New report also defines benefits to industry of infrastructure spending
Heavy vehicle productivity growth will plunge without further regulatory reform, the Bureau of Infrastructure, Transport and Regional Economics (BITRE) has warned in a new report, while nominating “better, more transparent cost benefit analysis” as the top public policy priority measure.
BITRE says the risk is that fleet-wide heavy vehicle average loads “are likely to increase by less than 5 per cent between 2010 and 2030, which contrasts sharply with the 40 per cent growth in average loads over the past two decades”.
“Increased uptake of higher productivity vehicles available under Performance Based Standards, such as B-triples and AB-triples, is likely to have a relatively small impact on national heavy vehicle productivity since freight that can take advantage of these larger vehicles represents less than 20 per cent of total road freight,” its Infrastructure, Transport and Productivity report also points out.
“Nevertheless, these larger vehicle combinations offer important increases in heavy vehicle productivity and freight transport efficiency for transport operators, producers and consumers in rural and remote areas.”
The report has also enumerated the value of public investment in transport infrastructure to the freight industry into the near future, using analysis unpublished previously.
The Australian Government spent $36 billion, and the states and territories $6 billion, on road and rail infrastructure between 2008-09 and 2013-14, BITRE states.
“BITRE meta-analysis of 128 road and rail project proposals indicates an average ratio of benefits to costs of about 2.7, and a present value of net benefits of $62 billion,” its report says.
It predicts that by 2016:
- for the program as whole, 61 per cent of the total road cost savings and 41 per cent of total rail cost savings accrue to industry
- this investment is expected to save the road freight industry $1.1 billion per year, or 1.3 per cent of total road freight industry costs.
- cost savings to the rail freight industry are expected to be $300 million per year by 2016, or 2.7 per cent of total industry costs.
“BITRE’s estimates of the productivity benefits resulting from these road and rail construction projects include the expected direct savings in freight and business car travel costs.
“Cost savings are expected to increase steeply over time as more projects come on-line until 2016 when implementation of projects is expected to be complete. After 2016, cost savings are assumed to only grow with traffic.”
BITRE has reminded governments rigorous and transparent cost-benefit analysis is crucial if public infrastructure investment is to continue boosting transport productivity.
A critical part of this is using multi-factor productivity as a central measuring tool when examining the “transport, postal and warehousing industry”.
The good news for government is that publically funded infrastructure performance has been positive over the past four decades.
“BITRE meta-analysis of 128 road and rail project proposals indicates an average ratio of benefits to costs of about 2.7, and a present value of net benefits of $62 billion,” its report says.
“Cost savings are expected to be 1.3 per cent of total industry costs for the hire and reward road freight industry and 2.7 per cent of total industry costs for the rail freight industry.”
To cement gains, it advocates “better prioritising of public infrastructure investments by transparent cost benefit analysis that captures whole of life costs including future maintenance needs”, amongst several options.
These include:
- implementing cost-reflective road and rail pricing where user charges are linked to damage and future needs, and there is a locational link between heavy vehicle charges and funding of improvements
- implementing city-wide variable tolling systems for major urban roads that allow consistent time of day and volume related tolling
- development of economic evaluation guidelines and modelling techniques to enable effective comparison of Intelligent Transport System technologies and traditional infrastructure investment opportunities, and encouragement of pilot deployments of new technologies.
It notes that multi-factor productivity growth has slowed nationally and internationally since 2002-03 but there appears to statistical anomalies complicating the data.
This is especially so for falling capital productivity that may be skewed by the sheer amount of cash being spent and which is at odds with sharp increases in labour productivity, which is back on trend following the global financial crisis.
“The main reason for this slowing appears to be capital deepening that is associated with large, sustained increases in private gross capital formation,” BITRE analysts say.
“The decline has accelerated since 2007-08 associated with large increases in public road and rail investment.
“Increases in multi-factor productivity growth for Transport, Postal and Warehousing since 2008–09 are due to significant increases in labour productivity.
“Despite short term impacts on multi-factor productivity, there is Australian evidence that well targeted investments in transport infrastructure result in productivity increases that benefit many other industries.”
Complicating matters for the freight industry is that ancillary transport is reported in other industry groups, leaving transport, postal and warehousing’s measure of road transport at 32 per cent.
The report can be found here.