Transport projects are high on the agenda for the Australian government (Infrastructure Australia, 2018). Urban congestion has continued to plague the population of Australia, with arterial roads and public transport working overtime to meet the growing demands of everyday Australians. In Sydney for example, driving to and from work takes on average 54 minutes, while commuting on public transport averages 82 minutes. To better deal with congestion, the Australian government needs to look retrospectively to gain insight into what is and isn’t working, and gain inspiration from other countries.
Australia’s population has been growing steadily, with net overseas migration trending upwards, and natural population growth remaining stable. Population density is low in Australia, although it is expected to increase based on projections that an increasing proportion of people will flock to major cities. This will slowly put pressure on Australia’s infrastructure which is why projects such as toll roads and public transport upgrades are on the forefront of government priorities.
Toll roads are important in alleviating congestion and reducing travel time for commuters. However, there are a multitude of factors that can affect the success of toll roads which include financing, construction risk, and operation risk.
It is common for governments to seek finance through private parties in the form of public-private partnerships. Governments can achieve their infrastructure goals by tapping into private coffers to circumvent budget constraints, which is a big plus come Election Day. However, all good things come at a cost. Governments borrow more cheaply than private companies (APO, 2017), leading to a greater cost of borrowing as private players are pulled into the mix. This will certainly burden the taxpayer.
Private companies are often involved in construction. Companies are profit-seeking, and set on efficiency. Their expertise is definitely a valuable resource for government although in some cases, government has forked out funds for cost overruns and delays (APO 2017).
Operations highlight the main issue with toll roads. Errors in traffic forecasts are quite common (APO 2017), with demand falling well short of predicted values. The result is a failed investment for private companies and their financiers. Governments may lose out in future if toll roads garner a reputation as a bad investment and drive away interest.
Toll road failures
Brisbane’s Airport Link was one of Australia’s largest road infrastructure projects at $4.8 billion. The tunnel opened to the public on 24 July 2012, but the operator, BrisConnections, went into voluntary administration shortly after on 19 February 2013, just months after the tunnel’s opening. Traffic forecasts for the Airport Link were highly inflated, with an average of 77 000 vehicles a day for the first seven days it opened, decreasing to around 48 000 vehicles a day in February 2013 from a forecast 136 000 vehicles one month after opening and 186 000 twelve months later.
Another example of a failed toll road was the Brisbane’s Clem7 tunnel, with road usage at 25 per cent of the amount predicted since it opened in 2010. IPO Investors of RiverCity, the tunnel’s operator, secured $121m in a class action against AECOM for producing misleading traffic forecasts for the tunnel.
Poor traffic forecasts played a huge role in toll road failures. However, the bidding process contributed to the disaster. Companies with higher traffic forecasts are more likely to outbid companies with more conservative estimates as they can offer a more competitive deal to government based on the numbers all else being equal. This leaves smaller room for error, thereby amplifying the consequences when things go wrong. To mitigate this risk, traffic forecasts need to be rigorously tested and assessed by independent experts, especially the assumptions underlying the model for traffic demand.
Ensuring a business case exists for a toll road is important to ensure construction is timed appropriately; not too early and impacting the financial feasibility of the project, and not too late leading to over congestion.
Public Transport in Australia
Public transport in Australia is organised at a state level, with each state government signing contracts with private companies. According to the 2016 census, train travel was the most common method of public transport in 2016, continuing this trend from 2011 as the third most common method of travel to work, with almost half a million people catching the train as their only method of travel to work.
The 2017 Sustainable Cities Mobility Index – which looks at public transport coverage, commuting time, and environmental impact among factors – reported that ‘Australian cities performed worse than global counterparts due to a lack of developed metro rail systems’.
Compared to countries like Japan, Australia is clearly behind in several areas of public transport. Unlike many countries which use roads as the main means of transportation, Japan uses an extensive railway network. Tokyo has a dense railway network that ensures citizens have multiple routes to access their destination, where it is common to find a station every 300 metres. Most railways in Japan are owned by seven for-profit companies called the Japan Railways Group (JR Group). Shares of several of the JR companies, such as JR East, JR Central and JR West are publicly traded on financial markets; the privatisation came about due to inefficient management, fraud and profit losses in the 1980s.
However, Australia is unlikely to imitate the level of success in their systems even if they conduct full privatisation of the industry. Australian cities expanded parallel to the growth of the automobile industry, enabling suburbs to be filled with detached homes with large gardens. This resulted in a lower population density in Australian cities compared with older cities such as Tokyo, which went straight from foot-travel to train. Although Australia is likely to reap fewer benefits from public transport compared to higher density countries, it is still vital in alleviating road congestion. Robust public transport infrastructure is necessary to ensure commuters are confident they will arrive at their destination in a timely and predictable manner, which could be achieved through government incentives or increased competition (Infrastructure Australia, 2017). This will allow initiatives encouraging more usage of public transport to have greater effect, and help change the stigma currently surrounding public transport in Australia.
Lessons from Kansas City
Kansas City is known to have some of the quickest commutes in the world courtesy to its adoption of innovative technologies to make transportation safer, easily accessible and more efficient. They leverage technology by using sensors to collect data which helps improve bus route efficiency, and intelligent traffic signal operating systems which improve traffic flow by adapting to peak hour times and events.
To ensure Australia can address the pressures of population growth and urbanisation, existing transport resources needs to be optimised. Increasing funding for research projects to develop smarter technologies could potentially lead to real time adjustments within the road network, and provide commuters with the best route to take given current traffic conditions, thereby making better use of currently existing assets.
The Australian government needs to address key challenges in transport to improve user experiences and avoid congestion. In looking at future projects, making better use of existing resources through optimising technologies and upgrading existing facilities can improve efficiency and shorten journey times. Only when the timing is right and proposals are backed by solid evidence and independent opinions should toll roads be built. Ensuring these challenges are met will allow Australia to take control of its congestion issue now and into the future.
The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ, its Partners and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.