With the COVID19 crisis continuing to wreak havoc around the world, there is a growing debate about how to stimulate Australia’s struggling economy. Could the rail industry and its supply chains offer one possible route to recovery?
On 2 September, data from the Australian Bureau of Statistics (ABS) confirmed what many people had been expecting for most of 2020: Australia was officially in recession. Gross domestic product (GDP) shrank by 7% in the June quarter, the largest contraction since records began in 1959. With the COVID-19 pandemic continuing to have a devastating impact, both here and worldwide, the economic outlook is the bleakest it has ever been since the Great Depression of the 1930s.
Confirmation of the recession also intensified a debate that had already been building since the COVID-19 crisis began: about ways to stimulate the economy as we emerge from the pandemic. While the Government’s stimulus measures so far have concentrated on emergency assistance for individuals and businesses affected by the downturn, there is a growing sense that more far-reaching measures will be needed, including funding for large-scale projects in infrastructure such as energy and transport networks. One notable voice backing investment in the rail sector and its supply chain is opposition leader Anthony Albanese. In a speech in May, Albanese cited rail as an area with the potential to play a key role in rebuilding Australia’s economy.
“We must invest in nation-building infrastructure including iconic projects like high-speed rail and we should be building trains here,” said Albanese. “Government procurement policy in rail manufacturing has produced superior outcomes to imports, and created regional jobs in Queensland, Victoria and Western Australia.”
Albanese renewed his call for high-speed rail in another speech in September, but it remains something of a pipe dream for Australia. Although proposals for a network linking the country’s eastern cities have surfaced intermittently for decades, significant questions remain about its feasibility in a country like Australia. However, we do have a substantial rail manufacturing industry that offers a strong foundation to build on.
According to the Australasian Railway Association (ARA), rolling stock manufacturing generated about $3bn of revenue in 2016 and contributes about 4,000 jobs to the Australian economy. The sector is led by companies including Alstom, Bombardier, Downer and UGL, with more than 900 companies involved in manufacturing and supply across the industry. Rolling stock manufacturing and assembly capability currently exists in Cardiff and Broadmeadows in New South Wales; Dandenong, Ballarat and Newport in Victoria; Maryborough in Queensland; and East Perth in Western Australia.Moreover, rail manufacturing is an important industry for our regional centres, with 46% of rolling stock manufacturing and repair services jobs located outside of the eight state capitals.
Nonetheless, not everyone seems to share Albanese’s conviction that we should be building trains in Australia. In August, New South Wales Premier Gladys Berejiklian reportedly asserted that “Australia and NSW are not good at building trains, that’s why we have to purchase them.” Berejiklian was speaking a week before the arrival in the state of a fleet of Chinese-built Waratah 2 trains. Unveiling the new trains, NSW Transport Minister Andrew Constance went further, saying “there’s a reason” why they were imported: because locally manufactured trains would – he claimed – be likely to cost 25% more than imports because of our higher labour, energy and material costs.
The comments drew widespread criticism. Albanese said: “Australians are great at building trains. The Tangara trains built in Newcastle have been the backbone of the Sydney rail network for decades. With demand for new rolling stock about to skyrocket, we need a national rail plan. We need to use the power of government purchasing to help revive and grow manufacturing in this nation.”
Geoff Crittenden, CEO of Weld Australia, echoed Albanese’s remarks, urging state governments to adopt procurement policies that would create jobs, a solid local supply chain, and an industry equipped to export trains all over the world: “Australia already has a substantial rail repair and maintenance industry. But it is not being supported by the state governments. Only weak-minded nations and leaders export strategically critical infrastructure projects. It is precisely this attitude – that sees state governments send what could be local jobs offshore – that will prevent Australia from recovering from the COVID-19 pandemic”
Manufacturers also took issue with the NSW Government’s claims. Based in Bayswater, Victoria, Catten Industries has been involved in rail manufacturing for nearly two decades, producing parts for trains and trams in service across Australia as well as overseas. Catten’s managing director Ian Cubitt described Constance’s comments as “ill-informed”.
“I can categorically tell you we have the people, the knowledge and the facilities to manufacture trains and trams locally,” said Cubitt. “We just need the informed support of the decision makers to back the locally produced product. Germany can certainly do it, with high wages, so that is not an excuse. Keep the work local and allow our generation and future generations to improve and sustain a local supply chain, rather than supporting the growth of economies that are not conducive to building a better Australia.”
Advocating for rail
The Australasian Railway Association (ARA) also criticised Berejiklian and Constance’s remarks. CEO Caroline Wilkie said state government failures to adopt a nationally consistent procurement process – one that considers the whole-of-life costs of critical public transport assets – were behind moves to source overseas content.
“Passenger trains are being manufactured right here in Australia to the highest international standards,” said Wilkie. “There are facilities across the country that can design, manufacture, maintain and repair rolling stock to individual operator specifications, if government purchasers make the choice to do so.
“Australia builds trains very well and has a rich history of doing exactly that. When governments make choices to prioritise local content, they secure an outstanding quality of product while supporting local jobs creation and strengthening our supply chains.”
As the peak body for the rail sector in Australia and New Zealand, the ARA represents more than 150 member organisations including listed and private rail-related companies, government agencies and franchisees. Members include passenger and freight operators, track owners and managers, suppliers, contractors and consultants, as well as a significant cohort of manufacturing businesses.
“Manufacturers are a key part of the rail industry and many are ARA members,” says Wilkie, who has been CEO at the Association since February. “We work with members ranging from large manufacturing firms with a global footprint, through to local suppliers delivering rail products and services at the state level. Our Rail Industry Group supports the development of the ARA’s policy and advocacy agenda on issues relevant to rail manufacturers and suppliers.”
The ARA recently released its tendering framework, aimed at providing a best-practice guide for rollingstock and signalling tendering in the Australian rail industry. Since its launch, the ARA has been advocating for a nationally consistent approach to rail procurement in Australia. Further research to provide a deeper understanding of the rail supply chain is also underway.
The rail industry has continued to provide essential services to the public during the COVID-19 crisis, and the ARA has been working closely with its members during this time to ensure a whole-of-industry response to the pandemic. It also engaged with government regularly on the unique issues facing the rail industry during COVID-19.
In addition to its advocacy work, the ARA runs the AusRAIL Conference and Exhibition, the leading industry event for the rail sector in Australia and New Zealand. This year the organisers have bowed to the constraints imposed by COVID-19 and will be holding the event online; AusRAIL Live & On Demand will take place on 1-3 December, bringing together speakers from across the industry worldwide, and a dedicated online exhibition featuring live demos. The ARA also runs an extensive calendar of industry events throughout the year.
“We are currently hosting a series of Meet the Buyer webinars to give manufacturers and suppliers the chance to hear direct from transport departments, operators, major projects and Tier 1 suppliers about major projects, upcoming tenders and new works packages,” Wilkie adds.
((subhead))
Projects picking up pace
While there is little sign as yet of Anthony Albanese’s call for high-speed rail being met, governments across Australia are still pressing ahead with a variety of infrastructure projects that will create opportunities throughout the rail industry supply chain. In Victoria, the State and Commonwealth Governments in July announced the commitment of more than $300m in additional funding for the Regional Rail Revival program, bringing the total investment to more than $2bn. The Regional Rail Revival program is upgrading every regional passenger rail line in Victoria and creating 1,000 jobs.
More recently, the Victoria and Commonwealth Governments announced a $28m investment in direct rail freight between the Port of Melbourne and Dandenong South, with a new track connecting the main rail line with Dandenong South-based Salta Properties freight hub. The upgrade will connect to the Port of Melbourne’s $125m on-dock rail project, allowing shuttles to run from Dandenong South directly into the port. Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development Michael McCormack said the new freight rail link will support hundreds of jobs.
“We are backing this vital freight rail connection to support Melbournians through the pandemic and unlock private sector investment and economic growth into the long-term,” McCormack said. “The new spur line will connect the intermodal freight terminal at Dandenong South to the Cranbourne Line. As part of the Port Rail Shuttle Network it will help cut the number of trucks on inner Melbourne roads by up to 100,000 each year and support hundreds of jobs during construction and as part of the terminal’s ongoing operations.”
In NSW, the State Government has announced the investment of $28m in a project to upgrade the Tamworth Intermodal Rail Line to support regional NSW’s freight sector, creating hundreds of regional jobs. Deputy Premier John Barilaro said the investment will fund works to reinstate a section of non-operational railway line, support the development of an intermodal rail facility in Westdale and link Tamworth to the state’s major port.
“This significant investment is key to the development of the new intermodal rail hub that will better connect Northern NSW’s producers and businesses to the world,” Barilaro said. “This funding will restore and raise five kilometres of track on the West Tamworth to Barraba line and install new level crossings to activate rail freight access to Tamworth’s new Regional Freight Terminal. When complete, a functioning intermodal rail hub and freight terminal in Tamworth will create a direct rail route to vessels docked at Port Botany, saving businesses significant freight costs.”
Perhaps most ambitiously, in Western Australia, the State Government has embarked on Building for Tomorrow, the biggest transport infrastructure program the state has ever seen, and intended as a key driver of its COVID-19 economic recovery. More than $6.5bn has been committed to major infrastructure projects over the next two years, with $2bn to be spent on regional projects.
“As part of our WA Recovery Plan we’re making immediate investments in job-creating initiatives to help us rebound stronger than ever,” said Premier Mark McGowan. “And we’re also pushing ahead with the biggest ever investment in transport infrastructure.”
A major component of the Building for Tomorrow program is the METRONET construction program, which will add approximately 72km of new passenger rail and up to 18 new stations. In addition a new assembly facility is being built at Bellevue, where Alstom Transport Australia will built 246 new railcars to replace trains currently in service in WA. Bassendean-based manufacturing company Hofmann Engineering has been appointed by Alstom to manufacture bogie frames for the trains.
Grasping the opportunity
In April the ARA surveyed 58 Australian and New Zealand rail suppliers, contractors and freight operators about the impact of COVID-19 on their business. The survey found that constraints on the international shipment of goods and a decline in customer spending had been the biggest impacts of the pandemic on the rail industry, and that the most important thing governments could do to support the recovery was maintain their project pipeline.
The survey also revealed a significant opportunity for local manufacturing and production. Responses from rail manufacturers, suppliers and contractors indicated that many businesses are looking to increase their use of local suppliers in the wake of COVID-19, with 75% of participants considering changes to their supply chain planning to seek more suppliers within Australia or their home state. Caroline Wilkie sees this as a unique opportunity to strengthen the local supply chain and create new jobs in the industry as part of Australia’s economic recovery.
“There is $155bn in rail investment planned in the next 15 years, so there is a huge opportunity to realise more Australian jobs and economic benefits if the local manufacturing industry plays an increasing role in rail industry development,” says Wilkie, adding that there is also notable export potential. “There is a significant global rail manufacturing industry, and Australia’s reputation for quality delivery is well known.”
Nonetheless, there are still a number of major challenges facing manufacturers in the rail sector in Australia. Wilkie believes that many of these issues are compounded by flaws in government procurement policies.
“Procurement processes for rail manufacturing are fragmented, with state and territory governments taking different approaches to meet their local needs,” she explains. “This means specifications can differ from state to state due to historic procurement practices, often requiring bespoke approaches for each jurisdiction. Greater economies of scale could be achieved with a nationally consistent procurement process that takes away the need to tailor product and service offerings by state or territory.”
The ARA’s survey found that the industry is optimistic that the recovery would be fast once the full impact of COVID-19 was over. When asked how quickly they’d get back to normal once the impact of the pandemic had passed, most respondents forecast a relatively fast resumption of the activity levels reached prior to the crisis. However, there was also heightened demand for further government action to support a powerful rebound, including additional stimulus measures, together with strong local content policies and smarter procurement processes.
“A nationally consistent approach to rail procurement would improve productivity in the Australian manufacturing sector and provide new opportunities for jobs creation,” says Wilkie. “Local content policies that take a national focus, rather than state or territory focus, would also allow manufacturers to invest in larger, more efficient manufacturing hubs to service the Australian industry.
“The experience of national cabinet this year has shown that a national approach is achievable, and we would like to see greater co-ordination to support the industry’s post COVID-19 recovery.”