By Dennis White
Nothing short of a total political turnaround can save Australian National from its imminent break-up and disappearance from the rail industry.
The election of the Howard government guaranteed AN's fate, but the situation AN finds itself in is a consequence of Labor government decisions. The first goes back to the Whitlam era, when the government set about to establish a truly national rail carrier. The Australian National Railways Act (1975) contained a federal government offer for the transfer to the Commonwealth of the states' non-metropolitan rail operations, with direct financial compensation.
From the outset, the success of the policy hinged on the willingness of state governments to cooperate. Only two states, Tasmania and SA, had Labor administrations at the time. Whitlam based the policy on the significant financial burden to the states of their rail operations, but the hostility to Whitlam from the non-Labor governments overrode any financial considerations. Victorian Liberal premier Henry Bolte responded by stating that no socialist government in Canberra was going to interfere with the Victorian Railways.
Tasmania and SA did transfer their non-metropolitan rail operations to Canberra under the act. Those systems, along with the then-Commonwealth Railways, which operated only north of Port Augusta to Alice Springs and west to Kalgoorlie, constituted Australian National Railways, later to become Australian National, which began operations on March 1, 1978.
The absence of the other states placed the long-term viability of AN in jeopardy from that time. A long-term political strategy that changes in state politics would eventually rectify AN's limited base, was really more wishful thinking, .
The Fraser Liberal government was elected in 1975. Bolte retired at around the same time. Bolte's replacement, Rupert Hamer, asked Fraser to take over Victoria's non-metropolitan rail operations to ease Victoria's budget situation. Fraser responded that Canberra was not interested in having such a burden transferred to the federal treasury. AN would remain a sectional rail operator within the national network for the next 15 years.
Eventually, the drive for greater competition and "world's best practice" placed the national rail industry under the spotlight once again. By the late '80s, rail deficits, although determined by questionable mathematics, were becoming unmanageable for the states.
A drastic overhaul was long overdue. Given the correct set of circumstances, AN once again was placed to become what it had always been intended to be, the national rail carrier. Unfortunately for AN and the rail industry, such circumstances did not exist. Government-managed business ventures were contrary to economic orthodoxy, regardless of who was in office.
As well, the states still were not prepared to give control over the future of their internal freight operations to Canberra. What was negotiable was the overhauling of interstate freight operations to be managed by a single entity, but not AN.
With a significant injection of funds into rail infrastructure promised by Labor PM Paul Keating, the states were invited to join the Commonwealth in establishing a totally new rail operator responsible for the carriage of interstate freight. In 1993, the National Rail Corporation began operation. This was the final nail in AN's coffin.
WA, Queensland, NSW and Victoria did not rely on interstate rail operations as a significant source of their rail revenue. But interstate freight was the most significant source of AN's revenue, and this was handed to the NRC, along with locomotives, wagons and other infrastructure. AN's debt in all these areas remained with AN.
The NRC is structured as a private business registered under the Companies Act and it is a member of the Business Council of Australia. At present, the Commonwealth has a 51% shareholding in the NRC, with the states having shareholdings proportional to infrastructure equity.
The NRC is underwritten by the shareholders for its first five years of operation, after which it is on its own. If profitable after that period, it was earmarked for privatisation by the Labor government. If it fails to perform, the NRC will be sold to the highest private bidder. Either way, Australia's interstate rail operations will be privatised within five years.
The consequence of the Hilmer "competition" report on rail is that, since the establishment of the NRC, accredited private rail operators are eligible to compete on the interstate and intrastate rail network; a number of companies have begun operations, some using the existing systems' crews, locomotives and rolling stock on a hire basis, including AN's. The existing systems are not permitted to compete against the NRC.
Under these circumstances, AN has attempted to restructure its remaining operations with core activities being structured as separate business units. Each unit is expected to function independently, making the break-up of the organisation so much easier.
The Brew inquiry into AN's operation was established by the Coalition minister for transport, John Sharp, with terms of reference intended to lead precisely to Brew's eventual report. Basically, it calls for breaking up the organisation, privatising any part that the private sector shows interest in and closing the rest.
Since the release of the report there has been some doubt cast on Brew's impartiality because of his association with the Great Southern Railway company which, while not presently involved in any rail operation, has been indicating interest in buying up pieces of AN. Brew is listed as a consultant on the company's prospectus.
This revelation may cause some embarrassment to the government, but will not prevent the implementation of the report, despite the protestations of shadow transport minister Lindsay Tanner. In fact, the ALP will be relieved to see AN dealt with as expeditiously as possible, since it was that party in government that directly contributed to AN's present perilous state. Out of sight, out of mind!