A new vision for rail freight

Introduction

Good morning. It’s great to have the opportunity to speak at the 12th annual Victorian Transport Infrastructure Conference.

I want to speak today about the Australian Government’s vision for increased competition in the national rail freight market—and the role that intermodal terminals play in that vision.

I will start by looking at the national rail freight market—and the change that Inland Rail will bring.

Next I want to speak about the pivotal role for intermodal terminals in delivering on the Inland Rail vision.

Thirdly I will explain the role of the newly established National Intermodal Corporation in achieving our policy objectives. 

The National Rail Freight Market

Let me turn firstly then to the view that our government takes about the national rail freight market.

Across all freight modes - road, rail, air and sea - it is vital that we keep our supply chains moving efficiently.  Australians take for granted that we have well stocked supermarket shelves across the nation - but logistics industry professionals know just how much hard work and planning this requires.

COVID has taught us all some hard lessons.  The border restrictions, health orders and labour constraints it has triggered have hindered the movement of freight around Australia, requiring a renewed focus on capacity, resilience and flexibility.

To support a growing population, to drive a growing economy, and to remain internationally competitive, we must continue to invest in the infrastructure that supports Australian supply chains.

Key to staying competitive is better modal choice.  The simple fact is that on many routes we need to make it easier, cheaper and quicker to send freight by rail.

That in turn will give businesses more choice in moving their products as efficiently as possible, putting downward pressure on costs.

Road transport is the dominant form of non-bulk freight movement for the majority of commodities produced and consumed in Australia. Nationally, road freight volume has grown by over 65 per cent over the last 20 years. Over the same period, rail’s modal share on the Melbourne-Sydney corridor declined from 11 per cent and could now be as low as 1 per cent.

A big factor behind the rise of road freight has been large, multi-decade investment in our interstate highway networks.  While delivered by state governments, much of the funding has come from the Commonwealth Government. Yet rail still has much to offer. Its advantages, particularly for large volumes of freight movement across long distances, include greater safety, greater reliability and of course substantially lower carbon emissions per tonne moved.

Between the eastern seaboard and Perth, and between Adelaide and Darwin, rail has high mode share, reflecting these inherent advantages.  In recent weeks, we were reminded of the critical role of rail in these important supply chains, when the Trans-Australian line was cut off for more than three weeks due to major flooding. The result was shortages in Perth and Darwin.

But on other major routes rail is not living up to its potential. The Morrison Government thinks this is a problem - and that is why we have a clear strategy to increase the rail mode share in freight.

We are providing significant funding towards projects with this objective - and the centrepiece of our strategy is the $14.5 billion Inland Rail project.

Inland Rail is a transformational project designed to boost freight productivity and movement along the east coast, and increase trade access for regional communities, resulting in better connections between producers and their domestic and international customers.

Already, benefits are being realised as sections of track are built and operational. Grain growers in the NSW central west were freighting grain on 29 km of upgraded track south of Moree ahead of the 2021 harvest. The 104km Parkes to Narromine section was completed in 2020 and is now providing freight efficiencies flowing through supply chains that reach from Sydney to the east and as far as Perth and Adelaide in the west.

Deputy Prime Minister Barnaby Joyce has long championed this project and he is driving it forward with great passion and intensity.

Inland Rail will support the rail freight industry to transition to the use of 1800 metre, double-stacked trains along the entire Melbourne to Brisbane route. It will also release capacity in the increasingly constrained Sydney metropolitan and freight rail networks, as rail freight between Melbourne and Brisbane is able to move along the inland rail route rather than having to transit through Sydney.

The Pivotal Role of Intermodal Terminals

Crucial to the resolution of the Inland Rail vision will be to deliver modern intermodal terminals at each end of the alignment in Melbourne and Brisbane. These will be the gateway points to Inland Rail, as well as providing new terminal locations and services for rail freight to Sydney.

The need for such terminals is clear. The existing terminals in Melbourne and Brisbane are unable to efficiently handle and process 1800 metre, double-stacked trains.

In addition, the existing terminals do not have enough capacity to meet the forecast increase in freight over the coming decades. In Melbourne, the need is even more urgent because of the planned closure of the existing intermodal terminal at Dynon near the Port of Melbourne in 2031.

For these reasons, the Morrison Government has been working closely with the Victorian and Queensland state governments to identify sites and develop intermodal terminals in time for the commencement of full operations of Inland Rail, expected in 2027.

In the 2021-22 Budget, we committed $2 billion for the delivery of new Melbourne Intermodal Terminals. With that commitment we have accelerated the pace of our work to explore options for two terminals in Victoria - a terminal at Beveridge, in Melbourne’s north, directly adjacent to the Inland Rail track; as well as a terminal in Truganina, in Melbourne’s west, including an additional supporting rail connection.

Victoria is the freight and logistics capital of Australia. Due to its geographic position, intersecting major capital cities’ transport networks, Victoria has an enviable freight advantage. This is further strengthened by Victoria’s two curfew-free airports and the largest port container terminal in the country. 

To maintain this strong position, it is vital that advanced intermodal terminals using the latest technology are built and brought into service in Melbourne.  This is a priority to support the growing freight requirements of the state.  Of course these new terminals will also bring jobs and economic growth to Melbourne’s north and west - some of the fastest growing regions in the whole country.

Let me make it clear that the Morrison Government has an appetite to invest in terminals at both Beveridge and Truganina in line with Victoria’s long term freight strategy.  We think both will be needed to meet the freight and logistics needs of Victoria and Australia.  We also stand ready to contribute to the cost of the rail and road connectivity to support both terminals, working jointly with the Victorian government.

We are in continuing discussions with the Victorian government. These are complex issues with many considerations, and the two governments are yet to reach agreement. In my view however the discussions to date have been constructive and collaborative. They proceed from a shared recognition of the importance to both the freight sector and the broader economy, in Victoria and across the nation, of developing a clear and logical plan for the future of intermodal terminals in Melbourne.

As well as our work in Melbourne, the Morrison Government is continuing to collaborate with the Queensland Government to finalise the assessment of a new terminal in Brisbane to provide the northern anchor of Inland rail.

Critically, the terminals in Melbourne and Brisbane will link to the Government’s existing significant investment in the Moorebank Intermodal Terminal in Sydney. Once completed, we will have created a world class, integrated network of modern and efficient terminals across the eastern states.

This network of terminals will play an important role in supporting the national rail freight market to become as efficient and cost-competitive as possible.  Critical to this objective is ensuring that these terminals are open to all freight industry participants on an equal and non-discriminatory basis.

We are investing many billions of dollars of taxpayers’ money in a major new inland rail backbone along the east coast.  It is critical that all users of this rail connection can do so as fairly and cheaply as possible. 

Hence the Morrison Government’s approach is designed to remove barriers and incentivise new above rail operators to the network. Of course we also want Inland Rail to be used extensively by existing operators.  Our aim is a vigorous competitive market, with capable players strongly incentivised to carry as much freight as possible, and to work hard to win business from Australian freight users.  

Open and equitable access to the intermodal terminals is key to achieving this aim.  Compared to an alternative model in which the terminals are owned by a vertically integrated operator with a dominant presence in both the on-rail market and downstream markets, we believe an independent open access model will deliver several benefits. 

These will include more services and better asset utilisation; stronger competition within the rail freight market, both upstream and downstream; and supporting innovation and investment from private industry.

The Commonwealth Government has taken a similar policy approach in other infrastructure markets, where we are also making substantial investments.  For example, open access is a core principle of the Morrison Government’s investment in the National Broadband Network. 

NBN Co is required by law to provide open access to retail service providers to the monopoly network infrastructure which NBN Co owns and operates.  In turn this allows retail service providers to compete with each other fairly and vigorously.

Data from the Australian Competition and Consumer Commission highlights how this approach has led to: new entrants into the market; greater market share for smaller providers, like Aussie Broadband, Southern Phone and Superloop; and retail prices falling by 13 percent between 2016-17 and 2020-21. As a result, Australians are getting higher quality internet services for less than they would be likely to pay if broadband were supplied to the market by a vertically integrated monopoly.

Our commitment to open access is also seen at Western Sydney Airport.  A 75,000 square metre cargo precinct is being developed at the airport.  This will feature open access cargo terminals, rather than all of the terminals being locked up by any one operator. This makes more sense commercially for the airport; it also boosts competition and hence productivity in the air freight market.

The Role of National Intermodal Corporation

To deliver our plan of an integrated network of independent terminals, today we are announcing the establishment of the National Intermodal Corporation.

This is the company previously known as Moorebank Intermodal Company.  Until recently its role has been to deliver the Moorebank Logistics Park in south western Sydney. 

The Morrison Government’s investment in Moorebank alongside the private sector is supporting efficient freight movements between Port Botany and south-west Sydney, with the potential to take up to 3,000 vehicle journeys per day off Sydney’s roads and reduce up to 110,000 tonnes of carbon dioxide emissions per year.

The recent $1.67 billion investment by LOGOS and $1.2 billion investment by Woolworths Group at the Moorebank Logistics Park, demonstrate that industry is responding positively to the Government’s investment in intermodal terminals.

The government owned company delivering Moorebank has built up significant expertise over the last decade.  We now want the company’s board and management to deploy that expertise in the development of the national network of intermodal terminals which I have spoken about.

The new National Intermodal Corporation will work with the Commonwealth, respective State Governments, the Australian Rail Track Corporation and industry to develop the Melbourne and Brisbane Intermodal Terminals in time to meet the commencement of Inland Rail operations along the full alignment. 

The scope, planning, development and operation of the freight terminals in Melbourne and Brisbane will require specialist, proven expertise in order to minimise risk, support private sector investment, and achieve national freight-on-rail policy objectives.

Establishing National Intermodal as the Morrison Government’s investment vehicle for intermodal terminals will facilitate an integrated approach to Australia’s rail freight network. It will also allow Australian Rail Track Corporation to focus on delivery of the connecting rail infrastructure.  The two elements - the rail and the terminals - are both critical to the success of the $14.5 billion Inland Rail project.

In line with the principles under which ARTC operates, National Intermodal will be vertically separated to provide ‘below-rail’ intermodal services, as well as road connectivity, and facilitate private sector investment in technology, warehousing and distribution.

The performance and utilisation of intermodal terminals, and the rail networks they provide access to, is improved with co-located warehousing and distribution centres to minimise the pickup and drop off in the supply chain.

National Intermodal will focus on delivering competitive and customer-focused services with the aim of making rail freight a preferred long haul mode, as well as increasing competition and efficiency by ensuring open-access arrangements across the network.

Under this vision, for the first time Australia's east-coast interstate rail network will have a network of interconnected modern, efficient terminals, managed by an independent company, leveraging industry experience, and genuinely promoting open access to encourage new entrants.

These important terminals, connected by Inland rail, in co-operation with the road industry, will provide additional resilience and choice for the nation's supply chains to ensure that supermarket shelves remain stocked and industry gets the materials it requires.

Concluding remarks

Let me conclude with the observation that there has rightly been a lot of scrutiny on the question of future intermodal freight terminals in Melbourne.

Today I have sought to explain in more detail the Commonwealth government’s interest in these issues.  We see advanced, open access intermodal terminals as key to the growth of the national rail freight market.  In turn we see that market as an important contribution to the competitiveness and efficiency of the Australian economy.

We want to work collaboratively with the Victorian Government on the intermodal terminal strategy in Melbourne - just as we want to work with the Queensland Government on the intermodal terminal at the Brisbane end of Inland Rail.

We have a clear plan which we believe can deliver significant benefits to the freight sector and the broader economy - and we look forward to working with other stakeholders in government and the private sector to deliver on that plan.

This speech was delivered to the 12th annual Victorian Transport Infrastructure Conference on 24 February 2022