No. 123

A TIME TO BORROW TO BUILD INFRASTRUCTURE

Stone the even more than usually confused Crows. Residents of northwest Sydney are getting the long promised rail line – just not the promised one.

And it’s all down to the two bad Bs – borrowing and borrowing.

In December 2011, the O’Farrell Government released plans for the Castle Hill connection, announced (and then cancelled) by Labor as often as Bob Carr announces his expertise in American politics. [i]

But now we know it will terminate at Chatswood – because direct trains to the city will over-load the existing line. Sure, through services will start when the, sorry, when a, state government builds a second harbour crossing to reduce the burden on the Bridge. [ii]

Which will occur sometime between the election of a premier not yet born and never – because the one-thing politicians in NSW excel at is infrastructure avoidance.

Train lines cost a bomb and the 25 year old curse of the state banks still means premiers are loathe to borrow (unless of course it is to pay the public sector wages bill, which Campbell Newman claims the Bligh Government did.)[iii]

There are other reasons why stopping the line at Chatswood makes sense.

For a start, while the whole project is politically essential for the O’Farrell Government, it isn’t top of infrastructure adviser Nick Greiner’s list of essential projects.[iv]

The Grattan Institute also argues that transport infrastructure does not deliver big productivity benefits – although the economists who came up with this case probably do not spend hours every day commuting. [v]

But the state government has another reason to stop the new trains at Chatswood. It wants to quarantine the line from the rest of the Sydney suburban network, to stop the rail bureaucrats and unions getting their hands on it, which will inevitably occur if the line is integrated into the suburban system.[vi]

More power for the pin-stripe navvies gives ministers, be they Labor or Coalition, conniptions.

The Iemma Government wanted a private provider to run the Castle Hill line.[vii] And Nathan Rees tried to improve maintenance productivity on the railways, threatening government workers with private sector competition.[viii]

It is easy to understand fears of borrowing and unbudgeable bureaucrats. But they don’t justify leaving intact a rail system designed for when the Bridge was built.

It’s time to take on the public sector rail officials and union leaders who have created a culture that puts them at the centre of the system.

As Transport Minister Gladys Berejiklian put it in announcing that 750 middle management jobs will go, the railways have 20 times more senior bureaucrats “for the size of its workforce” than the education department. [ix]

And the Auditor General estimates that train drivers spend just 28 per cent of work time at the controls of carriages carrying paying customers. [x]

It’s another example of the culture of entitlement that allowed the public sector unions to use their pals in parliament to destroy Morris Iemma when he wanted to sell the electricity system to fund infrastructure. In essence, the comrades put the feather bedded jobs of a few thousand public sector employees workers above Sydney’s transport needs. [xi]

And they have governments bluffed to the extent that transport plans costing buckets of billions are based on the need to exclude public servants who will stuff things up to suit themselves if they get a chance.

It’s not on. With the government starting to soften us up for a return to tolls on the M4 and a new one on the M5 East to pay for roads, a rail system that is more expensive than need be because of bureaucracy is outrageous.[xii]

And don’t tell the Crows that fares can help fund a bigger network. Passengers only pay 22 per cent of the rail system’s cost. And the Independent Pricing and Regulatory Tribunal argues they should not pay more while the system includes unnecessary jobs, guards and staff on low patronage stations.   [xiii]

As for borrowing – it’s unpopular with ministers and investors.

Certainly the O’Farrell Government is selling Waratah Bonds to fund infrastructure. But with an interest rate beneath that the (government guaranteed) banks offer, they are not raising much money, just $20 million to date, according to Adam Creighton.[xiv]

And public private partnership transport projects in Sydney offer little comfort to superannuation fund managers focused on safe returns.[xv]

But the time to borrow to build infrastructure is now. As David Bassanese points out, the Australian 10-year government bond yield is at a 20 year low of around 3 per cent. “Despite our aversion to public debt, it’s rarely been cheaper for governments to borrow to fund national infrastructure projects.” [xvi]

There are always reasons not to build something – and Sydney is paying the price for a lack of past vision.

Granted it could be worse – imagine the city if Laurie Brereton had not ignored critics of the Harbour tunnel.

But it would be better if Carl Scully had built a bigger M5 East, the federal government had constructed Badgery’s Creek airport (perhaps with a classier name) and work had started on the Castle Hill rail line when it was first announced.

Unless the O’Farrell Government gets going who knows what Sydney will be like to work in ten years on – but it will not be good – unless you live in the inner-city and ride a push bike.

Stephen4@hotkey.net.au

ENDNOTES


[i] Jacob Saulwick, “Skytrain cherry on top of north west rail link,” Sydney Morning Herald, December 12

[ii] Jacob Saulwick, “Sydney transport shake-up: plan for single deck metro-style trains and second harbour crossing,” Sydney Morning Herald, June 20

[iii] Michael McKenna, “Debts delay Campbell Newman budget,” The Australian, April 17

[iv] Jacob Saulwick, “Greiner push for rail link planning to go private,” Sydney Morning Herald, November 16 2011

[v] J Daley et al, Game changers: economic reform priorities for Australia, (Grattan Institute) 26

[vi] Jacob Saulwick, “Privately run trains debut in north-west,” Sydney Morning Herald, June 21

[vii] Linton Besser, “Great idea, but white elephants trumpet,” Sydney Morning Herald, March 19

[viii] Katelyn John and Adam Bennett, “Rees puts rail workers on notice,” Sydney Morning Herald, October 20 2008

[ix] Transport for NSW, “Fixing the trains,” May 15 @ www.transport.nsw.gov.au/media-releases/fixing-trains recovered on June 24

[x] Josephine Tovey, “Efficiency suffers as overtime puts train drivers off the rails,” Sydney Morning Herald June 21

[xi] Simon Benson, Betrayal; The underbelly of Australian Labor (Pantera Press 2010) Rod Cavalier, Power Crisis: the self-destruction of a state Labor party (Cambridge University Press, 2010)

[xii] Heath Aston, “For whom the tag beeps,” Sun Herald, June 24

[xiii] Josephine Tovey, “Minister says no rail fair rise without upgrades, Sydney Morning Herald, April 24

[xiv] Adam Creighton, Investors not getting on the Waratah bond train,” The Australian June 13

[xv] Duncan Hughes, “Brogden sees super funding big projects,” Australian Financial Review, December 8 2011

[xvi] David Bassanese, “War on debt defies reason,” Australian Financial Review, June 25

'2012