Comments on the CLARA HSR Proposal
The CLARA (Consolidated Land and Rail Australia) project is impressive, indeed “uplifting”. It is predicated on Maglev technology, which is extremely fast. It would take only 1 hour 50 minutes express from Sydney to Melbourne, far less than flying, and would capture the passenger market.
CLARA is a private enterprise venture, not a government project. Clearly, to propose it the consortium has confidence that it would be independently profitable, have a high ROI and be financeable.
The venture is based on private value capture on adjacent land paying for the total capital cost of the project. It shows that no matter how big and how high the cost of a project, if great value is created, it can be financed wholly by value capture.
The plan is focused on decentralising population growth. Australia’s population is projected to double, grow by 24m to 48m, in the next 40-50 years. The project would relieve Melbourne and Sydney of population pressure by building 8 new regional cities in between them.
A great advantage of the private consortium and private finance is that the project would require little or no government funds or debt. It would create much more benefit than cost for Australians.
There are some disadvantages of CLARA. It is planned to run only from Sydney to Melbourne, not onwards from Sydney to Brisbane, which would be desirable. Maglev is high cost at $200b for Sydney to Melbourne. Wheel-on-rail technology may cost $200b, but it would run from Melbourne to Sydney to Brisbane, including general fast freight rail and housing for millions for the same cost. It would seek a more commercial route nearer the coast. The question is whether saving 70 extra minutes between Sydney and Melbourne is good value at double the capital cost?
The chosen route is inland and very accessible to rural communities. The route has a similar spur to Canberra as the Labor Government’s 2013 HSR Study route, but overall could be some 100km longer at 915km and further to the west. The advantage is speed, but the disadvantage in attracting a large population is the distance from the sea. About 80% of the Australian population live within 100km of the sea which indicates the desirability of climate and amenity to city people. Many people around Sydney would prefer to live to the north on the coast, as the existing population distribution shows.
Construction of maglev is like building a concrete double bridge running north and south between Sydney and Melbourne with big magnets on each side of both tracks for stability and propulsion. It is high cost per km and is many km longer than any other maglev project. The advantage over wheel-on-rail is that maglev can operate on somewhat tighter curves even at +400km/h because the magnets hold the cars in place. It can also climb steeper inclines. This saves construction costs compared to other technologies. However, it must be smooth enough on its viaducts that curves, humps and hollows avoid the potential for giving passengers a sense of sea-sickness at high speed. This may cost more than might be expected through hilly landscapes. The Japanese maglev, the first long distance project in the world, will have tracks in flat, straight tunnels through mountains.
The maglev creates value for capture in regions, but it destroys property value on viaducts in major cities through greater sight and sound. Maglev is not silent. Wind resistance causes noise at speed.
Entry to capital cities would be by viaduct. There would be no direct value capture on adjacent property except at one or two stations and at the terminuses.
Would CLARA have terminuses in the CBD at Central and Southern Cross transport hubs, which are the most convenient for passengers? It may have terminuses outside the CBDs with less convenience. Value capture opportunities and competitive trip times vary according to location.
A maglev trip CBD to CBD would take around 110 minutes compared with 180 minutes by wheel-on-rail. Both would be competitive with air. Airlines can be expected to react strongly to CLARA as Sydney to Melbourne is one of the busiest air routes in the world.
All serious large cities have freight rail as well as passenger rail. Maglev does not seem adaptable to heavy, general freight on the same tracks as passenger trains. A separate fast freight rail is not compatible. It could not be built next to the maglev tracks at the same time because of the viaducts, tighter curves, and particularly the steeper inclines, and the extra capital cost. The 8 cities envisaged, as well as Melbourne, Sydney and Brisbane, would have to be served by high cost road freight.
The fundamental question with decentralisation of population from major cities to regions is how many people are involved and how big are the rural cities? Melbourne and Sydney would need to grow from 4m to only 5m instead of the projected 8m to make a material difference to congestion and liveability. Even at 5m there will be loss of liveability. This means a distribution of some 6m to regions inland in 8 new cities between Sydney and Melbourne over the next 4-5 decades to have real impact on population pressure. Media indicate that a much smaller size for the 8 cities is in mind.
Ballarat, population 100,000, on the Dividing Range and Bendigo, 100,000, over the range to the north are limited in growth by access to water to 200,00 each. Eight cities on HSR of this size on or west of the Divide would be too small to make enough difference to rebalancing population growth of Melbourne and Sydney. Larger cities of up to 1m on the HSR route to the south and east of the Divide would not be constrained by access to more abundant and reliable water as it runs to the sea.
It is suggested that construction could begin in 5 years. It would be in stages spread over 30 years to completion in the mid-2040’s. The first stage would be Melbourne to Shepparton. Construction and operation rates would appear to match the rates of population increase and finance from sales of property. For many property buyers, certainty of completion of HSR Sydney to Melbourne, especially in the early years, would be deferred until the 2040’s, which may not be very attractive. Financiers need a timeframe with a maximum of 15 years. Construction should be finished inside that to give some years of full operation to gauge the results of the investment. Then Super Funds may refinance it. If built earlier, it would capture more interstate traveller than subsidised commuter revenue.
Government would need completion and operational viability within 10-15 years to reduce risk of failure and reassure it that the private project would not need government intervention and funding.
Apparently $10m has been spent on the private feasibility study and planning to date. It may need double or more before viability and projected cash-flows can be determined with confidence.
It was wise to purchase 16,000 hectares or 40% of the land needed on long term options, not cash, well in advance of speculators. The selected corridor is expected to cost $1.2b.
With the issues mentioned overcome, the CLARA maglev project should be in a strong position to go ahead. If it does, it would mean the end of competitors with wheel-on-rail projects from Melbourne to Sydney and Brisbane. These projects, also based on value capture, appear to offer greater value for money.
The sooner that HSR goes ahead the better to stimulate the economy to higher growth.
Peter J Knight B. Com (Hons) (Melb), MBA (Melb)
Chairman, The VFT 2 Project
Recently Founder, Chairman and CEO, The CEO Circle Pty Ltd
Former BHP Member of the Advisory Board, the original VFT Consortium
Former Manager Corporate Planning, BHP H.O.
Former Economist, RBA