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By Peter Koning – Chairman of the Chartered Institute of Logistics and Transport in New South Wales
It’s Budget time again and for a short period, our newspapers are full of stories of new dawns or broken promises. Commentators from all sides of the political spectrum have taken turns to praise or dismiss the myriad of proposals contained in the O’Farrell Governments financial offerings presented by the NSW Treasurer a few weeks ago. Amid all the argument and counter argument, it is all but impossible to arrive at a point where we as taxpayers really know what all the figures mean and understand if they are good, bad or simply indifferent for our rail industry.
Transport always makes up a large component of the NSW budget and as such, deserves special attention. As rail professionals, we are always keen to understand the thinking behind how NSW plans to approach the enormous task of funding this years (and future years) rail activities. I suspect that most of us would agree that governments of whatever complexion face a huge challenge in achieving that balance between political prudence, affordability and expansion.
Looking at the newspaper headlines on the morning after the night before, readers may be forgiven if they feel both elated and concerned. The $8.3 billion allocated to the North West Rail Link alongside a decision to spend $1.6 billion are all great news stories. Other headlines however remind us that there is no such thing as a free lunch and these investments must be paid for by efficiency savings. Many commentators have suggested that this will mean cuts in services as public expenditure is axed.
Seeing what the budget really means to the rail sector is difficult and I hold the opinion that the figures tells us very little about what is the true story behind the headlines. Not only must a budgetary statement be seen in relation to other policy initiatives but it is necessary to unravel what is being allocated this year from future spending commitments and aspirations. Politicians throughout the world have learnt the black art of spin and are becoming increasingly proficient in aggregating or disaggregating headline figures to tell the story they want us to hear.
So is the current budget good for rail? To answer this I apply 3 rules.
Rule 1: The budget must allocate enough money to deliver rail services but it must also facilitate the process of driving down costs. The reforms now arriving at Sydney Trains and NSW Trains will deliver an increasingly efficient customer centric railway. The strong emphasis in the budget to extracting efficiency gains can only support this process.
Rule 2: The budget must provide sufficient funds to efficiently renew the existing rail system. I always take the view that around 2.5% of the replacement cost of a rail system is a good indicator of what should be funded if the network is not to build up that dreaded bow wave of investment. Given the age of our network here in NSW this is a potentially a huge sum, and in applying the rule to any budget, a large dose of political pragmatism and economic reality is required.
Rule 3: The budget must recognise that rail is a growing industry and network enhancements are needed now to cater for future increases in demand. The commitment by the Government to new and game changing programs can only serve as testament to the States rail growth agenda.
If I was to make a prediction, I would suggest that commentators will look back on the 2013 budget as a turning point for rail. They will see it as a budget which recognised the transport benefits offered by rail yet one which demanded an ongoing commitment to achieving step changes in efficiency.
Peter Koning has over 30 years’ experience in the railway industry and is currently Chairman of The Chartered Institute of Logistics and Transport in New South Wales. He will be speaking on reducing the cost of rail freight transport at AusIntermodal 2013 in October.