What's driving the demand for freeways? Source: @AdamJohnRussell

The Victorian government’s decision to provide $6-$8 billion in Tuesday’s budget for Stage 1 of the East-West Link freeway but virtually nothing for the Melbourne Metro rail line is a major disappointment for public transport advocates.

The government however says it remains committed to building both. The explanation offered by the Premier, Denis Napthine, is that the freeway is ready to proceed but the rail line isn’t. He says the business case for the Metro isn’t finished yet.

 

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Many observers doubt the sincerity of that explanation and are pessimistic about the chances of the Metro being built. They question the wisdom of prioritising the freeway over the rail line given that:

  • Infrastructure Australia lists the Metro in its fourth and final ‘Ready to proceed’ category, whereas the East-West Link is only at the second stage ‘Real Potential’ category.
  • The Metro has a positive Benefit-Cost ratio (1.3) whereas the ratio for the freeway hasn’t been released publicly. Work done for the 2008 Eddington Inquiry suggests it’s negative.
  • Recent experience in Brisbane and Sydney indicates it can be difficult for toll roads to attract patronage at the levels required to make them commercially viable.
  • Most observers think public transport was a decisive issue at the 2010 election when voters removed the Brumby government. Roads and traffic congestion however were barely mentioned.

The relative virtues of investing in roads or rail have been debated for years in many forums. I’m not going to re-visit that debate here nor argue the relative merits of the two projects (see here and here for previous discussions).

Rather, I think it’s important for ongoing policy to try and understand why the government has prioritised the East-West Link over the Metro.

Here are some possible explanations that might’ve figured in the government’s decision-making processes (bearing in mind these projects are competing for limited funding but they’re not substitutes for each other i.e. they have largely different functions and markets):

  • The Premier said yesterday the business case for Stage 1 of the freeway is positive. However he won’t release the business case publicly, he says, because that could adversely affect the price the government would have to offer potential private sector participants.
  • Voters make many more car trips than public transport trips. Circa 90% of all motorised travel in the Melbourne metropolitan area is by car. Only around 10% is by public transport. An ABS survey found 62% of Melburnians hadn’t used public transport in the preceding four weeks.
  • A significant proportion of the risk-bearing funding for the freeway is expected to be sourced from the private sector, helping the government to preserve its AAA credit rating. All of the funding for the rail line would need to come from government.
  • Tony Abbott says he’ll provide $1.5 billion for the freeway if he’s elected Prime Minister in September. He’s explicitly said he won’t fund urban public transport. Julia Gillard hasn’t promised funding for either project (although she’s promised $1.5 billion for a new freeway in Sydney).
  • New urban public transport investments incur high ongoing subsidies since farebox revenue only recovers about a third of operating costs. Toll roads recover all their operating costs.
  • The advantages of rail over roads are mostly in economic costs i.e. externalities. Many of these costs are diffuse and don’t affect the state budget directly, or if they do it’s often well into the future when “it’s somebody else’s problem”.
  • The freeway attracts a wide range of interest groups e.g. it will be used for intra-metropolitan freight and non CBD business-to-business trips. These aren’t served as well by rail.
  • Although new freeways start to congest in peak periods after a relatively short period due to induced demand, they provide much faster trips in off-peak periods. That benefit is usually sustained for many years.
  • The freeway does double-duty – it provides political cover for the government to delay committing to a rail line to Doncaster.
  • The cleverly-named East West Link will fill in a “missing link” in the freeway network. Politicians know that emphasising the network effect is an appealing argument.
  • There’s opposition to Melbourne Metro from within the ranks of public transport advocates.

There are doubtless other possible explanations. I think the important lesson this list suggests is that there are underlying or ‘structural’ reasons why state governments from both sides of politics are likely to tend to favour investing in new freeways ahead of new rail.

Significantly increasing and sustaining the level of investment in rail relative to freeways in the long-term requires more than the conventional road vs rail arguments, many of which focus on environmental issues that governments seem happy to ignore.

It requires policy to focus on other pressure points, including on land use changes; on achieving a higher level of cost recovery; and on making driving more expensive relative to rail.