Moorebank Freight Hub: The True Last Mile of the Digital Economy

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One of the major issues for the digital economy in Australia has less to do with the availability of a connection to the internet, and more to do with getting goods purchased via the net to one's front door. The Moorebank Intermodal Terminal might just provide the model solution for the true last mile of the digital economy: home delivery.

Much has been said about the importance of connectivity and the benefits of internet communications. Many have hinted at the environmental-saving benefits of reduced travel and so on. But in practice, Australia's distribution infrastructure has evolved from a number of legacy transport technologies that would benefit from greater intermodal connectivity.

This week, the federal government signed an agreement with the Moorebank Intermodal Company (MIC) and the Sydney Intermodal Terminal Alliance (SIMTA) to develop the Moorebank Intermodal Terminal. SIMTA is a consortium established by ports and logistics operator Qube Holdings (67%) and rail freight operator Aurizon (33%). MIC is a government business enterprise that will be privatised once the terminal is operational and commercially sustainable. Details of the proposed development can be found here.

The basic purpose of the terminal is to move more freight out of Port Botany via rail. At present, some 5,000 shipping containers are moved to and from the port by road each day. The Moorebank hub will reduce the number of container trucks in Sydney but also encourage more interstate containers to be moved via rail. This is good news for the rail industry and will no doubt provide greater incentives for an increase in rail freight.

The benefits of rail freight include lower road maintenance costs and increased road safety due to a decrease in large trucks on the highways and in greater Sydney. The Westconnex project will facilitate greater movement of goods in the local area. As the digital economy continues to grow, it is not unreasonable to expect the number of light trucks to increase in local areas. Indeed, it is not uncommon to see delivery vans from various providers ranging from Australia Post, to Coles and niche providers such Lollypotz in most local areas. Of course, an increase in home delivery means a decrease in the number of cars on the road.

The design of the hub will include the use of warehouses as noise buffers for rail operations while taking advantage of Commonwealth land that is otherwise underutilised.With Sydney Metro Airport Bankstown and the proposed developments at Badgerys Creek nearby, the Moorebank hub should be the catalyst for major change in how freight distribution is managed in Australia.

But not everyone is happy about the proposed logistics hub. A concerted effort by Liverpool City Council and local members suggests that the Badgerys Creek site would be better suited to serve the needs of Sydney's future freight movement. Most of the opposition centres around the impact on  local neighbourhoods and health with predictions of "84% more trucks on the Hume Highway, 350% more trucks on Moorebank Avenue, and 22% more trucks on the M5 west of Moorebank Avenue".

But what is the alternative?

Property markets change, neighbourhoods change, Sydney's growth will continue. The problem will

not go away and less action will result in greater problems in the future. Even with the Moorebank freight hub approval, it will not be in operation until 2017. And this is in a location where public and private sector interests coincide, along with a willingness for large-scale private sector investment. The advantages of the Moorebank site are available now and would fit in with other investments in Westconnex and the Badgerys Creek development. 

But simply waiting for the stars to line up at Badgerys Creek in the same way they have at Moorebank is nothing less than wishful thinking. The Moorebank logistics hub is an opportunity that should not be missed. The challenge, of course, is to manage the disadvantages experienced by residents and local neighbourhoods. 

Nonetheless, some of the most important challenges to our future standard of living are plagued by nimbyism. And managing the social, political, environmental and economic disadvantages in local neighbourhoods while ensuring Sydney doesn't choke itself to death is not a policy challenge for the faint-hearted. But the true last mile is indeed the last straw, and the digital economy marches on.

Book Notes: "A Passage to India" by E.M. Forster

A Passage to India by E.M. Forster

My rating: 3 of 5 stars


This novel pre-dates Orwell's Burmese Days, so it is one of the earlier works that self-consciously examines Orientalism. However, unlike Burmese Days, I found it hard to get into. It must be Forster's near-Victorian style - it seems more like Joyce than it does Ford. Along with detailed notes to every chapter, it felt more like a work of non-fiction than a story based on Forster's travel experiences. Obviously important, but somehow shallow. Maybe this was an attempt to minimise the political backlash that was more likely to occur in the pre-Hitler period than it was in Orwell's time? Regrettably, this one goes down as "having read a classic" rather than a great literary experience for me.



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Labour and Infrastructure: Flogging the dead horse before you've even built the racecourse?

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The Productivity Commission, at the government's request, is seeking to identify improvements in the workplace relations framework through a public inquiry. In the meantime, Australia's competition ranking in IMD World Competitiveness Yearbook has slipped from 17 to 18 with New Zealand jumping ahead of Australia for the first time in 18 years. Is this a case of flogging a dead horse before you've even built the racecourse?

In his 2013 election speech, Prime Minister Tony Abbott said "I hope to be an infrastructure prime minister who puts bulldozers on the ground and cranes into our skies". Infrastructure is essential to ensure Australia's future standard of living and has long been identified as a source of poor performance in national productivity.

But the extent of the problem is now becoming obvious. 

CEDA headed up the IMD survey in Australia and, according to CEDA chief Professor Stephen Martin, the survey results suggest that "we just don't have any movement on any major infrastructure projects... There doesn't seem to be an infrastructure prime minister".

This follows the release last week of an Infrastructure Australia report that warned the cost of road congestion "would quadruple by 2031 to $53 billion". The impact of inadequate infrastructure on labour productivity could see traffic congestion (rather than an apparent lack of flexibility in the workplace relations framework) responsible for one of the biggest drags on Australia's economy.

Despite the poor performance of infrastructure, Australia's labour productivity continues to perform well in the short to medium term. But labour productivity is not so good when viewed over the longer term. Indeed, recent growth is still well below the levels achieved in the 1990s. But is that sufficient grounds to continue to focus on workplace reform when infrastructure efficiency is inadequate?

Of course, workplace reform is important as lifestyles - and markets - do change. But with infrastructure - and transport infrastructure in particular - so out of whack, is it not a case of flogging a dead horse when you haven't even built the racecourse?

Well, not exactly. The analogy is more accurately put as a case of flogging a dead horse at a race where nobody paid the price to enter the racecourse in the first place. Australia's infrastructure problems are less about building more infrastructure, and more about using the infrastructure we do have more efficiently.

In politics, the efficiency of infrastructure, in particular, the issue of road pricing, is trying but is not quite getting on to the policy radar. Instead, we seem keen to build more roads that will need to be maintained out of unidentified funding somewhere in the future.

To be sure, Transurban CEO Scott Charlton has launched a major campaign to introduce road pricing in Australia. The OECD, Productivity Commission, the Harper Review, the Henry Review and now IMD all point to the need to address the inefficiency of transport infrastructure. But this is in the face of the "infrastructure prime minister" who said of road pricing, "I think it’s not one that’s ever likely to be accepted by any government".

And the resistance is not likely to go away any time soon. In today's Australian Financial Review, the NRMA is calling for toll road prices to be regulated in line with inflation, rather than on purely a market demand basis.

The point is that when it comes to labour productivity, we are all about defending our pay and conditions while employers and governments try to reduce pay and conditions - often under the guise of flexibility - in a bid to grow labour productivity. But when it comes to paying for the roads we use every day, consumers and governments seem to be happy with the status quo.

As American economist Anthony Downs suggests, the solution to traffic congestion is more likely to remain that people will simply line-up to use roads at peak times because nobody wants to work at different hours or catch public transport or pay to use roads. Lining-up, then, is how we deal with transport infrastructure inefficiency.

 

This is much like the massive Boxing Day sales where people gave up their dignity to buy a microwave for $5. I'd rather pay the full price and keep my dignity.

So to come back to my dead horse analogy, it would seem that people are willing to flog the dead horse because nobody wants to pay for going to the race. How we solve this problem is anybody's guess, but until we do, labour productivity measures will force down pay and conditions all so that we can line-up to wait for access to our free roads. It is all very irrational. But then again, and despite what economists might like to tell us, so is human behaviour.