One of the beliefs that some people count against High Speed Rail (HSR) is that the population and rail patronage in Australia are too small for HSR to be viable. They are mistaken. The Australian population has increased remarkably quickly, trebling since WW2 and growing substantially in the latest 25 years. It is projected to grow rapidly, doubling to 48m in the next 4-5 decades, faster than most other countries. This grows the patronage of HSR.
The original Very Fast Train (VFT) consortium feasibility study 25 years ago projected patronage over the following 30 years from a base in 1985 to 2016. The project was considered viable. The financiers required more certainty as there was a negative cash flow in the first several years of operations, while fixed cost would be recovered from fares over 40 years. They asked the consortium to approach the Federal Treasury, not to reduce tax but to spread payment out over more years. The Treasury refused because it considered that the patronage projections were over-stated.
In fact, 25 years later it was shown that the projections were under-stated and the VFT project should have gone ahead instead of being abandoned. In the Labor Government’s 2013 HSR Study Report patronage projections were based on the estimated actual numbers in 2011. The figure was 20% higher than for the same year projection in the VFT study. Further, the figure for the last comparable year of the Government study in 2016 was 30% higher than the private VFT study projection. These are significantly higher patronage numbers.
It is relevant to note that the estimated cost of building the VFT between Melbourne and Sydney in 1990 was $15b in dollars of the day. (Inflation and interest rates were far higher 25 years ago compared to historical lows today.) The 2013 Government study estimated the cost of HSR between Melbourne and Brisbane at $114b in dollars of the day. Half the cost for Melbourne to Sydney would be $57b. Some $42b would have been saved had the original VFT project gone ahead.
The air route between Melbourne and Sydney is the forth busiest in the world, busier than routes of western developed countries with larger populations. It is likely that Australian business patronage is a higher proportion of the total than in other developed countries. The length of this key bi-nodal route between the main cities is longer than the equivalent in western countries. Australian patronage is high.
Propensity to travel
The propensity of Australians to travel is clearly higher than other countries. It is linked to the sparsity of population in the great space of a large country, the culture of long distance travel and the wealth and prosperity of Australians. High business travel is linked to the level of hands-on management and face-to-face interaction with customers. The airlines project growing Australian propensity to travel with increased prosperity which grows patronage.
Share of the market
The 2013 Report assumed that HSR patronage would only achieve a 50% share of the interstate travel market. It is likely to gain 80-90% as in overseas markets, thus patronage was understated. Australian HSR based on the VFT2 concept would be very competitive. It would pay for the cost of building it in full within the construction time of 10 years through the sale of dwellings built above the tracks in trenches in the three cities, not gradually from fares over the following 40 years of operation. This would mean low HSR fares in Australia that would stimulate patronage and increase share of the market.
HSR would deliver passengers directly into the CBDs, unlike in major overseas cities where rail terminals are outside the CBDs and unlike airports even further outside CBDs. This competitive advantage grows with road congestion. Railways from airports to CBDs mean the inconvenience and time absorbed in changing transport modes. In time, high rise offices would be built around HSR terminuses adding to the convenience. HSR would be increasingly competitive and gain a larger share of total patronage.
Until the recently proposed VFT2 concept, HSR was only considered to be an interstate project. Since then, interstate is no longer the primary objective. This has become rebalancing or distributing the increase in population into regional or rural areas. It would avoid major cities doubling in size and losing their world leading liveability or quality of life by growing to 8m, the present size of London with its world liveability ranking of 53. Unlike the 2013 Report, VFT2 would connect with the main east coast airports for the convenience of regional travellers from the new cities which would sustain patronage.
The average size of UK houses is half the average size of Australian houses, which is the largest in the world. London with 8m people is considering “micro-flats” of as little as 9m² to accommodate young professionals in the “hollowed out “, high cost centre of London where wealthy property owners are often absent and people are increasingly reluctant to commute- see AFR 14.9.17. (Are these flats the future slums?) The flats are smaller than the already small high-rise flats built in Melbourne and Sydney. This demonstrates the present trend to densify further the already densified London which awaits Melbourne and Sydney as they reach towards their planned 8m populations and loss of liveability. It is not necessary to cram 8m people into the space now occupied by 4m.
Melbourne, Sydney and Brisbane do not need to double and lose their living space, the ultimate luxury. HSR facilitates construction of 6 or more new cities of 1m, the size of Adelaide, and growing others on the HSR line within 1 hour commuting of up to 2-300km by HSR to major cities’ CBDs for work, without loss of liveability. Road and air cannot do this. The aim of the HSR project would be to settle 10m of the extra 24m population increase in new cities around the major cities, thereby relieving them of loss of liveability. At the same time, patronage would increase, as would its certainty.
Annual revenue from daily HSR commuter patronage to CBDs would grow in time to the size of revenue from intermittent interstate patronage. Total patronage and revenue would be large and growing in the long term based on low fares that do not include recovery of the original cost of construction.
Government subsidies of HSR commuter fares raised from a small increase in land tax of the many who gain from the unearned benefit of sustained liveability of the cities by building HSR would encourage increased new city settlement and HSR commuter patronage.
VFT2 would be competitive, have double the airline patronage and be profitable. It would be viable.
The advantage of the VFT2 concept in paying the total capital cost of the HSR/FFR project within the construction period is that it is less sensitive to passenger patronage. It does not rely on enough passengers to pay for its original fixed cost from fares over 40 years, only the smaller number needed at a minimum to pay for variable operating costs, which would be well covered.
The HSR/FFR project would protect Australia’s high liveability and prosperity from unnecessary large losses. It is a robust and worthwhile project that would make Australia a better place to live.