The Lake George tollway plan stood out like St Matthew in the sycamore tree.
It took two paragraphs of a 15-page speech by Transport Minister Laurie Brereton outlining his national transport agenda.
Most of Brereton’s proposals made good sense and seemed to have been backed with some study of detail. The plan for the Lake George section of the Federal Highway, however, looked like a throwaway line with no attention to consequences or detail.
Brereton was talking about an efficient, integrated national transport system and is able to do so from a better bureaucratic platform than his predecessors. Previously the portfolio had been linked to Communications or split into the several modes of transport: Land, Shipping and Aviation, each squabbling for power and funds.
He linked transport with the national economy. Good. He cited the exquisite example of a mere $15 million, 600-metre road opened last month between the National Rail terminal at South Dynon and the Port of Melbourne. It will cut the cost of transhipping containers to Australia’s busiest port by 30 per cent. No-one had thought of it before.
The integration of the four modes (road, rail, sea and air) is essential for efficiency. So is competition across and within them.
To have effective competition, you must have what the economists call a level playing field _ a much maligned phrase. But clearly, if you subsidise one mode unfairly, users flock to it. The community pays for the subsidy and yet taking Australia as a whole it might have been cheaper (economically, environmentally and socially) to use another mode which lies semi-idle.
Equally, if one mode has a government-imposed impediment (a rigid award system for employees for example), users flock to the other mode, which, once again might be more expensive.
The level playing field is important for society to get the best out of its transport system.
Economies of scale on one hand and overloading on the other can result in an efficient mix of transport uses and one in which each mode is looking for efficiencies to stay in the race.
Brereton even hinted that the Australian National Line, for years union-dominated and uncompetitive, might feel the chill wind of competition. Heavens, the trans-Tasman route might be internationalised, too.
He talked about breaking down state monopolies in the ports because they are inefficient.
The Telecom experience shows us the efficiency dividend of competition. In an ideal world where there are no slackers, and workers and managers are motivated by the highest standards of customer and public service, having two organisations to do one job would be inefficient, especially a job like telecommunications. However, it is not an ideal world. Monopoly breeds contempt of customers, laziness and lack of inventiveness. The prospect of a hanging in the morning concentrates the mind. Competition breeds better practice.
The Telecom experience also shows that the enemy is not the public sector. Nor is it true to say private efficient; public inefficient. The enemy is monopoly, private or public.
The Lake George toll, therefore, flies in the face of nearly all of what Brereton is trying to do.
It would give a monopoly to a toll-taker on the only route into Canberra.
In a some way it would make the playing field less even across the modes and within them if the toll is imposed unevenly.
A tollway is a very inefficient way to levy a tax to build a road. It requires at least 15 full-time employees (to collect and back-up); structures at the tollgates; separate administrative and banking back-up costs; wear and tear on vehicles and tyres as they stop and start (we are talking four million cars a year, that is 16 million gear changes); and extra fuel consumption. Not to mention the sheer aggravation of it.
Those costs amount to about $1.5 million a year, or about 40 cents a car. A $2 toll is hardly worth collecting. Even at $5, the collection cost is 8 per cent, making it one of Australia’s least efficient taxes.
Brereton did not talk about full-privatisation, but a toll to help fund the road. None the less the economics of full privatisation are instructive.
The Lake George section would cost $220 million using the existing corridor. Financing that through the private sector (at a higher interest than government borrowing) would cost about $20 million a year. Much of that would have to be spent before any toll was collected. It would need to be repaid in say 20 years, adding another $11 million. Add the administration fees of the toll and you have a toll of about $11 a car.
And that is giving the private operator a freebie with the land.
If you carved a new route and had to buy the land, the cost goes well over $300 million and the toll goes over $15 a car.
This is why road projects are pre-eminently a public matter. Land resumption, priorities (economic, social, environmental, crash reduction etc) are best left in government hands. The actual construction, of course, is best contracted to the private sector by tender, because then you have competition among tenderers and a cheaper road which benefits the community.
But the creation of a tollway can only be a monopoly project (can you imagine two tollways to Goulburn).
The tollway adds another element to the choice of route. If the existing carriageway is by-passed it can become the “”free road” for those who don’t want to pay the toll. However, if the tollway uses the existing corridor there is no “”free” alternative other than a chase through the back blocks of Tarago or Gundaroo.
Incidentally, the 1992 back-of-an-envelope crash costs on the stretch would be about $15 million, leaving aside the social cost of four dead and 17 severe injuries. The cost of extra wear and tear is anyone’s guess. Preventing those costs alone justifies the upgrade.
A marginal issue is that Australians might be less likely to take the detour from the Hume to see their national capital.
And then there are the totally irrelevant issues which in fact decide the matter. With the Olympics and the centenary of Federation many tourists will be coming to Canberra, so they can be capitalised on. Also funding for the Federal Highway (in a nation whose second-most popular past-time is Canberra-bashing) had to be got through the budget and/or loans process.
And last but not least, Canberra has no marginal federal seats and no loud-noise generating specific industry, so it does not matter if they get upset.