John Fullerton CEO Presentation – ALC Forum, 20 March 2014.
Good Morning everyone, thank you for being here, it is a pleasure to be able to address you all today.
As you are aware, the theme of the ALC Forum, and my speech this morning, is “It’s Time to Deliver.”
What I really mean is that “It is Time to Deliver by Rail”
Some of you may have already seen the video that we have played just now.
It was produced as part of our ‘Better for Business’ campaign which we launched recently.
Hopefully that video gives you a brief snapshot about where ARTC is heading and today I’m going to talk about how we can deliver, now and into the future.
Australia does need to make important decisions about how best to move freight across this nation.
I think we all agree that we can’t just throw money at infrastructure and hope for the best without a plan to deliver real benefits to business and the community.
ARTC has such a plan for rail and we can deliver now, notwithstanding that a lot of work still needs to be done to ensure Australia has the right infrastructure to support growth and equally importantly that we’ve got the right transport policy to deliver the best outcome for the Australian economy.
From my perspective, I believe that the outlook for rail is positive and the sector has enormous potential to deliver those long awaited benefits to make Australia a more productive economy and certainly, to improve our standard of living – in terms of its role.
The basis of my optimism for rail is really, two-fold:
Firstly, from both an infrastructure and rolling stock point of view, the rail industry has significantly modernised itself over the last ten years – I’ve worked in this industry for 30 years and I think the last ten years we’ve seen an enormous change. Both in terms of the quality of the infrastructure: often you don’t see what’s being improved out there, but trust me there’s been a huge improvement to the interstate network.
And more importantly I think, I think in terms of the investments by our rail operator customers in terms of rolling stock, terminals, the privatisation process that occurred over ten years ago, has all contributed to placing the industry in a very strong position for the future.
I believe rail can perform today and has got a lot of opportunity out there into the future.
Secondly, there is a pipeline of projects – I’m going to talk a bit about them later – that we continue to roll out to ensure that we continue to improve rail infrastructure around the network.
And as the video took you through this morning. ARTC has done a huge amount of work on that interstate network.
It’s fair to say when we inherited a lot of it – it had suffered 30 years of neglect – which is a sad indictment in terms of how rail has been managed over the last half a century.
But ARTC has invested around $4 billion on the interstate network.
A lot of that money was spent on just to fix it, not a lot was spent to expand it, although part of that was to replace rail, to build new passing lanes, to build new crossing loops to build a dedicated freight line into Sydney and to replace a lot of the safeworking systems.
And a lot of that work has come to an end and that’s why I have a lot of confidence about the ability of the network to deliver those benefits to those that play a part in the supply chain.
But there is more to be done and I will get onto that shortly.
Rail has always been competitive from price point of view with road, the longer distances always help this of course, but now we deliver a lot more reliability, and the east coast corridor between Melbourne and Brisbane has been able to deliver significant improvements in reliability over the last six to twelve months.
Which means a lot of freight that wasn’t on rail before, that was taken away from rail, is slowly finding its way back and we think that is just the start of a change in mindset in how we should be using rail on the eastern seaboard.
The above-rail operators, that is, ARTC’s customers – have also been making big in-roads into improving the national intermodal rail fleet – they’ve been investing in new state-of-the-art locomotives; new rolling stock, invested in terminals and information technology to position rail far more competitively in the market place.
Which brings me to my earlier point that rail is ready to deliver now.
It’s no surprise to anyone in the room that:
- Rail is cheaper.
- It helps solve road congestion.
- It is a safer mode of transport.
- Rail is the environmentally responsible transport choice.
By expanding your supply chain to incorporate rail or increasing your existing use of rail – you are taking direct action on carbon and positioning yourselves for the future.
There is now a much improved rail network available – and it is a serious freight alternative for your business.
If I worked for a logistics company that was making longer term decisions around developing new distribution hubs I would be strongly advocating the need to be next to the rail network and to develop rail options.
Rail is a vastly different place today and those that make rail work in their supply chains will be the ultimate beneficiaries.
And it is encouraging when you see companies like SCT, Linfox, Qube and others investing in distribution and terminal facilities, based on the right links next to the rail network and being able to mix efficiently with the road network.
That’s a sign of the future and where rail can play a far bigger part in the supply chain.
Collaboration with Road
If I can for the moment talk further about the supply chain and in particular, the collaboration with the road freight sector.
Often the rail and road freight businesses are presented as this kind of immutable, dichotomy.
That view is too simplistic and in my experience, it is not accurate or representative of the rail industry’s been saying.
Collaboration across the whole of the supply chain is absolutely vital, and it is matter of making sure rail does the things it is good at, road does the things it is good at – and there’s that sensible interface between the two that leverage of each one’s capabilities and efficiencies.
That said there are some facts that should disturb us:
To me the most obvious one is the current situation where over 70 per cent of the land freight task travelling between Melbourne and Brisbane is on road is just not sustainable.
I would go as far as calling it a national disgrace that a rail corridor nearly 2000 kilometres long can only command a market share of around 25 per cent.
And I think we’re all at fault to have allowed that to have happened.
It’s been a long gestation – but those kinds of figures are reflective of some poor decision making.
And if you think that is okay – just take a look at the east-west corridor where rail has a market share of 82 per cent.
If we thought 25 per cent was okay for intermodal movements between the east coast and Perth.
Can you imagine just what the impact would be on the infrastructure if we had 400 B Doubles operating each day to Perth in addition to what’s operating currently?
Just imagine what that means in terms of trucks travelling through and how much investment would be needed to upgrade the road network just to handle it.
No-one in the right mind would suggest that would be sensible to have a market share of that level for that corridor and what I have trouble with is a market share of just 25 per cent over a similar distance is something we should be happy about.
And that’s why ARTC has embarked on this program – to fix the network, to build capacity, to prepare itself for achieving greater market share growth of that Melbourne to Brisbane corridor.
Likewise is the fact that only 12 per cent of containers moving into and out of Port Botany are on rail. A major Port ten kilometres from the centre of a city of nearly five million people – is beyond the capacity to digest:
Can you really believe that this can be the case in 2014.
There’s just some of the challenges we’ve got to get that market share up to a sensible level.
As we hear often: the expected growth of future interstate and intrastate freight movements is massive: Doubling from a 2010 figure of 500 billion tonne kilometres to a trillion tonne kilometres in 2030.
Any person thinking this can be carried predominantly by road is living in Disneyland.
To think that in 2030 we would still have a market share of 25 per cent on rail between Melbourne and Brisbane – just think of the impact on the road investment alone.
There is also an ironic, self-fulfilling truth, which is the more freight we put on our roads, at these kinds of growth levels, the more the sector will choke itself into submission – irrespective of how fast you build new highways or road capacity.
And look I’m not against building new road capacity. I think that’s important and the work by the Federal Government to improve the road network is very positive. But it’s important we get the balance right.
And that is a key point – do we want to continue to play catch-up and build more freeways to handle a disproportionate increase in trucks or do you want instead to move more freight on rail – at a lower level of investment and lower cost to the community.
The pitch that B-triples or „High Performance Vehicles’ can meet those needs because they carry more freight more efficiently and safely than a larger number of smaller heavy vehicles, doesn’t wash in comparison to a 1500 metre freight train which offers considerable more benefits.
And that would remove 40 B-triples off the Hume highway.
It also ignores some other inconvenient truths:
- Road safety is a major issue in our community.
- Cities are too congested.
- The margins for long distance truckies are too slim.
- The cost of building and maintaining our roads is costing us too much.
So how do we get that balance to get better use of our rail network.
Funding and Investment
It’s no secret that we also need to drive down the unit cost of moving freight across the country.
We need a national approach to freight and applying a lot of rigour and transparency around the planning and prioritisation of infrastructure projects.
Infrastructure planners and policy makers of the past have failed us previously, and it is pivotal that we make sure we get this next stage of the planning, to get that right.
Part of this equation is reviewing heavy vehicle charging to a more equitable and cost-reflective and user-pays type system as with every other utility across the country.
Fixing distortions in the heavy vehicle charging process is complex – and long debated – but a reformed system of heavy vehicle charging should be implemented as a priority and as soon as possible.
It needs to be made clear: Australia needs a balanced infrastructure investment portfolio across road and rail networks.
And the framework for the delivery of intermodal terminal precincts that effectively and efficiently link road, rail and distribution functions together are absolutely vital.
There’s no doubt that existing transport hubs are becoming more and more marooned from emerging distribution hubs and freight precincts as cities grow.
And pick-up and delivery costs for freight to get onto the rail network is continuing to be further affected by those distances.
Modern terminals that allow that exchange between road and rail is critically important.
The Productivity Commission in their recent report has highlighted the need for far more prudent investment decisions and policy reform in relation to infrastructure use and spending; and to select projects that give better economic outcomes.
They have made it clear that Australian governments, at all levels, have not in the past got the balance right and it has never been so important to get that fix (the selection process) right to ensure we can get the biggest bang for our buck.
An exciting future
Despite these structural impediments rail is making progress as I outlined in my earlier point and we can deliver the freight needs of business along the east coast today.
I am very keen to promote those opportunities, recognising there is some work to do.
The second point I referred to earlier is the short, medium and long-term projects which will strengthen rail’s position further.
Strengthening the back-bone of the freight network.
An example of this short-term activity can be seen in the Port Botany Rail Line upgrades and integration of the Metropolitan Freight Network in Sydney into ARTC’s network control – operating out of Junee.
These two projects are directly aimed at improving the Port to Terminal interface and they have connections not just to the Interstate rail network but to the road network as well.
And as a result, we’re working with all the stakeholders targeting to reduce congestion around Port Botany and encouraging more freight movements on rail.
Think also about the Southern Sydney Freight Line – a billion dollar project we finished in January 2013 to completely separate the metropolitan freight network from Macarthur to Enfield.
And likewise the additional work being delivered to the North Sydney Freight Corridor – with additional passing lanes and underpasses to provide further separation from the metropolitan passenger network, and that will lift the rail freight capacity by a further 30 per cent.
ARTC is also rolling out its Advanced Train Management System (ATMS) which is a state of the art, computer-based safe working system we are working on with Lockheed Martin.
Proof of concept trials for ATMS are complete and proved successful and we are now preparing for the next phase of the project to deploy ATMS on a section of our network in South Australia between Port Augusta and Whyalla.
The benefits of this safe working system is it further improves the safety benefits of rail. It prevents the possibility of trains colliding. This technology will prevent trackworkers being struck by a train because it has the capability to override human error.
It’s going to provide profound changes to the safety of the rail network.
In addition is the capacity benefits provided by ATMS – because the system allows trains to run closer together, so we’re avoiding the need to spend a lot more money on things like passing lanes, crossing loops.
Let me talk briefly about Inland Rail and ARTC’s role in that.
And, particularly in the context of the existing east coast freight network.
For those not aware of the project, Inland Rail is a new connection between Parkes and all the way through to Brisbane.
It will provide a second link between Queensland and all the other states including WA – not just Melbourne, ensuring resilience and redundancy for the existing rail network because there’s an alternative pathway between the southern states and Queensland.
Allowing long trains, double stacked, with shorter transit times.
It will be a further enhancement to the rail network that will drive greater productivity.
Recently, the Inland Rail Implementation Group, Chaired by former Deputy Prime Minister John Anderson, and which I sit on as a member, along with the Secretary for Infrastructure and representatives from Queensland, Victoria and NSW.
We have agreed to prioritise three parts of work for sections of the route. Between Rosewood and Kagaru in Queensland (where there is opportunity to connect to the existing interstate network just south of Acacia Ridge), and began to upgrade existing sections of the network that we own and operate between Parkes and Narromine in NSW and Narrabri to North Star just south of the Queensland border.
We are currently working through those three projects and how to commence work in the next couple of years.
We should also remember that Inland Rail is not a new concept and is not a new project.
ARTC has already invested a billion dollars in upgrading the track between Melbourne and Parkes with concrete sleepers, dual track and new rail and new passing lanes and safeworking systems.
We’ve also spent a billion dollars connecting Cootamundra to Port Botany through the Southern Sydney Freight Line.
To provide a dedicated connection to the Inland route – and that’s why it should be seen as an upgrade to the existing network.
And Inland Rail should also not be seen as just a high profile, one-off rail investment initiative but, rather, a natural enhancement to the country’s rail infrastructure – just like we do with the road network like the improvements to the Newell or Hume Highways – which progressively increase capacity, deliver more competitive transport infrastructure and offer greater rail network diversity and resilience.
And redundancy to the network, which is something customers are asking for, should there be a track washaway or incident.
The other aspect that is not often contemplated is that the Inland Rail line will create a more direct rail connection – that is, double-stacked, nearly two kilometre long trains – between our two mining powerhouse states – WA and Queensland – which is an enormously exciting prospect – this will reduce Brisbane to WA transit times by around 15 hours – a saving of around 1000 kilometres off the connection.
I won’t deny that the project is complex in its delivery – all these types of projects are – and how they are to be funded. And a lot of this is to be worked through.
As a logistics industry – this project is a game changer from a rail perspective – and will provide a quantum change to the way we move freight across the network and allow us to be far more competitive.
So in conclusion, can I say rail’s time has come.
We have made a lot of progress over the last ten years and it should be allowed to rightly dominate in its areas of strength.
It is better for your business.
It’s better for communities.
It’s better for the environment.
It’s better for motorists.
It’s better for the Country.
I think it is time to get on board.