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Transurban's huge profits

Speeches in Parliament
Janet Rice 14 Feb 2018

You may have caught up with news today that Transurban Group's net profits for the six months to June rose 280 per cent, from $88 million to $331 million. How about that? Transurban run 13 out of the 15 toll roads in Australia. City Link in Melbourne is by far its most profitable. Those profits come straight out of your pockets.

Sadly, what we haven't heard in the news today is any announcement from the Victorian government that these soaring profits will trigger an urgent review of Transurban's finances to see whether it is making 'super profits'. If it was found that they were, it would trigger an early exit clause within the CityLink contract and return the road to public ownership. The lack of such an announcement is yet another indication that the Victorian Labor government have essentially privatised transport planning in Victoria. They are sanguine about such massive profits as they work hand in hand with Transurban to build another massive toll road that will add to these profits, the West Gate tollway and tunnel. In short, this is a road designed to create profits for Transurban, not to address Melbourne's transport needs.

But without any touch of irony, Transurban chief executive, Scott Charlton, warned today of 'bad behaviour' from the early 2000s returning to the tollway building business, when returns were 'front ended' and where external traffic consultants 'increased and justified' traffic forecasts. He was apparently claiming that Transurban are innocent of such behaviour in comparison to their competitors. I think he's a hypocrite. Notably, however, what Mr Charlton is hypocritically criticising is echoing the news from a fortnight ago, when the Bureau of Infrastructure, Transport and Regional Economics released its Ex-post economic evaluation of national road investment projects. BITRE's report was scathing. It noted that cost-benefit analysis of road projects as practiced is 'prone to errors' and that there is 'much room for improvement' if they are to be used as an effective tool for project prioritisation.

The BITRE findings also included that the net present value of the projects they studied was overestimated by significant margins due to overestimation of road user benefits and inaccurate traffic forecasts, and that the base cases for projects suffer from overestimation of travel time cost savings. To overcome these concerns, BITRE strongly recommended that independent reviews of traffic modelling results should be mandatory for any cost-benefit analysis. That's where this story gets really interesting, because in contrast to their disingenuous spiel, spinning their line that Transurban are the good guys and the poster child for investors, Transurban are up to their neck doing a dodgy deal that will increase their obscene profits still further.

The exact problems highlighted in the BITRE report are what Transurban is doing in cahoots with the Victorian government to justify their $6 billion West Gate tollway tunnel. Experienced transport planner William McDougall made this clear with his testimony to our Senate inquiry into toll roads last year. Mr McDougall has over 35 years of experience working on major transport projects, and was employed by the Victorian government to support the independent peer review that was done of the economic and transport modelling. He lost his job when he was critical of the work that had been done. Mr McDougall told us that the modelling that the Victorian government used in assessing the proposal for the West Gate Tunnel Project produced higher forecast traffic flows than it should, the cost-benefit analysis was distorted in ways that increased the assessed benefits, it inflated valuations of time saved by motorists, it downplayed induced traffic and it treated land use changes in ways which produced more favourable results in the early years of the project. He concluded that the work of assessing the West Gate tunnel and other projects was actually a process of justifying the road after the decision was made, and considers that there was at least optimism bias and possibly deliberate distortion and misrepresentation of traffic forecasts in the economic benefits that flow from them in the appraisal process. This sounds eerily like the criticisms in the BITRE report, and exactly what Transurban's CEO was disingenuously criticising this morning.

At least there was an independent peer review, I hear you say, but the Victorian government has refused point-blank to make this independent review public. If Transurban are so confident that they are squeaky clean, they could choose to make this peer review public themselves. Funnily enough, they haven't. Here will be the news, I can guarantee, from Senate estimates in two weeks' time when I once again ask Infrastructure Australia about whether the Victorian government have shared that peer review with them: the answer will be no. I've asked this question at every estimates session for the last two years. Every time, Infrastructure Australia agreed that it would be valuable if the Victorian government were to share the peer review, but that they've decided not to. Meanwhile, the Victorian Labor government is barrelling full bore ahead despite not having got planning approval for its road through the parliament, despite not having got its agreement to extend Transurban's CityLink concession through the parliament and even though it knows it has not got the support for either of these critical approvals in the upper house. The Victorian government said that if it doesn't get its legislation through the parliament it will override the need for planning scheme approval, and it will saddle all Victorians with billions of dollars of debt for this road. This is everything that is wrong with transport planning.

There was other Transurban news from last week that will not come as a surprise in this context, and that was the release of the political donations data. This showed that Transurban has paid the Labor Party over $28,000 in donations in 2016-17—in effect, buying political influence to get the policy outcomes they want. But that's not to say we'd be better off with the Liberals. The Liberal Party also received tens of thousands of dollars from Transurban, and also has a serious toll road addiction. In fact, the Victorian Liberal Party's determination to knock off the West Gate tollway tunnel isn't, sadly, because they've seen the light and want to invest in the transport solutions that would solve our congestion and pollution problems—namely, public transport, walking, cycling and freight rail. Instead they want to go back to East West Link, which was roundly rejected by voters at the last Victorian election.

I understand Transurban CEO Scott Charlton has today accused the Greens of being hypocritical and playing cheap politics by trying to kill off the West Gate Tunnel. No, Mr Charlton, no. There is so much that is wrong with this road. It's not just that it siphons billions of dollars into Transurban's pockets and that in doing so it starves public transport of funding. It will funnel thousands more cars into the streets of inner Melbourne. It will destroy Footscray's Maribyrnong River frontage. It will destroy the environment of Footscray Road with a double-decker freeway overhead. It'll cut a swathe through prime inner-city redevelopment sites, leaving them with tens of thousands of cars and trucks cutting through them every day. It's massively expensive transport, really bad for the luckless commuters who have to shell out for tolls which escalate higher and higher every year. It'll result in more air pollution, cancer- and asthma-causing particulates and more carbon pollution, which is causing dangerous global warming. And it will increase the pressure for yet more and more expensive tax-and-toll-guzzling roads just like it. It will not just be North East Link; stay tuned, yes, for the East West Link again, the outer metropolitan ring road and more. If we don't invest in public transport that gives people the choice of getting out of their cars then we will have to keep building these massive roads at massive cost.

There is a way forward out of this mess for Melbourne. It's the way forward that the federal government should be funding. As well as building metro rail, we should be committing to Metro 2 and fast, frequent bus services linking the suburbs. We should be building airport rail. We should be fast-tracking rail efficiencies so we can have trains at least every 10 minutes. We should be fast-tracking getting freight off our roads and onto rail. We should build the West Gate ramps, a much more modest but just as effective project to get trucks off residential streets in Footscray and Yarraville. It really will be news when state and federal governments, Labor and Liberal, finally see sense and join the Greens and the rest of the world in building transport systems that work for people that support clean, green, sustainable cities. I know it's going to happen eventually, so why can't we just get on with it?

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