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Investment of Commonwealth and state funds in public passenger transport

CHAIR —I welcome representatives from the Victorian government. I remind senators that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how the policies were adopted. Officers of a department are also reminded that any claim that it would be contrary to the public interest to answer a question must be made by a minister and should be accompanied by a statement setting out the basis for the claim. Before we go to questions, do you wish to make a brief opening statement?

Mr Hopkins —We do, and we have a presentation and copies of that for circulation to the committee.

Slides were then shown—

CHAIR —Thank you.

Mr Hopkins —Looking at today’s presentation slide, I will go through a bit of the Victorian context, some explanation of what has been happening in Victoria in terms of patronage, the approach that Victoria has taken to land use and transport planning integration, the national context, nation building and, finally, some comments about federal taxation treatment.

Looking at the next slide, Victoria’s population growth is strong. Victoria’s population growth has accelerated in the last couple of years. We are attracting 1,500 people a week. Victoria accounts for about a quarter of all overseas migration, with about 90 per cent of those people coming to Melbourne. Growth is much faster than we were anticipating when our first major land use and transport plan, Melbourne 2030, was released in 2003.

Since that time, population growth and public transport patronage growth has accelerated quite rapidly, and I will talk more about public transport growth. In 2003 we were anticipating a population of about six million by 2030 but, as you can see from the chart, we are looking at just under seven million by that time now. Turning the page gives you a sense of where that population growth in Melbourne is occurring. There is strong growth to the west, to the south-east and the north. Melbourne’s east, as you can see, is largely consolidated. We would expect a bit of urban consolidation there but, really, the main areas of growth will be on the major rail corridors to the north, to the west down in Wyndham and to the south and south-east into Casey and Cardinia.

Turning the page again, you can see that, while our population growth has been strong in the last few years, public transport patronage growth has outstripped that, in the last couple of years at least, by a factor of four. Again, this was something that we did not anticipate either in 2003 or in 2006 when we were preparing Meeting our transport challenges, the government’s then transport plan. I will go through these figures in a little bit more detail. If you turn the page you can see that in terms of mode share Victoria has the highest public transport usage per capita in Australia of any of the major cities, recently just passing Sydney. We are looking at about 120 trips a year per person in Melbourne.

In 2003 the government set a target of accounting for 20 per cent of all motorised trips in Melbourne to be on public transport. At that point I think public transport was accounting for about 9.6 per cent of trips. It is now accounting for 13 per cent and growing quite rapidly. On turning the page again you will see that, of that eight per cent growth that I spoke about, metropolitan train, which is also coming off the largest base, is growing at the fastest rate of all metropolitan modes. For the last few years we have been averaging about 12 per cent growth, which means that every three years you are adding another third of the people to the network. It is obviously quite challenging to meet that sort of growth.

The next page shows the tram figures. Again, there has been strong growth in the last year but coming off a slightly smaller base. Tram patronage has really accelerated in the last 12 months and shows no sign of fading. Perhaps the biggest unexpected growth from Victoria’s point of view is, as shown on the next page, in bus patronage. You can see that bus patronage was stagnant for many years. In fact, if you follow those graphs well into the 1990s, you will see a fairly flat line with maybe one or two percentage points. Over the last three years we have had over eight per cent on average growth: 7.4 per cent, 7.4 per cent and 13 per cent in the last 12 months. Part of that picks up on significant increases to service standards in Melbourne, but a lot of it has to do with some other factors that I will talk about.

The next page shows V/Line train and coach patronage. You will notice that the scale is significantly greater and that in 2006-07 we had 31 per cent growth. That figure is a little bit misleading. If you look back to 2003-04 and 2004-05, you will see that there was a decline in patronage. During that period we were delivering the regional fast rail project, which meant that there were huge disruptions. A lot of track was being ripped up and we were not running services, so a lot of people were turned off and were not taking the option of the replacement coach services.

CHAIR —V/Line is all of the country stuff?

Mr Hopkins —V/Line is all of the country rail and coach. So you see a big bounce back in 2006-07, and 2007-08 shows fairly strong growth. That is the sort of growth that we are expecting to see continue for a little while yet.

Turning the page again, metropolitan train patronage for the last century is shown. As you can see, Melbourne last had the sort of patronage it is now experiencing back in the 1940s and 1950s. Perhaps the most interesting thing about this graph, from my point of view at least, is the slope of the line on the right-hand side. We have an almost vertical patronage growth. As I pointed out earlier, this is about 12 per cent a year. We are approaching the limits of our existing infrastructure. We have never carried this many passengers before and we are still growing at about 12 per cent. So, with the figures for the last six months, which we showed on the earlier slide, we are still looking at about 11 to 11½ per cent growth per annum.

We have done some research into what the drivers of change are for people who have shifted from driving to public transport. Petrol prices and parking costs are factors as are, interestingly, health and fitness, environmental concerns and different attitudes towards transport and the role of transport in our lives. However, car-running costs and so on also make a contribution for the people who reduce their vehicle use and move to public transport. Twenty-one per cent of people who changed their behaviour told us they were travelling less, 26 per cent were walking more and eight per cent were cycling more. Certainly some of the work we have done suggests a very strong growth in cycling as a mode of transport to work. Journey to work figures for cycling to work in Melbourne have just about doubled in the last five years between census periods.

I have talked about the integration of land use and transport planning in Melbourne. Melbourne 2030 was released in 2003 and encouraged the outwards growth of Melbourne into the established rail corridors in the north-west and south-east. Redevelopment of existing suburbs is clustered around railway stations. In December last year we released Melbourne @ 5 million with the Victorian transport plan, which, again, looked to focus activity and development consolidation around six major transport nodes outside of the Melbourne CBD.

I will touch briefly on the six strategies that have underlined Melbourne’s approach to public transport for the last four or five years. The first of those is focusing on the metropolitan train system. As I think is quite clear, we are in uncharted territory in terms of patronage. We are carrying 10 million people more than we have ever carried before. We need to focus on the capacity of the system. Part of that is about changed operations and part of that is about a big investment in infrastructure. The second one—and I think Jackie Fristacky pointed this out—is that we have a fairly good radial train system; what we do not have at the moment of the same quality is circumferential public transport services. The introduction of a SmartBus service in a series of concentric rings plus on some other major corridors, such as from Melbourne to Doncaster, will start to fill in some of those gaps to complement the rail system.

Third, Melbourne’s local bus services were, up until fairly recently, not of a particularly high quality. Local buses perform a really important function in terms of getting people from their houses to the principal public transport network of rail and tram. So there has been a big push to increase frequencies, span of hours and geographic coverage. I think we are now at a point where about 96 per cent of Melbourne households are within 400 metres of a bus stop.

Senator HUTCHINS —Are these all privately operated modes of transport?

Mr Hopkins —Yes. All are either franchise or service contracts managed by the Department of Transport.

Senator LUDLAM —When you say 96 per cent of Melbourne households are within 400 metres of a stop, what is your minimum frequency to be considered a viable stop?

Mr Hopkins —We do not have a minimum service standard at the moment.

Senator LUDLAM —So even if it came past once a day you would still be counted as within a bus catchment.

Mr Kinnear —We have moved a long way towards achieving a minimum standard, which is that services run from early morning till seven o’clock at night seven days a week, which is a far step forward from where we were about two or three years ago. The requirement is on every one of those routes that there shall be a bus service at least hourly. We have not quite got to that point yet, but that is where we are heading.

Senator LUDLAM —Thanks.

Mr Hopkins —Turning to item 4, at the moment about two thirds of the tram system operates in a mixed road environment, meaning it is mixing with traffic. There are no other tram systems in the world that are of a comparable scale where so much of the tram system has to operate in a mixed traffic environment. So a big part of the push has been to try and, where possible, separate tram operations into more of a light rail service and separate them from traffic operations.

Fifth, another big focus has been increasing physical access to the system and meeting the requirements of the Commonwealth Disability Discrimination Act, particularly for the bus and train network. That is relatively straightforward. For the tram network, Melbourne obviously has a far bigger tram network than any other city in the country and that is probably where our greatest challenges have been and will continue to be into the future.

Finally—you will not have this and I am sorry all we have given you is a picture—the sixth aspect has been efficient and fair pricing regimes to try and better cost and better provide for the social needs of people accessing public transport but also to make best use of our infrastructure. That is about encouraging shift out of the peak, where that is possible, and mode shift to public transport.

Turning the page, on 8 December 2008, the government released the Victorian transport plan which was aligned with our Freight futures plan, Melbourne @ 5 million, which is the land use plan that complements Melbourne 2030, and our submission to Infrastructure Australia on our priority projects. The VTP contains $38 billion worth of projects over a 12-year period. As part of that we were seeking $10 billion over that 12-year period from the Building Australia Fund.

Turning the page again, we do not make that request without being prepared for the state to pull its own weight. So as you can see investment in public transport infrastructure has risen from the late nineties and early 2000s from about $100 million to almost a billion dollars in the last year. I think the numbers for 2009-10 are somewhat higher again. It is very easy to think that public transport is just about major projects and iconic projects but the first steps that we have taken, other than making some changes to operations of the train network, have been some small-scale projects to try and milk as much as we can out of the existing infrastructure.

What you can see there is five projects around the network. I will go through them. In Clifton Hill we have duplicated a single track and are building a new bridge over Mary Creek. In Cranbourne we have put in stabling for five new trains to allow trains to start at their origin rather than having to move out from the city. There is stabling for six trains, two new crossovers, a platform and new maintenance facility at Craigieburn. There is additional stabling at Westall, which is just near Dandenong, and additional track in the west where you can see, just above Werribee, the addition of extra track and new platforms at Laverton Station to remove a bottleneck caused by trains entering and leaving the Altona Loop.

Turning the page, as I said, a number of the drivers of transport policy at the moment are both national or international issues such as climate change, the introduction of a CPRS at some point or any means of dealing with a carbon constrained future, drought and the availability of water, the growth in the freight task, shifting population growth, growth in international trade and urban congestion at our ports creating bottlenecks in freight movement. In summary the point that I am trying to make here, perhaps rather inexpertly, is that the major cities are where freight transport and passenger transport come together. Melbourne has the biggest container port in the country. It is located in the middle of the Melbourne CBD which means that you have the interaction of hundreds of thousands of people coming into the city as well as thousands of tonnes of freight containers coming into the city. Where those freight and passenger movements interact becomes a challenge. The Commonwealth has long invested in freight movement and initiatives to support freight movement, but our view would be that you really cannot look at freight movement alone without considering its impact and the impact of passenger transport on freight movements.

If you turn the page, you will see I have listed the strategic priorities of Infrastructure Australia, which the committee is no doubt familiar with. We took these into account when we were writing the Victorian transport plan. The VTP’s strategic objectives are very much in line with the objectives of Infrastructure Australia’s assessment program. If you turn the page you will see that we lodged our submission to the national infrastructure audit in June 2008. The five priorities are the transport needs of a growing city, which will very much be the focus of today; freight access, exports and linkage, and links back to the transport requirements of a city; water projects; telecommunications infrastructure; and climate change and energy infrastructure.

Two of the major projects of particular relevance to this committee are over the page. I think we have given you a map showing some of the choke points on the regional rail network from trains from Bendigo, Ballarat and Geelong. Currently, these trains have a reasonably clear run through the country. Once they start interacting with suburban trains in metropolitan Melbourne, which are crowded and because of the crowding are becoming less reliable, there is a huge impact on reliability of V/Line services.

If you turn the page, you will see one of the two major public transport projects that we put in our submission to Infrastructure Australia is the regional rail link—a new 40-kilometre twin track rail link from west Werribee to Southern Cross station, via Tarneit and Sunshine; new platforms at Southern Cross station, which will separate regional and metropolitan train services, allowing regional services to run express from Melbourne and free up some capacity in the metropolitan train system. It will also include rebuilding of the station at Sunshine, with extra platforms and the construction of a new rail bridge over the Maribyrnong River. The intention is that the regional rail link will provide capacity for about an additional 9,000 passengers per hour into Melbourne. The regional rail link provides a dedicated line to Southern Cross for regional services, which should also increase the speed of trains coming in from Bendigo and Ballarat and will increase the reliability of trains coming in from Geelong.

By separating out the regional and the metro there is also a huge advantage for the metro services in that we begin to move to a more European style metro system that becomes a little less metronomic. Currently, we have a train system that is trying to fulfil a number of tasks. Regional trains and metropolitan trains are mixing on the same tracks. Also, the metropolitan system is trying to fulfil not only a metro style system of short distances carrying a large number of people but also a suburban network which sort of implies a different level of comfort. Currently, the metropolitan rail system is trying to do two of those things and if you overlay that complexity of the regional rail network you have got what I have heard called a bowl of spaghetti that we need to unpick.

If you turn over the page you will see the second major project there is the Melbourne Metropolitan Stage 1, which is a new rail tunnel between the west and east of Melbourne. That will increase the capacity of the rail network by about 12,000 passengers per hour. Stage 1 of the tunnel, which we have shown on the map, will be from Dynon to St Kilda Road at Domain, with a stage 2 to Caulfield to be delivered after the completion of stage 1. This will provide new access to the strategic economic clusters of biotechnology and education in Parkville, as well as to the ICT industry at St Kilda, not to mention the knowledge and health sector up around Parkville, with the hospitals and the university. Melbourne Metro Stage 1 is also the logical conclusion to the regional rail link.

If you turn the page again, you will see the extension to Caulfield will provide capacity for 20 trains in each direction from the northern suburbs to the south-east suburbs. Twenty trains is pretty much the equivalent of about 40 free-way lines. Just quickly, I do not need to explain to you that, currently, FBT treats motor vehicle use and public transport use differently. Currently, the state’s view would be to not change the treatment of cars, but we would be seeking more equitable treatment of public transport uses as part of that.

Finally, where would a state submission to a Commonwealth inquiry be without pointing out the amount of money collected in excise and the amount distributed? We think there is obviously an opportunity for the Commonwealth to increase funding into transport. A shift to provide greater public transport would be welcome.

In summary, I would say that the Commonwealth has for a long time quite rightly funded economic freight movement. We are now at a point where a lot of the movement of freight is being impacted on by passenger movements, particularly in the major cities. It would be more appropriate to consider passenger transport at the same time as we consider freight transport because the two are so intertwined. Thank you. I would invite questions.

CHAIR —Thank you. That was a very in-depth presentation and we do appreciate it. I would like to discuss the subject ‘The costs of motoring and changing community attitudes are key drivers’. Two weeks ago in Canberra we had a presentation from the International Association of Public Transport. When was your survey done?

Mr Hopkins —That was done by Sweeney Research in 2009, so it is very recent.

Mr Kinnear —February.

CHAIR —That is very recent. How many people were surveyed?

Mr Kinnear —I am guessing 500 households or thereabouts.

CHAIR —You can take that on notice if it was more or less.

Mr Hopkins —We will take that on notice and get back to you.

CHAIR —By all means, thank you. The reason I ask is that the international planners who came to see us in Canberra said that they undertook a survey in Melbourne. They came back with some figures. I am guessing here, but I think that number surveyed was around the same as you gave—500 or 800 or thereabouts. Other committee members may remember. However, they did not believe the response about why people were going from car patronage to public transport, so they redid the survey—two weeks ago they told us that happened two or three weeks previously, so it was within the last month. They had eight indices, I think, on why people were going from cars to public transport and the environment was not one of them. Now we see your survey of 500 households, where the environment is equal No. 2. You can understand that, from our point of view, we could not have more conflicting evidence. What do you say to that?

Mr Kinnear —We have been doing other surveys very similar to this—this is about the third wave. In the first wave, in mid-2006, overwhelmingly the change was happening because of petrol prices. At that stage the environment was barely a marker on this scale. By the time we did the second wave, in the latter part of 2008, the environment and personal health and fitness had both become significant. I cannot quote you the numbers, but by February that had risen again. I think that this has been a rapidly emerging issue—the more we think about bushfires and drought and the more all those sorts of things happen. That is all front-of-mind stuff from a consumer’s point of view. I could only reconcile that with your other survey results by saying that this is a fairly rapidly changing market shift, but it has clearly been building up through a series of surveys that we have been doing over the last three years.

CHAIR —Our issue is to shape it somehow into some report. You could not get two more conflicting outcomes, allegedly from the same time in the same state.

Mr Hopkins —It is probably worth pointing out, without knowing the details of the other survey, that ours was a survey done of people who had changed from motor vehicle use to public transport. So it is possible that we are looking at a smaller subset here, and there could be definitional issues as well.

CHAIR —There could be, but I was led to believe that the other survey was also of people who had made that change. You will be on the pointy end. I am sure there will be a lot of questions because we have heard such conflicting evidence today and in the submissions—it all depends where it comes from—but it is all starting to point to the same conclusions for the committee members here today, though the other senators will have their own view.

I was of the opinion that Melbourne had the best public transport system in Australia, although my view has narrowed. Your tram system is absolutely superb and I congratulate you on it, but what has come out is that it is fantastic as long as you are heading into the city and not trying to head east-west. You have copped a fair bit of flak during the day, so this is your turn to defend your public transport system, but I am sure there will be a pisling. You can get into the city from anywhere with, on average, four-minute intervals on the trams, is it?

Mr Hopkins —Perhaps in peak on some services.

CHAIR —But there are 30-minute intervals between Carlton and Collingwood.

Mr Hopkins —It is fair to say that Melbourne has done the radial transport very well over the years but that our circumferential—the east-west travel but also north-south in the east of Melbourne—has been a neglected area until probably 2005-06, when we started investing in the SmartBus network. I am sorry I do not have a map to give you. We have a fabulous public transport network, as you say, that provides that radial service, but we are in the process of building that SmartBus network. The idea will be that you provide a bus service that has similar service attributes to rail. So you are looking at about 15-minute intervals, high-quality wheelchair accessible vehicles and real-time information available at stops—my bus will arrive in three minutes, two minutes et cetera. It is fair to say that it has been a neglected area, but it is an area that the government is focused on and it is very much a part of the Victorian transport plan.

CHAIR —One could see from your presentation the amount of money that was spent in the previous 10 financial years; then all of a sudden it is like, ‘Wow!’ Obviously there is a lot of catch-up to do, but the effort is being made. It would be fair to say that you have a long way to go, as you have recognised.

Mr Kinnear —I would like to support your point on that. On those routes where we have introduced SmartBus systems, as Michael described them, which include technology for train and traffic signals and all those sorts of things, we have seen a minimum 50 per cent increase, getting up towards a 100 per cent increase on some of those routes where we have made those changes. That supports your contention that there is a demand.

CHAIR —Absolutely. Professor Stanley reiterated that 50 per cent increase. The standard criticism of SmartBus was that passengers were getting off the train and looking at the back of the bus as it took off. But you have now got that all mickey mouse.

Mr Hopkins —That is a perennial example that comes out. It was near Monash University and was fixed a couple years ago. People have some long memories, and quite rightly so.

CHAIR —You are allowed to have stuff-ups. If you fix them, that is fantastic. That is what it is all about.

Senator BACK —People remember the bad news a lot longer than they remember the good news. Is your submission to the Building Australia Fund a publicly available document?

Mr Hopkins —We will be able to provide you with a copies of the infrastructure audit and the Victorian transport plan, which includes a breakdown of the projects and which ones build in some assumptions about Commonwealth funding.

Senator BACK —Can you give us some understanding as to how your relationship with the outsourced public transport providers works? Are you proactive or reactive in the way that you audit? Presumably it is your organisation that oversees their performance. It seems to be quite different between cities. Three of us here are quite familiar with Perth, for example, and are very keen to know how that is organised.

Mr Hopkins —I might deal with the bus network first because it is fairly easy to deal with. The bus network has largely always been in private hands in Melbourne, with the exception of National Bus, which ran about 30 to 40 per cent of the network up until the 1990s, when it was privatised as well. Contracts are held with individual bus operators that service particular routes and services. Government sets timetables and works with operators to take feedback from them, which you obviously have to do because they have the operational experience, the staff and the expertise.

The train and tram networks were franchised in 1999 and were refranchised in 2002-03 with the collapse of National Express which was running both half of the train network and half of the tram network. At that point in refranchising, the opportunity was taken to consolidate the two train operators and the two tram operators into single entities which are currently being managed by Yarra Trams and Connex Trains, as I am sure you are aware.

Government is responsible for infrastructure and long-term planning. It owns the assets, does the timetabling and works with the operator to try and get the best out of the system. Far from it being a distant relationship, it is very much a partnership. We are in there with the operator but, ultimately, when it comes to the long term, they are responsible for the day-to-day operations and the interaction with customers and we are responsible for the long-term planning, timetabling, service requirements and, as part of the franchise agreements, setting and monitoring performance standards and those sorts of things. That is a very high-level description.

Senator BACK —Sure but that is how it is working. How would you improve it if you had the opportunity? How could you and they do it better?

Mr Hopkins —I will have to very careful at this point because we are in the middle of a refranchising.

Senator BACK —I will withdraw the question then. The only other question I have to ask is: what sort of proportions does the Victorian transport plan call for in the funding of public transport as opposed to road transport into the future?

Mr Hopkins —From memory it is about fifty-fifty. The important thing from our point of view is that when we were putting the plan together there were a lot of fairly simplistic arguments about road versus public transport. About 80 per cent of our public transport kilometres are operated on the road either by the tram network or the bus network. The road network is particularly important especially in outer metropolitan Melbourne where you have public transport mixing with private cars. It is about fifty-fifty but I can confirm the numbers for you if you like.

Mr Kinnear —I can confirm that. It is $38 billion in total of which about $18½ billion is public transport.

Senator BACK —That would represent an increase presumably from the past. The mix would not have been fifty-fifty then.

Mr Hopkins —It is always difficult to know what you are comparing when you are talking about infrastructure and public transport. There is a tendency to compare infrastructure spend with infrastructure spend which has in the past—I think I showed you the chart which shows investment over time—clearly favoured roads for a long time. What that does not show though is the operating costs. The operating costs for roads, maintenance costs and so on, are generally quite low, whereas for public transport in Melbourne, picking up V/Line train and coach as well, you are looking at about a billion dollars a year in operational costs above and beyond revenue collected.

Senator LUDLAM —Thank you very much for your presentation this afternoon. Just continuing on with the Victorian transport plan, of the 50 per cent roughly that is road funding is that mostly for new metropolitan freeways?

Mr Hopkins —You will have to excuse me, I am not an expert on the road side. It includes a number of major road initiatives on the outskirts of Melbourne, the Mornington Peninsula link, the north-east connect, a second Maribyrnong Crossing, which is in inner Melbourne, and a large program of outer metropolitan arterial roads into the growth areas.

Senator LUDLAM —So freeway funding in Victoria certainly has not fallen out of style just yet. Of the public transport spend, which you would be a bit more familiar with, what are the major components of that?

Mr Hopkins —Of the VTP?

Senator LUDLAM —Yes.

Mr Hopkins —The two projects that I spoke about, which are the regional rail link and the metro tunnel part one. I am happy to provide a more detailed breakdown but it also includes the SmartBus program that I spoke about, which is another significant component for the expansion of outer metropolitan bus services. It also includes continued investment in tram priority projects and a large fleet procurement—up to 70 new trains plus 50 additional V/Line carriages and tram procurement as well. It also includes the Disability Discrimination Act compliance program, which is a couple of hundred million dollars for infrastructure, particularly on the train network.

Mr Kinnear —I do not know whether you have access to the plan itself but at the back of that plan there is a table which sets it out project by project, and dollars for each project.

Senator LUDLAM —The disability stuff: is that retrofitting existing stock as well?

Mr Kinnear —There is a lot to DDA. It is about the infrastructure itself. You saw some of the new big platform stops out in the middle of the roads out here. That is a significant part of the DDA program. There is retrospectively refitting railway stations to provide all the stuff to enable people with disabilities—who cannot see or hear or whatever else—to use them. At the end of the day there will be a large amount of expenditure in achieving that DDA result on railway stations because of the ramps and other things that need to be dealt with. There are low floor trams—when we need to buy new trams for replacement or capacity purposes we now pay a premium to buy new low floor trams to achieve DDA objectives. There are something like 10,000 bus stops in Melbourne. We are going through each and every one of them now to make the minor changes that need to be made to each of them to make them DDA compliant.

Senator LUDLAM —Over what period of time is that $38 billion proposed to be spent?

Mr Hopkins —Over 12 years.

Senator LUDLAM —Of that you have asked for around $10 billion worth of Commonwealth funding, and that is specifically for the metro—for the projects that you are putting here.

Mr Hopkins —These are the two major public transport projects. I think some of the road projects that I spoke about are also included in that. The north-eastern connector, which connects the east link with the Western Ring Road, is part of it. Maribyrnong crossing is another project. I have not mentioned it because it is not a public transport one. It is about better freight access into the port of Melbourne through the inner western suburbs—the truck action plan. From memory that includes a component. It is all spelt out in the plan. When we provide you with a copy of that there will be details of each project. But it is not just public transport ones that are seeking Commonwealth funding.

Senator LUDLAM —I suppose for the purposes of our committee I am more interested in the public transport spending. What you have put on the table are, by any standards, very, very expensive projects compared with what you could potentially do with that money. Are there any proposals, for example, for outer metro expansions of the heavy rail system?

Mr Hopkins —The problem we have at the moment is that we do not actually have the capacity in the inner core to be able to run more trains from the outer metropolitan suburbs. There was a lot of work done in the lead up to meeting our transport challenges—the 2006 document. We identified that the priority has to be on increasing the capacity of the inner core. Once we have the capacity to run extra trains then it becomes reasonable to extend out into the suburbs. All of the growth areas that we are talking about are actually along major rail corridors. There is the Dandenong corridor in the east, which includes both the Pakenham and the Cranbourne line. The north is served by a number of lines and this is one of the areas where there will be a rail extension from Epping to South Morang. In the west there is the Werribee line, which is the train to Geelong, and in the more northerly west there is the Sunshine corridor.

Senator LUDLAM —The Building Australia Fund is looking very depleted at the moment owing to the state of the global economy and surpluses that no longer exist. Has your department considered whether, if the funding is not provided as expected, the Victorian government would be prioritising the road funding or the rail funding?

Mr Hopkins —I think that is a bit of a hypothetical question. I am not sure I can actually answer it. I think the Victorian government would have to consider its options at the time. It is probably worth pointing out, though, that the $10 billion was not predicated on what is in the existing Building Australia Fund. It is actually assuming that the Building Australia Fund will be topped up over the next 12 years. We have not made any assumptions that we would get half of the $20 million that went into the BAF, whenever it was announced. It was an assumption that the BAF would be increased over time.

Senator LUDLAM —I think that is a shared assumption. When we heard from Professor Newman in Perth about a week ago, he told the committee that Infrastructure Australia was hoping that bidders would include agglomeration economics and agglomeration affected cost benefit calculations, but he also said that nobody had done that. Is that something that you take into account when you are planning public transport proposals or expansions?

Mr Hopkins —Internally, when considering those things within the Victorian government, we generally do not take into account the wider economic benefits of what are known by my economist friends as WEBs—the wider economic benefits, the agglomeration benefits. I know that Infrastructure Australia has requested that, and we have done some work to try to pick those things up in our submissions to Infrastructure Australia.

Senator LUDLAM —I suppose on paper they make public transport projects that much more attractive—

Mr Hopkins —I am not sure about that. I know they certainly make road projects look more attractive as well—

Mr Kinnear —I think I can add to that. There are two levels of wider benefits. It is standard within our evaluations, if we are evaluating the merit of a public transport project, the benefits of that will deliver in terms of reduced road congestion and reduced greenhouse gas emissions. All that sort of stuff is taken into account. When you are using the term ‘agglomeration benefits’ or wider economic benefits, yes, that is something that Infrastructure Australia specifically sought. We had already done a fair amount of work in that area, and we have certainly included those benefits. They tend to add something of the order of 20 per cent to the benefit stream that would otherwise be there for the project. Yes, that is applied to public transport projects as well as road projects.

Senator LUDLAM —I suppose you would be pretty well aware of some of the criticism that has been put that, in going for the very expensive metro lines, we are passing up opportunities for perhaps less expensive but more extensive ones. A witness earlier today said that we are better off with a large number of small initiatives than two fabulously expensive tunnels. Would you care to comment on those observations?

Mr Hopkins —Certainly. If you go through to the slide headed ‘recent projects’, which is about the 17th or 18th slide, in putting the VTP together, I talked about our six strategic priorities, and the first of those was building capacity into the metropolitan rail system. You do that in three ways. Firstly you try to maximise the way you operate the system to get the maximum out of your existing infrastructure. We had a big dip in patronage through the 1960s and1970s. During that period, a lot of decisions were made that made compromises between various users. Those compromises were entirely legitimate and understandable at a time when you had infrastructure to spare. That meant things like running more express services to suit the needs of outer suburban areas. The problem with that is that it starts eating up capacity and you start using what we call ‘train paths’.

The last few years have seen us unpicking some of those compromises and moving to a much simpler operating pattern to try to get the benefits that we could. The second thing you do is to start making some of those small improvements. This slide talks about what some of those projects are, and they are about making small investments at key locations to try to milk what you can out of the existing system, to sweat the assets a bit harder. For example, we have built an extra rail bridge at Clifton Hill and changed the operating pattern of the Clifton Hill loop. What happened there was that the loop ran in such a way that it would change direction at noon. It would run counterclockwise in the morning and clockwise in the afternoon. What that meant in the morning was that trains going into the city had to cross the paths of trains going out of the city. That has been unwound. We have also built a second bridge to allow for greater capacity.

Once you start doing that, though, you are getting close to the limits of what is achievable there. Each of the loops has a maximum theoretical capacity of about 22 to 24 trains an hour. You have to remember that those loops are run as four individual loops and there is no way to mix and match services between them. Some of those loops are running close to capacity now and we are getting to the point where we really need to go to the third step, which are some stepped changes in investment. Ray, would you like to add anything to that?

Mr Kinnear —Only that a lot of the debate which has gone on is quite rightfully around fairly short-term operational changes, and I would say that we have made a fair number of those. Even from a pricing perspective, we now offer free travel if you make your trip before seven o’clock in the morning, for example. We have done almost everything we can do to stretch the use that we can get out of the peak period capacity on the system that we have at the moment. Most of the debate is really around, ‘Have you got that last 10 per cent of capacity that you might get out of the system?’ Whilst we are debating that, patronage is growing by 12 per cent every year. We are looking here for a solution that is going to work for a decade or more in a decade where we are talking about a doubling. So we can have a lot of discussion around 10 per cent here or five per cent there, but it is now upon us that we need to find a means of virtually doubling the capacity in a short period of time. And these projects are the only way to achieve that.

Mr Hopkins —Both the government and the Treasury have quite rightly put us under a fair bit of acid to make sure that we are getting all of these benefits. As much as we would love there to be huge amounts of untapped capacity just waiting for us to flick the switch, it is not true, unfortunately.

Senator LUDLAM —I suppose the counterargument is to establish better development at nodes around the city rather than working out how to get another 100,000 people into the city at peak hour. So why are we not looking at decentralising employment services, housing and so on to the suburbs around the edge of the metro?

Mr Hopkins —And that is very much a part of Melbourne @ 5 million. Our argument is that you will always have a strong centre. In fact, the percentage of employment in Melbourne CBD compared to the percentage of employment throughout the metropolitan area is quite low by Australian and international standards. In terms of the percentage of jobs that we have in the centre, it is actually quite low. Part of Melbourne @ 5 million is in fact about trying to pick six central activity districts across the city and make those attention for consolidated development—much more intense development around places that already have fairly high-quality public transport links—and then going back and having a look at the way those central activity districts connect with the residential areas around them. That is underway. Unfortunately, we are at a time when it is not a case of one or the other; it has to do both.

CHAIR —Thank you. I am sure there are a lot more questions to ask, but we do appreciate your assistance to the committee. From submissions today we imagined that you guys were going to walk in here with horns growing out the side of your head, because you are all the baddies. One thing I will leave you with is: why can’t you get the trains matching up with the buses on the timetables? You can take that on notice.

Mr Kinnear —You have run out of time now, have you?

CHAIR —You are lucky; we have run out of time. Thank you very much, gentlemen.

Committee adjourned at 4.48 pm