Transportation costs are a major issue for Australians, with most of our top-end fares on the country’s major rail lines going for less than the cost of the ticket.
But it seems that rail transportation is no longer cheap.
It is estimated that the cost for a single round trip from Sydney to Melbourne is more than double that of a round trip on a public transport system such as the national public transport network.
According to a new study by the Institute for Fiscal Studies, Australia’s rail transportation system is already paying out almost $100 billion in taxpayer-funded subsidy payments to the rail industry.
Australia’s transport minister has said he expects the cost to rise as freight rates rise and the cost-per-kilometre of freight in Australia’s transport network increases.
This means that a single journey from Sydney’s CBD to Melbourne’s CBD could cost up to $250 more than a similar journey on the national rail network.
In the case of the national railways, the cost is more complex.
Australia’s railways rely on government subsidies to operate, and they are expected to receive $17 billion from 2020 to 2021.
So the government pays the cost through the rail subsidy, which in turn provides funds for the rail company to run its business, and it’s not unusual for the government to be the main beneficiary of the rail subsidies.
So far this year, the government has spent $18.6 billion on rail subsidies, of which $7.6bn is expected to go to the railways.
However, this is only a fraction of the total subsidy paid by the rail sector.
According to the Australian Bureau of Statistics, between 2015 and 2020 the government spent $23.3 billion on transportation and $21.4 billion on freight subsidies, which is almost double the total rail subsidy.
The Australian Bureau said that the rail system had the highest average cost per kilometre of rail in the developed world, and that average cost of a single kilometre was almost $2,400.
“A number of factors make it expensive to run the rail network,” the Australian Institute of Transport and Technology (AIT) told the ABC.
“[The] rail subsidy provides the government with a buffer to protect its interests in running the rail franchise.
This includes the government’s role in ensuring that the railway operates on the lowest possible cost of operating.
It also means that the public is protected from the full impact of fare increases and costs of capital projects.”
The report found that freight rates were rising rapidly, with rail freight rates rising from $1.75 to $2.70 a kilometre in the first three months of this year.
And in May, freight rates rose by almost $6 per kilometer, and by nearly $30 per kilomete over the past year.
The rail subsidy is not just a cost for the railways, it is also a cost to taxpayers.
Under the Federal Government’s rail subsidy scheme, the Government provides funding to rail companies through the Rail Infrastructure Fund.
Since the inception of the scheme, taxpayers have paid $3.5 billion into the fund, which has now been increased by $2 billion.
By 2020, the total funding earmarked for rail infrastructure projects will be $25 billion, with the Government spending $4 billion.
According the AIT report, the rail program was a major driver of Australian productivity growth, with productivity gains from new rail infrastructure costing $11 billion per annum.
“The cost of Australia’s railways to the nation has risen by more than 60 per cent over the last four years, with freight costs in particular accounting for more than $10 billion in recent years,” the AITS report said.
“As the rail budget has been reduced by almost half, rail subsidies are now being used to pay for these increases, further driving productivity gains.”
But the rail cost of rail subsidies is not the only thing driving up freight rates.
Currently, there are some major road freight tariffs that are levied on freight that is headed for Australia’s ports, which have an impact on the cost per km of freight.
Transport Minister Darren Chester said that if the Government had not acted to protect the rail and freight subsidies then the price of freight would have increased, which would have affected the competitiveness of the industry.
“This is why the Government has worked to improve the rail infrastructure program to make sure the freight subsidy is paid for,” he said.
“These changes have not only benefited rail freight and the economy, but also made it easier for Australian businesses to attract overseas customers to their supply chain.”