Digital innovations are transforming the world. Makes you feel concenred (if not more than a little sad) to be associated with an “old economy” industry like Passenger Rail Transport. Or is it?
Digital innovations are transforming the world. In the post-2000 “tech wreck” suspicions were confirmed concerning technology based companies with no earnings history and bubble-based market valuations in an overall US market valued at 29 times earnings. Today’s market is closer to 20 times earnings and the most successful tech organisations are profitable, with proven business models based on technology that has evolved exponentially since 2000. Does this raise concerns about being associated with an “old economy” industry like Passenger Rail. Or is it?
High-speed Passenger Rail (as suggested by the name) operates significantly faster than traditional rail traffic on dedicated tracks. The system originated with the Bullet Train, which commenced operations in Japan in 1964 on what became the Shinkansen network.
Some relevant facts:
- Over the years since 1964, many countries have developed high-speed rail to connect major cities including Austria, Belgium, Britain, China, France, Germany, Italy, Japan, Poland, Portugal, Russia, South Korea, Spain, Sweden, Taiwan, Turkey, the United States and Uzbekistan;
- The transport technology is mature (read “trusted”) and the cost base is set to be revolutionised by major Chinese railway companies with the opportunity to exploit economies of scale based on huge domestic demand. China’s high-speed rail plans are ambitious, aiming to invest $300 Bn to construct a 30,000 km network as the largest, fastest, and most technologically advanced high-speed railway system in the world by 2020. There was plenty to see on this subject at the (soon to be merged?) China North Rail Corporation and China South Rail Corporation stands at the 2014 Innotrans Exhibition:
- Passenger train services, whilst traditionally regarded as “second class” transportation by some sectors of the population, are set to be revolutionised by technology that improves reliability and punctuality and enables customer interaction with services via mobile technology in ways that will satisfy what is rapidly becoming our “business as usual” expectations;
- Whilst Brisbane, Sydney and Melbourne are not amongst the largest metropolitan areas in the world, the distances between these centres makes high-speed rail transport a competitive option with air travel when taking total origin to destination times into account. This assertion is based on the experience of high speed rail in Europe, which has proved to be an effective competitor against aircraft for travel times up to 3.5 hours / distances up to 750 km. As a further interesting fact, the 713 km Sydney-Melbourne air corridor is currently one of the busiest in the world by passenger volume;
- As a peek into the future, the Australian Bureau of Statistics predicts that Melbourne and Sydney will each grow to a population of 8 million by about 2050, with consequent increases in travel demand and pressure for emissions reductions;
- High-speed transport links on the East Coast of Australia could enable people to live in cities like Shepparton and Goulburn and commute to Sydney or Melbourne for work. This would make living in these regional areas far more attractive;
- With the independent role of the Reserve Bank in managing monetary policy endorsed by successive recent governments, the Federal Government is left with fiscal policy as its major lever of economic management. High-speed Passenger Rail would be a major investment in economic infrastructure that would require long-term planning but represent a prime opportunity for nation building.
With our economy in a comparatively strong position from a net debt perspective and with a maturing local market for private sector infrastructure finance, one senses that only the short-term nature of politics stands in the way of such an investment in Australia.
Do you agree?
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BE (Mech), MBA