Taxpayers hoodwinked by High Speed Rail

By Unconventional Economist in Australian budget

August 6, 2019 | 6 comments

The Guardian has run a detailed report explaining how Australian taxpayers have given “$8m of $20m earmarked to progress high-speed rail to a consortium led by a man who has no expertise in major infrastructure projects, who had been a bankrupt and who was once a National party candidate”:

The Consolidated Land and Rail Australia consortium, better known by its acronym Clara, is headed by Nick Cleary, a would-be property developer from the southern highlands of New South Wales.

Cleary is a man with big dreams. Clara has sold bureaucrats and ministers on a vision so large it’s almost eye-watering: a high-speed rail network between Melbourne and Sydney that would open the way for not one but eight new cities, each between 200,0000 and 600,000 people, to be constructed along its route.

They would rise from the paddocks over the next 50 years, taking the pressure off Sydney and Melbourne as workers moved to the regions, but still with access to highly paid jobs just an hour away by rail.

Some of the new centres would be planned for the outskirts of existing regional towns, helping to revive their economies.

“The policy on population has failed because we have failed to overcome the tyranny of distance,” Cleary says. “Between now and 2061 we are going to grow the population by 15 million. Our plan is to build cities at scale connected by high-speed rail.”

Proponents say the “value uplift” of turning rural land into city and suburban blocks – generating billions for Clara – would more than cover the cost of the rail line, well north of $100bn, plus the estimated $5.5bn of infrastructure such as roads, water, waste services, schools and hospitals needed in each new city…

An investigation by the Guardian has revealed that Clara has no office – its principal place of business, according to Asic records, is the office of its law firm, DLA Piper in Melbourne. It has just $422,000 in paid-up capital and so far has no major shareholders or directors with expertise in infrastructure projects, property development, construction or financing.

Asic searches show a web of companies behind Clara, but the ultimate controlling shareholders are Cleary, his wife, Erin Cleary, and his assistant, Alexandra Johnson, who acts as Clara’s contact point.

Cleary says there is a separate consortium agreement and “there are a number of firms that are funding us while we pass those milestones” of developing the business plan…

The Guardian has also learned that many of the options Clara signed with landowners along the proposed route for the high-speed train have lapsed, leaving a bitter taste for farmers who were swept away by Cleary’s promises of cities rising from the paddocks…

The farmers who signed up with Cleary in 2017 thought they were on the cusp of a gold rush that would change their lives. But two years on Cleary has not been seen for months, and the options agreements have lapsed…

Cleary’s background seems to have passed the Department of Infrastructure by when it funded him.

Around the southern highlands, memories of Cleary’s plan for developing dairy farms, his own included, are still raw. Several families lost money.

Asic records show that the agricultural finance company CNH Capital filed to place him in bankruptcy in May 2010. Cleary sought to discharge the bankruptcy a year later but failed to provide written information about his property and income. He was discharged from bankruptcy in June 2013.

In an excruciating session of Senate estimates last year the deputy secretary of the then Department of Infrastructure, Regional Development and Cities, Luke Yeaman, and the head of rail policy, Andrew Hyles, were forced to admit they were not aware of Cleary’s bankruptcy or that Clara had just $422,700 in capitalisation…

MB has explained many times why the East Coast High Speed Rail (HSR) project does not stack up, namely:

  • The exorbitant cost associated with building and operating the rail line;
  • Lack of population density to support the project; and
  • Lack of competitiveness against air travel unless there are massive ongoing operational subsidies from taxpayers.

The proposal put forward by CLARA states that the HSR line could be funded via value capture. However, in order to make value capture work, the train would have to make too many stops – making it a high-speed train that moves at a snail’s pace.

Sure, the government could get around this problem by running express trains from town X,Y,Z into the capitals, but this would result in far less passenger utilisation per train, deeper investment in rolling stock, and much bigger operational subsidies.

This is a key point: to encourage people to move to regional centres and then commute into the CBD for work would require fares to be kept affordable, which in turn would require heavy subsidies from the government. After all, there’s little point moving from, say, Melbourne to Shepparton, and saving $300,000 on a house, if it costs you $200-plus a week to travel into the Melbourne’s CBD via HSR.

The proposal is for eight new cities with populations of between 200,000 and 600,000 people to be established on this rail line between Melbourne to Sydney. So, that’s between 1.6 million and 4.8 million people living in new cities west of the great dividing range. Where is the water going to come from? Don’t they realise just how dry this country is west of the Great Dividing Range? NSW is already experiencing a severe drought, and adding millions more water consumers is obviously unrealistic.

Finally, and perhaps most importantly, the biggest barrier to HSR is getting from the outskirts of Sydney, Melbourne or Brisbane into the CBD.

These trains are not compatible with suburban commuter trains unless they slow to the same slow speeds due to alignment and congestion, in which case they are no longer HSR. Further, the current commuter train systems in Sydney and Melbourne are already at capacity and cannot cope with existing demands, let alone imposing a HSR network.

This means HSR would need to be separated from the existing commuter network via new train lines and stations. And since our major cities are already build-out, this would necessarily require acquiring some of the most expensive capital city real estate in the world or tunnelling under it, either of which would cost a small fortune.

The above Guardian expose is wonderful material for Utopia, which has already ridiculed HSR:

Lots of wasteful activity at great expense to the taxpayers via a LNP crony…