The real cost of missing the high-speed train

At three times the cost of the NBN, high-speed rail on Australia's eastern seaboard faces heavy opposition. But the long-term economics are compelling.

On my recent honeymoon, we took the German ICE train from Munich to Venice.The trip takes 7 hours and was, at the time, much cheaper than direct flights.

It is a pleasant journey, if you ever get the chance. Hurtling through the snow clad landscape, watching one region melt into the next.

Sipping Paulanerbeer in the mealswagon as you wend your way through the spectacular scenery of the Brenner Pass.

It’s not hard to see why many Australians return from Europe with a romantic notion of high-speed rail wondering why we haven’t built a similar network here.

The answer is that unlike Europe, with its multi centric cities, Australia is dominated by our big five cities. Intercity travel is increasingly common - the Sydney-Melbourne route being the fifth busiest air passage in the world - but it is by no means a daily affair.


Critics of the proposed high-speed railway down Australia’s eastern seaboard choked on their wheaties this week at the $114 billion price tag unveiled by the federal government.

At three times the cost of the government’s national broadband network, it certainly is an awe inspiring sum.

And if the history of large infrastructure projects is anything to go by, even this estimate is likely to be conservative.

In a paper titled “Survival of the unfittest: why the worst infrastructure gets built - and what we can do about it”, the Oxford University’s Bent Flyvbjerg estimates that of 258 major projects studied in 20 different countries, including the Channel tunnel and San Francisco Bay bridge, nine out of 10 suffered cost over runs. Rail projects are the worst offenders. Of 58 rail projects, there was a 45 per cent average cost over-run, compared to 20 per cent for road projects and 34 per cent and bridges and tunnels.

On this track record, it’s not unreasonable to assume the price tag of HSR could be more like $180 billion in today’s dollars.

But a crucial point of this week’s report - missed by most commentators - is that this cost of action must be weighed against the very real costs of inaction. The debate over HSR is not unlike the debate over action on climate change in this regard.

Already, Australia’s failure to provide adequate infrastructure to keep pace without growing population is creating costs in terms of congestion and lost productivity.

Consider this.

At federation, Australia’s population was a little under 4 million people.

In 1950, we topped 8 million for first time. In 2000 it was about 19 million and today the Bureau of Statistics population clock is hovering just below 23 million.

In the last decade, we have added as many Australians (4 million) as we accumulated in the first 50 years of federation.

We couldn’t and shouldn’t want to slow this population growth. But creaking urban infrastructure is increasingly imposing limits to growth.

Left unchecked, there will be an increasing cost to society from congestion on our roads and key transport routes. Not to mention the social costs of hostility towards new migrants.

The cost of action on HSR may be great, but the cost of inaction are great too, and climbing.

The government’s high-speed rail report argues strongly that we cannot afford to be sceptics when it comes to the long-term implications of population growth:

“It is most likely that demographic and economic trends will support a steadily improving case for HSR on the east coast rather than otherwise,” the report notes.

“In that case, policy-makers, whether or not yet convinced of the merits of committing to HSR, may also legitimately weight the possible consequences of not taking actions to preserve that option at some point in the future.”

“In this regard, inaction is not benign. In the absence of a protected route, the spread of cities and other developments in the preferred corridor will gradually reduce the constructability and increase the potential capital costs of a future HSR program, rendering it increasingly more difficult to implement, even while the fundamental trends may become increasingly favourable.”

As the population grows, the economics of the HSR become even more compelling. Indeed, this is part of the reason for the long time frame proposed for the project, which is not completed fully until 2058. Critics say it must be done faster. But demand for intercity travel will take time to build. But build it will, pushing the economic benefits even further in favour of the project.

But there is a cost, too, in delaying.

Already the biggest cost factor of the proposed network is the required tunneling of 144 kilometres, or 8 per cent of the proposed 1,748 kilometre track. Sydney alone will require 67 kilometres of expensive tunneling to avoid the politically Herculean task of seizing land and removing tenants from the desired route.

If we had acted earlier to protect a route, the costs would have been lower. And every year we wait before marking out a route, these costs will escalate.

At a cost to the taxpayer of $37,543 per page, the government’s 534 page report into the feasibility of high-speed rail along Australia’s Eastern seaboard deserves more attention than it has got.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles