Road and rail competitive neutrality: some core issues

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Robert Gunning

The Presiding Commissioner

Freight Inquiry

Productivity Commission

LB2 Collins Street East


Dear Commissioner

Road and rail competitive neutrality: some core issues
The purpose of this brief submission is to focus on the core issues relating to road and rail competitive neutrality which the Productivity Commission is required to examine in its inquiry into Road and Rail Freight Infrastructure Pricing.

This submission has been prepared in the expectation that, for a variety of reasons, it is unlikely that the Productivity Commission will receive any overt trucking industry submissions that effectively focus on the core issue of "competitive neutrality" which is central to the inquiry. In this regard we note that the first substantive term of reference for the review is that:

The review will estimate the full financial costs of providing and maintaining freight transport infrastructure on major road and rail networks. It should be based on the principle that prices charged should reflect all costs in each mode and that there are benefits in a national pricing regime. In estimating these financial costs, the review will take account of the extensive research and studies on this issue, including by the National Transport Commission and the Bureau of Transport and Regional Economics”
This submission could reasonably be characterised as a pro-trucking submission which seeks to defend the industry from poorly-based assertions regarding competitive neutrality. These assertions are mostly made by interests associated with the public rail system in Australia.
Ultimately this submission recognises that the Productivity Commission will find that both road and rail have a role to play and each has some positives and negatives in the competitive neutrality balance. But in our view public policy is showing signs of swinging too far in the wrong direction. It will ultimately damage the prosperity and well being of all Australians if policy is formed on misguided basis that publicly rail infrastructure is suffering from an imbalance in competitive neutrality.
This submission argues that on a narrow view of market costs rail infrastructure is significantly underpriced compared to trucking. Moreover, extending the cost boundaries to include “externalities” does not change the overall picture.

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