Invest in the invisible: Well-connected freight to improve productivity and sustainability

There needs to be a long-term, cohesive effort by governments and industry to get this right. Government’s role is to make targeted infrastructure investments and to create the right policy settings, so that industry has the confidence to invest in the right operations, writes WSP's Sam Potts and Jim Hirst.

An optimal freight system often works without people noticing. It can easily be overlooked and undervalued.

But recent experiences of freight disruption have heightened people’s awareness of this backbone of the economy. The COVID-19 pandemic, war, extreme weather and industrial action showed Australians just how much they rely on the freight network, both for their everyday goods and the prices they pay for them.

While these disruptions were partly the result of exceptional events beyond our control, they also exposed the vulnerabilities of our national and international freight networks.

Outside large mining areas, much of Australia's freight productivity is lagging that of other nations. Future trends and events will further test our freight system, including:

• Freight demand forecast to increase by 26% by 2050

• Big changes to the composition of freight (less coal, more commodities such as grain and steel, and more online shopping parcels)

• More competition for space on congested transport networks

• Transitioning industry to meet decarbonisation targets, and

• Growing community expectations for faster and more reliable deliveries. 

There is a big task ahead to futureproof the freight system for a more productive, resilient and sustainable Australia. There needs to be a long-term, cohesive effort by governments and industry to get this right. Government’s role is to make targeted infrastructure investments and to create the right policy settings, so that industry has the confidence to invest in the right operations. So how can we get freight moving faster, cheaper, and more reliably, while minimising impacts on people and places?

A technology-friendly, innovative ecosystem

Adopting new technology and encouraging innovation could dramatically advance freight movement. This includes digitisation, electrification, automation, tracking technologies and freight facilities that optimise intermodal transport. Automated production and warehouses, autonomous trucks, predictive shipping and rerouting, and last-mile drone deliveries are examples.

Government can proactively support the adoption and integration of advanced technologies and create the conditions for a technology-friendly ecosystem through fit-for-purpose, harmonised regulatory frameworks and safety standards. This can also include carbon-reduction initiatives, which will contribute to climate-change mitigation and improve the long-term financial sustainability of the freight sector.

Optimise existing assets

Existing freight-network asset capacity, connectivity and reliability can be maximised through infrastructure and policy solutions. Improving the consistency and transparency of access between states and jurisdictions, and infrastructure managers across Australia on and between the road, rail and aviation networks will help.

On the road network, automating access and supporting the adoption of modern and future heavy vehicles could improve productivity, safety and the environment. Protecting industrial lands and ensuring they are connected to key freight routes is also important.

On the rail network, investigating opportunities to run urban freight shuttles, including breaking up regional freight entering cities, improving the alignment of rail freight paths across networks and with windows at ports, as well as a review of the access regimes to better incentivise industry investment are potential solutions. Other opportunities include better separating rail freight and passenger services and targeting identified bottlenecks, to prevent interruptions to both freight and passenger services, and providing dedicated rail freight lines to intermodals.

Resilient infrastructure and operations

A productive, efficient economy leans heavily on a reliable supply chain, which can deliver even in periods of change and uncertainty. This resilience creates trust, which allows industry to work on an efficient ‘just in time’ basis rather than the more cumbersome, wasteful ‘just in case’ models, where producers and suppliers build up large, unproductive inventories as a buffer to minimise the impact of supply-chain failure, which have become increasingly common in recent years.

Working with the freight industry to better understand the costs of delays to support required investments and delivering infrastructure to create additional capacity can help re-establish trust throughout the supply chain.

Supporting competition, driving down costs

Governments could also explore how to improve competition in the freight and related sectors so that improvements to productivity are passed on to the consumer. Australia has successfully adopted competition policy across much of the economy, however, we need to continue to consider ways to improve competition in the freight sector. Options include: reforming regulations that unjustifiably restrict competition; supporting third-party access to infrastructure; limiting anti-competitive behaviour; and implementing related reforms.

Increasing freight productivity and resilience won’t be easy. It requires cooperation across all levels of government, transport operators and logistics companies.

Importantly, this isn’t just a question of shielding Australia from disruption. There is much to be gained if we make well-targeted investment in our freight networks, which could lead to greater industry confidence to invest, greater business competitiveness, improved productivity, more attractive imports and exports, and lower cost of living. Ultimately, these improvements will benefit the wellbeing of all Australians. It is an opportunity too important to miss.

This article is republished with permission and was originally written and published by the Committee for Economic Development of Australia.

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