Regulate without fear or favour ALC says

ALC calls on the Australian government to avoid intervention that will force freight services users to make choices between modes based on cost alone

Regulate without fear or favour ALC says
Regulate without fear or favour ALC says

By Anna Game-Lopata | December 16, 2010

The Australian Logistics Council (ALC) has called on the Australian government to avoid intervention that will force freight services users to make choices between modes based on cost alone.

ALC Chief Executive Michael Kilgariff made the comments in a response to the National Transport Commission’s (NTC) draft discussion paper about the role of government in rail infrastructure investment released earlier this year.

Industry responses to the NTC draft paper were due on December 15th.
They will be incorporated into a further policy draft by February 2011 which will be completed and delivered to the Australian Transport Council (ATC) in May.

Kilgariff says while ALC doesn’t want to get involved in a ‘road versus rail debate’ he says the peak logistics body's concerns are primarily focussed on achieving supply chain efficiency.

"We’re not promoting rail over road, what we want to see is an environment where those who purchase freight services can make a rational choice about which is the best mode of transport to get their particular product from A to B."

"We believe the role of government is to regulate without distorting that decision with heavy handed intervention such as rail subsides for example."

Kilgariff concedes government intervention in the market is inevitable in the development of infrastructure that achieves social outcomes such as alleviating congestion.

"But it’s not the role of government to intervene in such a way as to actually guide people towards one mode or the other," he argues.

"By all means the government needs to set the regulatory framework for how the rail freight mode will operate, but it needs to be careful not to disrupt the competitive neutrality of the modes."

"When the NTC’s draft policy paper comes out in February 2011 we’ll be looking for a regulatory framework rather than a government subsidy of rail."

Kilgariff says rail will probably remain the traditional mode for freight travelling long distances but that the ALC’s concerns lie in the implications for rail given the push to develop intermodal facilities that receive freight from ports such as in Victoria and the outer suburbs of Sydney.

"Price is obviously a factor and is part of the work going on behind the scenes in the COAG (Council of Australian Governments) road reform program," he says.

"Obviously there are different views about how that might play out."

Kilgariff stops short of making a prediction about the impact on rail of road reform, but says changes in the regulatory environment related to the use of mass distance location pricing will most likely influence the choices people make about the mode they use.

Despite ALC concerns about the possible impact of intervention, Kilgariff says infrastructure development must be a government priority.

"Given capacity constraints, Australia’s rail networks are not currently in a position to sustain dramatic increases in freight movements," he says.

"If we are going to see a growth in the amount moved by rail we also need to look at how the infrastructure can be developed to take up that projected increase."

"The reality is that Infrastructure Australia and the Commonwealth are now saying to industry that their capacity to pay for infrastructure is fairly limited," Kilgariff says.

"There is a role for government in the provision of infrastructure but the private sector also needs to have a think about how that infrastructure can in fact be provided and priced with access arrangement worked out to ensure there’s a return on that investment.

"So that’s one of the challenges for the NTC’s discussion paper."

Kilgariff points to the Sydney to Newcastle link as Australia’s major infrastructure crisis.

"Undoubtedly the Sydney to Newcastle network is where the major issue for the freight task is at this time," he says. "It’s not just about improving the freight task in NSW, it’s a national problem."

"My feeling is that
the NTC paper
will be
important in terms of encouraging debate and getting people to look at the overall freight task," Kilgariff says.

"But whether there will be substantive policy outcomes isn’t yet certain. Most ALC members are major rail users so we’ll be looking to thie
completed paper with great interest.

"ALC will wait until the release of the final draft
policy paper in February to make any further response."

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