Australia's growing freight task: Challenges and opportunities
Good morning everyone. Thank you Phil for that introduction, and to the SA Freight Council and ICHCA Australia for inviting me to speak here today.
As Phil mentioned, I am the Acting Chief Executive of Infrastructure Australia, the nation's independent infrastructure advisor.
We advise governments at all levels on the projects and reforms needed to fill today's infrastructure gaps and meet the challenges of the future.
It's our job to champion the ‘big picture’ view of Australia's infrastructure needs.
When it comes to freight, this means having the infrastructure and systems in place to respond to the significant growth in demand we will see in coming years.
Australia's growing freight task is one of our biggest infrastructure challenges.
Between 2011 and 2031, the total domestic land freight task will grow by 80%.
This is being driven by unprecedented population growth, coupled with increased demand from our trading partners in Asia and rapid changes in technology, e-commerce and consumer behaviour.
Faced with these growth challenges, our national supply chains and infrastructure will need to evolve to support both our economic productivity and quality of life.
Australia's economic competitiveness is closely linked to the quality of our national supply chain infrastructure—the ports, railways, roads and airports that link Australian goods and services to domestic and overseas markets.
And of course equally as important as the infrastructure itself are the ‘systems and human’ elements of the supply chain—the strategies and people in place to make it all work.
The transport and logistics sectors of the Australian economy are estimated to contribute 14.5 per cent of GDP, making strategic planning critical to our prosperity.
If our infrastructure and systems aren't equipped to handle increased demand, Australia could be faced with increasing bottlenecks and delays on our roads.
This means our goods will take longer to reach ports and markets, and the quality of many infrastructure services Australians rely on will decline.
Beyond the impacts this has on the community and business, the cost to the economy would also be significant.
Without investment and reform to increase capacity and better manage demand, the annual cost of congestion in our capital cities could exceed $53 billion by 2031.
With that in mind, my remarks today will focus on the benefits of adopting a more long term, strategic approach to national freight and supply chain planning.
I will also preview some of the key freight issues which Infrastructure Australia is focusing on as part of the 2019 Australian Infrastructure Audit, which is currently underway and due out for release in July next year.
This is a significant piece of work from Infrastructure Australia, and will provide an evidence base to help Australia's governments plan for growth and make smart, strategic decisions about future investments.
But first, I want to discuss the challenges and opportunities facing the sector, beginning with Australia's impending population growth.
Challenges and opportunities
How we respond to population growth has been the subject of much debate in recent months, but it is worth taking a moment to consider what this means for the freight sector.
Over the next 30 years, Australia will grow by an additional 10 million people.
Three-quarters of this growth will occur in our four largest cities—Sydney, Melbourne, Brisbane and Perth.
Growth in our smaller cities—Adelaide, Canberra, Darwin and Hobart—will be slower, contributing around one tenth of Australia's forecast population growth over this same period.
Overall, population growth is a good thing for the Australian economy—it provides a larger domestic market for businesses and increases the size of our labour force.
And of course for freight, it's also driving an overall increase in demand.
But population growth does exacerbate congestion on networks that are already under strain, particularly in urban areas where freight and passenger transport share the same road or rail infrastructure.
With the majority of economic activity now occurring in our major cities, urban freight will be as critical for our future growth as traditional long-distance freight.
There is a need to protect freight facilities from urban encroachment.
In addition, there may be a greater need to operate urban freight networks much more intensively in off-peak periods—something which is likely to encounter strong resistance from affected communities.
A challenge for the freight industry will therefore be establishing their ‘licence to operate’ in a changing economy—that is, striking a balance between meeting both community expectations and customer demand.
Equally important for our national freight and supply chain planning is the increasing demand from our trading partners in the booming economies of China and Southeast Asia.
Consumers in this growing region want high-quality Australian products, including fresh produce, as quickly as possible.
Already 75% of Australia's goods exports are going to Asia—with China, Japan, Republic of Korea, India, Hong Kong, Singapore and Taiwan all in our top 10 largest export markets.
OECD projections suggest that Asia's share of the global middle class will grow from around 35% in 2015 to 80% by 2050—offering enormous opportunity for export-oriented Australian businesses.
Our proximity to Asia, combined with our reputation for high quality exports, therefore has the potential to be a strong driver of economic growth for Australia.
However, our ability to capitalise on this is only as good as our freight and supply chain networks.
Maintaining and improving the efficiency of supply chains needs to be a key focus if we are to take advantage of these opportunities and keep Australia cost competitive.
Another factor impacting our freight and supply chain planning is technology.
Australia's freight networks are already responding to the advent of big data, open data and digital technologies.
This has been accompanied by a shift in consumer behaviour, with consumers being more empowered than ever when it comes to determining when, where and how they receive goods and services.
Consider, for instance, the impact online and mobile shopping has had on how Australian businesses manage their supply chains, with inventory availability and shipping times now an important factor in purchasing decisions.
With this, micro freight is becoming an increasingly important part of Australia's freight and supply chain networks.
In Sydney, for instance, light commercial vehicles, or delivery vans, make up about 15% of traffic, which is about 6% more than heavy freight vehicles.
Add to this is the impact of new developments such as automated vehicles, distributed production, 3D printing and drones, and you have an industry undergoing a significant period of change.
We will undoubtedly hear some interesting insights into the impacts of these technologies when they are addressed in detail in tomorrow afternoon's session.
What's clear though, is that we are at a particularly critical moment for the freight sector.
We will only be able to meet these challenges and make the most of the opportunities I've just described, if we have a long term, strategic approach to national freight and supply chain planning in place to guide investment and reform.
And certainly, we are seeing some promising progress on this front.
National Freight and Supply Chain Strategy
Infrastructure Australia is strongly supportive of the Australian Government's work in developing a National Freight and Supply Chain Strategy, which Naa Opoku will be providing an update on later this morning.
In fact, a key recommendation in the Australian Infrastructure Plan, which we released in early 2016, was that a National Freight and Supply Chain Strategy be developed to guide investment and reform.
his is because, as it stands, Australia's freight and supply chain networks are not well-equipped to grapple with the challenges I've just described.
Currently, ownership, operation and oversight of Australia's freight networks is fragmented across governments and private providers.
Freight planning is being undertaken by all levels of government, but it is usually not well-integrated with land-use, transport and strategic planning frameworks.
To date, much of Australia's freight planning has addressed infrastructure and individual modes, rather than focusing on the supply chains that are necessary for the freight sector to support Australia's economic development.
And it has not kept pace with developments, both in terms of policy changes and the availability of new analytics tools, which allow for a more detailed and sophisticated examination of supply chains.
Economies of scale can be achieved by addressing new issues on a collaborative basis, rather than each jurisdiction ‘doing its own thing’.
For example, addressing the implications of changing global economic prospects for freight flows is better tackled nationally, rather than state by state.
Infrastructure Australia has played an active role in the conduct of the inquiry into national freight and supply chain priorities, working closely with the Department and the expert inquiry panel throughout the process.
In line with our recommendations in the Australian Infrastructure Plan, we have advocated for a focus on defining nationally-significant freight corridors and precincts, and identifying the network constraints and gaps.
This is important as it would enable essential corridors to be identified and protected for future freight routes and terminals.
Research released by Infrastructure Australia last year found that protection and early acquisition of just seven key corridors could save Australian taxpayers close to $11 billion in land purchase and construction costs.
These are significant savings, and we are pleased to see state governments increasingly taking action on this front.
For example, earlier this year, the Queensland Government announced that it would protect the corridor for the Townsville Eastern Access Corridor to meet a future need.
The commitment included acquiring land and gazetting the proposed corridor.
Similarly, the NSW Government announced that it would move to identify and then act to protect four strategic transport corridors in western Sydney—a move which is estimated to save future generations over $6 billion
Savings of this order are too large to ignore.
That's why we encourage all governments to pursue joint corridor protection efforts as a genuine productivity-enhancing reform.
Importantly, we need to do more than protect corridors for future rail lines and sites for future intermodal terminals.
As our cities become both larger and denser, we must also protect the operational integrity of existing and future freight networks.
This means we have to more effectively manage land use change around those networks.
It is critical then that our national freight and supply chain strategy actively does this, while also encouraging governments to prioritise investment in the protection of strategically important corridors.
Infrastructure Priority List
Another of the key reasons we advocate for a national freight and supply chain strategy is because it would also support better project development and better transport integration.
Having a clear understanding of what needs to be done to address today's gaps and meet future needs, would strengthen the ability of governments and Infrastructure Australia to assess the strategic context for investment proposals.
With the states and territories increasingly looking to the Australian Government to fund upgrades to, and maintenance of, their networks, a national strategy would assist in prioritising maintenance outlays and new investments.
For our part, Infrastructure Australia has positively assessed a number of major infrastructure projects in the past year that will offer substantial benefits for the national freight sector.
As many of you in the room today would know, one of our key responsibilities is to assess business cases for nationally-significant infrastructure proposals to determine whether they have strategic merit and clear economic benefits.
This is how we develop the Infrastructure Priority List, the independent list of nationally-significant investments Australia needs over the next 15 years.
We have a rigorous assessment process for adding projects to the Priority List, which considers the strategic fit, economic impact and deliverability of projects.
There are a number of projects on the 2018 Priority List, which directly benefit the freight sector, including North South Corridor here in Adelaide—a key freight and commuter route being progressively upgraded into a continuous motorway.
Also notable is the Murray Basin Rail Upgrade in Victoria—currently under construction—which will deliver important upgrades to our rail freight network in the Murray Basin region. The project will help remove around 20,000 truck trips from our roads drive economic growth, create jobs and provide a major boost to the transport industry, agricultural sector and regional communities.
Another is Inland Rail, Australia' largest ever freight rail project connecting Melbourne and Brisbane via regional Victoria, New South Wales and Queensland.
The current rail connection between Melbourne and Brisbane, via Sydney, can't match the speed of the inland road connection and demand for freight transport along this corridor is expected to grow by more than 8 million tonnes by 2050.
The proposed Inland rail solution, which involves constructing a freight rail line of approximately 1,700 km, would provide a service with a highly reliable transit time within 24 hours.
These are transformational infrastructure projects, with substantial strategic benefit in addressing the challenges of our growing national freight task.
Infrastructure Australia is currently consulting with governments at all levels to develop the 2019 Infrastructure Priority List.
Once again we expect freight proposals to be an important part of our big picture view of Australia's future investment needs, when the Priority List is released early next year.
It is important to acknowledge however that our work, and the resulting investment decisions by Australia's governments, can only be improved by having a broader, strategic framework in place at a national level.
On that note, I want to take a moment now to talk briefly about the Australian Infrastructure Audit, which is also currently underway and has a role to play in supporting strategic, long term and national planning in the freight sector.
As I mentioned earlier, Infrastructure Australia has commenced the 2019 Australian Infrastructure Audit, in consultation with our colleagues in state and local government.
With the 2019 Australian Infrastructure Audit, we are updating the evidence base that informs infrastructure decision-making at all levels of Australian government.
It will help to identify the most pressing infrastructure gaps in our cities as well as our regions, and it will have a particular focus on how each sector is performing and how this impacts individual users.
The Audit is a significant research undertaking that seeks to explore the likely effect of major trends on infrastructure demand and supply, and identify what governments should be doing to meet the needs of the future.
Alongside the 2019 Priority List, the 2019 Audit will therefore present a cross-sectoral picture of our infrastructure challenges.
Themes for the freight sector
While work on the Audit is still underway, I can tell you that a key focus of our analysis will be on how we improve the efficiency of our supply chains.
Responding to the challenges of population growth, increased demand from our trade partners and technological change, the Audit will consider what can be achieved through a strategic approach to corridor and supply chain planning.
Part of this will involve looking at the efficiency of port and intermodal operations, and the role for government in facilitating strategic infrastructure investment.
Also being considered here is the role of technology such as driverless trains, trucks and drones, and how it can integrated into existing supply chains.
As you would expect, the Audit will also have a strong focus on what we can do to relieve last mile issues and pinch points, particularly in urban areas where we are seeing a lot of growth.
Here we will canvass potential reforms like the physical separation of freight and passenger networks, and strategic planning to develop specialist logistics zones away from residential areas—all of which will undoubtedly be of great interest to the industry.
Unlocking regional economic development is another important area of focus for the 2019 Audit.
With seasonal traffic on capital intensive infrastructure a key challenge, we'll be looking at opportunities to consolidate rail lines, prioritise maintenance of strategically-important feeder railways and develop feeder trucking routes.
We'll also be examining the viability of developing freight and logistics hubs in regional centres, with strategic capital investments supported by robust business cases identified as a potential driver of growth.
Australia's role in global markets will, of course, be a focus, with our analysis focusing on how we can maximise the potential of our ports and be responsive to trends in global markets.
Agility and responsiveness of our infrastructure is similarly important, when we look at micro freight and challenges involving time sensitive freight.
This spans everything from improving the use and availability of real-time data, to strategic planning to encourage the more efficient location of warehousing.
As you can tell from this brief summary of our upcoming research focus for the 2019 Australian Infrastructure Audit, Australia's freight sector is undergoing a fairly unprecedented period of change.
To make the most of the opportunities ahead of us, Australia needs a long term, strategic approach to our national freight and supply chain planning.
This is the key to ensuring our freight and supply chains are operating as efficiently and effectively as possible, and delivering long-term productivity benefits to the Australian economy.
The Australian Government is making important progress in development of a National Freight and Supply Chain Strategy, and we look forward to seeing it finalised over the next year or so.
And next year, with the release of the 2019 Infrastructure Priority List and the Australian Infrastructure Audit, we look forward to continuing to shape public debate about how we can improve our freight and supply chain planning and meet our future challenges.
By taking a ‘big picture’ view, we can ensure our freight and supply chain infrastructure is working in our national interest and delivering the best outcomes for all Australians.