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Investment of Commonwealth and state funds in public passenger transport

CHAIR —Welcome. Veolia Transport has lodged submission No. 36 with the committee. Do you wish to make any amendments or alterations to that submission?

Mr Paterson —No.

CHAIR —I invite you to make a brief opening statement, followed by Professor Stanley.

Mr Paterson —Thank you. Veolia welcomes the committee’s inquiry and we have, as you say, submitted a detailed paper to you. In our submission we touched on four key points which we would like to highlight today. But first I would like to explain why an operator of passenger transport would want to appear here at all. Veolia feel strongly that the operator’s perspective should be heard. We also think that we have a unique perspective, being the only private operator of an urban rail system in the country here in Melbourne. Throughout Australasia Veolia is responsible for more than 250 million passenger trips a year served by more than 4,300 staff using more than 1,100 vehicles. We run trains, buses, a monorail and a light rail network. We operate in Melbourne, Sydney, Brisbane, Perth, the south-west of WA and also in Auckland. Australia’s PT networks have suffered from decades of underinvestment as policymakers have focused on building cities around the car. Today we can see the disadvantages of this approach, in pollution, traffic congestion and social isolation. While governments at all levels are now paying much more attention to passenger transport issues and increasing public investment in infrastructure and services, there is much more that can be done.

Let me turn to the four key issues in the Veolia submission. The first is the question of investment. Veolia welcomes the decision of the Commonwealth to fund public transport infrastructure via the Building Australia Fund. In most systems around the country passenger numbers on public transport are growing. In Melbourne the train network alone has seen an 80 per cent increase in usage since 1999. There are almost 100 million more passenger trips a year now than then. The increasing demand and historic lack of investment mean that the network is struggling to deal with the influx of passengers. The only way to fix it properly is to invest. The states traditionally funded public transport infrastructure but they no longer have the financial capability to do it alone, and hence the need for the Commonwealth, with its wider tax base, to partner with the states and the private sector. It is terrific that the Commonwealth has undertaken such a rigorous approach to reviewing the projects put forward by the states via Infrastructure Australia. We would argue that passenger transport should get its share of those funds and the Commonwealth should be bold and support the right projects, not just divvy up the cash between the states based on population. In the context of a large Commonwealth investment, the private sector recognises that it should make more efficient use of current and future infrastructure. We must make the networks we run work harder and smarter. The changes we made here in Melbourne to the operation of the network were a good example of that last year, and the pursuit of free travel prior to 7 am by the state government here is also a good initiative.

Our second point was about accountability, about separating the roles of operator and regulator. State governments that operate public transport networks are conflicted as both the operator and the regulator. We argue that franchising the operation of transport networks to the private sector would deliver better services and overcome the accountability problems. The history of state operated networks is mixed at best. As our submission shows, the private bus operators in Sydney are much more efficient than the publicly operated ones. Also the early case study of the efficiency of the rail networks in Sydney, Brisbane and Melbourne shows that the cost per passenger movement was much less in Melbourne for the privately operated network compared with both Sydney and Brisbane. Looking north for a moment, the special commission of inquiry into Sydney ferries conducted by Bret Walker SC demonstrated the multiple and serious failures of the current structural model for Sydney ferries. The New South Wales government is heading down the path to test whether the market can deliver better outcomes for the citizens of Sydney. Veolia and some other highly reputable companies are competing for the opportunity to run Sydney ferries and we are very confident that we will present a compelling case for improvement. With the right contract in place, the accountabilities will be very clear. Competition will ensure that the taxpayers do not get ripped off and the innovations and experience of the private sector will be made available to Sydney as they should be. Because the contract will be a partnership with the state government, the interests of the state and the passengers will be protected.

Further, to address the concern raised earlier by Professor Currie, Veolia as a private operator would be happy to provide public access to information about operational costs and capital investments on public transport networks it runs. We have nothing to hide. We pride ourselves on being opened with the public as to the issues that impact on public transport. Here in Melbourne, despite the issues it sometimes causes us, Connex provides more information about operational issues and reasons why things go wrong and go right than any publicly operated network in the country. We pride ourselves on being opened with the public as to the issues that impact on public transport. Here in Melbourne, despite the issues it sometimes causes us, Connex provides more information about operational issues and reasons why things go wrong, and go right, than any publicly operated network in the country. We also take the time to ask our passengers what they think. In Melbourne we introduced the meet our managers sessions in 2007. The management team, I and Rob and others, met with customers to get their direct feedback at city railway stations. This feedback was acted upon and a $10 million ‘We hear you’ program was rolled out as a result. The sessions were well received by customers and have now been held in Auckland as well. We also conduct customer and stakeholder research and have a strong feedback culture within the business.

The third point of our submission concerned tax treatment, or could I say the mistreatment, of public transport by Commonwealth taxes. Currently tax concessions are granted for the use of private motor vehicles and actually encourage motorists to travel further than they want to or need to to avoid paying tax. Given that private motor vehicle use has such a profound impact on greenhouse gas emissions and urban congestion, the tax system seems to be at cross-purposes with other government policies aimed at reducing greenhouse gas emissions. Our present public transport fares attract no tax concession, they include GST, and salary sacrifice of public transport fares is not very common. In our view it would make better sense if either tax concessions to private motorists were removed or similar concessions were afforded to public transport users. Given the positive impact on the environment inherent in public transport use and the efficiencies derived from high-capacity public transport, public transport fares should be a tax deduction. As has been noted by the UITP in their submission, the Canadian province of Quebec has adopted a measure to provide tax incentives to employers and their staff who use public transport. Obviously this change would come at a cost to the Commonwealth budget and that would be very difficult in the current environment. However, we contend that the Commonwealth must be focused on the longer term, and a more appropriate tax treatment of public transport fares, perhaps phased in over a few years, will benefit the community over time.

The fourth and final point relates to the CPRS and the fact that private motorists will again be protected from any increases in fuel costs due to the impact of putting a price on carbon. The irony is that the best form of transport from a carbon pollution reduction scheme sense is high-density urban rail, yet the input costs for it will increase due to the spike in electricity costs and these will presumably have to be passed on to the public transport users via higher fares in some form. So the public transport user has to pay more while the private motorist is protected. This is a truly perverse outcome. We argue that the Commonwealth should invest in quality public transport infrastructure and should get the states to have the private sector play a greater role in public transport service provision, and it should amend the tax system to give incentives for greater public transport use. If this is done, privately operated public transport will deliver high-quality passenger outcomes while reducing our carbon footprint.

CHAIR —Thank you. Do you wish to have anything to that, Mr Ellison?

Mr Ellison —No, thank you.

CHAIR —Professor Stanley.

Prof. Stanley —Thank you. I want to talk about three things in my submission today, firstly about the sustainability of our current land transport systems, secondly the role of public transport in improving that sustainability and finally the role of the Commonwealth, the federal government, in enhancing that sustainability. Australia’s current land transport systems are not sustainable, for three particular reasons. Firstly, the level of congestion costs, which is plainly a problem in our cities. The Bureau of Transport Economics has estimated that at $10 billion and I am sure you have heard from many submissions that those numbers expected to double by 2020. Greenhouse gas emissions are the second area I want to talk about. That is not only an issue in metropolitan areas but also an issue in rural and regional Australia. The third area I want to talk about is social exclusion and the role transport systems play in reducing social exclusion, and that is also an issue in regional and in metropolitan areas.

The scale and significance of these three issues is such that solutions are in the national interest. These are not parochial state-based issues; they are issues of national significance. As I have said, congestion costs $10 billion annually. Transport is Australia’s third-largest source of greenhouse gas emissions and it is the second fastest-growing source of emissions, the estimate being that emissions will increase by about two-thirds from 1990 to 2020, and very large numbers of Australians, particularly in rural but also in outer urban areas, are severely disadvantaged by the transport options that are not available to them. Public transport can play a role in improving sustainability in all those three areas, and I therefore put it to you that improved public transport is in the national interest.

Because of shared responsibilities between levels of government, the national interest in more sustainable transport systems and improved public transport demands a joint approach across levels of government, with federal leadership, along the lines we are seeing in Canada, and partnering relationships with other governments. In most cases that is with a state government, but in Queensland it is also with Brisbane and, if you get outside the cities and bring in regional areas, it is important that local government is involved there as well. Federal governments in the US and Canada are well aware of this and for some time have been using arguments to do with congestion, with social exclusion and with greenhouse gas emissions to, if you like, support their involvement in public transport—particularly in the US but more recently in Canada.

The sorts of changes that we need, in our cities in particular, in our transport systems to improve sustainability are not incremental; they will be transformational changes. A few months ago I ran a conference for the Australian Davos Connection, and you may have been given copies of its report From incrementalism to transformational change. I chaired the organising committee of this conference. The basic thesis was that we do need transformational change, in particular in our cities, and that the transport systems sit underneath that if we are going to achieve sustainable outcomes for the 21st century. I think the Building Australia Fund provides a unique opportunity to engender transformational change and deliver the federal leadership that I talked about.

More sustainable transport in our land transport area is not just about money. If we are going to deliver maximum benefit from, in particular, improved urban public transport systems, long-term strategic approaches to system planning and delivery are required. Dr Mees talked about one model for that. I have to say to you that, in my experience of the systems that exist around the world, there is no such thing as the right answer. You can get the right answer with a range of different systems in those areas. Land-use planning and transport planning need to be undertaken in a much more sustained way, and part of the answer to that is going to be that we must have increased densities in our cities if we are going to achieve more sustainable outcomes from a long-term point of view. I believe Professor Rob Adams made a presentation to you in Canberra about his idea of linear cities. I would suggest that Vancouver is a very good model, but Curitiba started about the same time as Vancouver, in the 1970s. It is a linear city model, and I think that is what we should be looking at much more closely for our cities in Australia.

One problem that I talked about in the summary chapter of this report is that Australian governments typically adopt short time frames, which is not the way to get sustainable outcomes when we face the sorts of challenges that we as a community face at the moment. The Building Australia Fund, I believe, provides an opportunity to attach some conditions to grants that may be given for project support in states to ensure a long-term and more strategic approach, which adopts integrated land-use and transport perspectives, is taken.

What sorts of public transport improvements are likely to be sustainable from a long-term point of view? If you are looking at the congestion and greenhouse arguments then it is time we made a start on a metropolitan rail network. I do not mean three or four projects; I mean at least one or two—one in Melbourne and one in Sydney—to get this thing going and show that it can happen. We need to be spending much more on trunk bus rapid transit services, particularly cross-town, servicing major nodes that are developing in our cities. We need to increase the frequency and span of service improvements. Paul Mees talked about Melbourne’s SmartBus. What he did not tell you was that those services improved their patronage by 50 per cent in four years. It was a remarkable achievement. Better information services are an important part of growing patronage and, if you are going to achieve a greenhouse gas emissions target that Australia is going to have to look for long term—and I am talking 80 per cent, not 60 per cent, by 2050—then we have to do something about mandatory fuel economy standards for motor vehicles. That has not much to do with public transport, but I make that point and leave it with you.

With regard to social inclusion, my belief is that the key to dealing with social inclusion from a public transport point of view is to adopt minimum service levels across our cities and regional areas. We have demonstrated in Melbourne that, if you implement a minimum service level of an hourly service running from about six o’clock to 10 o’clock, you can get very significant increases in patronage and reduce the risks of social exclusion in the outer suburbs. Melbourne bus patronage has grown by 13 per cent in the last 12 months. That is unheard of anywhere else in Australia. The Australian Transport Council should lead the adoption of national standards of access for urban and regional areas.

The Building Australia Fund is, I believe, a unique opportunity to assert the national significance of sustainable land transport systems and the role of public transport in contributing to improved sustainability. It is also a unique opportunity to begin an ongoing federal commitment to improved Australian public transport systems. We have never had that in Australia, and it is time we did. It is also an opportunity to start driving transformational change in Australian transport systems and services to improve that sustainability. Thank you.

CHAIR —Thank you, Professor Stanley. You mentioned that Dr Mees talked about the SmartBus system but did not mention there was a 50 per cent improvement in patronage. Why was there a 50 per cent improvement in patronage?

Prof. Stanley —I was chairman of the Bus Association Victoria at the time that program was initiated and we worked very closely with the state government to identify the main drivers of demand. The main drivers of demand came through as service frequency and reliability, and that is universal. In Melbourne we did not have that. The targeting was at least a 15-minute service most of the day, with half an hour outside the peak periods. Those service frequencies were fundamental in driving those patronage increases.

CHAIR —So there were SmartBus improvements, but we heard that the standard joke was that you were getting off the train and looking at the end of the bus. Did the 50 per cent improvement come before or after you got the timetable integrated with the trains?

Prof. Stanley —Notwithstanding those mistakes, that 50 per cent improvement was achieved. There is always more that can be done to improve integration of services. Paul did talk about the problem of buses running across two and three train lines, which make selection a difficulty, but there is no excuse for trains that arrive three minutes after the bus has left. The bus should be leaving after the train.

CHAIR —Thank you. Mr Paterson and Mr Ellison, we really appreciate having operators appear before us so we can hear from you. We have toured four states now and there has been a great representation of public transport users, bicycle groups and councils; you are the second operators as such. I understand that some questions we ask you could be a little bit touchy in terms of your relationship with who you are contracted to, but you guys are at the pointy end and if it all goes bad you get blamed—it is simple as that. I have flicked through your submission and I see that there is not a state in Australia where you are not, so you would obviously be able to tell us where it is done properly for what good reasons, and then where it is done absolutely terribly, for obvious reasons.

Mr Paterson —I feel I am being set up here.

CHAIR —No, and that is why I am saying to you that if it is a bit touchy I fully understand that. As has been said, we can go in camera, which is a private session when we ask everyone else to leave the room.

Mr Paterson —No, it is fine. We do not operate in South Australia, by the way.

CHAIR —You are not in South Australia?

Mr Paterson —No, not yet. I think it is worth saying that from the operator’s perspective we can work in almost any operational environment; that is one of the things we can deliver to the table. There are genuinely good parts of every public network where we operate. The governance arrangements in Perth are very different to those in Melbourne and yet, from our perspective, they both work. Even in Sydney, where we operate buses in the south and south-west and we also operate the monorail and the light rail, which are two very different systems, they both seem to work from our perspective. The only state in which the urban rail system has been franchised is for Melbourne. We would argue there are great benefits to Melbourne, despite what Dr Mees might say. Given the various pressures and the patronage growth et cetera, we still believe that better outcomes have been achieved through efficiencies and benefits, and the private operator has been able to bring some experience from overseas to that as well. I am not trying to avoid the question but in each of the states there are different models and they each work to varying degrees, I would argue.

CHAIR —Okay. I am very envious of Melbourne’s public transport system in the CBD, and I have said on a number of occasions that no-one does it better in terms of clearing special events, a la the football and what not: you are brilliant, and I take my hat off to you. But what has been put to us today is that once you get out of the CBD it is not that flash in terms of cross-servicing. I find it hard to believe that to get from Carlton to Collingwood there is a 30-minute wait for a bus and that is beyond your control. How good would it be if there was integration of smart ticketing and timetables between all modes of public transport in Melbourne?

Mr Paterson —Obviously that would be a major improvement, and I guess the smartcard ticketing has been a long time coming, but we are convinced that when it does get here it will make a major difference to the way the whole system operates and integrates better. There has been a lot of talk about the train arriving and the bus leaving. The key to getting that right is actually bus frequency. As John mentioned, if you move from 30 minutes to 15 minutes or even better to 10 or five minutes, there is no issue about integration and there is no issue about coordination because you do not have to wait very long anyway. It is much more difficult to alter the train timetable and the train operating patterns than it is to operate a bus network. So the key to that is absolute frequency. You see that where governments invest in frequency the whole issue just goes away. Obviously the plans that the Victorian government has here, and those of other states, to massively increase investment in bus networks will solve that problem over time—there is no question about that.

CHAIR —I do understand that because we are talking about a multi-injection of funds to get frequency increases, but I would not have thought that it would be that hard if the left hand spoke to the right hand and said: ‘The train is going to be here at X time. Can you be there five minutes earlier?’ I may be missing something and I am sure you will help me out, but that would not be an extra cost, surely?

Mr Paterson —Probably not, but I think one of the other ways to get around that problem is to have more information about the train network at the bus stop and vice versa.

CHAIR —I will wholeheartedly agree that the buses should work around the trains; I do not argue with that.

Mr Paterson —Where there has been investments made in getting information about train arrival times at bus stops, you have seen a big increase in the coordination there. One of the other things we tried was to have bus drivers of certain bus lines subscribe to the Melbourne SMS update service. That gives you notifications of when the train is arriving and whether it is on time or not. That sort of information actually makes a big difference. So the bus driver knows if it is going to be a one minute wait as opposed to a 10 minute wait and he, with some discretion, can make a call as to whether he waits for that train or not.

CHAIR —So you do not have that now?

Mr Paterson —In some places that does exist and it actually makes a difference. That is something we need to do in the universal sense, given the money that is available to us.

CHAIR —I have witnessed the Perth bus system where they are all on two-way radios and there is talking going on all the time. You will see a bus sit in a bus stop specifically because he or she might have picked up a bit of time and got a few green lights and then moved on. Do you have that same system of constant contact here in Melbourne?

Mr Paterson —I am less aware of the bus side of things. Maybe John can help.

Prof. Stanley —A lot of the operators to do that, yes. It is a no-no to ever run ahead of schedule, so they certainly try to keep to the schedule. But I think that the key point is the one that Mark made—that is, if trains are running to a 10 minute frequency and buses are running to a 15 minute frequency, it is very hard. The bus timetable needs to be a multiple of the train timetable—15 and 30 or something—so that you can at least meet every second train.

CHAIR —Yes, of course. Is it seen here in Victoria as trains versus trams versus buses?

Mr Paterson —No, not at all. I do not think that it ever has been, really. We regard ourselves as part of a wider industry delivering a product to customers. A lot of our customers catch trams and lot of tram customers catch our trains and buses and vice versa. They actually work very well together.

Mr Ellison —The franchise arrangements have an incentive scheme for us to work together even if we did not want to because we are sharing the same revenue pool. So whatever the revenue pool is, both the tram franchisee and the train franchisee get a set percentage. It helps us when tram revenue grows and vice versa. So the way it is set up means we work together. There is also an institution here called Metlink, which both the tram franchisee and the train franchisee are shareholders of. That currently looks after the system-wide marketing and information service for the metropolitan system as a whole. That meshes in well with the multimodal ticketing system that we have. So the way that it is set up is designed for people to work together—tram and train franchisees and buses.

CHAIR —Okay, thank you. I have one question that I want to ask before I go to my colleagues, and it was a carryover from the public hearing in Perth. I think it was transport sustainability that talked about the current Melbourne rail system taking additional rolling stock. We heard in Perth that the current rolling stock was the same as 1975, despite addition of a new loop to the system. What is the capacity? Is it at full capacity now here in Melbourne?

Mr Ellison —Are we talking about the infrastructure or trains?

CHAIR —I am talking about your rail system compared to your rolling stock.

Mr Ellison —We definitely need more trains. In the past 10 years our patronage has grown by 80 per cent at the same time as the fleet has increased by about nine per cent. To be sure, there were efficiencies we could make in the system and there was, if you like, fat that could be used to better utilise the rolling stock. But all of that has now happened and we are into a deficit. The deficit is congestion. So as patronage has gone up much faster than the availability of rolling stock, we now have a much more congested system than we used to, and the result of that has been a decline in punctuality standards and also a decline in customer satisfaction because people do not like the extent of overcrowding that has occurred on the system. So we definitely need more trains and that is why the state government has gone out and, over several decisions, ordered additional trains.

CHAIR —I am sure that the feedback sessions were very interesting, but I had better flick to my colleagues. Senator Hutchins.

Senator HUTCHINS —This franchise system, what equipment does Connex and Veolia own?

Mr Ellison —Here in Melbourne you mean?

Senator HUTCHINS —Yes.

Mr Ellison —Virtually none. All the trains are owned by a series of banks and the state has ultimate control of those.

Senator HUTCHINS —What about the lines?

Mr Ellison —The same—infrastructure, all the same.

Senator HUTCHINS —Are you responsible for the maintenance of the lines?

Mr Paterson —Yes, we are

Senator HUTCHINS —You are responsible for the maintenance of the line, the trains and trams?

Mr Paterson —Not the buses, no. For the train network we are responsible for the maintenance of everything above the track, including the track itself.

Senator HUTCHINS —Explain to a non-Victorian how the franchise system works. Are you obliged to have so many trips a year?

Mr Paterson —No. There is agreement about the timetable and we cannot decrease the number of services without the state’s agreement. In fact, we have been increasing them quite dramatically. We work with the state very closely about a plan each year on maintenance. We agree certain work needs to be done to certain levels and certain standards. We are in constant discussion with them about how to improve the network. So, with the state, we went down the path of what is called the network development partnership, whereby we got together and said that to deal with the growth in patronage that we expect, the current network cannot cope with that so we need to make some changes. The changes we made here in Melbourne last year in terms of changes of the operation of the loop for certain lines, which relieved some of the congestion in the city loop, was a good example of us working together and taking some tough decisions. That was not necessarily popular with the customers, but to actually improve the quality of the network and actually make the network work a bit harder pending the long-term investments that are coming down the track either by the state government of through the building Australia fund. So it is actually quite a good cooperative relationship between us and the government, I would argue.

Mr Ellison —In addition to all of the works programs, which are specified on an annual basis and approved by the state, we also do an annual business plan which talks about the whole range of business initiatives in customer service or whatever that we propose. The state can effectively agree to them when the business plan is adopted.

Senator HUTCHINS —How do you resolve disputes between yourselves and the government?

Mr Ellison —We talk.

Senator HUTCHINS —Is there an independent mechanism or body, and is it either you do it their way or you walk away from it?

Mr Ellison —We have never had to use that. We have never had to go down the independent expert route. We have always worked together in partnership to resolve issues as they arise.

Senator HUTCHINS —I just want to ask a question of Professor Stanley. You mentioned that one of the areas that will overcome some of the difficulties in the future is increased densities in the city. I am from Sydney, like you are. You would know that, like almost any city in this country, inner-city housing prices are extremely high and rental accommodation is extreme high as well. One of the things over the last 12 months that the Lord Mayor of Sydney has been carrying on about is the lack of people who are not merchant bankers or high-priced corporate lawyers, but someone to deliver the milk in the morning—those sorts of semiskilled jobs. What is the plan to have affordable rental and non-rental accommodation when making cities more dense? I just cannot see that on the horizon

Prof. Stanley —Senator, I actually live in Melbourne; I visit Sydney to teach transport—

Senator HUTCHINS —I just saw that you are at the premier university in the country—the University of Sydney.

Prof. Stanley —I am; I teach transport policy there, but I am a visitor. I will talk about that in relation to where is Melbourne is going, which I think has a lot in common with where Sydney has been, and that is based on the idea of suburban nodes. The Victorian government has recently announced six nodes places—like Broadmeadows, Dandenong and so on—and it intends to increase development densities in those areas. One of the key purposes of that is to get jobs closer to people.

Senator HUTCHINS —Or people closer to jobs.

Prof. Stanley —Sure; have them close together. That is partly to do with affordable housing as well. I am actually a director of VicUrban, which is the government housing agency in Victoria. It will be active in some of those areas in terms of increasing the supply of lower-income affordable living housing. The idea of higher density development along major public transport routes, which Professor Rob Adams has talked to your about, involves, in some versions, a requirement for 20 per cent or 30 per cent affordable housing as part of those developments, with a view that, if you free up the planning restrictions and allow higher density development—perhaps without even any rights of appeal to the standard tribunals, if it is not a heritage area—there will be a capital gain to the person making the development and the price of that capital gain is the inclusion of affordable housing in the development. The Victorian approach is really to focus on the nodes and I think those links as well to try to make sure that affordable housing is developed as part of that process.

Senator HUTCHINS —How far is Broadmeadows from here?

Prof. Stanley —Broadmeadows is about 30 kilometres from here.

Senator HUTCHINS —On one of Mr Paterson and Mr Ellison’s trains, how long would it take to get into the city?

Mr Ellison —About 30 minutes.

Prof. Stanley —Broadmeadows is a major manufacturing and logistics centre, and I think it has a strong future in that area. But you need more jobs of the kind that you talked about as well. You need a spread through the range of activities for jobs and you need the housing that runs with that.

Senator BACK —I am at a loss to understand. On the one hand, we have heard that we are at capacity here and, on the other, we have heard from Dr Mees that we are nowhere near capacity and we see figures quoted on what happens in Tokyo and elsewhere. Can you tell someone who does not understand this why there is such a divergence of view? Is it because trains in Tokyo go faster or they are longer? Is there in fact unused capacity—before someone starts investing heavily in new capital?

Mr Paterson —That is a fair comment. In terms of the Melbourne situation, I think there are a few things worth mentioning. One is that the City Loop, which is much lauded, was not actually built to the specs that it was originally designed for. Secondly, since 1999, there has been an 80 per cent increase in patronage, and there have been no changes to the signalling headways and, largely, no changes to the rolling stock. This means that you have many more people getting on and off trains in City Loop stations and it takes longer and longer. The City Loop assumed, I think, 20 seconds for people to get on and off, but it can take up to a minute and a half these days.

Senator BACK —Because of more people?

Mr Paterson —Largely, because of more people. The combination of those things means that the theoretical capacity of the loop cannot actually be achieved on the ground for one day. We are not arguing that not one more person can fit on a train; that is a ridiculous notion. We have never said that. In fact, the changes we made in Melbourne last year meant that, by taking some trains out of the loop, the system was starting to get untangled. However, with the expected growth in patronage over the next 20, 30 or 40 years, you cannot simply add more and more people to a congested system. At some point, you need to invest heavily in a different way of doing things.

We have argued that the Eddington Tunnel—as it has become known—is one way of doing that, and probably the best way. Is it expensive? Of course it is. But it is about setting ourselves up for the patronage growth of the future and setting ourselves up for a time when public transport use is going to increase as people turn away from motor vehicles for environmental and other reasons. We are trying to plan for that long-term future. For once, I think we are putting the view that, if we invest in this infrastructure now, we will actually plan to get ahead of the demand curve, At the moment, we are trying to play catch up.

Senator BACK —Speaking of transformational change, Professor Stanley, which suggests high levels of funding input, presumably in the past the Commonwealth must have made significant allocations to the states and I gather there has not been an enormous amount of accountability—or has there? Secondly, going forward, if it was the decision of the federal parliament to make more significant allocations, on what basis should they be made and how can we report back to the taxpayers that the funds have been wisely spent?

Prof. Stanley —One of the difficulties in the past has been that objectives have never been clear. I think there is a very strong case for federal involvement because of the national interest in the issues that I talked about. The federal government needs to be clear about what objectives it intends to get out of that process if it is going to put substantial amounts of money in, and I think it should put substantial amounts of money in. In the past there have been matching requirements and conditions put on funding but mostly in relation to road programs. There has not been any ongoing federal program apart from when Brian Howe was the Deputy Prime Minister and he had the Better Cities Program.

Going forward, it is probably talking about taking up the model that was used in road programs back in the 1970s when the Commonwealth was providing funds to the states for various sorts of road purposes but conditions were attached to those grants. I think that is what you should be doing now in this process. Some of those conditions should be two of the things I talked about. The states should not be getting any money that has not got a five-yearly updated transport plan. We have seen a number of transport plans around Australia come forward in the last few years. You would have to say that they have been produced much quicker than you would expect a well thought out transport plan would be produced. This is something that needs to be done on an ongoing basis. The US is much more used to this. Under the US federal funding they require metropolitan planning organisations to be in place in cities. I would have thought something like that. Evidence of an integrated approach to transport and land use is another condition you may wish to put on, and objectives in terms of congestion, greenhouse gas emissions, social inclusion as a price, plus some conditions on the way planning processes are done in terms of a long-term approach to integration, transport and land use.

Senator BACK —To ensure that those five-year plans are undertaken successfully it could be a two-part funding exercise. The Commonwealth could assist at that lower level and when it was satisfied that the outcomes are likely to be met it could then link it to more substantial funding.

Prof. Stanley —I do not think it would happen if it was done in that order. I think the transformational change is going to require fairly big amounts of money so the Commonwealth needs to be involved therefore in fully understanding the planning processes and the evaluation and so on that are being done to justify those major expenditures.

Senator BACK —The injection of funds to the states from GST revenue? You do not think that has been sufficient or is going to be sufficient into the future to achieve what you are talking about?

Prof. Stanley —No. We are talking about very substantial increases. The cost of these projects—you are talking about $8 billion or $9 billion for Melbourne and in the 20s for Sydney, given the scale of the sorts of projects they are talking about now. It is inconceivable that you could do all of those but you need to get a couple of them going and that is going to take a substantial amount of money. But it is only with projects of that scale, it seems to me, that you can get transformation.

Senator LUDLAM —Thank you for coming in this afternoon. I am puzzled at the disconnection between some of the evidence we have already heard and some of what you have presented today. There clearly seems to be some gaps, at least in interpretation. Speaking strictly for Melbourne, if the Commonwealth was going to, as we are suggesting, provide substantial amounts of public funding for public transport, where would you advise that it go? What is needed the most here?

Prof. Stanley —I would be putting money into the first part of the metro project in Melbourne, which is the one which I think has been talked about through Infrastructure Australia, which is the western part of that link. That is really important. The other thing that ought to be a major focus is cross-town SmartBus projects. We are seeing those at the moment in terms of simply competing with existing traffic in the arterial road network. We have to do much more to get bus priority operation. I would be looking at some road improvements to facilitate bus priority in the cross-town routes.

Senator LUDLAM —The metro seems to be a bit of a preoccupation in Sydney as well—the really fantastically expensive underground rail. It was pointed out by Dr Mees that there has not been an extension to the suburban railway to the extremities of the network since 1930. So why the preoccupation with funding central rail links and not extending the network out into the suburbs?

Prof. Stanley —I think the rail specialists would probably answer that better than me. My view would be that we need the capacity in the inner part before we can take what is going to be extended on the fringes.

Mr Ellison —That is it in a nutshell. We have extended the electrified system in Melbourne on a number of occasions since 1930. We extended the electrified rail system to Cranbourne, Craigieburn, Sydenham all in the past 10 or 15 years. Each time we extend the electrified system it adds to the catchment area of the electrified system and basically puts more people into the system. The Eddington study and others have shown quite conclusively that the inner core of the system and the system which feeds that will both hit the wall in a very short time unless we do something radical—something transformational.

Senator LUDLAM —I am presuming you have read these studies by Dr Mees that he has provided to the committee. He says that in fact we are accommodating fewer trains now. Flinders St was handling 113 suburban trains at rush hour in 1929. In 2008 it accommodated 94. There is a lot of spare capacity in the system. Can you please untangle the contradiction between this work and what you have presented today?

Mr Ellison —That would take some time. The system we have now is quite different from the system that existed 70 years ago in many, many respects. The fundamentals of transport demand now are quite different from what they were then. The city is geographically many times bigger than it was then. The average trip length is many times longer than it was then. The peak is much more concentrated now than it was then. We have had the city loop overlaid onto the system. As well as that, we have not had the additional infrastructure built in the suburbs that was postulated when the city loop was constructed. There is a raft of differences. There are more differences than things that are similar. Unless you sit down and analyse all of them it is very hard to take the simplistic analysis.

The other point to note is that Dr Mees’s theories about this kind of thing have been around in Melbourne for many years. As part of the evaluation process that was gone through by the Eddington study, they looked in some detail at the fundamentals of transport capacity and demand in Melbourne to see whether there is something that everyone is missing, some magic pudding that we could take something out of. They could not find the magic pudding. After spending a considerable amount of time and effort they produced a report which basically outlined in a very technically correct away why we have a capacity shortfall now and why the comparisons with 1930 are too simplistic to be of any benefit.

Senator LUDLAM —Two hundred kilometres of light rail have been costed in Perth at about $5 billion and you are proposing to spend $8 billion here on one underground loop into central Melbourne. It is a vast amount of money—the entire Building Australia Fund amounts to about $8 billion these days. Is there any potential to rethink the priority for public transport here or are we really stuck on this tunnel in inner Melbourne?

Mr Paterson —It is a large amount of money but we are saying that it is still the best way to spend it. The fact that it is expensive does not mean it is wrong. Answering your first question, in our submission to IA we made the point that you need to do the east-west rail tunnel but also the Tarneit link in the western suburbs because not only has there been a massive growth in urban rail but the growth of the regional—the V/Line—network is massive as well. On that corridor coming from the west you have urban and regional trains competing for track space, and they are causing problems for each other. To separate out the regional and urban trains from the west would actually make a massive difference to the operation of the network, which is the other project that we said should be funded as well.

Senator LUDLAM —So that is getting the regional rail lines off the same tracks as the suburban?

Mr Paterson —Where that is possible, yes.

Senator LUDLAM —One of the sharpest criticisms—and we will put this to the state government department when they are here a bit later—is of the lack of an overarching coordinating body that is not competing with anybody but is just looking after the interests of the user. Do you agree with that criticism of the Melbourne network?

Mr Paterson —No, I do not think so. I think the fact there is no person with the title ‘coordinator-general’ does not mean there is no coordination happening. I do not think it is as black and white as Dr Mees paints it. But you are right, the state government will speak for themselves and they are more expert in that area than we are, I think.

Senator LUDLAM —I put it to you that there are a lot more people than just Dr Mees who have put that to us. Around the country we have varying degrees of coordination and Melbourne and Sydney do not really have that, and Perth does—the integrated ticketing, the making sure that people—

Mr Paterson —There is integrated ticketing here in Melbourne already—it is not a smartcard but it is integrated.

Mr Ellison —It is integrated now; it was integrated well before the other states.

Mr Paterson —It has been integrated for 20 years. You can get the same fare and you can go on a bus, a train and a tram. Integrated ticketing already exists.

Senator LUDLAM —That is good to hear.

CHAIR —Thank you for your assistance to the committee. We will now take a short break.

Proceedings suspended from 3.00 pm to 3.17 pm