Australia’s railways have been left scouring for scraps after the latest Federal Budget overwhelmingly prioritises road infrastructure.

A total of $8.6bn has been set aside for transport, of which only 5%, or 1.3bn, is dedicated to rail development, while roads will receive $8.5bn. This year’s package falls within the record $50bn infrastructure spending, announced in 2014, aimed at building and strengthening new and existing networks between 2014 and 2019.

From the numbers it’s clear that rail investment is rapidly approaching a steep funding cliff, with total Federal rail funds further dropping from A$1.3bn to A$670m by 2018-19. Urban rail is a particularly sore loser in the government’s books, with federal co-funding expected to be cut from $514m to only $17m by the end of the decade.

Furthermore, some of this year’s money flows directly from rail to road, as the government announced the re-allocation of A$187m from Victoria’s Regional Rail Link towards the state’s two main highways.

The government’s continued commitment to roads is not much of a surprise. In 2013, Prime Minister Tony Abbott openly opposed backing public transportation systems, and in particular railways, laying out his intentions to push for more road construction instead.

Abbott declared at the time: “The Commonwealth Government has a long history of funding roads. We have no history of funding urban rail and I think it’s important that we stick to our knitting, and the Commonwealth’s knitting when it comes to funding infrastructure is roads.”

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By GlobalData

However, the government’s financial backing of roads over railways does raise huge doubts regarding future sustainability, environmental efficiency and congestion problems in Australia, the country with the third-fastest growing population among OECD countries, as projected by the United Nations.

Interim chairman of the Australasian Railway Association (ARA) Bob Herbert expressed his disappointment at the money shift, saying that such decisions risk discouraging the railway industry, its contractors and suppliers.

Rail-air multi-modal freight systems have the potential to revolutionise the freight transport market.

“We are seeing money earmarked for rail projects […] being allocated to improving highway infrastructure that directly competes with Victoria’s regional rail system,” Herbert said.

Which railway projects are still standing?

This year, a few key railway projects across the country will divide a shared pool of A$1.08bn in federal funding, mainly directed towards improving and upgrading freight corridors. According to the Department of Infrastructure and Regional Development, the rail freight sector is expected to experience strong growth by 2030, with total domestic freight projected to grow by 80%.

The cross-continent Inland Railway between Melbourne and Brisbane is one of the main rail projects at the core of Australia’s development and “the single most important rail freight project in this budget cycle and the next”, as described by ARA. The government committed A$300m to this year’s pre-construction works of the 1,730km proposed line, which includes planning, assessments and consultations.

Deputy Prime Minister and Minister for Infrastructure and Regional Development Warren Truss stressed the project’s significance in a press release in March, saying: “Inland Rail is a game-changer. It is vital infrastructure that will boost capacity and productivity along the country’s fastest growth freight corridor.”

The Inland Railway was included in ARA’s Key Platforms manifesto, which sets the project’s completion date in 2026. In light of the recent funding, Herbert said: “We are hoping for a stronger, clearer and more significant long-term funding commitment to Inland Rail from the 2016-17 budget.”

The other investment in national railways is the implementation of the Advanced Train Management System (ATMS), a communication system aimed at improving train capacity and security. The $50m funding towards ATMS will see installation of new, more advanced signalling systems, digital control centres and communication devices to aid the smooth running of freight trains across the country’s tracks.

“We are hoping for a stronger, clearer and more significant long-term funding commitment to Inland Rail from the 2016-17 budget.”

In Tasmania, work will continue on the Freight Rail Revitalisation programme, which was granted $59m over the next four years. The funds are to go towards “raising the quality of the major lines on the Tasmanian rail network”, according to a government list of earmarked infrastructure projects.

However, such is the extent of the government’s determination to invest in roads that railway projects are being denied funds from currently defunct, and reportedly inefficient, highway schemes.

The Melbourne Metro Rail Link, a proposed 9km metropolitan rail project in Melbourne, has been refused investment despite $1.5bn in federal funding freed up by the dumping of the East West Link toll road project by the Victorian Government. In the meantime, the funds promised for the toll road remain “in a locked box”, according to Abbott, who will wait for the highway project to be resurrected in the future.

The PM stressed he was not prepared to redirect the funds towards the Metro Link, but was “more than willing” to fund the $11bn rail project through an asset recycling scheme, which would require the Port of Melbourne to be sold on a lease to generate profit.

These plans don’t, however, go far enough for Herbert, who says: “The Federal Government’s continued approach of prioritising roads over rail will not address the long term transport needs of our growing cities.”

“Australia as a nation is facing increasingly serious economic, social and environmental problems with traffic congestion clogging our roads, transport emissions choking our urban environment, fluctuating fuel prices and the continued growth of our major cities.”

Ignoring railways: a threat to productivity?

Australia is confronted with the prospect of increasing congestion and sustainability issues, especially in its big urban areas such as Sydney, Melbourne and Brisbane, where almost half of the country’s 23 million people are concentrated. Predictions published by the Australian Trade Commission in their Investment Opportunities in Australian Infrastructure report see that number increase by a further 2.7 million in all three cities by 2031. The report also found that the economic price of congestion is expected to cost Australians A$20.4bn by 2020.

The biggest railway deal in South Africa’s history is predicted to propel its economy to a new level of prosperity.

Certainly when compared to its European counterparts, for whom rail transportation is a centrepiece of future population planning, Australia seems to be heading the other way.

A report published in April by market analyst Timetric found that investment in railway construction projects dominates Europe’s road and railway market. Over the coming years, the EU railways sector has the highest value at $804bn, followed by the roads sector at a considerably lower $301bn.

Australia’s intensive road investment already comes against a backdrop of high usage of cars. According to the Department of Infrastructure and Transport, Australia’s cities tend to have higher private car use than public transport use when compared with overseas cities.

As a result, “the transport sector also contributes the largest proportion of average household carbon dioxide emissions at almost 4%. Light passenger vehicle use alone accounts for 35% of Australia’s average household emissions, by far the largest overall component of the transport sector’s emissions,” the department concluded.

Apart from cutting emissions, prioritising public transport also makes sense from an economic point of view. Studies by ARA analysing the impacts of congestion on urban roads in Perth and Brisbane found that a slow, blocked-up network hampers productivity. The Value of Action versus the Cost of Inaction report, published last year, highlighted the economic and environmental advantages of investing in railway infrastructure over roads.

“Rising congestion also harms future productivity growth – the logic is inescapable,” the report reads. “The ability of a city to move labour to high productivity nodes will be retarded by congestion. The result is that cities will be less productive and for an urbanised country like Australia this can mean only one thing – lower productivity and lower economic growth.”

Some of the decision-making by the Australian Government is influenced by reviews from the Productivity Commission, an independent research and advisory body which, in a July 2014 report, warned of “an urgent need to comprehensively overhaul processes for assessing and developing public infrastructure projects”.

“There are numerous examples of poor value for money arising from inadequate project selection, potentially costing Australia billions of dollars. Additional spending under the status quo will simply increase the cost to users, taxpayers, the community generally, and lead to more wasteful infrastructure,” the report concluded.

The commission also provided a possible explanation for the government’s preference of building more roads. Cost overruns are much lower for roads, while rail construction costs vary enormously. At the moment, the government applies cost-benefit analyses only for proposals exceeding the threshold of $100m in funding.

In a response to the commission’s report, the Commonwealth confirmed it began liaising with state, territory and local governments on a trial basis to implement state-run road funds for increased decision-making power for local authorities.

In the meantime, ARA will continue to push for the case of rail in the hope of more future investment. “ARA is determined to pursue its priorities through working with both federal and state governments to ensure the nation and its cities receive the rail infrastructure needed for the future,” Herbert said.