RAIL TRANSPORT IN VICTORIA

Rail Transport in Victoria

Rail Transport in Victoria

Introduction

This paper describes some of the recent changes to the rail transport scene in Australia, particularly the implications of the national competition policy based reforms and the opening up of railway tracks to third-party access.



Changes to the legal framework

To encourage and promote competition in Australia the Commonwealth, State and Territory Governments have sought to remove barriers to effective competition and to prohibit anticompetitive behaviour by fh-ms. The Trade Practices Act (TPA) was enacted in 1974 to protect the rights of consumers and to encourage and foster competition and fair trading. Recent changes to the TPA have focused on providing open access for third parties to facilities which are considered essential and which will increase competition (www.acn.net.au).

The practical difficulties and high costs in duplicating infrastructure facilities can be .an effective barrier to competition and open access to these facilities, for a fee paid to the owner or lessor, can increase competition. Infrastructure can also have natural monopoly characteristics where scale economies from a single facility can deliver the lowest unit cost. Previously, the TPA, and the law more generally, did not adequately provide for the position of a competitor in one market who was unable to compete effectively because another party had control of and would not give access to, a facility which was essential for competition. The new competition laws are now being administered across all sectors of the economy, but most notably in relation to gas pipelines, electricity transmission grids and railway lines (www.railserve.com).

Competition or bust!

Competition laws only provide for access to infrastructure under certain conditions, e.g.

Access is necessary to promote competition

The infrastructure is of national significance and is not economically feasible to duplicate.

The original authors of the competition policy reforms clearly had in mind essential infrastructure with a high degree of market power (www.harmfuladditives.com).

In Australia, this reasonably characterises the high-density coal lines such as the Hunter Valley in New South Wales, where there is no reasonable alternative to rail and railways have historically been able to extract monopoly rents. However, they were much more circumspect about more general application of the laws and suggested a case-by-case review of the potential costs and benefits/. When it comes to railways, however, there seems to have been a general presumption (not based on any real analysis) that the potential benefits from an open access regime covering all railway lines, even light density lines, will outweigh the costs. Indeed, there has been a form of competition McCarthyism with those speaking out against the reforms (typically railway operators) dismissed as vested interests and 'anti-competitive' (www.vic.gov.au).

To be fair to some policy makers, open access has been used as a means to another end, namely overcoming objections to privatisation of the railway and, on the evidence so far, seems to have had little material effect on the value of the railway in the sales process. A recent test case has halted the potential expansion of open access into private railway ...