Australia’s Transport Infrastructure Need

Address to the

Agricultural Outlook Conference 2009

Sydney

24 November 2009

By

Sam Nelson

Manager – Rural Affairs

National Farmers’ Federation

Introduction

Today I am going to highlight to you the importance of Australia’s transport infrastructure – Australia’s roads, ports and its rail network.

There is no doubt that transport infrastructure is critical for Australian agriculture, and we are coming an important period to shape the development and maintenance of our transport network.

So, during this presentation I will explain why transport infrastructure is important for agriculture, provide you with an overview of the challenges we currently face, review the trends affecting transport and consider what needs to be done for the future.

Why is transport infrastructure important?

To begin with, it is important to understand why transport infrastructure is so vital to Australian agriculture.

Australian agriculture relies on an effective and efficient transport system to move agricultural produce at low cost – and at the heart of this is our network or roads, railways and ports.

Australian primary producers compete in international export markets, where the competitiveness of Australian products might be impacted by tariffs, or direct and indirect subsidies to production by competitors.

Australian agricultural industries have also been faced with steadily declining terms of trade - production costs have certainly been increasing, and we have to look for opportunities to reduce or minimize these costs in order to remain competitive.

Australia farmers also supply domestic markets, and rely of efficient transport to ensure the delivery of fresh, high quality produce, to consumers.

Transport infrastructure presents a significant opportunity to reduce costs and maintain a trading advantage.

So - Australia’s food and fibre producers have a strong vested interest in transport infrastructure and its pricing.

We also need to remember that transport infrastructure is a big ticket item - it costs a lot to establish and we expect it to last for many years.

We also need to learn from some of the mistakes of the past.

The costs of poor choices or ill informed decisions about transport infrastructure can persist for a long time and may be difficult, and costly, to resolve – the legacy of Australia’s mix of rail gauges is testament to this.

It highlights the importance of having a well informed and strategic plan for transport infrastructure.

Our challenge is understanding what transport infrastructure is needed, and where we will get the most return from this investment.

Where are we? – an overview of the challenges

A key element of understanding future directions for transport infrastructure is to understand where we are coming from and what the transport infrastructure issues are that we currently face.

Over Australia’s history, agriculture has been a significant driver of the development of Australia’s transport infrastructure.

Agriculture has also experienced changes in the way we transport produce over the nation’s history, from droving mobs of sheep and herds of cattle, to bullocks and drays and barges and steamers on the River Murray.

A very simplistic way of describing the current state the Australia’s transport infrastructure is to talk about the circumstances of southern and eastern Australia and the north and north-west of Australia.

Australian agricultural production has been focused in southern Australia, south western Australia and along its east coast for many years.

The development of ports, rail lines and roads in these regions often coincided with the development of agricultural industries and the movement of agricultural produce.

In southern and eastern Australia our challenge lies in maintaining and upgrading the existing infrastructure.

In Northern and North-Western Australia it is a different story - as agricultural industries have not had the same history of development, but they are now looking to grow to meet new markets in Asia and establish industries in Northern Australia.

Here the challenges lie in getting access to infrastructure where there is competition from other industries – particularly mining - and developing infrastructure to improve the efficiency and effectiveness of transport in the region.

I will come back to Northern Australia in a moment.

So, as I mentioned earlier, in Southern and Eastern Australia the challenge is making the most of what we have.

Our ports have developed as the nation has grown, evolving to account for growth and changes in the nation’s imports and exports.

In many of the capital cities our ports are now surrounded by urban areas, potentially creating difficulties for them to expand or further develop the road and rail infrastructure that feeds into them.

There is also the challenge of working with the communities that now surround many of the ports - dealing with the noise and traffic – which has lead to curfews being established in some places, which obviously restricts port operation.

Urban Australians simply do not want to see, hear and smell trucks carrying live cattle and other agricultural produce to ports as they go about their daily business.

The road and rail network faces similar challenges in their development and maintenance.

At the heart of these challenges is understanding where to invest in infrastructure to get the greatest return.

However, delays and inaction on infrastructure investment – as a consequence of decision makers struggling with these challenges - can be costly for farmers – as well as the broader community.

The closure - and subsequent announcement to re-open the Camurra – Weemalah rail branch line in Northern New South Wales is an example which illustrates the sort of uncertainty that currently exists around our infrastructure, and how we go about investing in them.

For those of you who are not familiar with the background, the Federal Government undertook to do a review of New South Wales rail freight lines – used to transport grain - in October 2008.

This report was due to be delivered in May of this year, and it included an analysis of Camurra – Weemalah rail line.

Unfortunately, the report was delayed by a number of months and there was an accompanying delay in investment and action on the rail lines by the State Government.

In September it was announced that the Camurra – Weemalah line would be closed because of safety issues.

As a consequence, farmers and communities were faced with over 23,000 (23,500) extra trips by B-double trucks hauling grain through the region.

There were obviously going to be implications for the maintenance of roads, the safety of other vehicle users, as well as road noise and environmental consequences for the communities that live along these roads.

However, a commitment was subsequently made by the New South Wales government – only a matter of weeks later - to bring the line back into operation.

History will tell if there will be an impact on the transport of grain from this year’s harvest – and how these decisions and delays may impact on the region.

I would like to stress that I am not picking winners here – I am not saying that road transport is bad, and rail is good, but I am saying that the implications of not having a plan are important.

Inaction should not be a surrogate for a strategic plan on freight infrastructure.

The growing importance of intermodal facilities is also being recognized, along with the potential development of inland ports to complement the operation of sea ports.

Intermodal facilities are points which allow the transfer of goods between different modes of transport – including road-to-rail, rail-to-port or road-to-port.

The agricultural supply chain is only as strong as its weakest link – and the bottlenecks that can occur at these intermodal points are increasingly being recognized as opportunities for improvement.

So, to recap, the challenge in Southern and Eastern Australia to make the most of the infrastructure facilities that already exist – and make them as efficient as possible.

In contrast, in Northern and North-Western Australia agriculture needs access to transport infrastructure to allow the industries to develop - along with the need to develop and improve the existing infrastructure.

For example, the live cattle export industry in Northern Australia is looking to expand into the SE Asian market as these countries increase in their wealth, and demand for animal protein in diets increases.

However, the industry faces challenges at ports – increasingly competing for port space and loading preferences with the mining sector.

For the live export industry, delays increase costs – costs for holding the livestock as well as costs from having ships sitting out at sea.

These delays have consequences for the welfare of stock, as well as the additional costs to the industry.

Developing agricultural industries in northern Australia also face challenges to their expansion from the limited road and rail infrastructure which currently exists.

For example, cattle are predominantly moved by road trains, using roads that usually only accessible during the dry season.

Compared with the experience in southern Australia, transport infrastructure in Northern Australia is in its infancy.

In Northern Australia the challenge is to understand the potential of agricultural industries, and to support the development of an appropriate transport infrastructure network.

So, where are we going? – a glimpse at the trends

I have spoken about how transport infrastructure underpins the competitiveness of Australian agriculture.

And I have spoken about some of the issues for our existing transport networks in southern and northern Australia.

With this in mind, we need to consider the challenges ahead, and look at the transport infrastructure Australia needs for the future.

The demands on infrastructure for transporting agricultural produce will become more acute over time.

The challenge of moving the increasing volumes of food and fiber required by domestic and international markets will continue to grow.

Against this background, we need to remember that the productivity of Australian agriculture has more than doubled over the past 14 years.

Agriculture in Australia has had an annual average productivity growth of 2.8 per cent, and it is consistently outperforming other sectors of the Australian economy.[1]

Australia currently produces 93 per cent of all food consumed domestically, 1 per cent of all food consumed in the world.

The nation is responsible for 3 per cent of the global seaborne trade – in total Australia feeds 60 million people[2].

This task is only going to grow.

It is estimated that, globally, over the next 50 years the world’s nations will need to produce as much food as has been consumed over our entire human history3.

The challenge is achieving timely and efficient delivery of the agricultural produce that will be required -to meet the demands of Australian and international markets.

This challenge needs to be considered and planned for now.

We also need to recognize that markets and consumer demands are changing – as well as changes in the agricultural industries that produce the food and fibre.

And this has implications for transport infrastructure.

These changes include changes to the types of industries in regions; changes to marketing arrangements; and changes in market demands.

For example:

  • Treasury estimates put the Australian population at 35 million in 2049[3], which will result in significant increases in domestic consumption;
  • there is a growing use of GM crops which require segregation during handling;
  • there are pressures on horticultural production areas in urban fringes, shifting production;
  • the requirement to trace food and fiber through the supply chain to understand its providence is growing; and
  • there is continuing demand from niche markets for organic certified and local produce

In various ways these trends will impact on how and where agricultural production will occur and how it will be transported - which in turn impacts on how we plan for infrastructure.

The impacts of long term drought are also causing difficulties.

The variability in production from drought is making it difficult for decision makers to understand and plan for the likely volumes of food and fibre which will need to be transported in the future.

The strategic issue of rising fuel prices, and greenhouse gas emissions, will increasingly need to be considered as we look to develop transport solutions.

The transport sector is a significant energy user and a greenhouse gas emitter.

Increasing the efficiency of transport through improved infrastructure provide a mechanism to reduce fuel use- and as a consequence manage the impact of energy price rises.

All of these trends have some implications for the way we go about transporting agricultural produce.

They need to be considered and accounted for as part of the new national investment in infrastructure.

What needs to be done?

It is quite clear that a national plan for transport infrastructure is required.

The plan needs to consider the infrastructure already in place, understand the trends that are occurring within agriculture and focus on ensuring the continued efficiency and effectiveness of the transport sector.

By achieving this we will continue to underpin the competitiveness of Australian agriculture in global markets.

It may seem complicated, but the development of a national freight strategy for agriculture is achievable.

Whilst trends and changes within the sector may be difficult to properly understand, it is important to remember that the majority of the agricultural freight task is not contestable.

This particularly applies to road and rail freight.

Productivity Commission reports show that even substantial increases in road user charges are unlikely to have any significant impact on rail’s modal share of freight.

For many agricultural and food businesses, particularly those dealing with perishable or time-sensitive goods, trucking is the primary option for transport and is likely to remain so.

However rail is commonly used to transport commodities at low cost – for example - grain uses rail for approximately 85% of its export freight task.

These commodities depend upon rail to get their produce to market -and this is not likely to change in the short term.

There has also been a significant amount of work that has already been undertaken which can be drawn upon to develop a strategic national plan for transport infrastructure.

For example, the National Transport Commission has undertaken preliminary work to understand and map the grain and livestock supply chains.

A variety of industry groups are now actively participating and advocating on transport infrastructure issues.

The Business Council of Australia has recently released a report on what it sees as the nation’s infrastructure requirements.

The Minerals Council of Australia has also undertaken a study to examine the infrastructure requirements of its industry and the regions in which it operates.

It is becoming increasingly important for the agricultural industries to get involved and develop a clear picture of what is happening now - and how this will develop into the future.

As I have touched on during this presentation, there are four tasks that need to be worked through to do this.

We need to:

  1. identify the current freight flows of agricultural production - and understand other freight flows in regional Australia;
  2. understand how and why the drivers of freight flows may change – this particularly applies to understanding changes in the volume of exports and domestic consumption – and the likely changes in farm production;
  3. look at the problems in existing infrastructure and identify additional infrastructure requirements; and
  4. identify priorities and projects which are going to be overlooked by the current policy framework or processes.

Infrastructure Australia was established by the Commonwealth Government in 2008 to develop a strategic blueprint for Australia’s future infrastructure needs.

This work includes the task of developing a national freight strategy.

As part of Infrastructure Australia’s work - the “first cab off the rank” is the development of a National Ports Strategy.

The National Farmers’ Federation will work closely with both Infrastructure Australia and the National Transport Commission as they develop this strategy.

A key challenge in all of this will be to make sure that strategies around road, rail, and port infrastructure are not developed in isolation.

We need to ensure that all modes of transport are working efficiently and effectively, and that intermodal bottlenecks are eliminated.

Once these strategies are developed they need to be acted upon - and we need to ensure that there is a long term commitment to them.

This strategic blueprint is still to be developed, and efficient “joined-up” transport networks are required that deliver integrated solutions to the national transport infrastructure challenge.

Summary

To close my presentation I will go back to where I started.

I began by telling you I was going to explain why transport infrastructure is important for agriculture, that I would give you an overview of the challenges we face, talk about trends affecting transport and outline what needs to be done for the future.

Australian agriculture relies on an efficient and effective transport network to underpin the global competitiveness of our agricultural industries.

The transport infrastructure that we have in place presents challenges, and these vary across Australia –

  • In southern Australia we need to consider how to maintain and develop the infrastructure already in place,
  • Whilst in northern Australia we need to inform infrastructure development to capture emerging opportunities.

There is also no doubt that there will be changing demands on transport infrastructure from agricultural industries.

There will be changes in industries and the way they operate, changes in the way that we do business, and changes in the demands of markets.

To secure the future of the industry, keep costs down and remain globally competitive it is important for agriculture to be active in this debate.

Agriculture needs to be on the front foot – engaging with government work on Ports, and making sure that the National Freight Strategy accounts for the needs of agriculture.

A clear plan for infrastructure development - and a commitment to developing this infrastructure - is vital for the future of Australia’s agricultural industries.

[ENDS]

NFF Speeches – Australia’s Transport Infrastructure Need- 1 -

[1]Australian Government Productivity Commission, Trends in Australian Agriculture 2005.

[2] Dr Megan Clark, address to the National Press Club 30 September 2009.

[3] The Australian population is currently estimated at 22 million (November 2009), so 35 million is a 60% increase over the current population.