The Kirby Reports: Volume I - Report

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VII THE STATE RAIL AUTHORITY

1. THE OPTION DESCRIBED

1.1 The Essential Elements of the Scheme

The essential elements of the proposed scheme are:

1. At least four decentralised container parks
should be established. The following were
suggested locations:

the Cooks River Goods Yard

the Rozelle Goods Yard

the existing depot at Chullora

the existing depot at Villawood

2. Import containers would be carried by rail
to the depot nearest their final destination.
For example, if a container was destined for
Leichhardt and was imported through Port
Botany, it would first be railed from Botany
to the Rozelle Goods Yard where it would then
be carried by road to its final destination at
Leichhardt.

3. Export containers would be taken to the depot
closest to their origin. Thereafter they
would be railed either to Port Jackson or
Port Botany as the case may be.

4. The scheme is to apply to all classifications
of container. It would include:

Full Container Loads (FCL)

Less than Container Loads (LCL)

Empty Containers

The scheme would embrace metropolitan, country
and interstate containers.

5. A Statutory Authority would be established. Its
functions remained something of a mystery to the
Inquiry. It would not be responsible for the

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co-ordination of rail and road transportation.
It would have a responsibility to ascertain the
final destinations of import containers or the
origins of export containers so that they can
be directed to the appropriate depot. It would
have a function of maintaining statistics and
suggesting operational improvements.

6. Apart from its involvement in a Statutory
Authority, the State Rail Authority is to
be involved only in the transportation of
containers by rail. It will not share in the
running of depots nor in road transportation.

7. The depots are to be run by private enterprise
and to be let on tender, though advantage is
to be taken of the existing depots at Chullora
and Villawood. The Depot Operators would be
responsible for the cost of establishing the
depots.

8. The road transportation of containers is to
be a highly organised affair. First, the
Metropolitan Area is to be divided into a
number of ‘service areas’ each serving a
particular depot. There will, in addition, be
a fifth service area which will specifically
serve Port Botany. The right to carry containers
within the service areas to or from the depot
(or to or from the Port in the case of Botany)
will be exclusively the preserve of particular
large transport companies which will be selected,
by tender, for that task. Figure 4 depicts the
service areas.

9. The State Rail Authority advanced the view that
to some extent the scheme will be self-enforcing
and that it will not be necessary to establish
an inspectorate to ensure the scheme is not
evaded.

FIGURE 4

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10. It was originally suggested that the scheme
would embrace every wharf in Sydney whether
in Port Jackson or at Port Botany. The
Inquiry investigated the possibility of
extending a rail link to the wharves at
Darling Harbour. It is plain that that is
simply not feasible. Ultimately the State
Rail Authority suggested that either the
Darling Harbour facilities could be included
by means of a shuttle service. or alterna-
tively, these facilities could simply be
excluded and the scheme confined to Port
Jackson terminals on rail.

The rationale for the scheme was said to be the
environmental benefits which would arise from the
transportation of containers by rail. In addition
the State Rail Authority would maintain a trade
which is profitable and which is threatened by
the opening of Port Botany.

Environmental benefits would also arise from the
co-ordination of road transportation. There would
be less ‘empty running'. That co-ordination would
be the responsibility of the five large transport
companies. It would not be the responsibility of
the Statutory Authority or of the State Rail
Authority.

1.2 The Effect of the Scheme

The State Transport Study Group has made a painstaking
analysis of the effect of this option ₍₈₈₎. They do
not pretend to be able to calculate exactly the effect
of any option. To make any calculation it is necessary
to make certain predictions and assumptions. Predicting
the future is, in the nature of things, a hazardous
business. Nonetheless, the predictions and assumptions
made are the same for each option. The calculations

88. Exhibit 139.

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provide a basis upon which one can appreciate
the magnitude of likely effects. They provide
as well a basis for comparison of options.

If the State Rail Authority option were
implemented the result would be ₍₈₉₎:

instead of a 26% rail share (free
market) a 70% rail share

the rail kilometres under this scheme
would, of course, rise. The figures
are:

109,000 kms (free market case)
178,000 kms (State Rail Authority
option)

there will be a corresponding decrease
in the number of kilometres where
containers are carried by road. The
figures are:

2,532,000 truck kms (free market case)
1,587,000 truck kms (State Rail
Authority option)

inevitably there will be a degree of
double handling as containers are
transferred from road vehicle to rail
or the reverse

the Chullora depot would more or less
maintain its throughput

the Villawood depot throughput would
increase

1.3 The Environmental Benefits of the State Rail
Authority Option

Although there are a number of differences between
the State Rail Authority option and the Western
Suburbs option, fundamentally the former is a more
ambitious version of the latter. Both options
suggest the following depots:

the Chullora depot of Seatainer Terminals
Limited

the Villawood depot of Freightbases Pty.
Limited

89. Exhibit 139.

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The justification which is given for interfering
with the choice of mode is, in each case, the
environmental benefits which would arise from the
transportation of containers by rail. For the
Western Suburbs component of the trade there is,
environmentally, little to choose between the
two schemes.

The State Rail Authority scheme goes further. It
suggests, in addition, depots at the following
locations:-

the Cooks River Goods yard
the Rozelle Goods yard

A number of issues arise for consideration. First,
the fundamental premise underlying each scheme
must be examined: is the preservation of the
environment a sufficient reason for interfering
with the free market? Secondly, what are the
advantages, environmentally, in having four depots
rather than two? Thirdly, if there are advantages,
are there also disadvantages? What are they? Do
they outweigh the environmental advantages?

In view of the Inquiry’s ultimate recommendation
(which is in favour of the Western Suburbs option)
it is more appropriate that we address the first
question in the context of that option.

We shall commence this analysis with the second
question: the advantages of having four depots
rather than two. It is the Inquiry's view that,
environmentally, the advantages are dubious. The
other issues of cost, and the balance between costs
and benefits, therefore, do not arise.

The State Rail Authority assumes that in every case
there are environmental advantages in railing a
container to the closest depot or from the closest

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depot as the case may be. The assumption cannot
be supported in the case of the Rozelle Goods
Yard and the Cooks River Goods Yard. The boundary
between the service areas for those two yards is
depicted in figure 4. The location of the boundary
has been determined by measuring road distance.
Any location within the service area of the Rozelle
Goods Yard is closer to that Yard than the Cooks
River Goods Yard.

To define the service areas in this way assumes
that, environmentally, distance alone is the most
important factor. If road transportation is
minimised in terms of truck kilometres the
environment will be advantaged. Ordinarily that
is a safe assumption. It is demonstrably true in
the case of the Western Suburbs depots. With the
Cooks River Goods Yard and the Rozelle Goods Yard,
it will be true in some cases and untrue in others.

Distance is not the only factor upon which the
preservation of the environment depends. It also
depends upon access. If there were easy access to
and from each port (Port Botany and Port Jackson)
in all directions distance would be the only factor.
That, regrettably, is not the case.

Under the State Rail Authority option if a container
were imported through Botany and were destined for
that portion of South Sydney falling within the
Rozelle Goods Yard service area (see figure 4) , it
would be necessary to first rail the container to
the Rozelle Goods Yard, from which it would be
taken by road to its ultimate destination. We
rather doubt that the environment would be thereby
served. Access from Port Jackson in a southerly
direction is rather worse than from Port Botany
travelling north. There are a number of major
roads (including the Foreshore Road) leading from
the Port Botany terminals, or located within the
immediate vicinity.

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It may be possible to redefine the service areas
to take account of truck distance, truck access
and the sensitivity of the land uses through which
trucks must pass. The Inquiry has not undertaken
that task because it takes the view that the state
Rail Authority option is unworkable or undesirable
for other reasons. The reasons will emerge in the
analysis which follows.

1.4 State Rail Authority Revenue

Two issues must be confronted. First, there is
an issue of quantification: how will each of the
options affect the revenues of the State Rail
Authority? Secondly, there is a question of
philosophy: should the Government intervene in
order to protect the revenue position of the State
Rail Authority?

It is said that containers are a profitable line
for the State Rail Authority and that the profit is
threatened by the opening of port Botany ₍₉₀₎.
Members of the public in submissions to the Inquiry
repeatedly stated that the diversion of containers
from road transportation to rail would not only
serve the environment but would also boost railway
finances and "reduce the deficit”. The same point
was made by the Planning and Environment Commission
when it said:₍₉₁₎

"The PTC revenue from maritime container
traffic is about $10 million per annum
at present.. (the State Transport Study
Group) prediction of 26% of port Botany
containers going by rail constitutes a
loss of over 40% of all rail movements
at Port Jackson. The PTC revenue could
fall by as much as $4 million per annum
despite their capital expenditure at
Port Botany of $4.5 million."

90. Transcript P.T.C. 2/4/80, page 40.
91. Submission S.K/C 947, Appendix 9, page 3.

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Subsequently the Planning and Environment
Commission agreed that the loss suggested
($4 million) did not accurately reflect the
financial impact of the Free Market Case
upon the State Rail Authority ₍₉₂₎.

What, then, is at stake? In a Freight
Marketing Report reproduced by the State Rail
Authority in November, l978 ₍₉₃₎ the following
table is given:

TABLE 8.

PORT JACKSON MARITIME
CONTAINER TRAFFIC 1976-77.

RAIL	NUMBER OF CONTAINERS (T.E.U.s)*	PERCENTAGE		P.T.C. REVENUE ($)	PERCENTAGE
RAIL	NUMBER OF CONTAINERS (T.E.U.s)*	GRAND TOTAL	TOTAL RAIL	P.T.C. REVENUE ($)	PERCENTAGE
Metropolitan	79,599	25	59	1,253,986	13
Intrastate	18,066	6	13	3,762,978	38
Interstate	37,244	12	28	4,878,044	49
TOTAL RAIL	134,909	43	100	9,895,008	100
TOTAL ROAD	176,399	57	--	--	--
GRAND TOTAL	311,308	100	100	9,895,008	100

* T.E.U. = Twenty foot equivalent unit, e.g. one 40
foot container = two T.E.U.s.

92. Transcript P.E.C. 18/3/80, page 21.
93. Exhibit 131 Freight Marketing Report by Messrs.
Beevor, Bell and Kaye "Botany Bay Port Container
Traffic", paragraph 5.3.1.

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This table makes it clear that the total PTC
revenue from maritime containers in the year
1976-77 was almost $10 million. The intrastate
and interstate containers are not threatened.
They will continue to be carried by rail
primarily because rail is the cheaper mode over
longer distances. It is the metropolitan
maritime containers from which the State Rail
Authority derived 13% of its revenue ($1,253,968)
which is at stake.

The Freight Marketing Report does not provide a
basis upon which the profit earned by the State
Rail Authority in carrying metropolitan maritime
containers can be derived. The profit would
depend, of course, upon the costs expended in
earning the $1,253,968. What are those costs?

Before examining the evidence, it is timely to
refer to the accounting system of the state Rail
Authority upon the basis of which costs are
calculated. The matter was investigated by the
Enquiry into the New South Wales Road Freight
Industry. It said ₍₉₄₎:

"The problems connected with railway costing
are well known: the existence of joint
costs (costs arising from several traffics);
common costs (overhead costs which have to
be spread over several freight and/or
passenger operations e.g. signalling); the
high level of fixed investment costs in way
and works, stations and terminals, rolling
stock, communications; the difficulties in
measuring short and long term marginal or
separable costs (the extra costs arising from
transporting an extra tonne of freight, in
practice generally the costs associated with
taking on or cutting out some particular kind
of traffic) and hence of setting the floor
rate (price) below which traffic should not
be accepted, since the extra revenue would
then be less than the extra cost; and various
others. Even the total costs of running the
freight operations, which the PTC has been

94. Commission of Enquiry into the N.S.W. Road Freight
Industry, Volume I, Chapter 9, paragraph 1.

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recording in its Annual Reports for
several years, must be regarded as
estimates, based upon approximations
as to how the various costs should be
attributed to freight and passenger
operations.

But when all is said about these
difficulties, it is still the case that
the present PTC (now SRA) costing systems
are inadequate for providing usefully
accurate and timely information for price
setting and management. The modernisation
of these systems... is now in hand.. "

(emphasis added)

The State Transport Study Group calculated the
costs incurred in the carriage of metropolitan
maritime containers at $433,000 (95). If this
figure is correct there is something approximating
0.75 million dollars at stake. On any view that
is not a vast amount when compared to the deficit.
We do not doubt that there is a profit to be
earned if containers are forced to go by rail.
The impact of that profit upon the deficit is not
likely to be substantial.

That brings us to the second issue: the question
of philosophy. We have the advantage of a very
careful historical and analytical excursis into
road and rail competition by the commission of
Enquiry into the New South Wales Road Freight
Industry ₍₉₆₎. Certain transport economists from
Western Australia made a submission to that Enquiry
in the following terms: ₍₉₇₎

"This message (from recent major studies
in evidence throughout the world) is
that competition, in general, is a more
efficient, more flexible and more
responsive allocator of the correct traffic
task to the alternative transport modes than
is any form of Government intervention."

95. Exhibit 89, STSG "Port Botany Container Movements
Revised Findings January 1980", page 8.
96. Volumes 1, 2 and 3 January, 1980.
97. Enquiry into the New South Wales Road Freight
Industry, Volume 1, paragraph 2/9.

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The Historical Review by Mr. G. Wotherspoon ₍₉₈₎
bears out this conclusion. The State Transport
(Co-ordination) Act of 1931 which endeavoured to
offer some protection to the railways, cannot be
counted a success. Broadly the Enquiry into the
New South Wales Road Freight Industry recommended
competition rather than protection and a pricing
policy based upon the cost of delivering the
service. As a matter of philosophy, therefore,
it would be wrong in principle to divert containers
from road transportation to rail transportation
simply to preserve State Rail Authority revenue.

That leaves intact the other philosophical question:
whether the preservation of the environment is a
sufficient reason to interfere with the free market.
If that is the right course, and this Inquiry
believes it is, the beneficial effect which such
a course would have incidentally upon State Rail
Authority revenue cannot be ignored.

2. THE REACTION TO THE STATE RAIL AUTHORITY OPTION

2.1 The Maritime Services Board

We have already referred to the submission by
the Maritime Services Board in which it expressed
its opposition to any restriction of the
transportation of containers either at Port Botany
or Port Jackson. It expressed concern to the
Inquiry that the implementation of a scheme such
as that suggested by the State Rail Authority may
cause trade to divert to Melbourne. Melbourne,
it might be noticed, is the thirteenth container
port in the world whereas Sydney is ranked twenty-
second. Melbourne has already passed 500,000 TEU
per annum whereas Sydney only handles 350,000 TEU
at the present time.

98. Volume III of the N.S.W. Road Freight Industry
Report.

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The Inquiry is certainly concerned to ensure that
Sydney is not disadvantaged in relation to any
other port in Australia and specifically Melbourne.
It takes the view that Melbourne does not pose the
threat suggested in the public hearings. The
reasons for that view will be briefly outlined in
this Report in the context of the next option
where they are more relevant in view of the
Inquiry's recommendation.

2.2 The Chamber of Shipping

The Chamber of Shipping opposes any suggestion of
regulation. Its submission reads in part ₍₉₉₎:

"The Chamber rejects any suggestion that
a statutory body be established to
control and administer a road/rail
system encompassing the Sydney region
as proposed by the Public Transport
Commission."

The Chamber expressed concern as to the capacity
of the State Rail Authority to handle the number
of containers envisaged by its scheme. The issue
of rail capacity wilt be examined below.

2.3 The Terminal Operators

The State Rail Authority scheme met with universal
condemnation from the Terminal Operators. Submissions
were received from the following:

The Australian National Line

Container Terminals Australia Limited (CTAL)

Glebe Island Terminals Pty. Limited

Seatainer Terminals Limited

Seatainer Terminals Limited stood to benefit from
the State Rail Authority scheme. Its depot at
Chullora would be one of the four depots. It is
significant that this company nonetheless felt
compelled to register its opposition to the

99. S.K/C 1423, page 13.

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scheme. At the public hearings Mr. McSporran,
the National Operations Manager, made the
following statement ₍₁₀₀₎:

"The total regulation of rail transport
and the proposed co-ordination of road
transport, and the restriction of areas
in which the two depots referred to in
the Western Suburbs, namely Seatainer
Terminals and Freightbases would be
restricted in their commercial activities,
would in fact be totally unacceptable to
us.”

2.4 Liner Services Pty. Limited

Liner services Pty. Limited is the operator of the
Alexandria depot which is one of the four signifi-
cant LCL unstuffing depots in the Sydney
Metropolitan Area. It is also a 25% shareholder
in the company, Glebe Island Terminals Pty. Limited,
which operates the Glebe Island facility. It has
other operations interstate. It was just as
trenchant in its criticism of the State Rail
Authority scheme. It says in its submission ₍₁₀₁₎:

"The PTC proposal (now known as the
State Rail Authority proposal) is a
locked-in system monopolising the
complete distribution and collection
network to the detriment of the
cargo owner in the first place and
the man in the street in the second
place. This, in our view, is not a
desirable situation.”

2.5 The New South Wales Road Transport Association

The New South Wales Road Transport Association was
likewise opposed to the State Rail option. Its
written submission reads, in part, ₍₁₀₂₎:

100. Transcript 21st March, 1980, page 3.
101. Submission S.K/C 1425, page 3.
102. Submission S.K/C 804, Attachment A, letter 10/4/80
page 1.

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"It is our view the proposal calling
for total regulation of every aspect
of container movement from the Port
Botany and from Port Jackson is not
in the best interests of the Road
Transport Industry as a whole but,
perhaps-more importantly, not in the
best interests of the community as a
whole."

2.6 The Transport Workers’ Union of Australia
(New South Wales Branch)

The Transport Workers’ Union of Australia was not
very complimentary about the State Rail Authority
proposal. A scheme riddled with "bureaucracy" was
one of the milder epithets which it applied. At
the public hearing the New South Wales Branch
Secretary, Mr. H. Quinn, said that a national
embargo would be imposed if any such scheme were
implemented. His evidence reads ₍₁₀₃₎:

"Mr. Commissioner I have been instructed
to come and tell you, knowing this report
will go to the Government of the day, that
any suggestion of a statutory body will be
met with resistance by my organisation,
either nationally or locally and we do not
under any circumstances intend to accept
any statutory body which will monopolise
the cartage of containers and if it means
that we would close Port Botany down it
means just that."

3. DIFFICULTIES INHERENT IN THE STATE RAIL AUTHORITY OPTION

3.1 Introduction

It is said that there are a number of practical
and operational difficulties which arise under any
regulatory scheme. These problems will be examined
in the context of the 'Western Suburbs option’. If
there are practical difficulties of one sort or
another they may be multiplied by the State Rail
Authority scheme because under that scheme there
are four depots instead of two.

103. Transcript 5/5/80, page 19.

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The following exposition is little more than an
identification of problems perceived by the
Inquiry or by parties who appeared before the
Inquiry. In view of the Inquiry’s recommendation
no attempt is made in this Report to review the
extensive evidence on each issue.

3.2 Service Areas

We have said already that Seatainer Terminals
Limited rail import FCL containers to its depot
at Chullora. It does not sort them at the wharf
in an attempt to identify those with destinations
closer to Chullora than White Bay. There is
simply not the space at White Bay.

These limitations will not apply at Port Botany.
It is therefore not suggested that containers
should be indiscriminately railed to decentralised
depots. All options (including the option under
consideration) envisage a sorting procedure.

The service areas identified by the State Rail
Authority (see figure 4) ₍₁₀₄₎ make that sorting
procedure difficult if not impossible in the
Inquiry's view. The boundaries of the service
areas have been carefully located to ensure that a
container does not, for instance, travel to
Chullora only to be transported a greater distance
by road back towards Sydney.

The boundaries follow either geographical features
or major roads. That imposes a severe difficulty
from the point of view of sorting. It is not good
enough simply to know the suburb in order to say
whether the container goes by road or rail or goes
to this depot or that. At the periphery of each
service area one needs to know the street names and
the street pattern. Since some service areas are
separated from others by major roads one would even
need to know that odd numbers fell within one
service area and even numbers fell within another.

104. Page 98.

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No doubt the terminal employees will become
familiar with the service areas in time. In some
cases with some facilities the operation may even
be handled by computer. Whilst that process of
familiarisation is taking place or in those
facilities which do not employ a computer, the
confusion is likely to be substantial.

If there are difficulties in identifying the origins
and destinations of containers (a matter which will
be examined in the context of the Western Suburbs
option) those difficulties are likely to be multiplied
where the requirement extends to the identification
of a street name and even a street number in some
cases before the sorting procedure can take place.

3.3 The Cooks River Goods Yard

One of the depot sites suggested was the Cooks River
goods yard. This yard is presently used by a number
of large freight forwarders. It was not entirely
clear whether the scheme envisaged a container
terminal sharing the yard's space with the present
occupants or whether they would be displaced. We
assume it was the latter since the evidence before
us suggests that the yard is often congested by its
present operations (especially car trans-shipment).

We do not know whether the Cooks River goods yard
has changed since 1974. We assume that it has not.
In that year the Sydney Area Transportation Study
described the yard in these terms ₍₁₀₅₎:

"The small dimensions of the Cooks River
yard create problems and delays in train
marshalling."

Later in the same report, when describing the
development potential, the following is said ₍₁₀₅₎:

105. SATS, Volume 4, "Freight Transport Systems",
Chapter III, page 24.

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"Another limiting factor is the amount
of space available. Freight forwarders
consider that the short length of rail
sidings, the restricted manoeuvring areas
within the yard and the need to load and
shunt in the same roads are handicaps to
expanded use of this yard. The unloading
of motor vehicles is undesirable at Cooks
River because of the space requirements
and the limited area available.

However, these factors can be overcome.
Rail access can be improved to a sufficient
standard by duplication of the Botany goods
line from its origin near the Marrickville
loop to the Botany area, or at least as far
as Cooks River goods yard. Road problems
may prove more difficult to solve."

The Planning and Environment Commission questioned
the suitability of the Cooks River goods yard because
the access to and from it (via Canal Road) is so
poor. It says in its submission ₍₁₀₆₎:

"The (STSG) report found, however, that
enforced railing of FCLs to the Cooks
River yard would generate nearly 500
truck trips per day at the depot. The
entrance/exit to the yard is on Canal
Road which is an east/west route and
carries nearly 30,000 vehicles per day...
The roads in the (Botany) area, especially
the Foreshore Road, provide a much better
level of service than the roads in the
vicinity of the Cooks River goods yard.
There are good arguments, therefore, on
traffic grounds for not railing FCLs to
and from the Cooks River goods yard."

The environmental benefits to be derived by railing
containers from Port Botany to the Cooks River goods
yard seem to this Inquiry doubtful.

There were other limitations mentioned. A rail gantry
crane may be thought appropriate for a container depot
handling a significant throughput. Such a crane is a
substantial affair and is reasonably high. The Cooks
River goods yard is directly on the flight path for

106. S.K/C 947, Appendix 9, page 3.

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one of the runways at Kingsford-Smith Airport and
there are, accordingly, height limitations. Whether
a rail gantry crane would even approach those limita-
tions we cannot say. There was a faint suggestion
from one source that the limitation would be exceeded.

The State Rail Authority maintained that the cost
of implementing their scheme would be, on average,
no greater than the free market case. They supported
that view with a number of calculations. Upon
investigation that proposition could not be sustained
in respect of the Cooks River goods yard (even accep-
ting the S.R.A. figures). It was conceded by the
State Rail Authority that it would be more expensive
to handle containers through this depot than by a
direct road delivery system.

On the approach taken by the State Rail Authority
the Cooks River goods yard would make a loss. It
would hardly be an attractive investment to a
private entrepreneur.

The Inquiry does not accept that the implementation
of the State Rail Authority option would cost, on
average, no more than the free market case. It is
plain that such a course would be more expensive.
The cost issue will be examined in the evaluation
of the Western Suburbs Option. That analysis will
include a commentary upon material placed before
the Inquiry by the State Rail Authority.

3.4 Statutory Body

The shipping industry did not take kindly to the
suggestion of a Statutory Body. The Inquiry, for
its part, found some difficulty in appreciating
exactly what function the Statutory Body would
perform. It asked the State Rail Authority to
identify those functions. The reply was in the
following terms:

"..The functions of the proposed
Statutory Body would be:

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a) to establish the procedures needed
to ensure the containers are moved
by the nominated method with due
efficiency and dispatch;

b) to institute the necessary policing
practices and procedures to ensure
containers are moved to ultimate
destinations and original points of
origin and have not involved a
prior movement to another location;

c) determine the changes to the defined
method of transport which may be
justified by changes in an industrial
development of Sydney or other causes.”

The definition of functions is indeed vague. A
number of operational problems will be presented
by any regulatory scheme. The Statutory Body
would not concern itself with those. Any scheme
is likely to involve policing. Members of the
Statutory Body would not form an inspectorate to
perform that task. Exactly what it does in
"instituting the necessary policing practices"
is far from clear.

A regulatory scheme would involve a good deal of
co-ordination. It will be necessary to maintain
records of containers received and despatched by
rail from the wharf to a depot or from the depot
to the wharf. A Statutory Body would not
participate in that function.

If a scheme were to be introduced it certainly
would be necessary for someone within the State
Rail Authority to have specific responsibilities
in respect of that scheme. The Inquiry cannot see
that there is any call for the paraphernalia which
inevitably accompanies a separate Statutory Body.

3.5 Shipping and Depot Affiliations

We have already remarked upon the vertical
integration which exists within the ship and shore
aspects of containerisation. Shipping lines have
affiliations with container terminals and with
depots. To take but one example the shipping line

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ACTA operates a European and North American
shipping service in partnership with the
Australian National Line. ACTA is the parent
company of Terminal Properties of Australia
Pty. Limited which in turn has a subsidiary,
Freightbases Pty. Limited, the operators of the
Villawood depot. The affiliation between ACTA
and Freightbases ensures that its containers are
despatched to Villawood. There is, in addition,
a further wholly owned subsidiary of ACTA known
as Actrans which is a transportation company.
Again it is hardly surprising that ACTA and
Freightbases utilize the services of Actrans
for road delivery work which comes their way.

The State Rail scheme would cut across these
affiliations. In the case of the Western Suburbs
depots, for instance, the containers would be sent
to the depot nearest the final destination or
origin, as the case may be, regardless of any
affiliation. Likewise the road transportation
to or from the depot would be carried out by one
of the five large road contractors notwithstanding
any affiliation.

These are grave shortcomings in the suggested scheme
in the Inquiry's view.

3.6 Road Transportation

The road transport industry is characterised by a
large number of owner-drivers who work long hours
for relatively low returns. The industry suffers
from serious overcapacity.

The suggestion by the State Rail Authority that a
significant source of work, namely the transporta-
tion of containers, should be wrested from the
transport industry and given exclusively to five
large operators, was bound to engender a good deal
of heat. It did so. We have extracted already
the threat of embargo by the Transport Workers,
Union representing owner-drivers.

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The State Rail Authority advance two reasons to
justify the concentration of work in a few hands.
First, they maintain that significant environmental
benefits will arise by organising the industry in
that way. The transport task can be co-ordinated
by the large operator who, by means of radio
contact with his drivers, can direct them to the
next job and thereby minimise empty running.

Secondly, such an arrangement will minimise the
possibility of evasion. Each operator would
jealously guard its territory. Containers, in
the nature of things, are highly visible. Intruders
into that territory are liable to be reported.

Whilst conceding that the transport industry does
suffer, to some degree, from lack of co-ordination,
this does not seem a sufficient reason for
concentrating the road transportation of containers
in so few hands. The Inquiry entirely agrees with
the sentiments expressed by the Transport Workers’
Union and the New South Wales Road Transport
Association.

No doubt, evasion would be less of a problem if
the transportation of containers were confined
to five contractors. The Inquiry takes the view
that there are other ways of solving this problem
which do not require the extreme step of
excluding owner-drivers.

The Tamworth depot experience provides a potent
historical analogy which should have suggested to
the State Rail Authority that the scheme proposed
would simply not work ₍₁₀₇₎.

3.7 Rail capacity

A contrast should be made between the number of
containers presently handled and Lhe number of
containers which would be handled under the
proposed scheme. The facts are these:

107. The facts concerning the industrial history of
     the Tamworth Depot emerge from Volume 1 of the
     Commission of Enquiry into the N.S.W. Road Freight
     Industry, Chapter 5, page 25 and Chapter 12, page 5.

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in the year ended 30th June, 1980
the State Rail Authority carried
a total of 136,115 TEU ₍₁₀₈₎;

assuming a 70% share for both Port
Jackson and Port Botany the number
of TEU carried in 1985 would be
292,600 (i.e. more than twice as
many as presently carried).

Since Darling Harbour is not on rail it is probably
not realistic to assume a 70% share for both Port
Jackson and Port Botany. It will be something less
than that, though probably not much less. It is
still likely to be more than double the present
number of containers carried by rail.

The evidence concerning the State Rail Authority's
capacity to perform its present task was mixed. The
depot operators, Seatainer Terminals Limited and
Freightbases Pty. Limited, both expressed satisfaction
with the State Rail Authority’s performance.
Inevitably there were 'hiccups' as there must always
be in a system which experiences significant peaks
and troughs.

There were others who put a contrary view. The
Chamber of Shipping maintained that on occasions
there were significant failures and this because
there was simply not the rolling stock and
shunting locomotives etcetera available to meet
the demands made upon the system.

The Inquiry is prepared to accept that doubling
the container task in the space of less than five
years must create significant capacity problems
for the railways.

108. S.K/C 208, letter 19/8/80.

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4. CONCLUSION

It is the Inquiry's view that the State Rail
Authority option is not acceptable and should
not be adopted by the Government.

We should like to make two things clear. First
the Inquiry is speaking at one moment in time
and the position may change in years to come.
It is the Inquiry's view that if there is to be
a transformation from a free market to some form
of regulation one must tread warily in the
beginning. The proposal should be modest. The
State Rail Authority scheme has much to commend
it. It is, at this stage, too ambitious and too
complex.

Secondly, the Inquiry has greatly benefited from
the views put forward by the State Rail Authority
and the discussion which they generated. The
elucidation of an issue is certainly assisted by
having a range of options under contemplation.

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VIII THE WESTERN SUBURBS OPTION

1. THE WESTERN SUBURBS OPTION

1.1 The Option Described

The Planning and Environment Commission propose
an option in which the essential features are:

1. Sydney should be divided into an eastern zone
and a western zone.

2. The western zone is depicted in the map figure 5.
The local government areas on the boundary of the
western zone include Campbelltown, Liverpool,
Bankstown, Strathfield, Concord, Ryde and Hornsby.

3. Under this scheme import FCL containers destined
for the western zone would be carried by rail to
the decentralised depots at:

Villawood or

Chullora

4. Export FCL containers coming from the western
suburbs are to be delivered to the same
decentralised depots rather than directly by
road to the port.

5. The scheme would not apply to LCL containers
which would continue to be handled in the same
way as they are now handled (i.e. distributed
between the various depots according to shipping
line agreements or affiliations).

6. The scheme would embrace country and interstate
FCL containers. It would include empty containers.

The scheme was conceptual in its nature and underwent
some refinement in the course of public hearings.
There are two important aspects not addressed by
the scheme. They are:

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What arrangement is suggested
for division of containers
between Villawood and Chullora?

What arrangement is suggested for
the road delivery of containers?

On these matters the planning and Environment
Commission did not express a policy view. Each
question will now be addressed.

1.2 Service Areas

There are two possibilities. First, an attempt could
be made to define the service areas of the Villawood
and Chullora depots respectively. FCL containers
would be sent to the closer depot. In this way the
road transportation of containers would be minimised
and the environmental impact of container transporta-
tion correspondingly diminished.

The second alternative is simply to allow the depots
to vie with each other for whatever share of the
market they can capture.

The Inquiry is firmly of the view that the second
alternative is preferable. It takes this view for a
number of reasons. First, Villawood and Chullora
are very close to each other. It is difficult to
define meaningful service areas. Secondly, even
assuming a boundary could be found, it may bear no
relation to the different capacities of the two
depots. At present the Chullora depot handles
approximately 47,000 TEU of which almost 12,000 are
LCL containers whereas the Villawood depot handles
approximately the same number of LCL containers but
only 3,000 FCL containers. Thirdly, such a depot
arrangement would cut across shipping line affiliations
to which we referred in our examination of the state
Rail Authority option. Those affiliations should not
be disturbed unless indisputedly it is advantageous
to do so. The Inquiry shares the basic philosophy

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of the free market case that the less regulation
there is the better. Some regulation, in the
nature of things, may be inevitable. The matter
is to be approached on the basis that it should
be minimised.

These issues were put in argument to Mr. Robin
Jones, the General Manager of Terminal properties
of Australia Pty. Limited which is the parent
company of Freightbases Pty. Limited (the operators
of Villawood). He was asked whether it was
feasible and desirable simply to allow the depots
to compete ₍₁₀₉₎:

"Yes, well I think that would seem to
combine the benefits of some form of
orderly control and management of the
scheme and still retain some of the
benefits of private enterprise whereby
each depot would be able to increase or
decrease its amount of work depending
on its own efficiencies and the efforts
it made to do so. And it would also
enable the principal shipping companies
that are closely involved with individual
depots, to retain that relationship and
still get the sort of service that they
have become accustomed to from their
present supplier of that service."

1.3 Road Transportation of Containers

It is plain from our previous discussion of the state
Rail Authority option that the market should be left
alone and should not become the preserve of large
transport companies. Owner-drivers should be free to
carry whatever proportion of the trade they can obtain.

2. EFFECTS OF THE SCHEME

2.1 The Rail Share

According to the STSG calculations the rail share
under this option would be:

109. Transcript, 14/3/80, page 61.

47% (compared to 26% in the free
market case)
the throughput at the Chullora
depot would be maintained although
possibly on a slightly reduced
basis depending upon affiliations
and efficiency factors
the Villawood depot throughput
would be increased significantly
to approximately 39,000 TEU

For reasons which will emerge in the course of this
Report it seemed to the Inquiry that the Western
Suburbs option outlined by the Planning and
Environment Commission should be modified in two
respects. First, empty containers should be excluded
from the scheme. Secondly intrastate and interstate
containers which presently go by road should also be
excluded. The reason for these exclusions will be
discussed. If they are made the figures are:

the rail share would be then 41%
the Chulora depot throughput would
more or less be maintained
the Villawood throughput would be
reduced to 32,000 TEU

The Inquiry believes the desirability of a scheme
along these lines can be demonstrated.

2.2 Such a Scheme is Not Very Different from the
Present Arrangement

We have already remarked that the present rail share
is approximately 39% although it is brought about
by the shortcomings of Port Jackson (lack of space)
which will not afflict Botany Bay. Although Botany
Bay may not suffer from lack of space it does suffer
from another problem which we have identified in the
course of this Report. That problem is the environ-
mental damage that will be inflicted upon Rockdale,
Bexley and Campsie if a scheme is not introduced.
The reason, in other words, for maintaining the rail
share may change but it is equally valid.

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2.3 The Concept of Environmentally Damaging Cargo

There are many regulations which govern the
transport of containers. If cargo is hazardous
there is a procedure which must be followed. If
a vehicle is more than a certain width there are
authorities to be notified and a procedure to be
followed.

It does not seem to this Inquiry, therefore, such
a novel concept to characterise certain cargo as
environmentally damaging and therefore in need of
regulation.

2.4 The Rail Share Contemplated by the Terminal
Operators

The rail share suggested by this Inquiry
(approximately 41%) is not very different from
that which the Terminal Operators contemplate in
any event. The figures are:

ANL originally contemplated a 20%
rail share but since the Port
opened on the 10th March, 1980
the rail share has been 28%. The
jump, therefore, is from 28% to 41%.
CTAL in its Environmental Impact
Statement and in its submission to
the Inquiry contemplated a rail
share of 36% which is not very
different from the 41% proposed.
The White Bay facility already has
a much higher rail share than the
amount which will be required by
any scheme. The operators of this
terminal, Seatainer Terminals Limited,
indicated in the public hearings that
they would willingly participate in
such a scheme.
The Glebe Island Terminal presently
has a 20% rail share although it
does on occasions handle a much
higher proportion. At the time of
the port survey by the STSG the
rail share was in fact 41%. ₍₁₁₀₎

110. Edgerton, James and Jordan "Container Movements
in Sydney", page 66, table 1.

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Further, the Terminal Operators in their evidence
before the Inquiry acknowledged that there will
be a gradual shift to rail as the energy crisis
has its effect. The scheme, therefore, is simply
accelerating by a few years what they acknowledge
and expect will occur in any event.

2.5 The Effect Upon Rockdale, Bexley and Campsie

If the Western Suburbs scheme is implemented the
effect upon Rockdale, Bexley and Campsie is
dramatic.

Figure 5 indicates a screen line in the Rockdale
area. Calculations were made by the Planning and
Environment Commission and by STSG of the number
of vehicles crossing the screen line under the
free market case and under the Western Suburbs
option. The result is as follows:-

The PEC estimate 512 trucks per
day in Rockdale under the free
market case.
A maximum of 89 trucks per hour
during peak periods.
If the scheme they propose were
implemented (47% rail share) the
number of trucks in Rockdale would
reduce to 57 trucks per day
(including empty trucks) .
STSG estimate between 250 and 400
trucks per day in Rockdale (excluding
empty trucks for which they did not
feel able to make an estimate) under
the free market case.
If the PEC scheme (47% rail share)
were implemented the number of trucks
carrying a container either empty or
full would reduce to 26 per day.
If the rail share were 41 or 42% as
suggested by the Inquiry the number
of trucks in Rockdale would reduce
to 67 per day.

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FIGURE 5.

THE WESTERN ZONE

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The scheme, in short, would reduce the total daily
number of trucks crossing the Rockdale screen line
to a lesser number than would be experienced each

hour (in the peak) under the free market case. In
the Inquiry's view that is a substantial achievement.
It should not be put to one side unless the practical,
operational and financial disadvantages are
significant indeed.

It should also not be forgotten that these figures
represent the daily average. On some days the
position will be much worse. On other days it will
be better.

To appreciate the effect of the peak, a factor of
1.5 has been suggested by CTAL ₍₁₁₁₎. Applying this
factor to the PEC figures, the result is:-

768 trucks per day in Rockdale
134 trucks per hour in the peak

3. WHAT WOULD THE SCHEME COST?

3.1 The Contrast Between Direct and Indirect Costs

The opponents of regulation suggest that any scheme
will add to the cost of transporting and handling
containers. There will be a direct cost which can
be measured in dollars. There will, in addition,
be an indirect cost which cannot be quantified but
can certainly be identified.

The indirect costs will be examined later in this
Report. They include:

the threat of containers by-passing
Sydney and using Melbourne

the delay occasioned by any scheme
which involves the use of rail

the disincentive which a scheme
may provide for the establishment
of industry in the Western suburbs

111. CTAL transcript (Day 1) 19/3/80, page 75.

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3.2 Rail is Not Competitive Over Short Distances

The State Rail Authority valiantly defended the
proposition that the scheme advocated by it would
not cost any more per container than a direct road
delivery system. The defence failed. It is plain
that there is a direct cost associated with the
introduction of any scheme.

It was said by the Terminal Operators, by the
Transport Workers’ Union, by the New South Wales
Road Transport Association and by others that rail
cannot compete with road over short distances.
This cannot be doubted. The position may change
in the future when the energy crisis begins to
bite. For the time being it is clear that road
transport has the competitive edge over rail
within the Sydney Metropolitan Area.

The position is no different overseas. In the
United Kingdom a statutory corporation has been
established (Freightliners Limited) to carry
containers by rail. The following passage describes
the experience of that corporation ₍₁₁₂₎:

"Much has been written over the years
about Freightliner’s competitive position
with road and it will readily be
recognised that any hard and fast break-
even mileages can be most misleading.
For Freightliner's the break-even mileage
with road has been calculated to be
between 240 and 320 kms, but there are
very important qualifications. Where
port or private siding traffic is
involved requiring the road collection
or delivery at only one end of the rail
movement, services over route distances
below even 160 kms as f rom Felixstowe,
Harwich and Southhampton to London for
maritime traffic and for the London Brick
Company’s traffic over little more than
80 kms, between Bedfordshire and London,
can be profitable." (emphasis added)

112. Containers and their Handling, page 323.

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Within the Sydney Metropolitan Area the distances
involved would generally lie somewhere between 10
and 30 kilometres. They would rarely exceed 40
kilometres. This is considerably less than the
break-even mileage of Freightliner's (between
240 and 320 kms). It is less even than the most
favourable conditions under which Freightliners
carry containers (80kms).

It is beyond argument that a system requiring
containers to be diverted to rail for part of the
journey will add to the cost of container transport-
ation. That is not the issue. We have established
already that there is an environmental cost in the
road transportation of containers. Is the monetary
cost in handling Western suburbs containers in the
way suggested disproportionate to the environmental
cost? That is the issue.

3.3 The Direct Costs Which Are Said to Increase Under
the Western Suburbs Scheme

In a direct road delivery system there are the
following costs:

the terminal costs
the road delivery costs

Under the Western Suburbs Scheme or any scheme
involving the diversion of containers to rail for
part of the journey, there are the following costs:

the terminal costs
the rail haul costs
the depot costs
the road delivery costs

The Western Suburbs Scheme, in short, involves the
addition of a rail haul cost and depot costs without
any corresponding reduction, so it is said, in either
terminal costs or road transportation costs. Terminal
costs, indeed, are said to increase and although there

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is a slight reduction in road transportation costs
because the length of the haul is less, the
reduction is certainly not sufficient to compensate
for the other elements. It is this contention
which we must now examine.

In the course of that examination we will have
recourse from time to time to material placed
before the Inquiry by the State Rail Authority.
Although the Inquiry has recommended against the
State Rail Authority option that material is
important for a number of reasons. First, the
debate on the cost issue (in the submissions and
the public hearings) largely revolved around the
arguments advanced by the State Rail Authority.
Secondly, the Western Suburbs option recommended
by this Inquiry shares certain features with the
option recommended by the State Rail Authority.
It is possible to dissect the costs involved in
establishing depots in the Western suburbs (as
suggested by the Western Suburbs option) from the
additional costs associated with depots at the Cooks
River goods yard and the Rozelle goods yard. Thirdly,
the Planning and Environment Commission, which
advocated the Western Suburbs option, did not
consider the cost issue in depth. The following
exchange took place at a public hearing involving
the Commission ₍₁₁₃₎:

"COMMISSIONER: But is it not implicit
within the PEC submission that the
scheme (i.e. the Western suburbs option;
will somehow pay for itself or will not
cost money?

CONROY: It was assumed on the basis of
information that we had available at the
time that it wouldn't cost substantially
more to implement the scheme we proposed
..We considered that the extra financial
cost would be more than counter-balanced
by the reduction in environmental impact
as a result of our proposal.. If I say it
cost $100 to move a container by road

113. Transcript, Planning and Environment Commission
26/3/80, page 15/16.

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we were under the impression that it
might perhaps cost slightly more to
move it by rail than road, perhaps
something of the order of 10% extra
in that case. We thought that was
worthwhile."

3.4 The Terminal Costs

3.4.1 Introduction

The terminal costs are paid by the shipping
companies. There is, more often than not, an
affiliation between the terminal company and the
shipping company. The payment of terminal rates
in these cases is rather like transferring money
from one pocket to another.

The shipping company (or the Conference to which
it belongs) ultimately fixes the box rate according
to its overheads and what the market will bear.
Its overheads will include the container terminal
charges.

The terminals suggested to the Inquiry that the
implementation of the Western Suburbs scheme will
involve them in additional costs. The suggested
costs are:

(i) They will need to carry out
additional sorting of containers.
This will create the need for
additional labour.

(ii) They will need to purchase more plant
and specifically a rail gantry crane.

(iii) They will have to work extra evening
and night shifts and even at weekends.
There are shift allowances which make
this very costly.

(iv) Ship turn-around time will be adversely
affected.

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(v) Additional empty containers will
have to be introduced into the
system to compensate for delays
occasioned by the rail haul.

(vi) There will be a wastage of space
or the inefficient use of space
at the terminals. Less space is
needed if a higher proportion of
containers is carried by rail.

We will briefly examine the evidence on each of
these issues.

3.4.2 Additional Manpower

Containers, whether imports or exports, must be
sorted by the terminal. They are sorted according
to the type of container (whether LCL, FCL, empty)
the contents (refrigerated cargo which requires
connection to a cooling unit; hazardous cargo;
heavy, light, medium cargo (in the case of exports)
and so on) or according to their destination. With
import containers there is a further sorting
according to whether they are to be transported by
road or rail. The Terminal operators contend that
the western suburbs option will introduce another
sorting procedure and further handling.

To segregate the Western Suburbs containers from the
rest, CTAL suggested the following would be necessary ₍₁₁₄₎:

2 additional men for 3 shifts
equates 10 men (after allowing
for roster reliefs) at $25,000
per man/annum

$250,000 p.a.

It is clear from the context in which this
suggestion is made that CTAL was addressing the
State Rail Authority option rather than the

114. Submission CTAL S.K/C 1421, annexure tendered 28/3/80
entitled "The Effect of Rail Movement of FCLs
being Increased by Regulation” (Appendix B), page 3.

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Western Suburbs option. Since the State Rail
Authority option involves something slightly
less than twice the suggested rail share of the
Western Suburbs option (70% as opposed to 41%)
the suggestion would be, presumably, that the
Western Suburbs scheme would involve at least
one additional man for three shifts and therefore
approximately $125,000 per annum.

The road delivery system is a much cleaner method
of despatch for the terminal than the rail
delivery system. First, there is a minimum of
handling. The containers are taken from the ship
and placed in the yard where they sit until they
are collected by road transport operators. The
importer is allowed 3 days after the ship completes
discharging to pick up the container. It is a
matter of indifference to the terminal (within
limits) when the container is picked up. If it
is not picked up within 3 days additional charges
are levied. If the yard becomes too cluttered, the
containers are simply removed, at the importer’s
expense, to some other location (such as a depot).

The rail delivery system involves more work. It
has the potential for a good deal more heartache.
First, it may involve additional handling. Ship
turn-around time is of paramount importance. If
most containers are being delivered by road, usually
it will be more convenient for containers being
delivered by rail to be block-stacked close to the
wharf. Later, when time permits, they are transferred
to a rail stack (alongside the rail siding). Secondly,
that transfer will involve time and equipment (tugs
and chassis'). Considerable distances must be traversed
in large terminals such as those at Botany. Thirdly,
the terminal, in the allocation of staff to tasks which
must be performed, is dependent, to some extent, upon
trains arriving on time. Trains are rather like ships.
They do not always arrive on time or at the most

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convenient time. We will later examine the issue
of rail capacity. It will be apparent from a
survey conducted by the State Rail Authority at
the suggestion of the Inquiry that it is usual
rather than unusual for a train to be delayed.
The gang allocated the task of loading a train
may comprise nine or more men (including clerks,
foremen etc.). If the train is delayed it may
be difficult to divert those men to other tasks
within the terminal. Precious time may be lost
simply waiting around.

Fourthly, the train having arrived, it is essential
that it is loaded with containers within a certain
span of time (approximately 2 hours). If it is not,
the railways demand a demurrage fee.

Finally, the despatch of the containers by rail is
very much the responsibility of the terminal so it
must answer complaints if, for any reason, containers
are delayed. In the case of a road delivery system
the onus is upon the importer. The container is
either picked up or the storage charges mount up.
It is the container terminal which complains if
containers are not removed. It is the difference
between firing the bullets and being shot at.

To concede this is not to concede that the Western
Suburbs option will involve the terminal employing
additional men. The terminals, even without
regulation, will be required to handle a rail share
of 26 or 28%. It will already be necessary for
them, in the nature of things, to double handle
certain containers, transfer them over long
distances, incur the frustration of waiting for
trains and so on. They are not being asked to
perform a task which they would otherwise not have
to perform at all. They are being asked to perform
a task which they presently perform and to perform
that task on a slightly higher scale - the

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difference between 28% presently experienced by
ANL and 4l% under the Western Suburbs scheme;
or 36% rail share expected by CTAL compared to
41%.

Secondly, the shipping industry is characterised
by peaks and troughs. To some extent the
operation must be geared to the peak. The
General Manager of Glebe Island Terminals Pty.
Limited (Mr. Gilbert) put the matter in this way ₍₁₁₅₎:

"..There is a minimum strength below
which you cannot provide the proper
competitive and commercial service..
We must have the numbers that we have
got now for the occasions..we need
them."

In an exposition on the cost and charges of
running a container terminal, the same point is
made in the following terms ₍₁₁₆₎:

"With regard to the variable costs,
the following should be borne in
mind:

(i) There must be a basic minimum
outfit of equipment to enable
the berth to operate at a
satisfactory level of service.

(ii) A basic minimum level of
maintenance must be carried
out regardless of whether the
facilities are utilised.

(iii) The manning level must be such
that a satisfactory service
can be provided having regard
to the fluctuations in the work
load."

The daily cost of delaying a ship is said to lie
somewhere between $20,000 and $50,000 depending
upon the type of ship and the time of the year ₍₁₁₇₎.
It would be false economy to skimp on staff levels

115. Transcript Glebe Island Terminals Pty. Limited,
17/4/80, page 76.
116. Containers – Their Handling and Transport Chapter 11
“The Costs and Other Charges”, page 222.
117. Transcript CTAL (Day 1), 19/3/80, page 24.

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if the likely consequence is the delay of an
expensive vessel. Staff levels are therefore
generous.

Staff levels are generous for another reason.
When beginning this Report we referred to the
reduction in waterfront labour brought about by
containerisation. That is a world-wide phenomenon
and a feature of the system. In the Containerisation
Year Book for 1978 the following appears ₍₁₁₈₎:

"At most container ports throughout the
world over-manning, the price paid for
industrial peace, as well as other
restrictive practices designed to
preserve port jobs at the expense of
intermodal efficiency, are rife . This
holds good for ports where the box has
been a begrudgingly-accepted way of
dock life for many years, such as the
U.S., U.K. and Australia, or for countries
like New Zealand where it is a relatively
recent arrival."

The Inquiry does not doubt that an additional rail
share must involve additional work for the terminal.
Having regard to the generous manning levels and the
expected rail share in any event, the Inquiry is left
in some doubt as to whether this will necessitate
additional men. Even assuming it does, the cost of
this item is not substantial. It may become
substantial when added to other items but that is a
matter to be separately considered.

3.4.3 Additional Plant

There is no suggestion that equipment has been
purchased which will be useless if a scheme is
introduced ₍₁₁₉₎. The issue is whether additional
equipment must be purchased. First, there is a
suggestion that additiona tugs and chassis' may be
needed to transport the containers from the block-
stacks (adjacent to the wharf) to the rail stacks.
Secondly, the suggestion was made by CTAL that it

118. Containerisation Year Book 1978, page 14.
119. Transcript Australian National Line, 14/4/80, page 26.

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may be required to purchase ‘two rail mount gantries’
costing $2.3 million each ₍₁₂₀₎. Amortized over
12 years this would represent an annual
expenditure of $383,000.

It is important to appreciate that the CTAL
submission was directed towards both the State Rail
Authority option and the Western Suburbs option
though it did not always differentiate between the
two. At what level would it be necessary for CTAL
to install the rail mounted gantries? The answer
is provided by CTAL itself. First, in evidence the
following exchange took place ₍₁₂₁₎:

"COMMISSIONER: I take it from what has
been said that a 36% share for rail does
not dictate, at this point, that the
rail gantry be installed. Perhaps you
can tell me at what proportion you feel
that necessity would arise?

PLANT: Its towards the 100,OO0 figure
withiout sitting down and working out the
daily flow and so forth but towards the
100,000 figure.”

In a later written submission ₍₁₂₂₎ CTAL made the
necessary calculation. It is expressed as a daily
rather than a yearly figure. They suggest the
necessity to install two rail mounted gantries would
arise when the ‘average daily container handling'
reached 270 TEU per day. Assuming 250 days per year
the annual level would be 67,500.

Whether the level be 67,500 or 100,000 makes no
difference, because the share expected under the
Western Suburbs scheme should not exceed approximately
55,350 TEU ₍₁₂₃₎.

120. CTAL submission S.K/C 1421, dated 27/3/80
     Appendix B, page 3.
121. Transcript CTAL (Day 1) 19/3/80, pages 44-45.
122. Submission CTAL S.K/C 1421 dated 27/3/80
     Appendix B, page 3.
123. Representing 41% of 135,000 TEU being the 1985
     throughput.

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The terminals expect to use this equipment in
the future in any event. The following appears
in the transcript ₍₁₂₄₎:

"MIDDLETON: With regard to the rail
mounted-gantry would you envisage that
at some future date this would have
been necessary anyway.

PLANT: Oh yes. And the plans for the
terminal, as I said earlier, are for
these sort of gantries..When the
throughput makes it necessary and
justifies it."

Even if the Western Suburbs scheme did create the
need for this equipment (which it does not) it
would not be appropriate to assess the cost of the
scheme as the cost of the installation of the
equipment. The cost to the terminal is the hastening
of the installation by several years. It would be
necessary to calculate when in the ordinary course
the gantries would be installed, and to allow for
interest lost on the capital cost by their having
to be installed earlier rather than later.

Under the State Rail Authority option additional
plant would have been required. The Inquiry is not
convinced that any additional plant is required under
the Western Suburbs scheme.

3.4.4 Additional Shift Work Necessary

Both Botany terminals concede in their environmental
impact statements that the nature of their operations
will necessitate three shifts. Under the Waterfront
Award certain premiums are paid to persons on the
evening and night shifts. It is desirable for the
terminal to minimise the occasions upon which labour
is engaged to work on those shifts.

It may be necessary to work additional shift work
since the practice has been to service trucks
during the day and trains at night. The Inquiry

124. CTAL Transcript 19/3/80 (Day 1), page 43.

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accepts that certain additional evening shifts may
be involved. No quantification is suggested. We
do not suggest that the amount involved is trifling
In the context of the overall scheme, however, it is
not the most significant item.

3.4.5 Ship Turn-Around Time

CTAL made the following submission ₍₁₂₅₎:

"The conclusion drawn (from our analysis)
is that ships would be at berth
approximately 20% longer than is planned
at present.

This creates two problems:

(i) Berth occupancy increases from 39%
to 47% which would then start to
create ship queuing problems and
would exacerbate queuing in times
of industrial troubles or bad
weather delaying ships and then
causing a bunching effect.

(ii) Based on 140 ship calls per annum
the delay discharge time coupled
with ship demurrage costs averaging
$25,000 per day would incur the Lines
an additional cost of $1.4 million
per annum.”

This passage does not differentiate between the State
Rail Authority option (a 70% rail share) and the
Western Suburbs option (a 41% share when modified in
the manner suggested by this Inquiry). Since CTAL
expect a 36% rail share even under a free market, the
Inquiry does not accept that the implementation of the
Western Suburbs option will materially affect ship
turn-around time.

We are fortified in this conclusion by the following
passage which appeared in the joint CTAL/ANL submission
to the Simblist Inquiry ₍₁₂₆₎:

125. S.K/C 1421 dated 27/3/80 Appendix D, "The
Sorting of Containers", page 2.
126. Simblist Inquiry S 145: "Comments on Proposals
for decentralized Container Sub-Terminals”, page 3.

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"With regard to terminal performance,
it is obvious that vessel working
performance would not be affected by
the subsequent distribution of FCL
cargo by rail.”

In the case of FCL containers, CTAL have acknowledged
that the system they will employ will involve a
block-rail-stack adjacent to the wharf. The stack
will be later transferred to the rail siding when
the ship is on its way and conditions are rather
more relaxed. The Western Suburbs import FCLs can
be added to that stack, to be sorted and transferred
later.

There was the faint suggestion (made in the public
hearings) that exports coming by rail may delay the
ship. Only 13% of export containers come from the
Western Suburbs. In round figures approximately
4,000 export containers per terminal at Botany (an
average of 16 per day assuming a 250 day year) will
be caught by the scheme. The vast majority of export
containers either come from the country or are
trans-shipped from Brisbane. Exporters interstate
or in the country have geared their operations to
despatch their containers in sufficient time to be
carried by rail to the port. No doubt some from
time to time miss the boat. We should not be the
least surprised if some exporters found it difficult
to meet the deadlines. However, by and large, interstate
and country exporters seem to get by using rail. It
is difficult to see why the small number of western
suburbs exporters cannot do likewise.

3.4.6 Additional Empty Containers

The container boxes are either owned by the shipping
lines or leased from various international leasing
companies. The leasing cost is approximately $3.00
to $5.00 U.S. per day though there are variations
depending upon the type of container ₍₁₂₇₎. Shipping

127. Transcript, Chamber of Shipping dated 13/3/80,
page 23.

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lines generally own a certain number of containers
and lease a number of others to accommodate
fluctuations in trade or requirements at particular
ports. If there is a delay in handling containers so
that they are not available for re-export and use
elsewhere, a shipping line will require a greater
number of containers to handle its trade.

On the assumption that containers will be delayed
for one day by the introduction of the Western
Suburbs scheme, the following consequence will arise
according to the submission of CTAL ₍₁₂₈₎:

"Thus simplistically, it will be
appreciated that if 50,000 import FCLs
were delivered per annum through a
decentralised siding, container inland
residency would be increased by 50,000
non-productive days. On this basis,
if the average round voyage time for a
container was 125 days it follows that
an additional 400 containers may need
to be introduced into the system to
make good this delay in the availability
of units for re-use.”

Although shipping companies devote a great deal of
time and effort to container management, the system
is not so finely tuned that an additional day here
or there has the consequences suggested. The recent
wool strike, for instance, tied up thousands of
containers for months on end. Contingencies of that
sort arise all the time. The system must be in a
position to accommodate them.

The Inquiry accepts that the introduction of the
Western Suburbs option will involve delay of at
least one day. It accepts that it will not be a day
here and a day there: rather it will be a day
regularly lost for each container destined for the
Western suburbs or coming from the Western suburbs.
It accepts that a greater number of empty containers
may have to be introduced into the system. The cost
will, no doubt, find its way into the rates charged
by shipping companies. The Inquiry does not believe
that this cost is, relatively, of great moment.

128. CTAL submission S.K/C 1421, page 19.

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3.4.7 Wastage of Terminal Area

The Australian National Line said in evidence ₍₁₂₉₎:

"If.. through legislation.. the percentage
of rail is to be dictated we are in a
position where we have got 106 acres
which we developed on the basis of
something like 26% rail and the balance
road. If we were to move to something
around 50% or 60% rail or more we would
seriously have to reconsider the acreage
we need. For example we certainly wouldn't
need anything like 106 acres. We could
probably reduce that by some 50%.

The Inquiry is not inclined to view the suggested
wastage of terminal area as a ‘cost' of the Western
Suburbs scheme. First, the Botany terminals
acknowledge that the terminals have been designed
with a certain flexibility because the future of
oil is uncertain to say the least. They may be
required in the future to accommodate a much greater
rail share even under a free market. Secondly,
comments were made by the Botany Terminals (including
ANL) to the Simblist Inquiry which are relevant ₍₁₃₀₎:

"Submissions have been made to the Inquiry
suggesting that the impact on the Botany
area be minimised by constructing container
sub-terminals throughout the Sydney Region,
each inter-connected to the Port terminal
by rail.

The basis of the suggestion appears to be:

(a) a smaller port area would be
required since containers would
not need to be stored near the
wharf face..."

The document recites six suggestions which were
apparently made to the Simblist Inquiry. It then
deals with each suggestion. The terminals were
concerned to refute the idea that the use of rail
would reduce terminal size. To answer that suggestion
the following is said:

129. Transcript ANL dated 14/4/80, page 3.
130. Simblist Inquiry submission S 145: "Comments on
Proposals for Decentralized Container Sub-Terminals".

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"If all import cargoes were to be railed
out from the port terminal, some
reduction in the import storage area
could be made, but this would be more
than compensated for by the area
required for the necessarily expanded
rail facility.

It is apparent that the terminal area
would not be reduced.”

That passage does not sit comfortably with the
submission that the terminal area would be partly
wasted.

3.5 The Cost of the Rail Haul

The State Rail Authority provided information
concerning the charges it makes for carriage of
containers over short distances. The charges
are set out below:

TABLE 9.

STATE RAIL AUTHORITY CHARGES

Distance Waqon Loads Train Loads

0 – 10 km         $25                $16

11 - 20 km         $32                $22

21 - 30 km         $40                $26

31 - 40 km         $43                $30

These charges are for one way only.

The Authority also provided certain historical
information in respect of its charges to Seatainer
Terminals Limited (the operators of Chullora) and
Freightbases Pty. Limited (the operators of Villawood).
The information is reproduced below ₍₁₃₁₎:

TABLE 10.

HISTORICAL COST INFORMATION FOR RAIL HAUL.

Date Seatainer's Freiqhtbases
Chullora Leightonfield

1974      $ 7.65             $ 9.35

1975      $10.42             $12.12

1976      $l2.66             $14.46

1977      $13.93             $15.78

1978      $15.04             $16.94

1979      $16.09             $18.09

133. Exhibit 130.

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The most recent charges are considered confidential.

Captain Manly, a Director of Wooldumpers of New
South Wales had no hesitation in disclosing the
current rates charged by the State Rail Authority
for the movement of wool containers. His evidence
was as follows ₍₁₃₂₎:

"..On information supplied to me by
management of Yennora..I understand
the present costs per TEU movement
to either Glebe Island or White Bay
are $25.00 per TEU if it is a full
rake, and for individual movements
or movements of less than ten
containers, it is $32.00 per TEU
and I further understand that there
is suspected to be an increase in the
near future.”

Certain information was given to the Inquiry concerning
the cost to the State Rail Authority of carrying each
metropolitan container. Those calculations were
subject to the limitations arising from the accounting
system to which reference has been made. The
information was given on a confidential basis.
Certain information on this issue appears in a
document which is not confidential ₍₁₃₃₎ the Freight
Marketing Report of November, 1978. In that
document in Appendix 3(a) the cost of the rail haul
is given as $8.00 in a case of Villawood and $7.00
in a case of Chullora. The State Rail Authority's
profit in 1978 was in the order of $10 per container.

We have extracted this evidence at some length for
two reasons. First, the cost of implementing the
Western Suburbs option must be considered on a
realistic basis. The charges made to operators in
the field furnish the most reliable indication of the
charges which would be made under the scheme. Secondly,
we will examine cost material placed before the
Inquiry by the State Rail Authority in which it was

132. Transcript Liner Services Pty. Limited, 1/4/80,
page 58.
133. Exhibit 131.

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suggested that the Authority's profit would be
approximately $2 per container. This figure is
to be contrasted with $10 per container in 1978.
The margin today is greater than $10 as one would
expect with inflation. The sum of $2 is not
considered realistic.

3.6 The Cost of the Depot

3.6.1 What Would a Depot Cost?

The State Rail Authority was asked by the Inquiry
to furnish particulars of its calculation of depot
costs. They provided the following information:

TABLE 11.

SRA CALCULATION OF DEPOT COSTS ₍₁₃₄₎

Depreciation P.A.

Gantry Crane, $850,000
over 20 years $42,500

Hard stand/track, $350,000
over 35 years 10,000

Office $55,000 over 5 years 11,000

Fencing/security $65,000
over 5 years 13,000

$76,500

TOTAL P.A.

Interest on Capital at
10% reducing $92,000

Depot operating Costs
at $500 per week $26,000

Personnel

One Foreman         $15,500
Two Crane Drivers    25,000
Two Assistants       22,000
Two Clerks           24,000

                    $86,500

Plus payroll
overheads             24,700

TOTAL P.A. $111,200

SUB-TOTAL $305,700

Contingency at 15% 45,900

TOTAL COST P.A. $351,600

134. S.K/C 947 submission SRA, response to questions
asked 5/12/79.

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A number of comments can be made. First, the
gantry crane at $850,000 is rather less costly
than the gantry cranes envisaged by CTAL where
the cost was given as $2.3 million. It appears
that the figure $850,000 was not obtained from a
retailer. It was derived from a purchase made
some time ago. The discrepancy between the CTAL
figure and the State Rail Authority figure may be
explained on the basis that the crane required at
the terminal is a substantially larger piece of
equipment than the crane envisaged for the depot.

Secondly, the crane could not expect to handle 200
containers per day. Thirdly, the manning level is
inadequate and the wages for each classification
less than the average wage paid in the industry.

Finally, the calculation makes no allowance for the
cost of the depot land ₍₁₃₅₎. Yet obviously the land
is an important overhead, whether it finds its way
into the accounting system as a leasing charge or
interest on capital invested. We were not told
the charge made by the State Rail Authority to
Seatainer Terminals Limited for the land at Chullora.
Freightbases Pty. Limited owns the depot land at
Villawood. It was valued at $2.6 million. The
entire depot outfit at Villawood was said to be
worth in excess of $10 million ₍₁₃₆₎.

The Inquiry cannot regard the State Rail Authority
material relating to depot costs as furnishing any
basis upon which a judgement can be made on this
aspect of the Western Suburbs Scheme.

3.6.2 The Function of a Depot

The decentralised container park must duplicate to
some extent the facilities and functions of the
container terminal. They require expensive fork-lift

135. See P.T.C. Transcript 27/3/80, page 15.
136. Freightbases Transcript 14/3/80, page 63.

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trucks and even gantry cranes. They require space
where containers can be stacked and 'hard stand’
which is a thick pavement (perhaps 14” thick)
which will not crumble under the weight of the
containers, the fork-lift trucks and the heavy
vehicles.

There is, in addition, a substantial administrative
function which must be performed. Records must be
kept of all containers which are despatched from
the terminal or to the terminal. Quarantine and
customs facilities must be provided.

CTAL furnished the rnquiry with a detailed analysis
of the steps taken by a decentralised depot when
receiving containers or attending to their dispatch ₍₁₃₇₎.

For an import container the steps include:-

(i) the decentralised rail park receives
a list and manifest of containers to
be delivered to its facility

(ii) it receives communication of a train
load to be received

(iii) the train unloading sequence is
planned

(iv) the train arrives and the clerk checks
the train load

(v) the containers are unloaded from the
train into yard stacks

(vi) the clerk checks the container into
the yard stack

(vii) the yard stack file or board is updated

(viii) the container availability is published
in the daily commercial news

(ix) administrative checks are carried out
at the time the container is delivered
to the importer including customs,
quarantine and title to the goods

(x) container stored until picked up.

The procedure for an export container is no less
complex. The steps include:

137. Submission S.K/C 1421 letter dated 27/3/80
Appendix A.

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(i) documents are raised in respect of
all containers received and
documents issued to the truck
driver who delivers the container

(ii) the location of the exports within
the container yard is a matter of
careful organisation with its own
administrative paraphernalia

(iii) container stored until required at
port

(iv) the train loading sequence is then
planned in accordance of train
schedules

(v) the train loading is carried out

(vi) the clerk checks the train load

(vii) the rail consignment note and wagon
tickets are raised

(viii) the rail consignment note and wagon
tickets are placed on the train
wagon

(ix) the details of the train load are
communicated to the terminal

We have reproduced part of this material to contrast
the lifting of a loaded or empty container on the
one hand, with the running of a depot on the other.
Although there may be administrative work associated
with the simple lifting of a container, the running
of a depot is a horse of a different colour. Yet
the State Rail Authority in costing the depot
operation simply allow for the cost of a lift.
The New South Wales Road Transport Association, the
Australian National Line, Liner Services Pty. Limited
and the Chamber of Shipping adopt the same approach.
They confine the dispute to the number of lifts and
the cost of each lift.

We will later examine the cost material submitted by
the State Rail Authority (and the debate concerning
that material). We will suggest an alternative
approach which reflects more accurately the likely
cost of the Western Suburbs scheme. It is better, in
the Inquiry's view, to examine the present cost of
performing the service which the decentralised depots
will perform under the road/rail scheme.

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3.6.3 The Cost of Doubling Handling

There is an aphorism in the transport industry ₍₁₃₈₎:

"Everytime a commodity is moved, there
is an addition to its cost, but
nothing to its value."

In strict dollar terms the statement cannot be
doubted. Environmentally, the position may be
rather different.

Two issues were considered by the various submissions.
First, how many times would a container have to be
moved under a scheme which diverted containers to
rail for part of the journey and how does that
number compare with a direct road delivery system?
Secondly, what is the cost on each occasion a
container is lifted?

CTAL furnished the Inquiry (as part of its
submission) with a very helpful diagram. The
diagram has been reduced in size so that it can
be reproduced in this Report. It is figure 6.
The count begins, on this analysis, when the
container is unloaded from the ship and placed in
a block stack to be later transferred to a rail
stack adjacent to the rail siding. The container
may be moved fourteen times. It is only moved four
times in a direct road delivery system.

The other submissions ignore the moves within the
terminal. They ignore the lift from the rail stack
to the rail wagon (which is the equivalent of the
lift from the terminal yard to the waiting semi-
trailer). They begin counting once the train arrives
at the decentralized depot. That is in truth, so it
is said, the first additional move.

We do not doubt the moves described in the CTAL
diagram (Figure 6) will actually occur.

138. Submission CTAL S.K/C 1421, page 26.

FIGURE 6 - C.T.A.L.

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We are inclined to the view that counting should
begin once the container arrives at the
decentralized container park.

On this basis how many additional moves are
there? There are at least the following:

the lift - off the train into the
yard of the decentralised depot

the lift from the depot yard to
the semi-trailer when it arrives

perhaps a further lift in delivering
the container to the semi-trailer if
a two-high stacking system is adopted
and the container happens to be on
the bottom rather than the top ₍₁₃₉₎

If empty containers are excluded from the scheme
the total number of additional lifts is 2 or at
worst 2.5.

If empty containers are included in the scheme,
there are the following additional lifts:

the empty container must be transported
back to the depot where it is unloaded
from the semi-trailer to the depot yard

in some cases the shipping company
would use the depot as a convenient
place to store the empty from which it
could be redirected to an exporter in
the Western Suburbs. In other cases it
would be more convenient for the
shipping line to locate the empty
container within the eastern zone and
that would necessitate a further rail
journey back to the Port. There would
be an additional lift from the depot to
the rail wagon. The lift at the other

139. Transcript Liner Services Pty. Limited, 1/4/80 page 65.

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end does not count since it is the
equivalent of unloading the empty
container from the back of the semi-
trailer under the direct road delivery
system.

It is necessary to lay one ghost to rest. The
State Rail Authority suggested that three (rather
than four) additional lifts would be required
even though their scheme included the requirement
that empty containers should be railed back to the
Port. In some cases it would be possible, so it
was said, to unload the container direct from the
train to the waiting semi-trailer or from the
semi-trailer to the train.

CTAL responded to this suggestion with words more
elegant than we can muster ₍₁₄₀₎:

"It would be unwise, nay even foolish,
to think or consider that few if any
FCL containers could move direct from
rail to a road vehicle at a decentralised
rail siding or vice versa without first
being held in yard stack."

The experience of Freightliners in the United
Kingdom is recorded in the following passage ₍₁₄₁₎:

"On the face of it, it might now seem
possible to achieve a degree of sequen-
tial transfer between trains and waiting
lorries or trailers parked in echelon.
Indeed this was very much the aim of the
early planners. In practice neither
have proved possible to any great extent
outside "contract services”, although
some echelon loading of trailers is
carried out daily at Glasgow. "

The Inquiry rejects the suggestion. First, we believe
it does not occur in practice at Villawood or Chullora.
Secondly, many of the train movements occur at niqht

140. Submission S.K/C 1421 28/3/80, "Summing up re
the P.T.C. submissions".
141. Containers - Their Handling and Transport,
ibid., page 326.

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so the vehicles would hardly be waiting for them
when they arrive. Thirdly, it would take a fair
measure of coincidence for 15 vehicles to be
waiting for a train as it rolled in. These trains
do not run to schedules. They arrive haphazardly
throughout the day and night depending upon the
capacity of the terminals, the availability of
container waggons and locomotives, and many
imponderables which affect the co-ordination between
a railway system and a port system. Fourthly, import
containers are not advertised as being available until
they arrive at the decentralised depot. Only once
they arrive can the importer take action to direct
a transport company to attend the terminal. Export
containers will be coming from far and wide. It
is impossible to imagine that exporters would so
co-ordinate their separate operations to despatch
full containers in such a way that the semi-trailers
would coalesce as they came to the depot to form a
queue, from which the containers could be loaded
directly to the train. The suggestion is fanciful.
The Inquiry has no doubt that if empty containers
are included in the scheme, at least four separate
lifts are required.

There was a good deal of evidence about the cost of
lifting a container. The going rate is approximately
$14. The State Rail Authority charges $15 when it
performs this task ₍₁₄₂₎. Empty containers are lifted
for rather less (between $7 and $10 per container).
For the reasons which emerge below, the cost of
lifting a container seems to this Inquiry rather
less important than it seemed to the parties which
gave evidence at the public hearings.

3.7 The Road Transport Charges

The transportation by road of an import container
from the Port to the importer's premises involves
the following:

142. Transcript ANL 14/4/80, page 103.

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picking up the container from the
wharf

transporting the container by road
to the importer's premises

unstuffing the container at those
premises (for which an allowance
of two hours is made)

taking the empty container to a
depot or yard nominated by the
shipping company

Distance therefore is not the only factor. The
driver is unlikely to spend more than half an hour
on the road. The complete operation may take in
excess of three hours. The rate will not vary
substantially if the container has to be carried
a lesser distance. The "flag-fall element” in
the cartage of containers is apparent from the
following table (Table 12) which reproduces the
rates recommended by the New South Wales Road
Transport Association.

If the container weighed over 10.5 tonnes, and the
importer's premises were 31 kilometres from the Port,
the recommended rate would be $143. If the Western
Suburbs Scheme were implemented, so the container
was carried first to Chullora or Villawood, the road
journey may reduce to 12 or 13 kilometres in which
case the road delivery charge would be $117, The
difference, in that example, is $26, The issue
becomes whether $26 is sufficient to cover the
additional terminal costs (if any), the cost of
the rail haul and the depot handling costs.

In fact, the rates recommended by the New South
Wales Road Transport Association are not 'going
rates'. Because the road haulage industry suffers
from serious overcapacity, containers are regularly
carried by contractors for less than the recommended
rates. In the example, the difference may be rather
less than $26.

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TABLE 12.

RECOMMENDED RATES EOR F.C.L. SHIPPING
CONTAINER CARTAGE

1st December, 1979

Delivery Zone	Distance in Kilometres from Point of pick-up to Point of delivery	20’ Containers
Delivery Zone		Up to 10.5 tonnes	Over 10.5 tonnes
$ c $ c
A	0-3	80.00	90.00
B	3-6	86.00	97.00
C	6-9	92.00	104.00
D	9-12	98.00	111.00
E	12-15	103.00	117.00
F	15-18	108.00	123.00
G	18-21	113.00	129.00
H	21-24	117.00	134.00
I	24-27	121.00	139.00
J	27-30	125.00	143.00
K	30-33	128.00	147.00
L	33-36	131.00	151.00
M	36-39	134.00	155.00
N	39-42	137.00	159.00
Thereafter per kilometer add		.50	.65

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3.8 The Cost Calculations Submitted by Various Parties

3.8.1 The Freight Marketing Report ₍₁₄₃₎

The Freight Marketing Report published by the State
Rail Authority in November, 1978 was the first
attempt to compare the cost of a direct road
delivery system with a system of delivery via
decentralized container parks.

TABLE 13.

FREIGHT MARKETING REPORT NOVEMBER 1978

COMPARATIVE DELIVERY COSTS: DIRECT ROAD v RAIL/ROAD

The comparative costs of these two methods of delivery
can best be established on the basis of representative
deliveries ex Botany, as shown below:

DELIVERY POINT Waterloo Artarmon Milperra Blacktown

DIRECT ROAD

Road Distance 8km 18km 25km 35km
Total Cost $80 $92 $104 $115

RAIL/ROAD

Rail Depot C.River Rozelle Enfield Clyde

Rail Distance            7km      16km      17km      21km
Road Distance            3km      6km       9km       13km
Rail haul to depot       $6       $7        $7        $8
Container handling       $6       $6        $6        $6
Road Delivery*           $51      $51       $66       $66
Container handling       $6       $6        $6        $6
Rail haul from depot     $6       $7        $7        $8
TOTAL COST               $75      $77       $92       $94

DIFFERENCE

Direct road v Rail/ +$5 +$15 +$12 +$21
Road

* These rates are based on the flat rate for RACE containers
of $66 per container within a radius of 26k of Darling
Harbour, with appropriate adjustment made for trips of
substantially short distances.

143. Exhibit 131

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Having made the comparison between direct road
and rail/road the following is said:

"The difference between the direct road
and rail/road costs comprise the
potential contribution available to
rail/road service on the assumption of
being able to negotiate with the
Terminal Operators for the acceptance
of the rail/road service at the rates
shown for delivery by direct road."

It is assumed by the State Rail Authority that the
difference between the direct road costs and the
rail/road scheme being promoted by it, would be a
sufficient recompense to both the depot operator
and the State Rail Authority. To approach the
question of costs in that way seems to the Inquiry
both fallacious and dangerous.

It is dangerous because the differential between
direct road and rail/road (accepting for the moment
the figures of the State Rail Authority) can change,
What if the $5 difference at Waterloo became minus
$5? Would the depot and the State Rail Authority
be expected to carry the container at a loss? The
matter was put to the State Rail Authority in a
public hearing. Their response was as follows ₍₁₄₄₎:

"BELL: ..Our studies indicate that rates
for road transport will increase at a
slightly faster rate than for rail
transport.. Based on historical evidence..
That is the conclusion we reached.

COMMISSIONER: Assuming for the purposes
of argument, however, that contrary to
your expectations, suddenly the tables
were reversed, and because of a wages
explosion or for any one of a number of
reasons..the rail costs do increase
disproportionately to road costs, so that
suddenly the difference which you foresee,
is wiped out. What then should happen?

BELL: Assuming that to be the case, I would
imagine that a decision would have to be made
on the highest level.. as to what would be
the future of the scheme. I can't be any
more specific than that unfortunately.

144. Transcript, S.R.A. (formerly P.T.C.) 15/4/80
page 16-17.

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COMMISSIONER: The problem is that the
scheme just doesn't involve Statutory
Authorities who can soldier-on even
though they are doing so under a loss
situation. It would involve commercial
enterprises who are in it for their
profit.”

It is important to compare the cost of any forced
rail scheme with the cost of the free market case.
That is not in dispute. However, to suggest that
a scheme should be made to depend upon something
as volatile as the difference between the cost of
competing modes is wrong in principle.

Secondly, the approach assumes that the respective
parties will be satisfied with the difference,
whatever it may be. We rather doubt that they would.
Certainly the evidence relating to rail charges
suggests a greater profit in the past than that
suggested by the scheme. And would the depots be
satisfied with something less that $10 (to take the
most favourable example) and as little as $Z (to
take the least favourable) for performing a task
of receiving and despatching containers? We cannot
imagine that they would. An empty container park,
run on a shoe-string, without the hard-stand, without
the administrative inconvenience, without the
pressure of time limits, charges between $7 and $10
to move an empty container.

Nor could the inadequacies of the remuneration be
overcome by an enormous throughput. The Authority
presupposes a throughput of 40,000 TEU per depot.
To take the least favourable depot (Waterloo) there
is a profit of $5 to be shared between the Rail
Authority and the depot. The depot’s share (say
$2.50) obviously does not represent the depot profit.
Account must be taken of the depot overheads. We
venture to suggest the $2.50 would disappear. If
one were charitable and assumed $1 were left over,
after all overheads had been paid, would $40,000 be
a sufficient recompense to a depot? We cannot imagine

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it would even pay the rent. The following
sequence of questions was put to the State Rail
Authority ₍₁₄₅₎:

"COMMISSIONER: But just dealing with
the depot operators, is it contemplated
that the depots will be run by commercial
organisations for profit?

A: IL is.

Q: Have you approached any depot
operators and sounded them out as to
whether they would accept the sort of
profit margin which might be available
to them in the scheme which is proposed?

A: This has been discussed with..One of
the existing operators, but the rates that
would apply were not discussed the rates
that would be likely to be competitive
were not discussed with them.

Q: Yes, but isn't that important?

A: It is very important."

The matter, in effect, has never been discussed with
the depot operators. Had it been discussed the
Authority would have been quickly disabused. It
would have been apparent that private enterprise
would not be interested in risking large sums to
chase so small a profit.

3.8.2 The Submission by the State Rail Authority
to the Present Inquiry

The State Rail Authority in its submission to this
Inquiry adopted the same format as the 1978 Freight
Marketing Report. It revised the figures to take
account of price changes which had occurred since
November, 1978. The cost (as opposed to the charge)
of the rail haul was said to be confidential. The
Inquiry, for its part, had some difficulty in apprecia-
ting why material which is now out of date and of
purely historical interest should be confidential.
However, the material was provided on this basis.
The cost of rail haul has been deleted from the
following table which reproduces in part the submission
of the State Rail Authority on this question ₍₁₄₆₎:

145. Transcript SRA (formerly PTC) 27/3/80, page 7.
146. Submission S.K/C 208 entitled "Comparative Costs..”
page 3.

TABLE 14.

STATE RAIL AUTHORITY SUBMISSION.

DELIVERY POINT Milperra Parramatta

A. Road Distance 25km 28km

TOTAL COST $114 $117

B. RAIL/ROAD

Rail Depot Chullora Villawood

Rail distance 18km 26km

Road distance 10km 10km

Rail haul to depot      ---           ---
Container handling      $21           $21
Rail haul from depot    ---           ---
Road delivery           $73           $73

The difference between the direct road delivery cost
and the suggested rail/road costs in every case is
substantially less than $10. It is that amount which
the State Rail Authority suggests should be
distributed between the depot operators and the
Authority for their respective function.

We have said already that the Inquiry takes the view
that to approach the matter in this way is wrong in
principle. We cannot imagine that the depot operators,
or the State Rail Authority for that matter, would
accept so trifling an amount for the performance of
a substantial and complicated operation.

3.8.3 The Debate Concerning the S.R.A. Submission

Other parties to the Inquiry responded to the detail
of the State Rail Authority submission rather than
the principle. They quibbled with the amounts for
each item rather than the approach taken. They
insisted that $14 was the appropriate amount each
time the container was lifted. They insisted that
the container would be lifted at least 4 times and
not 3.

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It is instructive to look at these submissions.
Although the Inquiry takes the view that to some
extent they are misconceived, and that the
parties have been led on a merry dance by the
State Rail Authority in adopting the approach
which they did, they do provide an insight into
the issue of costs.

Each of these submissions adopts the same format
as the State Rail Authority. For simplicity we
will reproduce only that part of each submission
which relates to the depots in the Western suburbs.

First, the New South Wales Road Transport
Association provided the following figures ₍₁₄₇₎:

TABLE 15.

SUBMISSION N.S.W. ROAD TRANSPORT ASSOCIATION

DELIVERY POINT MILPERRA PARRAMATTA

Railage FCL Wharf to
Decentralised Depot $22.00 $25.00

Lift FCL Rail to Stack $14.00 $14.00

Lift FCL Stack to Road
Vehicle $14.00 $14.00

Approximate Storage Cost $ 3.00 $ 3.00

Delivery to Consignee $88.00 $88.00

Lift Off Empty Container $ 7.00 $ 7.00

Railage Empty Container $22.00 $25.00

Surcharge, SAY $ 3.00 $ 3.00

$173.00 $179.00
Direct Road Delivery ex
Wharf and Return Container $114.00 $114.00

Excess of Road/Rail
Charges over Direct
Road Charges $ 59.00 $ 65.00

147. Submission N.S.W. Road Transport Association,
Attachment A, S.K/C 804, page 9.

-163-

The calculation includes only three lifts and
the rate is different depending upon whether the
container is empty or full. The calculation
assumes the empty containers are railed back to
the Port. If that is not required the following
items will be omitted:

the lift-off of the empty container
($7.00)

the rail journey for the empty
container ($22 and $25 respectively)

the surcharge {$3.00)

On this basis there would still be a difference in
favour of road of $27 (Milperra) and $30 (in the
case of Parramatta).

The Australian National Line calculation is similar ₍₁₄₈₎:

TABLE 16.

SUBMISSION AUSTRALIAN NATIONAL LINE

DELIVERY POINT Milperra Parramatta

A. ROAD

Road distance 25km 28km

Total Cost $114 $117

B. RAIL/ROAD

Rail Depot Chullora Villawood

Rail distance 18km 26km

Road distance 10km 10km

Rail haul to depot      $25           $25
Container handling      $45           $45
Rail haul from depot    $25           $25
Road delivery           $92           $92

TOTAL COST $187 $187

148. Exhibit 127.

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The Australian National Line assumed the container
is lifted four times; twice when it is full and
twice when it is empty. The $45 which appears in
the calculation is based upon the charges made by
the State Rail Authority for that precise service ₍₁₄₉₎.
According to the published rates of the
State Rail Authority it charges $15 each time it
lifts a full container and $7.50 for lifting an
empty container.

The road delivery charges from the decentralised
depots at Chullora and Villawood are somewhat high.
The charges for direct delivery from the Port are
low. The suggested difference between a direct
road delivery system and a rail/road system is
correspondingly exaggerated.

If there is no requirement that the empty container
is railed back to the Port, the following charges
can be omitted:

2 empty container lifts (total $15.00)

rail haul from depot ($25.00)

The rail/road system is, on this basis, $33.00 more
expensive where the container is destined for
Milperra and $30.00 where it is going to Parramatta.

Liner Services Pty. Limited provided certain material ₍₁₅₀₎.

It deliberately prepared its calculation of
costs on a conservative basis. It assumed only two
lifts. In evidence the view was expressed (with
which the Inquiry agrees) that four lifts would be
required (or even 4.5) if empties formed part of
the scheme.

149. Transcript Australian National Line, 14/4/80,
     page 103.
150. S.K/C 1425 document entitled "Comparative Costs -
     Road v Rail/Road" and see transcript 1/4/80,
     especially pages 79-71.

TABLE 17.

SUBMISSION LINER SERVICES PTY. LIMITED.

The table refers to certain zones. These are the
3 kilometre zones used throughout the transport
industry. They are reproduced, for instance, in the
recommended rates of the New South Wales Road Transport
Association (Table 12). Liner Services Pty. Limited
adopted the road rates suggested by the State Rail
Authority in its submission. Again it did this to
make the comparison with the road/rail scheme as
favourable to the latter as possible. The differences
between the two methods of delivery are therefore
1ikely to be more, rather than less, than the
differences which emerge from the table itself.

In every case the road/rail delivery system is
more expensive than direct road. The differences
are far less than suggested by other submissions
The differences are (in round figures):

Milperra ex Botany rail is $10
more expensive

Milperra ex Port Jackson rail is
$15 more expensive

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Parramatta ex Port Botany rail
is $11 more expensive

Parramatta ex Port Jackson rail
is $22 more expensive

The calculation by Liner Services Pty. Limited does
not include an amount for empty containers being
taken to the depot, handled by the depot and
railed back to the port.

The Australian Chamber of Shipping furnished the
following calculation ₍₁₅₁₎:

TABLE 18.

SUBMISSION AUSTRALIAN CHAMBER OF SHIPPING.

DELIVERY POINT Milperra Parramatta

A. ROAD 25km 28km

Road freight to
consignee $114 $117

Lift on (at terminal) --- ---

Lift off (at terminal)
no charge --- ---

B. RAIL/ROAD

Rail Depot Chullora Villawood

Rail distance 18km 26km

Road distance 10km 10km

Lift on (at terminal) --- ---

Rail freight from
terminal and return $55 $66

Lift off rail at depot 7 7

Lift onto road            7           7
Road freight from depot 92          92
Lift off empty          7             7
Lift empty onto rail    7           7

$175 $186

Excess cost of rail/road
compared with road per
container $61 $61

151. S.K/C 1423 Annexure of letter 21/4/80 entitled
     "Comparative Costs of a Rail/Road Operation for
     the Movement on Containers in the Metropolitan
     Area as Against A Road Operation”. The table
     has been edited for the purposes of presentation.

-167-

The Chamber of Shipping does not suggest that
$7 is an appropriate charge for lifting a full
container. The 'going rate’ is $14. It has
used the $7 figure, and the road transport
charges suggested by the State Rail Authority,
to demonstrate that, even on a conservative
basis, there is a substantial difference between
the two systems.

The rail charge ($55 and $66 for Chullora and
Villawood respectively) are rather higher than
suggested by other submissions. They are
substantially higher than they are in fact. The
calculation requires modification to exclude
the costs associated with the return of the
empty container to the port. If an adjustment
is made by excluding half the cost of the rail
freight (representing the return journey) and
excluding the lifts associated with the empty
container, the differences which emerge are as
follows:

the container delivered to Milperra
is $20 more expensive than if it is
delivered directly by road

a container delivered to Parramatta
is $22 more expensive than if
delivered directly by road

The difference is in fact less because the rail
charge is overstated.

It emerges from this analysis that according to
these submissions the cost per container of the
Western Suburbs Scheme lies somewhere between
$9 (Liner Services Limited) and $33 (Australian
National Line).

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3.9 An Alternative Method of Calculation

What is presently charged for the service which
depots will perform under the Western Suburbs
scheme? The following table provides the answer ₍₁₅₂₎:

TABLE 19.

SUBMISSION FREIGHTBASES PTY. LIMITED

EX TERMINAL

Zone Terminal         $126.00

Additional Detention    42.50

Storage                6.50

TOTAL                 $175.00

EX TERMINAL RAIL DEPOT

Rail                   $17.50

Depot Handling          50.00

Zone Rate               88.50

TOTAL                 $156.00

The table is based upon the experience of a
particular client of Freightbases Pty. Limited.
The costs in each case include the return of the
empty container to the nominated storage facility.

The terminal costs include an additional detention
'penalty' of $42.50 and a storage charge of $6.50.

Once the Botany terminals are operating there will
be far greater container handling capacity. The
additional detention and storage fees are likely
to vanish. If they are excluded from the calculation
the comparison is between:

$126 direct road delivery

$156 delivery via the Villawood depot

a difference therefore, of $30.

152. S.K/C 1185 Freightbases Pty. Limited.

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Now the $50 depot handling fee is significantly
more than the lifting charges. It reflects more
accurately, in the Inquiry's view, the physical
and administrative complexities associated with
the running of a depot. The $50 fee is a charge
currently made by Freightbases Pty. Limited upon
the basis that few clients demand that service.
If the service were in greater demand, as it would
be under the western suburbs option, then economies
of scale would operate and a lower depot handling
fee could be expected. The depots are in competition
with each other even though they operate within the
framework of affiliations. We gather from conversa-
tions with personnel from Freightbases Pty. Limited
that a fee of the order of $40, or even less, could
be expected. If this were right the difference
between the road delivery system and the rail
delivery system would reduce even further to say $20.

Although the Inquiry takes the view that the
approach taken by the State Rail Authority (and
followed by others in the tables reproduced) is
wrong, the result is not very different at the end
of the day. Both approaches suggest a difference
of the order of $20 per container assuming there is
no requirement to rail empty containers back to the
port.

How many containers are caught by the scheme? It
will be remembered that the figures are as follows:

32% of FCL imports are destined for
the Western suburbs

13% of FCL exports originate from
the Western suburbs

Reducing these percentages to containers the figures
for the Botany throughput are:

approximately 30,483 FCL import
containers would be carried by rail ₍₁₅₃₎

153. Exhibit 139, STSG Calculation making allowance
for the 10% hazardous etc. exemption which would
be carried by road.

7,965 FCL export containers
from the Western suburbs

a total of 38,448 TEU from
Port Botany

For the Sydney port as a whole the figures are:

46,552 FCL imports going to
the Western suburbs

11,622 FCL exports from the
Western suburbs

a total of 58,174 TEU coming
from or going to the Western
suburbs

In round terms such a scheme would add approximately
$1 million per annum to the cost of Western suburbs
containers. The cost would be considerably more if
there was a requirement for empty containers to be
railed back from the depots to the port. The Inquiry,
however, has recommended against that suggestion.

3.10 The Cost is Likely to be Absorbed in a Box Rate

Seatainer Terminals Limited (the operators of the
Chullora Depot and the White Bay facility) have
Australia-wide interests. The productivity of each
port differs, as do the overheads ₍₁₅₄₎. Seatainer
Terminals settled upon a uniform pricing policy.
The report of the Prices Justification Tribunal
described the policy in these terms ₍₁₅₅₎:

"The company's base terminal charges..
are the same at each of the three
major ports of Sydney, Melbourne and
Freemantle. The Company stated that
the practice of charging a uniform
rate was introduced in response to
the wishes of trade groups and those
of its customers."

154. Judgement of the prices Justification Tribunal
     (10/3/77), page 88) where a comparison is made
     between the productivity of the Sydney, Melbourne
     and Freemantle terminals operated by Seatainer
     Terminals Limited.
155. Prices Justification Tribunal, ibid., page 57.

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In its submission to this Inquiry Freightbases
Pty. Limited ₍₁₅₆₎ suggest this principle could
be applied if regulation is thought appropriate.
The Inquiry agrees. Indeed we think it probable
that the shipping lines when competing with each
other for the Sydney Metropolitan trade (including
the Western suburbs trade) will find it neither
politically, nor administratively convenient, to
differentiate between containers destined for the
Western suburbs and those coming from other areas.
A uniform box rate absorbing and spreading the
additional costs of containers coming to or from
the Western suburbs is, we think, highly likely.

The Chamber of Shipping steadfastly opposed
regulation. It was more trenchant in its
criticism than most. It did suggest, however, a
fall-back position. If, contrary to its arguments,
the Inquiry took the view (as it does) that,
environmentally, regulation was desirable, the
cost could be spread across the entire Sydney
trade compulsorily. The possibility was raised
for discussion, rather than advocated by the Chamber.

In the Inquiry's view, there should be no
compulsion upon the shipping lines to spread the
cost of the scheme (by absorbing it in a general
box rate). There are a number of reasons. First,
we think it likely that this will happen in practice
without compulsion. Secondly, compulsion would make
it necessary for the State Government to embroil
itself in price fixing to ensure that the cost of
the Western Suburbs scheme was being evenly
distributed across the trade. That would be
an administrative nightmare. It is one which is
unnecessary in our view. Thirdly, whatever problems
there may be under Section 92 of the Constitution,
those problems are compounded by the imposition of a
tax upon containers. Fourthly, there is an attitude

156. S.K/C 1185 letter of 29/4/80, Appendix 5.

of mind to taxes of any sort. The problem is
exemplified by the following submission made by
CTAL to this Inquiry ₍₁₅₇₎:

"Furthermore, we find it an affront that
after spending $50,000,000 or more to
build a terminal aimed at providing an
efficient and speedy service to importers
and exporters alike, that we should be
considered as a tax collector for levies
imposed on those clients who, for the
good of their commercial businesses,
elected to use road transport instead
of rail."

(emphasis added)

Even if shipping lines (contrary to our expectations)
do not settle upon a general box rate absorbing and
generalising the cost of the western suburbs scheme,
the scheme is still workable and desirable.

3.11 Is the Cost Disproportionate to the Environmental
Damage?

It is not possible to quantify the environmental
impact of the road transportation of containers. It
is a question of judgement. The public, through
this Inquiry, has expressed a view. The elected
members of the public, the Local Councils, have
expressed the same view. The Inquiry supports that
view. The costs of the scheme suggested are not
disproportionate to the environmental damage which
would otherwise occur.

Corroboration for that judgement is to be found in
a valuable paper submitted by the planning and
Environment commission ₍₁₅₈₎. The paper attempts to
measure the impact of noise upon the community. It
attributes a cost to that impact. Three approaches
are suggested:

157. Submission by CTAL to the Inquiry 27/3/80,
     page 3.
158. S.K/C 947 paper entitled, "Evaluation of the
     Environmental Impact of Port Botany Container
     Trucks” dated 24/7/80, prepared by Mr. Michael
     Conroy.

-173-

the first approach is to estimate the
impact of increased noise levels on
property prices along the effected
routes and to assume the fall in
property price is the capitalisation
of the perceived noise cost

the second approach is to estimate
the cost of noise barriers to reduce
noise to the levels which existed
before the superimposition of the
additional traffic

the third approach is to estimate
the cost of noise insulation (and
other appropriate measures including
air conditioning) which would reduce
noise levels to a level considered
acceptable for a residential area.

Though the mechanics of each calculation are
interesting there is not the space in this Report
to reproduce anything more than the conclusion:

taking the first approach the total
cost of noise alone is estimated
to be $878,300 according to 1979-80
prices ₍₁₅₉₎

on the second approach (erecting
noise barriers) the total cost rises
to $3.5 million approximately ₍₁₆₀₎

insulating of existing dwellings was
estimated to cost between $4,000 and
$5,000 ₍₁₆₁₎.

Taking this as the measure the total
cost is calculated to be $8.27 million

159. P.E.C. ibid., page 15.
160. P.E.C. ibid., page 18.
161. Supplementary Paper 5.0 Commission of Enquiry
into the New South Wales Road Freight Industry,
Refer to P.E.C. ibid., page 19.

-174-

for which $1.35 million can be
attributed to the passage of
container trucks ₍₁₆₂₎.

The calculations involve a number of subjective
judgements about which people may differ. They
demonstrate, nonetheless, that the environmental
damage is not trifling even when the focus is
confined to one aspect; noise.

The western suburbs scheme will involve an annual
cost unlike the remedial measures suggested by the
Planning and Environment Commission which are not
recurring. Even so, this Inquiry reiterates its
judgement that the cost is not disproportionate.

4. THE INDIRECT COST OF THE SCHEME

4.1 The Threat of Melbourne

4.1.1 Have Containers Been Diverted from Sydney to
Melbourne in the Past?

More than once the suggestion was made that if any
scheme were introduced Sydney would lose trade to
Melbourne. Melbourne is already a larger container
port.

The Inquiry takes the view that these fears are
exaggerated. Sydney is unlikely to lose any trade
if the Western Suburbs option is implemented.

The major Australian ports are separated by substantial
distances unlike their European counterparts. The
following observation was made in the Summers Report
on the Adequacy of Australian Ports ₍₁₆₃₎.

"By and large Australian ports serve a
distinct area linked to them by road
and rail services, usually reflecting
the fact that almost all Australian

162. P.E.C. ibid., page 21.
163. Report February, 1976, page 2.

-175-

ports basically exist to serve the
trade from within adjacent areas of
their State. There are some, but
relatively few, instances where large
amounts of cargo go across the State
border to a port in another State.
In general, however, Australian ports
are sufficiently distant from each
other that they do not compete very
much for cargoes. This is a substantially
different situation from that in many
overseas countries where they compete
vigorously."

That is not to say that Sydney can afford to relax.
It cannot. There is, no doubt, a cost threshold
which, once exceeded, will cause cargo to divert
from one port to another,

There is certainly no call for panic simply because
Melbourne handles more containers than Sydney. If
comparisons are relevant, Sydney remains a larger
port than Melbourne in terms of tonnage across the
wharf. The matter is vastly more complex than
saying that the population of Sydney is more or less
the same as Melbourne and therefore the number of
containers ought to be the same. The variables
which will determine the throughput of a port are
stated in the following passage ₍₁₆₄₎:

"The functions undertaken by different
ports and the scale of port throughput
are related to the industrial base of
the city served by the port, its
population and the resource base of
its hinterland."

The North West of the Australian continent is
hardly a thriving metropolis. Yet the North Western
ports handle an extraordinary tonnage each year
because they are serving a hinterland rich in
minerals. Similarly Melbourne is serving an export
hinterland different to Sydney. It is nicely placed,
geographically, to service the container trade of the

164. Rendel and Partners "Study of Sea Ports/Land
Use Interaction", February, 1976, page 117.

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Tasmanian ports (Hobart, Launceston and Burnie)
as well as the Port of Adelaide. The Riverina
is closer geographically to Melbourne than Sydney.
A substantial part of its trade is directed to
Melbourne. More would go through Melbourne were
it not for the inhibition created by different
gauge railway lines.

It is really not to the point to say that
Melbourne is a larger container port. Rather, it
is important to confront two issues:

First, whether there is any evidence
that Melbourne is 'stealing' cargo
which rightfully belongs to Sydney,
and which is being diverted away
from Sydney because of the inadequacies
of that port.

Secondly, whatever may have happened
in the past, whether it is likely that
the introduction of the Western Suburbs
option will divert containers from
Sydney to Melbourne.

The President of the Customs Agents Association of
New South Wales, Mr. David Cable, appeared before
the Inquiry on behalf of that Association. He drew
our attention to an article containing the
following passage ₍₁₆₅₎:

"The basic fact that comes out loud and
clear is that the productivity in this
Port, for, whatever reasons, is causing
decisions to be taken that are working
very much against Sydney. During the
eleven months of this year (1979) 52
vessels have diverted away from Sydney."

1979 was a period of prolonged industrial unrest
upon the Sydney waterfront. Mr. Cable said ₍₁₆₆₎:

165. The Business Bulletin February, 1980, page 14.
166. Transcript 1/5/80, page 33.

"I don’t think it (referring to the
vessels by-passing Sydney) was the
facilities of the port that caused
it; it may have caused it in the
past, but it wasn't the cause in
1979, I don’t believe. I think it
was mainly industrial harassment."

Other parties before the Inquiry expressed a
similar view. Melbourne, in the early part of
1980, suffered its share of industrial unrest
on the waterfront (the issue being the Workers'
Compensation Amendment). Sydney was the
beneficiary on that occasion. Containers destined
for Melbourne were diverted to Sydney.

It is apparent, ₍₁₆₇₎ that in the past, Port Jackson
has been strained to the limit. Sydney sorely
needs the additional container handling capacity
which Port Botany will provide. Melbourne through-
out the last decade has had substantially greater
container handling capacity and lower berth
occupancy. If there were to be a diversion of
trade from Sydney to Melbourne, one would have
expected it to have occurred already. Yet where
is the evidence that it has occurred? Apart from
vessels diverted to avoid industrial disputation
at Sydney, there is no such evidence.

Such evidence as does exist, tends to suggest that
in relative terms (compared to the total throughput
of the Port of Sydney) the number of containers
trans-shipped from Melbourne to Sydney or Sydney
to Melbourne is not substantial. An investigation
conducted on behalf of the Federal Government and
completed in November, 1978, made the following
observation concerning the interstate movement of
containers ₍₁₆₈₎:

167. See Chapter II of this Report: Historical
     Perspective.
168. Report to Bureau of Transport Economics by
     Economic Research Unit Pty. Limited
     (unpublished).

-178-

"There are four major interstate
trans-shipment corridors associated
with the Australian container task,
with the Port of Melbourne as the
principal node. These corridors
are in order of importance:

- Melbourne/Adelaide

- Sydney/Brisbane

- Melbourne and Sydney/Perth

- Melbourne/Tasmania

The mode of trans-shipment movement
on the first three corridors is
principally by rail, while that of
the last corridor is naturally by
sea.”

To put the matter in perspective, the number of
containers moving in the Melbourne/Adelaide corridor
by rail (which is far and away the dominant mode)
in 1976/77 was 33,557 (imports and exports) ₍₁₆₉₎.

In the same Report the consultants state ₍₁₇₀₎:

"Shipping depots and depot/terminal
operators suggested that trans-shipment
in other than the four major corridors
discussed are fairly random and
insignificant in terms of the total
container task. With reference to
trans-shipments between Melbourne and
Sydney in particular, the comment
was made in that these movements were
usually in response to industrial
stoppages or significant queuing by
ships awaiting a berth at either port."

Industrial stoppages apart, there is no evidence
in the Inquiry's view of significant diversion
of container trade to Melbourne in the past even
though Port Jackson has suffered from severe
capacity restraints in the last decade.

4.1.2 The Effect of the Western Suburbs Scheme

Whatever may have been the position in the past,
can it be suggested that the introduction of the

169. Report to Bureau of Transport Economics by
Economic Research Unit Pty. Limited
(unpublished), page 91.
170. ibid., page 107.

-179-

Western Suburbs scheme will disadvantage Sydney
in relation to Melbourne in the future? Upon
analysis it is clear that it will not.

First, only a small proportion of the containers
aboard a ship will be caught by the scheme. The
rest will not be regulated. The statistics are:

approximately 32% of FCL import
containers are destined for the
western region

approximately 13% of FCL export
containers come from the western
region.

Since part only (and small part) of the ship's
cargo is affected by the scheme, the ship is hardly
likely to by-pass Sydney. Captain Geoffrey Manly,
the General Manager and a Director of Liner services
Pty. Limited gave the following evidence ₍₁₇₁₎.

"No ship wishes to by-pass. There is
absolutely no gain in passing a major
port and railing the cargo back.. it
(occurs) in circumstances beyond the
control of the shipping company in the
main. It can be caused by industrial
action. It can be caused by weather.
It can be caused by black bins or.. a
backlog of vessels and delays up to a
week or ten days. These vessels are
very expensive.

Now its going to be something very
critical.. before shipping companies do
not use the Port of Sydney in favour of
another port. There will be times,
when for one reason or another they
will by-pass, but as I say, it would be
a bit of a red herring to-say that ships
would be by-passing Sydney.”

Secondly, comfort can be drawn from the fact that
Sydney has experienced in the past something
analogous to the western suburbs option without

171. Transcript Liner Services Pty. Limited
1/4/80, page 83-84.

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vessels being diverted to Melbourne. The White
Bay facility rails import FCL containers to
Chullora. There is no difference in principle
between forced rail introduced by Seatainer
Terminals Limited to rationalise its White Bay
operation, and the forced rail suggested by this
Report to rationalise the road transportation of
containers within the Sydney Metropolitan Area.

It would be quite absurd to suggest that vessels
have gone to Melbourne rather than use White Bay/
Chullora. They may have gone to other facilities
within Port Jackson but that is a different issue.
It is an issue which will be addressed when we
consider whether the western suburbs scheme should
be extended to include Port Jackson as well as Port
Botany.

Thirdly, it being plain that vessels will not by-pass
Sydney, the real issue is whether exporters and
importers will export and import through Melbourne
rather than Sydney. They are unlikely to do so for
a number of reasons. The delay in getting goods
from Sydney to Melbourne by rail is likely to be at
least a week. In a comparable situation the
transhipment of containers from Melbourne to Adelaide
takes between four and six days ₍₁₇₂₎. Transhipment
between Sydney and Melbourne is expensive. The
charges dwarf the $20 which we suggest may be
payable per container under the Western Suburbs
scheme. They are ₍₁₇₃₎:

$180 per container to Melbourne
(for a full train load)

$194 per container (if less than
full train load) ₍₁₇₄₎

172. Survey of the "Movements of Overseas Containers
Throughout Australia”, ibid., page 190.
173. S.K/C 1424 Maritime Services Board of New South
Wales letter 30/4/80, page 3.
174. Exhibit 122 published Rates State Rail Authority.

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The rates by road are more expensive again. The
cost depends, to some extent, upon the weight of
the load. The position is summarised in the
submission of the Maritime Services Board ₍₁₇₅₎:

"The cost of road haulage from Melbourne
Sydney was also investigated with
one major interstate haulage company.
It was stated that the cost of haulage
by one rig was of the order of $540.

One rig could handle two lightly loaded
containers (say 10½ tonnes each) but
could not carry two full loaded containers.
On this basis it appears that for fully
loaded containers road haulage is not
competitive with rail haulage. One
advantage however, is that road haulage
would be to the door rather than to the
nearest suitable rail head.”
(emphasis added)

Because Melbourne does not have standard gauge
railway, it is necessary to transfer containers to a
road vehicle once they arrive in Melbourne so that
they can be transported to the wharf. We cannot
imagine in these circumstances that an exporter
or importer would be the least attracted by the
Melbourne alternative. He would be required to
suffer a week's delay; he would be required to use
the railways in any event; he would be required to
pay an enormous cost; he would be required to pay
for the double handling and a further road transport
journey once the container actually got to Melbourne.

There is a fourth reason for rejecting the supposed
threat of Melbourne. It is unlikely that a shipping
line would by-pass a major port such as Sydney where
other shipping lines, competing for the same trade,
service it. To do so would hand one's competitors
a major selling advantage.

Finally, we must emphasise the involvement of the
shipping companies in the terminal operations. They
have invested their capital in the provision of port

175. S.K/c 1424 Maritime Services Board of N.S.W.
letter 30/4/80, page 3.

-182-

facilities. In the case of Port Botany each terminal
will cost in excess of $50,000,000. The shipping
companies would hardly provide those facilities and
then not use them. They will use them. No doubt,
like other businesses, they will pass on any
additional costs entailed.

At the present time ships do by-pass Brisbane and
come to Sydney. The containers are railed to
Queensland (and the reverse in the case of exports).
There was the suggestion that Sydney may lose this
trade if a scheme were introduced. That suggestion
is rejected. The trade already goes by rail.
Unless a scheme seriously compromised the capacity
of the railways to handle containers, the Western
Suburbs option has no relevance to the Brisbane
trade. Sydney may lose the Brisbane trade for other
reasons (The Fisherman Islands Terminal). It will
not lose it because of any scheme.

4.2 Delay of Containers

Evidence was given that a scheme would inevitably
delay containers.

The Inquiry accepts that the addition of a rail
journey (and the handling at either end) must cause
some delay. The delay is likely to be at least one
day (when compared to a road delivery system) ₍₁₇₆₎.
It should not exceed three days.

The delay should be seen in perspective. In the
past, delays have been caused by severe congestion
at the Port Jackson facilities. Ships could not
slide in and out of port according to a prearranged
schedule. There was not the berth space available.
They had to wait their turn. Having been given a
berth, the average time to unload a vessel was four
days ₍₁₇₇₎.

176. See figure 6 CTAL diagram which suggests
at least a one day delay.
177. Transcript CTAL 19/3/80, (Day 1), page 20.

-183-

The position will change once Port Botany is open.
Whereas Port Jackson was barely able to handle
350,000 TEU per annum the Port Botany terminals
will add the capacity to handle an additional
650,000 per annum ₍₁₇₈₎. Suddenly Sydney will have
the capacity to handle almost 1,000,000 containers
per annum. Its trade in 1985 will be less than
half that number. There will no longer be ship
queuing caused through congestion.

There are other factors which will operate to
further reduce delay. The terminals at Botany
are leased by a consortia of shipping lines. The
ability of shipping lines, with a stake in the
terminal, to organise a schedule avoiding clashes
between vessels, is obviously greater than a 'common
user' facility where the vessels turn up and wait
in queue. Secondly, the terminals will not be
constantly straining to cope as they have been in
Port Jackson where the stream of vessels is relentless.
Any system constantly working to the limit of its
capacity must function less efficiently than a
system which has time to draw its breath, carry
out necessary maintenance, and finely tune its
operation to maximise productivity. Finally, Botany
Bay, as we have already remarked, represents the very
latest in container terminal technology. CTAL expects
to be able to turn vessels around in two days rather
than four.

In the judgement of this Inquiry delay is not a
significant factor. The delays which importers
and exporters have experienced in the past ₍₁₇₉₎
will be seen to be far greater than any delay
which would arise through the implementation of
the Western Suburbs scheme.

178. Maritime Services Board Submission to the
     Simblist Inquiry, page 92.
179. See Exhibit 124 in which Liner Services Pty.
     Limited surveyed the delay occasioned by
     containers being forced to go to Chullora
     or Villawood at the present time (and see
     also the comments of Seatainer Terminals
     Limited) S.K/C 1425, letter 2/5/80.

-184-

4.3 A Disincentive to Industry in the Western Suburbs

It may be suggested that a scheme which imposes a
cost upon the transportation of containers to or
from the Western Suburbs, provides a disincentive
to the establishment of industry in that area.

The Inquiry does not believe that the scheme will
operate as a significant disincentive to
decentralising industry. First, there is limited
industrial land in the inner city suburbs and it
is prohibitively expensive. There are substantial
tracts of industrial land in the West and South-
West. The following table is taken from a study
by the Planning and Environment Commission of
Sydney’s Inner Area ₍₁₈₀₎.

TABLE 20.

COMPARATIVE INDUSTRIAL LAND PRICES.

Price for standard serviced lot

2000 sq m site 2 ha site (per ha)

Botany                  $120 000           $420 000
Marrickville            $120 000           $450 000
South Sydney            $140 000           $470 000
City of Sydney          $140 000           NA

Blacktown               $ 40 000           $120 000
Penrith                 $ 30 000           $62 500
Milperra                $ 58 000           $175 000
Parramatta              $110 000           NA
Hornsby                 $ 85 000           NA

* There are 10,000 square metres in a hectare.

Source: Valuer-General’s Department, November, 1978.
Values at 30 June, 1978.

Secondly, surveys have been conducted which suggest
that transport costs are not the major factor in a
company's decision to establish in one part of the

180. Planning and Environment Commission "Sydney’s
Inner Area: A Study of Six Inner Municipalities",
page 67.

-185-

metropolitan area rather than another. Land
prices, and a ready source of labour and materials,
are far more important. Table 21 reproduces a
survey conducted by Plant Location International
in 1969. The survey has a number of limitations.
It was conducted by means of a questionnaire
directed to 350 firms of which 130 responded. The
firms were asked to nominate which of 12 selected
locational factors were important to them, and to
rank these factors in order of importance.

The sample was small. The responses are subjective.
The result can hardly be regarded as definitive, but
it does furnish some support for the suggestion that
the Western Suburbs scheme will not materially effect
the decision by a company to locate in the Western
Suburbs.

TABLE 21.

THE IMPORTANCE OF LOCATIONAL FACTORS ₍₁₈₁₎

Factor Percentage Choosing Factor

Site Area                                26.7
Proximity to Manufacturing Labour        24.5
Site Price                               19.3
Proximity to Markets                     12.2
Proximity to Other Operations of Firm     3.8
Proximity to Subcontractors               3.2
Proximity to Raw Materials                3.2
Waterfront Location                       2.3
Proximity to Executive Residence          1.2
Airport Location                          0.6
Waste Disposal                              0
Other                                     3.0

Source: Plant Location International Survey, 1969.

181. The Australian Institute of Urban Study "Manufacturing
Development in the Sydney Region", page 4.

-186-

The matter was examined by the Australian Institute
of Urban Studies ₍₁₈₂₎. It made the following
comment upon the importance of transport in
respect of site location ₍₁₈₃₎:

"Location in relation to transport facilities
has always been an important location factor
but the increasing use of transport firms to
handle all or part of the transportation task
is reducing the importance of this factor for
many firms. The Plant Location International
Survey revealed that 33% of manufacturers in
the survey subcontracted the whole of their
transport needs to a transport company, 54%
subcontracted some and only 13% handled the
task themselves. In an urban environment,
with the increasing acceptance of intra-urban
trucking and trans-shipment and the growing
sophistication of raw materials supply, and
distribution systems, fewer firms seek
locations oriented toward a fixed transport
node. However, proximity to the port, airport
or rail is still important for some firms
particularly if they are handling bulky, heavy
or perishable products."

Thirdly, the additional costs should be seen in
perspective. We do not know the number of containers
imported or exported by various establishments in the
Western suburbs each year. In some cases it will be
one or two or perhaps a dozen. For very large
establishments it may be more. The cost of importing
a container from Europe varies between $3,000 and
$5,000 (Conference line rates) depending upon the
nature of the cargo. From Japan it is several
thousand dollars. Even for an establishment importing
and exporting 50 containers per year (which would be
a large establishment) the annual cost would be
approximately $1,000. That sum is hardly likely to
determine whether someone establishes their industry
in the Western suburbs.

Fourthly, we believe it probable that the shipping
lines will fix an overall box rate for the Sydney
Metropolitan Area without differentiating between
containers coming from the Western Suburbs and

182. The Australian Institute of Urban Study "Manufacturing
Development in the Sydney Region”, page 4.
183. ibid., page 43.

-187-

containers coming from the Eastern zone. Administra-
tively it makes sense that they should take that
course. In the politics of the market place, there
are many advantages in their doing so. If that comes
to pass, there will be no financial disincentive
whatever in locating in the Western suburbs. Indeed
costs will be less than without the scheme, since the
road haul will be shorter and less expensive. If it
does not come to pass, the financial disincentive is
minor and, in the Inquiry's judgement, insignificant.

Go to CHAPTER VIII cont.
5. PROBLEMS INHERENT IN THE SCHEME
pp 187ff

The Kirby Reports

Sunday 24 May 2015

Volume I - Report - Chapter VII