Rob Dossor
The Government will undertake a scoping study in 2015–16 to
determine options for the future management, operation and ownership of the
Australian Rail Track Corporation (ARTC).[1] The cost of this study
will be met from the existing resources of the Department of Finance.
The ARTC was created in 1997 when the Commonwealth and the
states agreed to form a ‘one stop shop’ for all rail operators seeking access
to the national interstate rail network.[2] The ARTC’s corporate
charter is to:
- provide seamless and efficient access to users of the interstate rail network
-
pursue a growth strategy for interstate rail through improved
efficiency and competitiveness
-
improve interstate rail infrastructure through better asset
management and coordination of capital investment
-
encourage uniformity in access, technical, operating and safe
working procedures and
-
operate the business on commercially sound principles.[3]
As of 2014 the ARTC owns or leases (from states) and
operates over 8,500 kilometres of standard gauge track in NSW, Victoria, South
Australia, Western Australia and Queensland.[4] The map below shows the
ARTC network, including owned and leased routes.
Source: Australian Rail Track
Corporation (ARTC), ‘Our
Network’, ARTC website.
The ARTC has a monopoly in interstate rail haulage.[5]
The ARTC appears to own or manage all interstate rail lines, as well as
numerous intrastate lines (but the line between Northgate and Alice Springs is
under a long term lease to Genesee and Wyoming Australia).[6]
The 2013 Commission of Audit recommended that a scoping
study be undertaken to examine an appropriate access regime, implications for
ARTC’s leases and wider considerations stemming from intergovernmental
agreements that established the ARTC.[7] The Commission of Audit
further noted that the monopoly characteristics of the ARTC could be adequately
managed in a manner similar to airport or electricity distribution monopolies.[8]
It also found that ‘in recent years some of the capital projects undertaken by ARTC
have had marginal benefit-cost ratios, were not needed to meet future demand projections
or did not effectively address expected capacity constraints.’[9]
ARTC is estimated to be valued at around $4 billion.[10]
In 2012–13 the ARTC made a loss of over $202 million before returning a
profit of over $163 million in 2013–14.[11] ARTC has been rated at
Aa2 by Moody’s Investor Services (Moody’s)—with a baseline credit assessment of
a1. [12]
Moody’s stated, ‘the Government’s announcement of the scoping study in itself
is credit negative for ARTC’s Aa2 rating because it signals a possible change
in intention in relation to the government’s continued ownership.’
Moody’s goes on to say that ARTC’s ratings could be lowered
if there were a weakening in the likelihood of support from the Government due
to the full or partial privatisation of ARTC.[13] The ARTC could take
‘countermeasures’ to manage any change in ownership, such as changing dividend
policy or reducing costs.[14]
The Government
continues to invest in rail infrastructure managed by ARTC. The Budget, for
example, committed $400 million to enable the Inland Rail Implementation Group
and the ARTC to continue providing the Government with a delivery plan for inland
rail.[15] Whether the Government
intends to continue funding rail projects after a possible sale is unclear. Both
Labor and the Coalition have funded rail projects over the years and it may be
considered a responsibility of government to provide an appropriate level of
service for rail infrastructure.[16]
While the investment industry has welcomed the proposal,[17]
the rail freight industry has warned that privatisation could increase costs
for consumers.[18] Shadow Treasurer Mr
Bowen has said that ‘When it comes to these decisions there are two threshold
questions—is it a function which can only be conducted by the Government and is
it a good deal for the taxpayer?’[19]
[1].
Australian Government, Budget
measures: budget paper no. 2: 2015–16, p. 92.
[2].
M Vaile (Minister for Transport and Regional Development), ‘Boost
for Rail Across Australia’, Press release, 27 April 1998.
[3].
Australian Rail Track Corporation (ARTC), ‘Our Network’, ARTC
website.
[4].
Australian Rail Track Corporation, 2014 Annual
Report, 2014, p.2.
[5].
J Fullerton (CEO ARTC), Victorian
Transport Association, speech, 1 March 2013.
[6].
Aurizon may own a Queensland/New South Wales interstate line. M Fagan,
‘Introducing
Competition into Natural Monopoly Industries: An Evaluation of Mandated Access
to Australian Freight Railroads’, Harvard University, May 2007, p. 6; T
Kelsey, ‘Supply
Chain Week: Aurizon’, presentation, September 2013.
[7].
National Commission of Audit, Towards
responsible government: phase one, February 2014, p. 223.
[8].
Ibid.
[9].
National Commission of Audit, Towards
responsible government: phase two, February 2014, p. 9.
[10].
M Ludlow and J Kerin, ‘Rail
Track float backed by business’, Australian Financial Review, 12 May
2015.
[11].
ARTC, 2014 Annual Report, op. cit., p.37.
[12].
Moody’s Investor Service, ‘Moody’s:
No immediate rating impact from government’s announcement of scoping study for
ARTC’, Moody’s website.
[13].
Ibid.
[14].
R Kennedy, ‘Moody’s
eyes ARTC sale study’, Business Spectator, 18 May 2015.
[15].
The Inland Rail project will complete a new rail connection between
Melbourne and Brisbane, via Wagga, Parkes, Moree and Toowoomba. ARTC has been
tasked with developing a ten year program to deliver the project, under the
guidance of the Inland Rail Implementation Group. Australian Rail Track
Corporation (ARTC), ‘Inland
Rail – A significant commitment’, media release, ARTC website; ARTC ‘Inland Rail’, ARTC
website.
[16].
The government provided $426.8 million in equity injections into ATRC
since April 2011. Department of Infrastructure and Regional Development (DIRD),
‘Completed
Rail Projects’, DIRD website; R Webb, The
Commonwealth Government’s Role in Infrastructure Provision, Research
paper series, 2003–04, Parliamentary Library, Canberra, 1 March 2004.
[17].
‘Mandates
set to fly as budget resets the selling agenda’, Australian Financial
Review, 13 May 2015.
[18].
A White, ‘Rail
track sale will “lift costs”’ The Australian, 20 May 2015.
[19].
C Bowen (Shadow Treasurer) quoted in ‘Rail Track float backed by
business’, op. cit.
All online articles accessed May 2015.
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