Truck tax 'distortion' holds back rail sector, NTC says

"Distortion" in truck charges hampering investment and efficiency in rail freight, NTC argues

By Brad Gardner and Jason Whittaker

A "distortion" in truck charges is hampering investment and efficiency in rail freight, which remains at a competitive disadvantage in some markets.

A report into rail productivity from the National Transport Commission (NTC) advocates a new regulatory framework to encourage greater use of rail as the freight task increases.

The NTC says it wants to uncover the true cost of heavy vehicle movement to give governments a clearer picture of where to invest to prop up competing rail services.

The report points to the current road pricing methodology of averaging cost recovery regardless of which parts of the network a vehicle is using, which it says gives a distorted view of transport pricing and investment need.

The cost of allowing truck access on the rural network is higher than on better-maintained urban roads, the report suggests, meaning governments are not recovering the full costs of vehicle access in rural areas. The imbalance is exacerbated by trucks running at higher mass limits.

The NTC argues this puts competing rail services at a disadvantage.

"Clearly this impacts on the ability of customers to choose the optimal transport mode and may have contributed, in some areas, to the shift from rail to road transport, particularly for grain," the report says.

Rail operators like Pacific National have abandoned the rural rail network amid battles with government on who is responsible for investing in the aging track infrastructure.

The argument over cross-subsidies points to a future of truck owners being charged based on kilometres and mass carried. Governments have agreed to examine so-called mass/distance charging, which could push taxes much higher for rural operators.

For now the NTC simply wants to better-inform governments making transport investment decisions, a spokesperson says, as a "patch" in transitioning to mass/distance charging.

They say the report is the starting point to create a new planning and policy framework for rail, dismissing any notion of a new "ideological" fight between the modes.

A "band-aid approach" has been taken to rail in the past, bailing out operators who can’t make under-invested rural rail lines commercially viable on a case-by-case basis.

The new framework will allow governments to assess infrastructure and provide government subsidies on a needs basis, the NTC report says.

"This will result in subsidies being directed to the areas where the most value can be generated, and greater long-term funding certainty for rail," it says.

And it wants the power to work with jurisdictions and bodies such as Infrastructure Australia to solve what it says are "planning and investment deficiencies".

Citing one-off grants made by governments to the rail network, the NTC argues the current subsidy process is untenable because money is only being made available as a short-term fix.

The review argues one-off payments are also vulnerable to political rather than objective means, arguing that a national model is in the best interests of the rail industry.

Although saying subsidies can have a detrimental effect by creating a disincentive for companies to improve efficiencies, the review says they are beneficial when used "to compensate for distortions within the transport market i.e. road pricing".

The NTC also wants rail businesses receiving subsidies to be monitored to ensure they are meeting their obligations under funding allocations.

It wants a long-term holistic approach to planning across all levels of government, as well as greater clarity on the role of government-owned corporations like the State-owned Queensland Rail and federal Australian Rail Track Corporation (ARTC) infrastructure body.

According to the review, the rail industry is also suffering from inconsistent access to intermodal terminals, prompting the NTC to propose a national system to regulate terminals.

NTC Chief Executive Nick Dimopoulos says reform is essential to ensuring rail is a viable option and that national policies and plans are developed to improve productivity.

"A focus on productivity reform will deliver a growing rail freight system, with better track speeds, quicker transit times, higher axle weights, improved service and reliability," Dimopoulos says.

"The end result will be more competitive exports and lower cost products on supermarket shelves."

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