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Can we afford to get back on the rails?

12 December 2012

Australia’s largest cities still rely heavily on massive investments in rail before the second world war. With renewed interest in rail as a way of dealing with congestion, Peter Mares looks at what history can tell us about the value of reinvesting in railways

Right:

Photo: Russell Street/ Flickr

Photo: Russell Street/ Flickr



AT A BUSY intersection on Melbourne’s Nepean Highway, looking out over eight lanes of traffic, stands the imposing bronze figure of Sir Thomas Bent. Amid the noise of cars and trucks, few pedestrians stop to read the text on his plinth, which gives the outline of a long political career – as speaker of the Legislative Assembly 1892–94, premier of Victoria 1904–09, parliamentary representative for Brighton for thirty-two years, and a councillor of Brighton and Moorabbin for forty-five years.

But it is Tommy Bent’s surname that gives the best clue to his character, if not his impact on the city. In the early 1880s, his public and private roles – as commissioner for railways and as a property speculator – neatly overlapped. He not only promised to build railways to MPs’ electorates in exchange for political support, he also pushed through suburban lines that directly boosted the value of his own subdivisions.

As historian Michael Cannon writes, “Hardly a member of parliament whose vote could be bought went without his bribe in the form of a new railway, a spur line, or advance information on governmental plans to enable him to buy choice land in advance – the value of which was enormously enhanced when the line went through.” It was the decade of the land boomers.

Given such naked self-interest, it is remarkable how many of Melbourne’s early railways turned out to be good long-term investments. Despite waste and corruption, much of the network proved useful, giving the city a radial suburban railway that brings “quite remote suburbs close to the city,” in the words of historian Robert Lee. The Port Melbourne railway, which opened in 1854, kicked off decades of railway building that profoundly influenced Melbourne’s evolution as a city of suburbs.

Above: Much of Melbourne’s present-day rail network had been built by 1894. The blue and red indicate lines that were losing money at the time.
Photo: victorianrailways.net

While they didn’t experience the same rail-building frenzy, other major Australian cities also invested significantly in rail infrastructure in the late nineteenth and early twentieth centuries. As a city of the motor age, Canberra is an exception, although it is worth remembering that Walter Burley Griffin and Marion Mahony Griffin did design local rail and tram networks that were never built. That vision influences proposals for a light rail network under discussion in the national capital today.

Sydney’s first railway line, from the city to Parramatta, opened in 1855, and rail lines to Newcastle and Wollongong followed. These became the three main lines that crossed the colony – west to the Darling River, north to the Queensland border, and south to the Murray at Albury. Although these routes would become part of the city’s commuter network, Sydney’s first truly suburban railway was the Belmore line, which opened in 1896.

In Adelaide, a steam railway opened between the city and its wharves in 1856. Extensions were added to the jetties at Grange and Semaphore in the 1880s, and in 1873 a separate route was built to Glenelg. Brisbane’s first railway opened in 1875, a link to Moreton Bay was built in the 1880s, and lines north to Caboolture and south to Tweed Heads followed. In Western Australia, the 1881 rail link between Perth and Fremantle was built primarily to transport goods to and from the port; today, it too serves suburban commuters.

The expansion of Melbourne’s network slowed in the early twentieth century. The opening of the Glen Waverley line in 1930 marked the last outward extension of the system for eighty years. Spending on improvements continued, though, with the Victorian government embarking on what was then the largest conversion to electric rail lines anywhere in the world. Although the final cost of the scheme exceeded £6 million – equivalent, as a share of Australia’s annual gross domestic product, to more than $11 billion today – the efficiency gains quickly became apparent.

Sydney’s electrification was even more ambitious. The city’s rail system was far less developed than Melbourne’s and public transport was based primarily on trams. As tram services converged on the city centre in the morning peak, Sydney’s narrow streets struggled to cope. In the absence of a harbour crossing, there were also problems at Circular Quay, where up to seventy-five ferries an hour were docking at or approaching the wharves.

In 1912 engineer J.J.C. Bradfield was appointed to lead a new Sydney Harbour Bridge and City Transit division within the public works department. He spent the next twenty years trying to realise his dream of electrifying Sydney’s railways, building a loop beneath the city, extending suburban rail lines to the eastern suburbs, and linking lines north and south of the harbour via a bridge. With the first world war intervening, the first electric and underground trains didn’t run until the end of 1926. Legislation for the Sydney Harbour Bridge passed in 1922, and the “stupendous steel arch railway bridge – the largest arch railway bridge in the world” finally opened in 1932.

In retrospect, these decades were a high-water mark for urban rail. As car ownership took off in the 1950s, passenger numbers began falling in every city. In 1955 there were almost seven times as many people as passenger vehicles in Australia; by 2001 that figure would fall to two. In some places, railways were shut down altogether.

But investment didn’t dry up completely. In Melbourne, a city loop was carved out beneath the central business district, opening in 1985. In Sydney, the remaining components of Bradfield’s rail vision were built, with the loop to Circular Quay completed in 1956 and an eastern suburbs line opened in 1979. In Brisbane, the city rail network was finally electrified. Generally, though, these were decades of line closures and plans for new services not carried out.


THEN something unexpected happened. In the 1990s, after decades of stagnant or declining patronage, urban rail began to win back customers. The reasons varied from city to city.

In Sydney, annual passenger journeys rose by a solid 11 per cent between 1998–99 and 2010–11, probably influenced by factors such as increasing traffic congestion and petrol prices. The same factors were at work in Melbourne, but there the numbers almost doubled, driven by rapid employment growth in the inner city. In Southeast Queensland, passenger journeys jumped from an annual forty million to sixty-five million in the decade following the building of a railway to the Gold Coast and a branch line to Brisbane airport.

The most spectacular growth was in Perth, where patronage grew more than 500 per cent in two decades, reflecting major investment in new lines. In the 1970s there had been pressure to close down the entire Perth rail network – just forty-eight kilometres of track – because the capacity of rail was “well above” requirements and buses were considered to offer greater flexibility. A well-organised protest campaign and the election of a new government in 1983 brought a change in policy. Over the next decade, the rail link to Fremantle was reopened, the network was electrified, and new lines were built north to Joondalup and south to Mandurah. By 2010–11, total passenger boardings were approaching sixty million a year, up from fewer than ten million in 1991. Within three months of the Mandurah line’s opening in late 2007, two-and-a-half times as many passengers caught trains each day as had used the buses operating on the route previously.

Adelaide is the exception, and contrasts starkly with Perth. In the early 1990s the networks of both cities had fewer than ten million journeys per year. Two decades on, with no significant investment in rail, Adelaide’s passenger numbers are still below ten million.

Faced with increasing – and costly – congestion in most capital cities, Infrastructure Australia argued in 2008 that major new investments in rail were needed to deal with future decades of population growth and the increasing economic, social and environmental costs of road transport. Some of that investment is under way. In 2010, more than half of the investment recommended by Infrastructure Australia ($4.6 billion in total) was for urban rail (both heavy and light). Projects include the regional rail link to separate regional and metropolitan trains in Melbourne, the Adelaide rail revitalisation program and the Gold Coast (light rail) rapid transit system.

Many more projects are in planning or on wishlists. But there’s a problem: rail is very expensive. State and federal governments lack funds and are averse to taking on debt. Does the history of rail provide any guidance as to how it might be funded in the future?


AUSTRALIA’s first rail line, to Port Melbourne, was built and financed by a private company (assisted by generous land grants for stations, workshops and the route itself). The business proved profitable, and the Melbourne and Hobson’s Bay Railway Company soon opened a branch line to St Kilda and then amalgamated with another private railway to develop a network in the city’s south and east.

But this successful private investment proved to be the exception to the rule. The Sydney Railway Company went broke before its line to Parramatta opened in 1855. When the government took it over, New South Wales became home to what one historian describes as “the first government owned railway in the British Empire.” As economic historian N.G. Butlin writes, Australia’s transport problem was firmly back in the lap of government. It has remained there ever since.

Supporters of rail often argue that governments should simply borrow the money to build new lines, as they did in the past. But this argument ignores a big part of the story: the substantial public debt accumulated to build rail assets also had social, economic and political consequences.

Government-backed bonds sold in London funded Victoria’s spectacular burst of rail construction in the nineteenth century, but the income from these investments fell short of expectations.Rail’s operating costs grew from 50 per cent of railway revenue in the 1860s and 1870s to almost 70 per cent of revenue in the following decade, and there was not enough profit to service the growing debt.

In the mid 1880s, annual investment in suburban and rural railways peaked at a remarkable 6 per cent of Australia’s national product. Between 1875 and 1892 the colonies’ combined public debt quadrupled from £54 million to £198 million – from less than 40 per cent of gross domestic product in 1870 to more than 100 per cent of GDP in the 1890s. When British financiers withdrew their capital, the boom went bust. According to Butlin, over-investment in rail played a leading role in the balance-of-payments crisis and the decade-long depression of the 1890s.

Victoria was left with a legacy of debt. As Michael Cannon writes, the growing interest bill on capital costs and accumulated losses “crippled Victorian budgets for decades.” What he called “the incubus of the railway boom of the 1880s” was still weighing heavily on the taxpayer in the 1960s.

Funding for the ambitious expansion and electrification of Sydney’s rail network was more carefully considered. A third of the cost of the Sydney Harbour Bridge, for instance, was to be paid by a “betterment tax” imposed on landowners north and south of the harbour whose holdings were likely to rise in value as a result of the bridge; the other two-thirds was to be repaid from the railways budget, with the Railways Commissioners predicting a profit of £250,000 in the first year of operation. The state government borrowed money in London to fund the expansion of Sydney’s rail system, with repayments to be covered by increased profits from the electrified suburban system.

But the Great Depression cut passenger numbers and trains faced intense competition from road transport as – in historian Robert Lee’s words – “unregulated private buses picked the eyes out of the most lucrative urban transport markets.” By the time the Sydney Harbour Bridge opened in 1932, the debt situation was so bleak that the premier, Jack Lang, considered suspending loan repayments. Six weeks later the state governor dismissed him on the grounds that Lang’s plan for dealing with the financial crisis was illegal. Robert Lee argues that the events of 1932 have inhibited public transport spending in Sydney ever since. Governments have been “so scarified” by Lang’s fate that they have not dared to make the investments necessary to cope with ongoing growth.

Between 1922 and 1932 £30 million had been spent to electrify Sydney’s railways, build the underground city circle and construct the Harbour Bridge. It was a massive investment, equal to about 4 per cent of Australia’s annual gross domestic product and equivalent to around $50 billion today.

Residents of Sydney and Melbourne continue to benefit from the imprudent spending and mistaken assumptions of earlier generations – and the political corruption of people like Tommy Bent. But it is hard to imagine either city without its existing rail network.

If Sydney did not have railways, residents would need to travel those 5.85 billion passenger-kilometres each year by other means. If buses took three-quarters of these passengers, then their load would triple and extra buses would be struggling through increased car traffic. Since rail currently accounts for 44 per cent of journeys to work in the central business district, a large proportion of those extra buses would be trying to cram into the narrow streets north of Town Hall in peak hour, replicating the tram jams of early twentieth-century Sydney.

Of course, imagining the implications of less rail investment is interesting but not scientific or conclusive. If Bradfield’s vision had never been achieved then Sydney would be a different city. Perhaps it would be less centralised, with jobs more evenly distributed across the metropolitan area. Or it may have fewer people and a smaller economy because growth would have been constrained by lower mobility.

“Transportation technologies have always determined urban form,” says urban economist Edward Glaeser. This means that when we consider investments in transport systems in coming years, we need to think about more than the financial costs and benefits. We also need to consider what type of cities we want and how different transport choices will shape them in different ways. We need to determine our priorities too: do we invest in transport in order to lift productivity and efficiency, to redress spatial inequality, or to protect the environment? Can we do all three?


WE CAN’T build our way out of traffic congestion by constructing more urban freeways, which the evidence suggests will tend to encourage more car and truck journeys rather than fewer. To improve urban efficiency, public health, environmental protection and spatial equality, we need far greater use of public transport – especially with our growing urban populations and the rapid rise in freight transport on city roads. The challenge is to take Australian cities back to the future, to an era when the private car was less dominant than it is today.

Part of the solution is to use existing public transport systems more efficiently by organising networks better and upgrading existing services. As transport planner Edward Dotson told a Victorian parliamentary committee in 2009, it should be possible to “progressively raise the maximum practical, reliable capacity” of Melbourne’s existing rail lines to a target frequency of “no less than twenty-four trains an hour” (or one train every 2.5 minutes). Infrastructure NSW points out that today’s CityRail express service from Newcastle to Sydney is slower than the prewar “Newcastle Flyer” steam train, suggesting significant room for improvement. In peak periods Sydney’s trains carry far fewer passengers than many railways overseas – partly because they use two-door, double-decker carriages, which transport between 50 and 150 per cent fewer passengers per hour than three-door single-decker carriages. (Double-decker carriages have more seats but less standing room and are much slower to load and unload at stations.) Such problems are not simple to fix, but they do not generally require billions of dollars.

The question is whether entirely new rail lines are also a necessary part of our urban transport future. To what extent do we need to replicate the massive investments of the late nineteenth and early twentieth centuries?

High-capacity automated urban rail systems (like subways) have five times the passenger capacity of a four-lane freeway. While they’re not as advanced as metros in many other countries, Australia’s newest urban rail lines – the Joondalup and Mandurah lines stretching north and south of Perth’s central business district – have more than three times the capacity of the three-lane Mitchell and Kwinana freeways, which run parallel.

As well as offering the potential for high-frequency, high-speed, high-capacity services segregated from road traffic, rail offers reliability, safety and passenger comfort. It has a much smaller carbon footprint than private car travel: a commuter driving alone in peak-hour Melbourne traffic produces roughly three-and-a-half times the carbon dioxide emissions of a train traveller covering the same distance. And people are generally willing to walk longer distances to railway stations than to bus or tram stops, with obvious health benefits, because trains will take them further and faster.

But rail has disadvantages, too. It takes a long time and a lot of money to build, and is difficult to change. Land must be set aside or acquired. It is generally better-suited to travel in and out of a city centre than to travel between neighbouring suburbs, yet in Australia’s dispersed cities only about 20 per cent of jobs are located in central city areas. (While close to half of the work trips to Sydney’s central business district are made by train, rail comprises only 5.3 per cent of all journeys in the Sydney region.)

Nor is rail always an effective option for trips made for social and leisure activities, shopping, or access to education or health services. Most of these trips are local, and buses are generally a better way of expanding transport options within the outer suburbs of Australia’s growing cities.

Infrastructure NSW argues that investment in new heavy rail lines is not justified and that buses are “the most appropriate public transport mode for most of Sydney over the next two decades.” It proposes rationalising bus routes to create “a primary network of fast, frequent and direct services” that have the speed and reliability to compete with car travel. In practice, this means fewer bus stops spaced further apart, as well as greater priority for buses on city roads – in other words, getting buses to operate more like trains.

But different bus users have different needs. A peak-hour commuter wants the bus to take a direct route with as few stops as possible, whereas a retiree may want to access the shopping centre one day, a bowls club the next and a hospital every now and then. (In Melbourne, more than two-thirds of bus users do not have a driver’s licence.) Even if it involves a slower, more circuitous journey, many users need a bus service that stops at as many places as possible.

Even if improved bus services can meet these twin challenges, the experience of the Mandurah line in Perth suggests that urban passenger rail can do something qualitatively different. Not only can good rail services encourage a more rapid shift from car travel to public transport, they can also induce new travel that had not been previously anticipated. If people find it easier to travel to a wider range of jobs then workforce participation can increase and productivity rise as workers’ skills are better matched to jobs.

Increasing numbers of those jobs are likely to be clustered together. If we accept that knowledge-intensive industries will drive employment and productivity in coming decades then bringing employees together in efficient ways is particularly important. Despite the rise of new communication technologies, evidence shows that proximity matters more in the knowledge-intensive sector than in other industries. Edward Glaeser calls this “the central paradox of the modern metropolis – proximity has become ever more valuable as the cost of connecting across long distances has fallen.” Given its capacity and speed, rail is the most effective way to bring people and firms together.

This is one of the major arguments for the proposed Melbourne Metro, a nine-kilometre rail tunnel with five new underground stations running under the inner city. A report by SGS Economics and Planning concludes that the Metro would enable businesses to achieve “higher productivity through economies of scale and scope” and workers to “more rapidly accumulate skills and knowledge.” There would be benefits, too, from “knowledge spillovers,” as individuals and companies learn from one another.


THIS brings us back to how transport choices shape the city in fundamental ways. Melbourne’s city loop is a vivid example: before it opened in 1985, retail and office space was clustered around Flinders Street station to the south of the central business district. The loop helped to spread activity further north and enliven previously dormant parts of the city. This is the upside of rail’s inflexibility – because it is fixed, it provides a more certain carrot to attract developers and finance.

Recognising the desirability of more rail is one thing. Working out how to pay for it is another. The critique of standard cost-benefit analysis is that it fails to capture the wider economic benefits associated with the increased proximity that investments in public transport can bring. If these pluses can be calculated in project appraisals, along with all the health and social gains, then governments could borrow with greater confidence that increased revenue will fund repayments. This is the approach being taken with London’s £14.8 billion Crossrail project. And while the history of rail funding serves as a warning against amassing high levels of government debt, there are positive lessons from those investments too. The “betterment tax” used to partly fund the Sydney Harbour Bridge captured some of the windfall gains flowing to landowners as a result of linking the city and the North Shore. In Melbourne, a special levy was imposed on city rates to help fund the city loop.

If we build more urban rail in the twenty-first century then it is reasonable that funds should be recouped from those who benefit. Property owners are an obvious example, but it might also be worth considering increased fares, particularly since the subsidies for rail disproportionately benefit inner-city workers in well-paid jobs. Smart cards mean pricing can be used to discourage discretionary journeys taken at certain times in certain directions – in peak-hour heading towards the city, for example.

It seems logical that drivers should also pay because they will gain when new rail lines reduce the pressure on roads. But the relationship between transit and traffic is contested. Some evidence suggests that roads are less congested in cities with large, well-established rail systems, and some studies show that new public transport at least reduces the rate of the growth of vehicle traffic. The counter-argument is that latent demand for road space is so great that even if a new rail line encourages some drivers to catch the train, others will quickly take their place behind the wheel. If this is true then the logical response is a pricing system, such as congestion charging, to manage demand. Governments could sell or lease urban freeways to private operators and allow them to introduce time- and direction-based tolls. The capital raised could be devoted to new rail lines.

None of these measures is politically easy. But there is evidence that voters have a big appetite for changes in urban transport. With leadership and a clear linking of costs and benefits, new urban rail lines might yet have a place in our future transport mix.

Perhaps the most obvious lesson of history is that urban rail can continue to benefit a city more than a century after it is built. As J.J.C. Bradfield wrote about the Sydney Harbour Bridge, “Future generations will judge our generation by our works.” •

Peter Mares is the Cities Fellow at the Grattan Institute and an adjunct research fellow at the Swinburne Institute for Social Research. A longer, fully referenced version of this article is available on the Grattan Institute website.

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Above: Germany’s chancellor, Angela Merkel.
Photo: World Economic Forum

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Photo: World Economic Forum