taken from a drone at the height of these buildings, about seven years before the developments were completed. This allows us to understand things.

You can start seeing how this links to both marketing and operations. The marketing people use this to help lease the development, giving Lendlease efficiencies and a quick approach to delivering these buildings. But it is not only that—it has allowed the builders and the facilities managers to understand the facility long before it was finished, so they could plan how they were going to operate this environment.

This is similar to a fly-through. We get fly-through done all the time for new developments, but fly-throughs are an end point. They create a single piece of content which does not get reused. So our approach is to take that content, get the same outputs but retain the data behind it. So behind all of the elements you see in this environment there is actually data and information travelling around.

A good example of that is the construction sequences. One of the first things we did was to link up the engineering drawings with the program manager's drawings—so essentially how they were going to be constructing the building. We can stop this and go to any particular point in time throughout the entire life cycle and see how the project was developing. So this can be used for comparisons, to see how a projected time line proceeded versus an actual time line, and where certain issues might have arisen during the project, so we can see why they happened. It is all about project communication.

In this particular example, it became a very useful tool for a prominent bank which was moving into the centre tower to help with their change management process. So they were moving about 19,000 staff into this building and they had concern about this being a construction site for two years after they were moving in. With this tool they could understand at what point they could move certain people into certain levels of different towers, knowing that there was not going to be a construction site outside their window 20 metres away from them. That was one of the small elements we did for that particular organisation.

Some of the other elements included things like induction training, safety training and evacuation planning. This all related to risk reduction and risk mismanagement for them. Their big concern was their staff, obviously, being a banking corporation. They wanted to know how Lendlease was going to be keeping their staff safe. So we put in the Lendlease supporting diagrams. Additionally, just as an extra, we also put in the marketing material so the marketers could turn this into a signage testing exercise to understand how their signage would be displayed to visitors to the site, increasing the value of the overall development. Once the banking corporation saw this they understood the value of visual content for their staff. We have done a series of induction videos and evacuation plans that would have been cost prohibitive to make to this level of detail without having this virtual asset to begin with. I will show you one of those videos in a moment.

So the level of detail here—we have used this for the design development stage, largely for design collaboration, coordinating a lot of the various contractors and partners onto a single project, which formed the basis of this environment. It was then handed off to the project managers and builders, who could actually see how this thing was going to be built. Then this has formed the basis for the OBSI, which is actually operating the building in the long term.

To give you a very small sense of that—and I will not show you the live application because it is actually linked into the buildings as we speak—for instance, we can open and control building elements, such as turning on lights, opening shutters, unlocking doors and so forth all through sensor technology or, as is better known these days, the internet of things—IoT technologies. For instance—and I am not doing it right now—when I open and close one of these things this will open and close a real one in life on that same building and vice versa. If it is open and closed in real life, it is open or closed here. So it becomes a virtual representation of the real world. This allows us to do testing, simulation, evacuations. We can plan for how we are actually going to operate our facility before we get there.

In terms of a high-speed rail, there is going to be a lot of challenges, and those challenges come down to data infrastructure, geography, business processes, business needs, community engagement. You need a visual tool which gets everyone on the same page.

Mr Mounas : Particularly when the stations are fully developed.

Mr Harkins : Yes—within the stations and the tracks. So we can actually represent these simulation ideas before they happen. So if there is a particular work-type statement which needs to be achieved which is complex in nature we can model up, simulate it and actually make sure that it is going to work before we achieve it. We have saved Barangaroo—I am not going to say any figures—a large amount of investment in mistakes not made. So being able to test it first—making the mistake first in a virtual environment and then being sure that the solution that they have suggested will work at a later stage—is vital for how this all comes together.

I will show you one last environment and then I will finish up. This is not only about smart buildings and smart cities. Smart buildings, for us, are the basis of this. If we do not capture the information inside a building, our cities will never be smart. Eighty per cent of activity actually happens inside buildings, not out on the streets. Some of the vital activities happen out on the streets, but we have to get all of the information at multiple levels—from macro to micro. In terms of that, this is a proof of concept that we have done with transport for New South Wales about simulation planning and scenario planning—so how the New South Wales transit network is going to work in relation to people movement and scheduling. The way that we currently schedule allows for, at most, two schedules or three schedules to be created a year, which means that we are fairly slow in responding to quick changes.

We took all of their data, incorporated it, digitised it essentially and put it into a system which allows us to see incoming and outgoing passengers, station capacity, how many passengers are on the platform and a range of other factors linked to these environments. We can then set all of our requirements. We can say that out at the showground we have an event with 20,000 people. We can put 20,000 people in there, run a simulation and see the little trains running around the tracks here and actually see how it is affecting our stations as we go. So once we have done this, it lets us see to a greater level of detail more quickly. Rather than two schedules in a year or in six months, I can do about 20 in an afternoon, which means iteration leads to better outcomes. What is more, this can be used for project engagement, where I can get down to street level and actually see how my system is being affected both from a macro scale and from a micro scale.

There is also a range of extra things—there are analytics in here, a huge amount of data; there can be live data. We can link this up to the actual system so we can have a simulated mode as well as a virtual mode where we are showing the actual state of the tracks—where our trains are, how many people have scanned in at which Opal points to which stations—and we can actually respond to emergencies much better and quicker because of tools like this.

In terms of the high-speed rail and the smart cities, which we are going to be heading towards, these tools are going to be vital in the next five to 10 years in how all of our population interact with both our infrastructure and our smart cities. Feel free to ask questions.

Ms Chikarovski : I think it is scary really that you can do so much. I am here to help but I am scared witless by it all. I will now ask Dr Chyi Lin Lee to speak about value capture through infrastructure funding.

Dr Lee : I am from Western Sydney University. Thank you for the opportunity to present this smart city high-speed rail and roads integrated environment project. It is a team project with myself and my colleagues. I specialise in property investment areas and my colleagues specialise in different areas—cost-benefit analysis, environmental impacts, financial projections, micro-economic impacts and economic modelling—so we have quite a good team with different sets of skills.

For this project, one of the key concepts here is value capture. We have done a literature review of what value capture means and what has been done overseas. What we found was that the value capture concept is just a way of infrastructure investments which will create new economic activities. What is more important is that these new economic activities will create direct and indirect benefits and those benefits will exceed the cost. Most importantly, this concept tries to capture all of these benefits, how we will use these benefits and how we will use the fund for infrastructure. So that is our understanding of value capture.

Why value capture? According to the Smart Cities Plan, which was issued by the Australian government, there is so much important infrastructure that needs to be funded. We need to consider smart infrastructure funding as an investment wherever possible according to the Smart Cities Plan. So value capture is one of the methods we can use—in other words, we can say smart infrastructure funding may be considered. What happens when you see value capture? To give you an example, if you look at the Sunshine Coast in Australia, for the Sunshine Coast light rail, KPMG's study suggests that value capture made will be able to contribute 10 or 20 per cent of the infrastructure costs. In Hong Kong it is a different story. MTR—mass transit rail—projects are generally fully funded. Basically, they give them the development rights, so they develop the properties surrounding the rail line, and they use that money to fund the infrastructure.

If you look at the UK, there is the Crossrail project, but, unlike the Hong Kong model, it just partially funds the rail project. What we are looking at here in relation to smart cities, what we understand here for our team is that generally value capture can potentially be a funding model, especially for the smart city development focus. Our definition is to use the realised profit from property value uplift in the smart city to finance the Sydney and Newcastle's high-speed rail.

In order to understand this new development, with integration with the smart city and the high-speed rail, et cetera, our teams have the capacity to conduct comprehensive analysis, not just about the economic feasibility, but also about the social, economic and environmental impact as well. If we do the analysis we will look at several elements. The first element generally will be financial estimates. We look at how viable they would be and what value would be added. If we build the high-speed rail, new houses will be built, zoning will be changed, density will probably be higher. How much is the impact? More businesses will be moving into the area. How will that value be added through these activities and how we could capture that? That would be the financial part.

Apart from the financial part, not just focusing on dollars and cents, we also look at other variables like social and economic impact as well. We will be studying the impact of how these will affect housing affordability. Particularly we study whether it will be generally a home owner-occupier or investor dominated housing market, et cetera. We also look at the mobility impacts—how we will transport people. Maybe enhancing connectivity will bring people in that area in Newcastle to the cities. Maybe people from Sydney will come because the houses will be relatively cheaper in that area considering that transport and connectivity has been enhanced. So maybe some people in Sydney may move into those areas. So we will study that impact as well.

We also study the impact on traffic and how that will affect the traffic in general. Apart from the social and economic impact we also look at environmental impacts. We do the environmental impact assessments, and our understanding is that these new buildings will be green buildings. So how will this affect the environment?

Apart from the projections of that impact, we also consider risk. We do risk assessment as well. We look at how this will be built in. Importantly, there may be some unexpected environmental impact, so we do that analysis. What is more important is that global financial and economic stability will be considered, because all the value capture, et cetera, is based on the market doing well. What if the market does not go well? That kind of impact will be considered as well in our analysis.

So basically this is what we have done and this is what we wanted to presented to you. Our team just wanted to show that we have done several projects for organisations in Australia, international organisation, Our team is really keen to investigate more in these areas and models to validate the project.

Ms Chikarovski : Next I will ask John Moore to talk about the analysis that we have been looking at and how we can have some sustainable funding in infrastructure.

Mr Moore : I am very excited to talk to you today about how the value capture model can sustainably fund infrastructure projects.

We have a great opportunity to shape the funding and participation in infrastructure projects in Australia. Value creation, or value capture, enables all parties; the federal, state and local governments; the technology providers; the consortium; and the community to have agreed and predetermined benefits. This proposal is the delivery and operation of high-speed rail and road infrastructure and smart cities.

The total proposal includes Sydney to Brisbane, but we have divided it into three stages. Our first stage is Sydney to Newcastle tunnel, and that is underground from Central in Sydney, through to Newcastle via tunnel. That is 140 kilometres. Stage 2 is Sydney to Canberra via Western Sydney Airport, which would be a partial tunnel. Stage 3 is Newcastle to Brisbane. This presentation concentrates on stage 1, the Sydney to Newcastle tunnel, as an example.

The consortium will engineer, deliver and operate an end-to-end infrastructure solution by using value-capture to fund and develop five smart cities, connected via high-speed rail and car tunnel, between Central Station and Newcastle. Each smart city will cover 100 hectares and accommodate 40,000 people, and the tunnel length is approximately 140 kilometres.

What is a smart city? It is a totally planned community that is connected, physically and technologically, to facilitate community-based living; collaboration and innovation; integrated; affordable housing; and the celebration of ethnicity. This means: green cities; zero waste technology; waste burnt at high-temperature to produce electricity; high-speed rail operational costs subsidised through the sale of excess electricity; solar harvesting; green building materials; and other initiatives.

The tunnel is a two-layer tunnel that will carry two high-speed rail train tracks; three lanes of road traffic, with tidal flow management; and utilities and accommodation. The tunnel will be up to 150 metres below ground. There are pictures of those tunnels in the presentation.

Now we come to the estimated capital costs. The estimated cost to build five smart cities, at 40,000 people each, is approximately $25.7 billion. The land purchase and land development—that is, the infrastructure development on that land to make it viable for a smart city—is about $250 million. The high-speed rail costs, including the train sets, are $30 billion. The revenue expected to come from those smart cities is around $97.5 billion. This leaves a net revenue, before tax, of approximately $41.5 billion. I think our estimates, that we have undertaken quite vigorously, show that there is significant profit in it to establish both infrastructure and cities.

We looked look at the modelling of train trips between Sydney and Newcastle, and this analysis just looks at the travel that might occur between the four smart cities and Sydney. Looking at 40,000 people, times four smart cities, with 2.6 people per household, and if one of those people travels via high-speed rail per day, five days a week, for 46 weeks of the year, to the city and back, from a remote smart city, that equates to 120,000 trips. If there is a trip average of $25 per day, that is equal to $30 million per day. There is $160 billion per year in operating income in stage 1. This will need to shift 60,000 people in peak hour, so needs approximately five or six train sets. The operational costs of the high-speed rail are expected to take up 30 per cent of that operating revenue.

The operational principles of stage 1 include energy production. We have already heard from previous speakers about the greened electricity that is being produced. I have included some figures there on waste disposal, at $120 a tonne, which is what it generally costs at the moment. High-tech processing will generate electricity from this waste which will produce $300 per tonne in revenue. Additional power generated, of course, will be sold back to the grid and profits used to subsidise rail operational costs and potentially fares. Operational costs in this model are not required to fund capital costs. The model includes environmental sustainability and social sustainability, as has been talked about previously.

There are a number of risks involved in the consortium implementing this. I will list those risks and identify how we propose to mitigate them, and it is really on the construction side of things. Regarding funding sources for stage 1, we already have $56 billion available for that from sovereign entities, superannuation funds and international infrastructure funds. The project needs to be staged—Sydney to Newcastle first, Sydney to Canberra via Western Sydney Airport as the second stage and Newcastle to Brisbane as the third stage. Stage 1 is expected to be completed within five years, assuming that approval can be achieved in a reasonable time.

Additionally, population growth and rebalancing of population to support smart city growth is important. That means that international migration would need to be assessed to make sure that those smart cities can be filled appropriately. Stamp duty concessions may be available for homeowners who purchase in those smart cities, which will be a great incentive for owner-occupiers and lower-income families. And there may be other concessions that are available that will enable affordable purchases in those smart cities. The rail corridors would need to be allocated. One of the major risks in this project is that the allocation of corridors for above-ground light rail will need to be allocated. Planning permissions from state and local governments will need to be identified and the basic infrastructure must be available to the smart cities, such as water, electricity, sewerage and waste. Technology is really important here. The technology that is used for this whole value capture methodology needs to be proven. The technology for high-speed rail would need to be tried and proven and the use of different technologies could affect the value capture model significantly.

In summary, value capture can provide an ideal funding model for value capture infrastructure and affordable housing solutions for Sydney. When we think about rebalancing the population and making it attractive for families to move out of Sydney into a more affordable area, then high-speed rail is ideal. The high-speed rail system can provide access to Sydney city in less than 40 minutes from Newcastle. There are many economic and productivity benefits for the government. Sydney and associated cities become world class cities. This enhances Australia's standing in the region. It leverages our educational and business competence in the region and leverages Australian international consulting skills. In short, we hope to be able to provide, on behalf of the Spacecon consortium, a profitable high-speed rail system on the east coast of Australia. Thank you.

Mr Mounas : I want to pick up on John's point. One of the important points for the committee is that the economic modelling can be varied to suit political outcomes or government outcomes. For example, as John touched on, fares can be adjusted so that the fare pricing is lower to allow more commuters. There is a benefit by having lower pricing—obviously from a cost-of-living side, but there is also a benefit to the consortium by having lower fares because there are more people that could come through the centres. The second point, in terms of the planning around smart cities, is that in a collaboration agreement with the government, you can actually allocate social housing et cetera in those pockets. It is not like the consortium is coming up with an approach and saying, 'Here it is.' It is a collaborative approach to make sure there is a social benefit as well as an economic benefit for the venture partners. I just wanted to re-emphasise the point which John was covering.

Ms Chikarovski : Mr Doy is going to talk about the tax implications of all of these and work out how we can fund all of these things properly.

Mr Doy : I do not believe there are any of the tax slides in this presentation for the members, but we can provide some details of that later. We have had a broad look at things at this stage and looked at the very specific tax effects of the consortium's proposal—not necessarily the tax effects of the value capture ideas and concepts that flow—specifically around the Sydney to Newcastle leg of it. As I said, it is very high level and order of magnitude, so think of it on that basis. There are no concessions or subsidies modelled into any of this as is often the case with these infrastructure projects. And, again, not looking at the operational stage, which was touched on shortly before, in terms of the rail patronage and the revenue that flows and the operational costs of that. With all those caveats in mind, I will throw a few numbers at you.

These figures have been taken from the other presentation. In terms of the proposition for Sydney to Newcastle, John had figures in his presentation of around $97 billion from the property sales that result from being given the rights to develop and sell residential, commercial and other types of property associated with the city areas. Then there are estimated costs of $56 billion, which includes $25/$26 billion for actual construction of that building stock itself and then, importantly, the $30 billion for the HSR itself. The point was made earlier that the revenue from property sales covers the cost of the construction of the rail itself—so no need for specific government support there. Again John's figures estimate a profit of $41½ billion—and this is over the life of the project, okay? We are not looking at a tax profile of any specific years, but over the period of the thing. If you look at tax at 30 per cent on that, corporate income tax, that is about $12 billion. That cost, I should also point out, includes the interest cost paid on the financing which is coming from the offshore sovereign wealth fund at a normal rate of interest of, I believe, about six per cent as modelled in the modelling. The parliament, in other contexts, has been very concerned about offshore leakage of revenues and therefore lower tax in Australia for economic activity here. This is not happening in this case. You have very transparent arrangements with the offshore providers of finance and so forth, leading to that taxable income here in Australia over the life of the project. Again, obviously, proper models will have to be developed in time, and I am sure Commonwealth and state treasuries will want to get involved in all of that. What that then says is that if you have a tax of $12 billion there is $30 billion left over here after this is done by the consortium members, to potentially keep investing in other projects of this type going forward. That is on the income tax side.

Obviously, there is a job creation aspect to this as well. There have been estimates of 145,000 new jobs being created. You would have to look at the average wages there, but if you look at them as more in the construction industry and at, say, $50,000 a person, that ends up with a PAYG tax payment of $7,800 per person. The total PAYG over the life of it would be around about $1 billion. These are revenue flows that will go directly to the federal government.

One of the things that we have not specifically put into the numbers you will get is that from those additional jobs there will be state taxes as well, most notably payroll tax. Again, a lot of these things end up with payroll tax concessions and so forth. That is about another $400 million. But governments often broker that away. If we are getting more employment in these regional areas with the various firms that will participate in that job creation you would think there would probably be some form of support there from governments.

GST is the next area. What we are talking about here is the GST on the sales of the developed property, whether it be the residential or other types of property. Of the $97 billion of property revenue there, the vast majority, about $93 billion, is estimated to come from the residential aspect of things. The way the GST law works there, you do not necessarily get 10 per cent of that figure. There is a thing called the margin scheme, where it works differently. Because there will be a cost of this land coming through, so when the land is provided by government it will not necessarily be at zero cost—there will be a cost of that. Again, we have estimated—and these are very broad numbers—at least $7 billion in GST flowing from these properties sales to the final consumers. If businesses are purchasing the commercial properties they will be claiming that GST back and there would be GST on their outputs rather than directly from that. But think of that figure of about $7 billion around GST.

Stamp duty was mentioned before. Again, this is stamp duty on the final consumption of the property, which would again be a state tax. Whether there would be stamp duty concessions for particular types of home purchases in these areas would be a matter for state government. But there is a $4 billion estimate of stamp duty flowing from those sales.

When you add all that up, that gives you something in the order of $24 billion or $25 billion of tax revenue flowing at various levels of government over the life of the project. These are very broad numbers. Depending on what happens with the profits that come from it after tax, if any of that is repatriated offshore there are of course withholding taxes on that, but I have not put that into these figures at all. Those are some very broad numbers based on the other numbers that the consortium has produced, just to give you an order of magnitude idea of the scale of this thing and the contributions to federal and state taxation revenues.

Ms Chikarovski : You will note we have a large number of people in the room behind us. They are further representatives of both the organisations that have presented here today. Amongst our group we have two representatives of local government, Tim Askew and Greg Fenwick, from Newcastle City Council. The reason they are here is that they are clearly interested in the prospect of a high-speed rail to Newcastle, and the economic benefit that would bring to their city.

In the interest of time, we did not actually ask them to speak. If you would like them to, that is matter for you. Or, alternatively, perhaps the committee would like to speak to them more informally afterwards. But I do bring it to the attention of the committee that they have travelled down to Newcastle because of their ongoing interest in this particular project, not necessarily this consortia only but certainly in the concept of a high-speed rail to Newcastle and the benefits that would provide to Newcastle and the Hunter region. So it is a matter for you, Chair. They have not filled in their witness forms yet, but I am sure we can manage that if we needed to.

CHAIR: Let's proceed to discussion. Then if we have some time we would very much like that. If we do not have time, I will have time.

Ms Chikarovski : I appreciate that. Some people might have to get back to other parts of Australia. Thank you, Mr O'Brien, in particular.

CHAIR: Llew, do you want to get off?

Mr LLEW O'BRIEN: Sure. First of all, I compliment you on your presentation today and the comprehensive and thorough plan that you are putting forward right down to the simulated bolt in a high-rise building. It is very impressive. Two questions: in terms of the international projects of this nature, what would be most like this one to compare with. What is most comparable to this?

Mr Moore : The Hong Kong project is probably the most similar to this. It is not the same length but it is high-speed rail. It is not 'smart cities' but it is done under value capture model. So it is probably the closest from that point of view. There are other examples which would be closer from a smart city high-speed rail, like the high-speed rail in Qinhuangdao. But they are slightly different.

Mr LLEW O'BRIEN: One of the things that I brought up with previous witnesses was about freight and integrating that into passenger transport. Obviously, this model does that with your traffic transport as well as your passenger trains. But does any of the high-speed rail carry freight, as well?

Ms Chikarovski : Can I just make a comment about the reason for the double tunnel between Sydney and Newcastle. You are not from New South Wales, so you are probably unfamiliar with it. And I am sure the chair is very familiar with what happens on that particular route, if there is a problem on that freeway. On more than one occasion, not only has it been blocked because of a traffic problem—cars running into each other, trucks rolling over—but also we have had on a previous occasion a very long time ago the actual road cut because of fire. We had bushfires which, basically, kept people on it. So the idea of incorporating the road into it is to make sure that there would be an alternative safe route should something happen to the existing freeway. I think for people who live on the Central Coast, for example, the idea that there would be an alternative when the road was closed is something which is particularly attractive. So we were very deliberate in including that part—Sydney to Newcastle to have the double tunnel. That is not necessarily the case for the rest of the line—clearly. So it would not be the case that we would be suggesting that that would be necessary for other parts of the link. However, further investigation might prove that going into Melbourne, for example, it might be useful. But the particular problem with the existing freeway was the reason that we went to the double tunnel between Sydney and Newcastle. And it is possible because the technology, which has been developed by the Koreans and is built on existing technology, will allow a tunnel of that magnitude to be built in a relatively short period of time, considering how long tunnelling takes.

Mr LLEW O'BRIEN: All going perfectly well, what sort of time line would you put on a project like this?

Mr Shin : [Inaudible] we have a time line of five years. And the two years [inaudible]. And another three years—the construction. Our plan actually starting same time. That is why we are trying to go full funding. Hong Kong have already done that—made a success. They are developing their tunnel system. Also, they are very high profit and they are waging 180 per cent, I think. They are full funding. And the same time start, same time completion. Our plan is the same model.

Mr LLEW O'BRIEN: One final question: the projection of 140 jobs. Was that just through construction?

Mr Doy : That is right. Yes.

Mr LLEW O'BRIEN: Okay. That is very, very impressive. That is all I have to ask.

Mr Shin : We had this plan originally, especially as, from Newcastle to Sydney, it is a high-congestion area. Also, in relation to the environment, it is a very strict area—there are a lot of national parks and also some harbours and the Blue Mountains—so they have tried very hard to manage this area. That is why we sink a lot in the developing centre underneath the tunnel. I think it is a special case. They are a special circumstance in Australia.

Ms Chikarovski : So it is not only the existence of the road. Every proposal that I ever saw in my time required significant disruption to the national parks between Sydney and Newcastle. This particular proposal addresses all of that by going underground. The level of community concern about it, I suspect, would be somewhat less, one would hope—you can never can say those things, as you would know. But we would think that the whole concept of not destroying the landscape would address a lot of the concerns of people who have previously been putting these proposals forward.

Mr LLEW O'BRIEN: This might sound like a crazy question, because I have no technical knowledge in this regard, but driving from Newcastle to Sydney all I see is rock.

Ms Chikarovski : My understanding is that it is sandstone. Is that correct?

Mr LLEW O'BRIEN: It is sandstone; yes.

Ms Chikarovski : Sandstone is the easiest thing in the world to bore through.


Ms Chikarovski : And, in fact, what you will end up doing is you will actually address one of Sydney's other problems, which is that it is running out of sand! So we will be able to take the sand out of those tunnels and use the sandstone.

Mr Doy : It is part of the revenue model.

Ms Chikarovski : Yes; you actually take the sandstone. It is much easier doing that dig here than perhaps other parts of Australia.

Mr LLEW O'BRIEN: I would not want to do it with a pick!

Mr Mounas : But in actual fact you do not want it too soft. You want a reasonable hardness because, when you are boring through, you do not want the tunnel collapsing. Sandstone is perfect because it has the right amount of hardness, but it is not too hard; it is not like iron ore rock.

Ms Chikarovski : We actually have a video, which we can send to the committee afterwards, which shows the tunnelling machine. It is extraordinary technology. It tunnels and then it puts in the cladding behind itself. So, as it bores through it clads. It is just magic—from someone like me who is completely non-mechanical. I just watched it and I cannot believe they can do it. But that is how they do it.

Mr Mounas : Mr Llew O'Brien, you raised another question about the freight. One of the advantages of this solution is that it takes trucks off the surface roads and puts trucks down the tunnel, so that helps the environment as well as reducing truck congestion on the main road.

Mr LLEW O'BRIEN: It jumped out at me when I saw the roadway in the tunnel. I thought that answered one of the questions I had previously about just having passenger transport. If you are creating new cities and new industry and new products to go to market and services, you cannot do it just with a passenger train, so I am very, very impressed.

CHAIR: Where is the land required for the five smart cities coming from?

Mr Moore : We already have I think 150 hectares in Newcastle. There will be greenfield sites along the way. We have had discussions with Transport for New South Wales in regard to what might happen in Sydney. There could be some land allocated there for redevelopment of the central area to enable that to happen. There would be three other cities along the way between Sydney and Newcastle. Those areas have not been entirely determined yet.

CHAIR: You are actually buying the land?

Mr Shin : We have bought land in the Newcastle area. We have 100 per cent acquisition already. In three areas—Gosford, Wyong and Morisset area—we are under negotiation. I do not think there are any acquisition issues. That is the easy part.

Ms Chikarovski : So while in effect we talk about new cities, it is actually additions. Morisset would be a massively expanded town, but the others would be incremental growth to what is already there. As you are aware, there are already significant numbers of people who come from Gosford and Wyong down to Sydney already. So what we are saying is that development around those stations would be sufficient to fund the project but also to provide opportunities for people who are already in those towns.

CHAIR: If I recall correctly, there is a plot of land between Newcastle and Maitland where there is space for some one million houses.

Ms Chikarovski : Perhaps this might be an appropriate time to ask the representatives of Newcastle Council to enlighten you on that.

Mr Askew : The question asked was about the land and the proposition for more people in that space. It is actually a state plan—it is the Hunter regional plan 2036, which has just come out in the last week or so. I was meant to get a briefing this afternoon on that plan, so I cannot tell you exactly how many people there could be and where those spaces are. We do have areas from the back of Wallsend through our LGA to the border of Maitland and Cessnock LGAs. There is also land to the south of that in Lake Macquarie LGA. There is also land that stretches through to Maitland City proper. I think that is probably the zone you are talking about, where there are probably thousands of hectares that are developable. There are a lot of problem environmental areas in there as well. There are areas marked as offsets for vegetation and there are also a lot of flooding issues in those areas, so getting the right spaces is critical. But the state plan has covered that very well, so you could basically reference that to identify the potential areas.

CHAIR: That is tickling my imagination. We are looking at five smart cities—40,000 people—as being enough to fund this infrastructure, but there is a greater opportunity, when you look at the infrastructure combined with the land use, to raise vast amounts of money. When you combine that you maximise your uplift, so you have a better target for value capture to be able to fund ongoing infrastructure of all sorts, but also going north of Newcastle to Brisbane. That would be my thinking. Is that consistent with yours?

Mr Askew : It is. We are in the very early stages at our council of exploring the opportunities in the Smart Cities Plan that the federal government has recently brought out. We are exploring an opportunity to do a City Deal through that program, which would incorporate Greater Newcastle as we see it. In that City Deal it talks about funding mechanisms for infrastructure in the long term. Those funding mechanisms are the ones we are talking about today. All of those things tie together, but I must say that we are at very early stages. I went to Canberra with the Lord Mayor two weeks ago, and we talked to various representatives who are looking at these city deals. There are already three that are working towards signature. They are Townsville, Launceston and Western Sydney. No-one has signed on the dotted line yet but these things are happening.

What they are working towards is early next year—in March or April—to open that City Deal proposal to all cities in Australia to apply for, and they are going to open it on a competitive basis. We have not had the meetings yet, but my next step is to convince our council that it is a good way to go. Having been on this trip to Canberra with the Lord Mayor, she is very passionate about it. That includes looking at greater populations in our area: what are the job growth prospects? Importantly, how is the transport going to connect together? All of this takes money and value capture is one of the methods that you could use to tie it all together and get it happening.

We constantly heard 'jobs and growth' down there, which is part of their tagline at the moment. What excites us is that it is about underwriting the sustainability of Newcastle from a jobs perspective. We see this City Deal as an opportunity. Again, as I said, it is very early days at our council. No-one has endorsed anything but we are exploring it.

CHAIR: It would seem like an incredibly exciting opportunity to bring Newcastle to—what is it 30 or 40 minutes with this high-speed rail?

Mr Askew : Forty minutes.

CHAIR: There is extraordinary value to grow it. It seems one of these perfect scenarios of opportunity, of being able to affect. Do we have agreement that high-speed rail is the infrastructure—when combined with appropriate land use—that generates the most uplift of land value to any infrastructure?

Dr Lee : Based on our understanding, especially when you look at the Hong Kong models, generally the infrastructure can be financed through the development right. That means that if you want to build rails, generally with other stations, et cetera, the zoning will be changed. There is no doubt about it. You may increase your densities around the station areas. All this will most likely uplift property values, especially if your land has been rezoned. We have not done the analysis, but our understanding about value captures is the increase of the value of the properties generally can be used to fund infrastructure. The increase of property value will not happen without that infrastructure.

CHAIR: When you are looking at Sydney as having the second most expensive real estate in the world and you have very low cost acreage in this region, that would have to be the perfect storm to affect massive uplift and, therefore, massive opportunities of value capture.

Ms Chikarovski : That, I think, we are all agreed on. The question of course—

CHAIR: I just wanted to hear somebody else say it.

Ms Chikarovski : I will not speak for the council, because that would be presumptuous of me—perhaps you might like to offer your opinion afterward—but I know that for everybody sitting around here, otherwise we would not be here to be perfectly honest, it is that opportunity which increases the value which makes the whole project viable. Perhaps council would like to comment?

Mr Askew : As I said, we have only had preliminary looks at how this might help our city or the greater Newcastle area. As far as high-speed rail goes, as this group has said, there is massive uplift. Also in brownfield sites we see some benefit. If you are wanting to connect to these new cities through our current city of Newcastle we need to create the great transport networks that pull everything together. Even in brownfield sites you can get at least 10 to 20 per cent funding of those light rail connections, or it might be bus rapid transit or other transport mechanisms through existing Newcastle streets, because the value of those properties around those routes increase and we can capture some of that value through appropriate mechanisms. So yes, there is benefit right through the cities.

CHAIR: One of the frustrations has been the lack of alignment between the three levels of government and, probably, that triggers my hackles a bit—I would like to think that when you say 'we can' you mean between the federal government, the state government and the local council.

Mr Askew : That is what the City Deal does.

CHAIR: I think that is one of the things you have established to this point, the need to align our interests, work cooperatively, to effect a master planning—which we have sadly lacked to this point—and a master funding mechanism that can sustainably effect a planned growth and a planned decentralisation. You would think Newcastle is such an obvious hub to kick this off and, then, equally balance going the other way, towards Goulburn because, in my mind, would you be not leveraging the asset—that is, the Sydney CBD area. It is impossible to grow Sydney beyond a certain amount but if you have two or three or four million people within half an hour or 40 minutes of Sydney it would seem to be advantageous.

Ms Chikarovski : It is certainly within our thinking. That is why, when we looked at this, the Sydney to Newcastle route was the first and, to us, most obvious place to start this project, because of exactly that point. You have a city which is bulging at the seams, in terms of Sydney; it is very expensive. You have, in Newcastle, a particularly attractive city in which to live, in terms of all the infrastructure there—the entertainment infrastructure, the schools infrastructure—and you live near a beach. It is a particularly beautiful place to be.

Our view was if you could encourage people to move to Newcastle because they could then commute to Sydney for work, if they needed to, it was a very easy proposition to sell to people in Sydney who could not afford to live in Sydney. That is why we concentrated on that. We have looked at Sydney to Goulburn for the same reason. Our view was the view of collective governments, that this project should proceed on the basis of a split both ways, and our consortia believes they have the capacity to do that but they could do both parts at the same time.

I just need to say that one of the things the consortia is very conscious of is that this is a Melbourne to Brisbane project over 20 years. We would like to think that we could deliver that whole project. We are also very conscious of the fact that the federal government and other governments would require a bit more competitive tendering than that. So we are particularly keen to see, in terms of your committee in its deliberations, perhaps a decision about what the infrastructure will be, what sort of train you are going to look at. It would make sense, then, over that period of time, to tender our constructions.

We put our hand up for Sydney to Newcastle because we particularly believe that that tunnel is required to get that piece of infrastructure up but, beyond that, whilst we would love to do all of it, we do understand that there may be some other competing interests which would suggest that other groups might do it. But one decision which needs to be made by all three levels of government—and, hopefully, led by your committee—is the decision about what the train structure will be, what sort of infrastructure it will be and how that can be developed.

That is why we are particularly interested in the Korean model, which says if you get the infrastructure right the capacity and the trains can be upgraded. So if you decide you are going to build this sort of infrastructure you are futureproofing it by saying, at the next stage of development of these trains, the existing infrastructure will be able to cope with that. We recognise that there will be improvements in technology, in train technology, but the experience from the Koreans is that if you build the infrastructure right, in the first instance, you can accommodate those upgrades and you futureproof it.

We are happy to give you any further information about how they have done that because, to our mind, that is a key part to getting this project up, knowing that over the next 20 years when it is built, from Melbourne to Brisbane, whoever builds it will be building it in a way that operating it will be able to continue to be improved over the next 30, 40, 50 and 100 years.

Mr Mounas : You won't have to change carriages at the border.

Ms Chikarovski : Yes, you do not want to have to change carriages at the border.

Mr Mounas : We want broad gauge standard gauge.

CHAIR: You don't think the idea of different gauges—

Ms Chikarovski : We do not think that is a particularly useful thing, Chair!

CHAIR: It is interesting. I had a thought about our Hyperloop friends who were here earlier and looking at your tunnel with the road. You could probably fit a Hyperloop through that road as well as a future upgrade, but we do not know how far off that is.

Mr Mounas : This is a collaborative approach between government and private. It is not a cookie cutter. We are going to work with you to get a solution that works the government's long-term strategy as well as our economic interests, obviously. We are not giving you a fixed solution. It is a collaborative solution to come up with the best solution.

CHAIR: What is stimulating my imagination is that it would appear to me that there is going to be all sorts of collateral benefit in terms of other uplift in the region that we just talked about. If you are going to build a 40,000-people town outside of Goulburn, there is going to be much more that follows. The whole concept of value capture is that anybody who gets an unearned benefit has to contribute to the cost of that infrastructure. It unfortunately means for the federal government, when we collect capital gains taxes, that we should be hypothecating about it. If we are going to develop a really good value-capture system, we should not allow any value to escape so that we are collecting as much as we can to fund the infrastructure. When we say 'infrastructure', it is not just the high-speed rail; it is the roads, the freighting and the things that Llew talked about earlier today. Can we get to a point of having a plan for value capture that will give confidence to your group, for instance, to say, 'Okay, we'll go ahead and commit to funding the infrastructure,' knowing that we will be collecting these revenues from our value-capture system?

Ms Chikarovski : One of the reasons we have been working with University of Western Sydney is to test the model on that basis. To be perfectly honest, if you cannot do that properly and if you do not take into account what every level of government is expecting to get out of this project and do not factor all of that into the model you are not going to be able to come up with a realistic outcome for the proponents. We are working with Western Sydney on the value-capture model. There is information available. We are more than happy to provide the modelling that we get to the committee, provided that is kept, obviously, in confidence. It needs to be kept in confidence because at this stage we need to make sure that we know where our modelling is going, but we do not want it available to our competitors, to be perfectly honest.

CHAIR: What would be your advice as to our next step to progress this?

Ms Chikarovski : From my experience, a recommendation to government about the need for this, having taken all of the evidence that you have now taken. The value in doing this is obviously No. 1. I assume your committee is working towards making a recommendation about a very fast train and how it can be funded, so my advice would be to initially, primarily, ensure that the technology is one of the things you recommend, because, if there is an argument going forward about what sort of technology, that is going to slow everything down. The second thing I would recommend is to suggest to the government that this is an opportunity which can, in fact, be funded by the private sector, and you would be asking for efficient and clear modelling from all of those people about their funding models, including us and everybody else. You would have to be able to say to the government, 'We've looked at these funding models and we're confident that there is a way in which this can be done. We appreciate that there is no project of the magnitude of this which is without some government contribution.' That is just the reality, whether it is in some sort of tax concession or whatever. We can provide you with what we think would be the best modelling. We have talked about some of those things briefly. Thirdly, probably the No. 1 and most difficult part of your deliberations will be how you persuade the three levels of government to come together and decide to do this.

I know there is scepticism, because we have been talking to various people. I know there is enthusiasm on one hand, but there is scepticism on the other. That scepticism mainly revolves around whether the three levels of government can agree (1) on a route, which includes coming in and out of the cities, because that is the No. 1 thing; (2) on the technology, because everyone is still up in arms about that; and, most importantly, (3) they want to know what the risk profiles of all these things are.

If I were the committee, I would be making it very clear that we need to have very clear understanding and full disclosure on risk profiles. By 'risk', I obviously mean economic risk and environmental risk but, for the purposes of this committee, also political risk. I am realistic enough to know that political risk is one of the things which could make a project like this very difficult if the government did not believe that they could minimise the political risk. That includes, for example, in a failure—what happens if the consortia you choose do not deliver? All of those things need to be factored in to your consideration and, in those things, if you were to take it to the government you would have to be very, very clear about what you expected from any consortia that put their hand up to bid for part or all of the project.

CHAIR: Does that lead to going out and asking for an expression of interest?

Ms Chikarovski : Can I say that at the moment that I know that we are not the only group that has presented to you, and that there is a level of interest in this not only from the groups themselves but within the community. I started my presentation to you by saying that 20 years ago I looked at this and raised my eyebrows, and when these guys came to me a few months ago I raised my eyebrows. The really interesting thing about it now is that I think that there is an acceptance within the community that people will actually travel by train. We know that one of the busiest air routes in the world is Sydney to Melbourne, but it is still a three-hour trip because, by the time you get to Sydney airport—and I live in the city—by the time you get from the airport to the city, check in, wait, get to the other end and get to where you are going, it is pretty well a three-hour trip.

People are now more willing to accept that you could do this in whatever time that takes. As one young person who uses the very fast Japanese trains said to me the other day: 'I arrive at the train station 20 minutes before the train departs. I do not have to worry about checking in bags and all those sorts of things, I just get on the train. Then I get off at the end and I am 10 minutes from where I want to go.' People around the world are now understanding the experience of train travel and the convenience of train travel. I think that is happening here as well, or there is starting to be a realisation of how it would work. I think that, given interest within the private sector, the interest within government and, as importantly, the interest within the community of getting this up, this is now is exactly the right time for an expression of interest.

CHAIR: Would you agree that the scepticism previously had been born out of a belief that it did not stack up commercially, when it was looked at as an operation that had to make money out of the ticket? Whereas now your consortium is showing very clearly that this is actually a money-maker based on value-capture opportunities, and if you are projecting that out over the lifetime of this infrastructure then it is an enormous money-maker?

Ms Chikarovski : With the greatest respect, I do no think anybody who sits around this table at the moment would disagree with you—that this is an opportunity in which we can, as a company, make money. We would not be here if we did not think that was possible, so I agree with that. I think you are right, looking at some of the previous projects that were suggested. I am sure you are well aware of the Sydney to Canberra route that was discussed. A lot of time and energy went into that proposal, but the idea of being able to fund it from ticket sales just does not add up, and it will never add up because we do not have the population to sustain it just through ticket sales. It has to be through other things. Everybody here would agree with you that it is these other ways in which you can value capture, make that money, that will make this project stack up.

CHAIR: Is it a geopolitical exercise to some degree?

Ms Chikarovski : In what respect?

CHAIR: In that one of our greatest trading partners, a country with which we have had a very long history of well over 100 years of engagement, a country that has lifted itself up enormously, is a country with which we are such natural partners. Everything we cannot do they do very well, and what they cannot do we do very well. To lift that friendship, that diplomatic relationship, that trading relationship, the people bridge, to almost a partnership of assisting us to develop our country with their technology, their experience, and their Hyundai-like attention to making something absolutely reliable and cheap to run, which seems to be a Korean trait of integrity, is very attractive. We seem to be such great natural partners, and I think we can literally be saying: 'Here's our federal government value-capture system that is going to fund this. Will you partner with us in the development of our country?'

Ms Chikarovski : From the Australian side of things—and I am no longer the politician, so it is not up to me to make political statements—I would have thought that this would be a perfect example of how we could build on the Australian-Korean free trade alliance in terms of that relationship that we already have. As a pure citizen I say that, but I would have thought that was one of the ways that we could maximise the value of that agreement, but perhaps, Raphael, you might like to say—because Mr Shin is very close to the Korean government.

Mr Shin : Truly, it is not only the Korean government, but Koreans, of course, are very interested in investment here also, probably with some technological support. We have opened our consortium. We tend to collaborate with any country where we can bring in the technology and some funding, or something else. We are open, so we can work with the government, with the Korean government and other governments, and other consortium parties. So literally, finally, we can build in Australia—a great way.

Mr Moore : If I can add to that too, Australia is in a great position in terms of its educational productivity and exporting education to Asian countries. So, if you look at the cultural exchanges that could occur through technology exchanges and educational exchanges, and potentially expanding the 456 visas to enable Asian children to come into Australia for university education, and then, through that, exchange technology and knowledge. So I think there is a great opportunity to look at the whole region in terms of what cultural exchanges could occur and to bind the region together through the whole methodology.

Ms Chikarovski : To your point, the fact that the Korean government—who, as I have said, have sent their apologies—wanted to be here today was that they do see this as an opportunity for that continued growth in relationships between Australia and Korea. They, quite rightly, are very proud of the technology that they have developed and that they are now exporting around the world. To them, Australia is obviously a particular place where they would like to bring this technology and expertise. And John is right: they have very good engineers who I am sure we could learn from in terms of the technology and I believe they could learn from us some of the things that we do very well.

Mr Doy : I think the chair is right: it is a game changer. It could be a game changer in terms of that whole geopolitical relationship, and you think of where the Snowy Hydro started and that. This would be a modern-day version of that with the technology that is clearly at the leading edge.

Mr Mounas : Raphael is actually doing some other Korean technologies, for example, in the electric vehicles and electric batteries, that would somehow also be incorporated into these smart cities—waste energy et cetera. So it is not just limited to the high-speed rail; there is collaboration going on at the moment with Korean partners on those aspects.

CHAIR: We have had a lot of contributions. We had a very interesting contribution earlier today from a group called Austrans who have a light, autonomous rail system that needs investment to develop it, but it is fascinating linking technology to high-speed rail and other forms of transport. But it would be great to get us all responding—

Ms Chikarovski : In one room?

CHAIR: and in one room, and working collaboratively to have integrated transport. It is fine having the high-speed rail but, when it gets to where it gets, how do we move people on to their final destination?

Ms Chikarovski : We have had some of those conversations with Newcastle. Tim has been part of some of the conversations we have had because, as you know, they are putting in light rail up there. We have talked about how this would integrate with the light rail that they are putting in through Newcastle. So I absolutely agree with you.

CHAIR: I will see that our Austrans people contact you with their stuff. I thought it was fascinating. The people who developed it did so in the 1980s, I think. They were so far in front of their time, but they are still persisting. It is a very specific solution for Sydney and Melbourne and Newcastle's transport problems—getting cars off roads and having light rail that is fast and very adaptable. Llew, do you have any more questions or comments?

Mr LLEW O'BRIEN: No, but it is very interesting.

CHAIR: Do you have any more advice as to how to proceed to make this happen? I am just greedy—I want it to happen in my lifetime, actually.

Mr Mounas : Well, give it to us immediately!

Ms Chikarovski : Just give us the go-ahead!

Mr LLEW O'BRIEN: Let's have it start in Wide Bay, if we could!

Ms Chikarovski : We are happy to come to Queensland eventually.

Mr Mounas : We have a virtual model of Wide Bay, because there has been an unsolicited proposal put forward already.

Ms Chikarovski : That is to the New South Wales government, but it is in the very interim stages. Our advice to you would be to persuade the federal government that they should put out an EOI, in concert with New South Wales in the first instance and, if you are thinking of starting from Melbourne, with Victoria. We would be delighted to respond to such an EOI in a very convenient period of time.

Mr Shin : We have a video of Songdo and how that has been developed over time.

Ms Chikarovski : We can leave that with Dr Pender so you can have a look at it.

CHAIR: That would be appreciated.

Ms Chikarovski : We will get enough to circulate to the committee, so everyone can have a look at it at some stage.

CHAIR: Thank you very much for your attendance here today, especially our guests from Newcastle. I would like to point out that my tennis coach came from Newcastle, so I would not be here if it were not for him. If you have been asked to provide any additional information, which you have, would you please forward it to the secretary by 3 November. You will be sent a copy of the transcript of your evidence and will have an opportunity to request corrections to transcription errors. With that, I declare the meeting closed.

Ms Chikarovski : Thank you for the opportunity.

CHAIR: Thank you very much.

Committee adjourned at 15:17