No. 167

ECONOMICS DERAILED ON TRAIN TO THE HILLS
STONE the crows! Were the Carr-Iemma-that other bloke-Keneally governments right to announce, but never build, the northwest rail link?

Treasury allegedly argued, back then, that a train line to the Hills was a waste of money.[i] It supposedly told the O’Farrell Government the same thing.[ii] And some of the pointiest heads in the press agree. Alan Mitchell deplored budget funding for the Epping-Rouse Hill line last week, “for which there is no economic justification”. [iii]

Funnily enough, that’s not what the state government says. It claims the $8.5bn project will deliver $35bn to the state’s economy, although how this multiplier works and over how long is not apparent.[iv]

But, does Mitchell have a point; do we too easily assume urban rail is a Sellars and Yeatman good thing, without considering the opportunity cost? Perhaps a point made by the Grattan Institute’s John Daley applies. Transport infrastructure “in strictly economic terms does not have economic impacts large enough to change the game of Australia’s economic growth.”[v]

Indeed, Daley also argues the all but universal assumption – that Australia’s infrastructure is less inadequate than overwhelmed – is little more than a dream of engineering avarice, “a long wish-list of the projects that engineering and construction firms would like to build.”[vi]

Good-oh. The trouble is, though it pains the Crows to caw it, there are times (granted not many) that immediate economic return is not the only consideration in capital works. Yes, the Crows know taking the economics out of projects leads to building gold plated parish pumps – Japan is replete with roads to nowhere and bridges nobody needs because they were all anybody could think of to keep the economy ticking over. A case of “Keynes, trains and automobiles” as The Economist puts it.[vii]

But there are cases where the economic impact of one project interacts with broader social trends. As Daley suggests, public transport may be important to productivity as the best way of moving workers to jobs.[viii] Rod Eddington adds that economic analyses don’t necessarily pick up the benefits of concentrating sources of intellectual capital together, universities, consultancies and the like, and making it easy for workers from all over to reach them. Perhaps the NBN will change this, but Jane Frances Kelly argues people have a fundamental need to work face-to-face.[ix]

And there are times when people do things economists think are irrational, like living in the Hills, a long way from their work in North Sydney and the CBD. And really, really like living in the Hills – demonstrated in a 2009 Four Corners program, which shared commuters daily two hour each way grind. These people need a train.[x]

In any case, the northwest is the fastest growing region of greater Sydney this century, and intra-regional journeys to work – 170,000 northwest residents commute within their region – will be the real growth the new train line will surely serve.[xi]

There are two others reason to build the northwest rail link. Premier O’Farrell promised and promised and promised it, and voters don’t take it well when unequivocal commitments are broken. And people get sick of government not improving their lives.

There were undoubtedly economic arguments why Gough Whitlam should not have sewered the cities but the people of western Sydney blessed him for it.[xii] And, if you think ordinary voters accept that their lot is to endure poor services, have a look at the riots in Brazil last week. They started over a hike in bus fares.[xiii]

 

ENDNOTES


[i] Frank Sartor, “Don’t worry about debt, Sydney needs this metro,” Sydney Morning Herald, September 29 2008, For Sartor’s distaste for Treasury see his The fog on the Hill (2011)

[ii] Jacob Saulwick, “North-west rail line costs revealed in emails,” Sydney Morning Herald, October 26 2011

[iii] Alan Mitchell, “O’Farrell’s risky fiscal strategy,” Australian Financial Review, June 19

[iv] Transport for NSW, “Northwest rail link,” @ http://goo.gl/sckSm  June 16 recovered on June 22

[v] John Daley, Game-changers: economic reform priorities for Australia, Grattan Institute, June 2012, 26 @ http://goo.gl/la4iX recovered on June 22

[vi] Andrew Main, “800bn infrastructure deficit just a mirage says think tank,” The Australian June 5

[vii] The Economist, January 12

[viii] John Daley, “Where to focus infrastructure,” Australian Financial Review, June 20

[ix] Grattan Institute, “Productive Cities: opportunity in a changing economy,” May 9 2013 @ http://goo.gl/g21KE recovered on June 22

[x] ABC TV Four Corners, “Off the rails,” October 5 2009 @ http://goo.gl/Y8Csp recovered on June 22

[xi] Commonwealth Bureau of Infrastructure Transport and Regional Economics, “Population growth, jobs growth and commuting flows in Sydney, 2012,” @ http://goo.gl/qbjad 63, 30 recovered on June 22

[xii] Whitlam Institute, “Whitlam and western Sydney,” @ http://goo.gl/GHgra

recovered on June 22

[xiii] James Hilder, “Mayor axes fare rise that provoked nation-wide riots,” The Times, June 23

'2012