The latest Labor promise is for a $2.1 billion Western Sydney rail link – something the NSW Labor Government has been promising since 1998.
The ABC reports today
Federal Transport Minister Anthony Albanese says the project is vital for the region.
“This is an important project for Sydney that links two major economic hubs that will have a transformative impact on Sydney, particularly confirming that Parramatta is Sydney’s second CBD,” he said.
“The Commonwealth commitment begins in 2014, so there’s no impact on the budget bottom line.
“But we know that this is a project that’s viable, we know it’s necessary and we know it’s a much-needed project for western Sydney.
“It is an important step forward for Sydney and that is why the two governments have come together for this project.”
The Federal Government will cover 80 per cent of the construction costs, while the NSW Government will put forward $520 million for the project.
Construction will start in 2014 and it will take three years to complete.
If it is both ‘vital’ and ‘viable’ why hasn’t the NSW Government built the link?
And what does Albanese mean by ‘viable’.
Does he mean:
- That the revenue from the sale of tickets will cover the operating costs plus provide a market return to the equity holders (the traditional definition of ‘viable’)
- That the revenue from the sale of tickets will cover just the operating costs of the rail link?
- That the revenue from the sale of tickets may cover part of the operating costs of the rail link?
Since the Government didn’t conduct a cost-benefit analysis of the NBN, can Minister Albanese confirm that a CBA will be conducted for the rail link before throwing taxpayers money at it?
And if it is really ‘viable’ as in (1) above, why wouldn’t the private sector build and operate the project without government support?
ASIDE: the Coalition needs to win a net 14 seats to form Government. Sure it would rely on the three independents, and that would be sub-optimal, but those independents would not support Labor. That would mean a composition in the Parliament of 73 Coalition, 74 Labor and 3 independents. That’s equivalent to a nation-wide swing of 1.9 per cent to the Coalition. Should the Coalition on pick up 72 seats, that would be a hung Parliament with 72 Coalition + 3 independents = 75 Labor.
Good to see the SMH is casting a critical eye over this policy
http://www.smh.com.au/federal-election/gillards-2b-transport-fix-20100810-11y71.html?autostart=1
Not!
pedro
11 Aug 10 at 8:29 am
This bit of rail line was supposed to have been built about 10 years ago, but was scrapped when costs blew out on the original project. Only a short section of line was built and the rest was axed.
More here:
http://www.railway-technology.com/projects/parramata/
boy on a bike
11 Aug 10 at 9:36 am
And more stuff:
http://en.wikipedia.org/wiki/Epping_to_Chatswood_railway_line,_Sydney
Construction of the PRL began with the Chatswood to Epping section, which commenced in November 2002.
In August 2003 the NSW Transport Minister, Michael Costa, announced that the Epping-Parramatta section would be postponed indefinitely.[6] The delaying of this section was justified on the grounds that the expected daily patronage of 15,000 passenger trips did not justify the project’s $1.2 billion cost. The government feared that the line would be under-utilised, much as the Airport Link (a public-private project) has been. There also had been community protest against the routing of the line through Parramatta Park (one of three possible routes supplied by the government). The government later announced the construction of a passing loop on the Carlingford line, which would have allowed a half-hourly frequency all day,[7], however this project was cancelled in November 2008
So Costa thought it was not worth spending $1.2bn on it back then, but it’s suddenly worth spending $2.1bn on it now. What’s the bet it suddenly becomes unviable after the election?
boy on a bike
11 Aug 10 at 9:38 am
Is there a reason that a rail line has to be make a profit? Even toll roads are rarely held up to that standard.
AJ
11 Aug 10 at 9:51 am
Laugh or cry?
http://en.wikipedia.org/wiki/Proposed_railways_in_Sydney
All capital cities need decent undergrounds and a national rail network running through regional centres. Not the 1970s technology we have now. PPP/DCM/BOOT is the only politically viable and financially feasible way to do it.
.
11 Aug 10 at 10:06 am
I look forward to Kerry O’Brien asking the Real Julia how many kilometres of line – exactly – will be laid down during construction.
C.L.
11 Aug 10 at 10:52 am
I want him to ask her what the credit default swap rate is on the NBN vs the rail link. Or what the WACC on the DCM option for the rail link is. Or why the WACC is higher than Swan’s super profit rate, where mining companies build their own rail networks. Or what the expenditure multiplier was on schools stimulus. Especially ones with 10 times the inflated cost. Or what the payback period for the BER is. What is the IRR on the BER?
Kerry O Brien, BEng (Electrical) (Hons) (I), M Ec, MBA (Fin), Ph D
.
11 Aug 10 at 10:58 am
I’ll bet the rest of Sydney is looking forward to being connected with their westie bros.
Infidel Tiger
11 Aug 10 at 11:00 am
AJ “Is there a reason that a rail line has to be make a profit? Even toll roads are rarely held up to that standard.”
Before any money is spent – especially very large amounts – someone has to be convinced that it is value for money.
For something not used by everyone in the country that is best done by seeing if those who will use it are willing to pay for it.
Ken Nielsen
11 Aug 10 at 11:01 am
AJ,
The M7 is for profit and well run. They were advised by the ITLS mob at Syd Uni.
The LCT did not follow their advice.
Some people are very good at this. Google “choice modelling”.
.
11 Aug 10 at 11:03 am
let’s face it this will end up another broken promise – but I’m sure the rest of Australia will be thrilled that their taxation dollars are being used to build a railway line servicing Sydney
Heléna
11 Aug 10 at 11:47 am
“Before any money is spent – especially very large amounts – someone has to be convinced that it is value for money.”
I have no idea whether it is a useful project or not (I don’t live in Sydney) and if it isn’t it clearly shouldn’t be built. But it should be evaluated in line with other urban transport infrastructure, which, except for a couple of exceptions, is not expected to run at a profit.
AJ
11 Aug 10 at 11:47 am
AJ, every toll road I have shares in had better make a bloody profit! I wouldn’t put my money into them if I didn’t think they were going to generate a return.
boy on a bike
11 Aug 10 at 11:50 am
AJ,
The infrastructure itself may not return a profit (what is the revenue stream for a piece of open highway?) but there should be a positive benefit to the community (reduced travel time, reduced wear and tear, reduced fuel consumption etc.).
Did you google “choice modelling” as suggested? The wiki article looks good enough.
Andrew Reynolds
11 Aug 10 at 11:53 am
I don’t think a rail line or a road has to make a profit, and I think measuring the profit of a public network of transport options is stupid in concept because it is impossible in practice. But when I read that the Brisbane city rail network has a $10 a trip subsidy while the subsidy for bus trips is about $2 then it seems likely that the last thing we need here is more money poured in to rail.
pedro
11 Aug 10 at 12:29 pm
Parramatta is a dying city anway – if they’re going to waste money on rail, they’d be better linking Blacktown with Epping (via Baulkham Hills, etc)
Parramatta council has been severely restricting the amount of parking available, because they “want to make public transport better”. I’m not joking.
Their most recent idea is trying to limit all new apartment dwellings to one car space, because of the “problem” that residents kept selling the spares to office workers (that’s what happens when you create a shortage). Combined with their over-zealous heritage protection of crappy red-brick buildings creating slums all over the place, the city is in major need of a hostile takeover.
It’s Sydney’s 2nd-biggest CBD apparently… our office building has been 2/3 empty for the past 2 years.
Fleeced
11 Aug 10 at 1:16 pm
You need some fairly high densities to make rail profitable. In Sydney, the eastern suburbs line more than covers its operating costs from fares (no idea about the capital costs). Everything east of Parramatta covers its operating costs or more.
However, as you go west of Parramatta, things change. By the time you get to the Blue Mountains, the taxpayer is funding 90% of the cost of the rail ticket.
boy on a bike
11 Aug 10 at 1:50 pm
AJ,
I’m getting really short tempered these days with leftwhingers financial innumeracy. Don’t test me.
Is there a reason that a rail line has to be make a profit?
Yes you dickhead, because shit like that depreciates, needs a great deal of maintenance and carries a cost of capital/trade off issues.
If it’s cash flow negative it also means the taxpayer is hit each year to balance the books or we borrow more.
It’s really fucking amazing that in this day and age leftwhingers like you don’t understand the importance of profit and loss. There’s no excuse.
Even toll roads are rarely held up to that standard.
Which government owned toll roads are loss making? Is the entire portfolio of government toll roads loss making? Bullshit. I can’t think of one government owned toll road that loses money.
You’re confusing ( “Confuse” is a word that is often used when discussing leftwhingers understanding of very basic things) privately owned toll roads with government owned ones. If private toll roads lose money and have to be recapitalized why do I/you give a shit?
JC
11 Aug 10 at 2:03 pm