Getting freight right in a changing economy

By Michael Kilgariff, Managing Director, Australian Logistics Council

Australia’s cities are changing, and as a result, the way we move goods to their ultimate destination is changing too. The Australian Logistics Council has made a series of recommendations to the Australian Government to help make sure our freight strategy is fit for purpose as we move forward.

In the lead-up to the 2016 Federal Election, the Australian Logistics Council (ALC) urged the development of a comprehensive National Freight and Supply Chain Strategy to address these challenges.

The Federal Government subsequently agreed to undertake the development of such a strategy during the Prime Minister’s Annual Infrastructure Statement to the Parliament in November 2016.

ALC believes the inquiry and the subsequent development of a National Freight and Supply Chain Strategy represents an ideal opportunity to establish a high-level framework that will facilitate the safe and efficient operation of Australia’s supply chains, which will:

  • Provide an integrated and efficient freight transport and supply chain network for Australia’s international and domestic supply chains
  • To the fullest extent possible, ensure that policy settings and regulation are competitively neutral between the different freight transport modes
  • Allow freight operators to innovate and increase the productivity of the freight logistics services they provide, in order to improve outcomes for consumers, Australia’s industries and the wider economy
  • Contribute to continuous improvement in the safety of all freight logistics operations, as well as improved societal and environmental outcomes

The lived experience of Australian society over recent decades points to increasing levels of urbanisation. Effectively, this means we are trying to do more in a limited physical space.

In particular, resurgence in the desirability of inner-city living, coupled with rapid rates of population growth, present some urgent challenges for our freight logistics industry.

The essential items which most Australians take for granted in everyday life – food to eat, household appliances, clothing, medications and vehicles to name just a handful – are generally not grown or manufactured close to the places where most of us live.

These commodities must be transported from their point of origin to the retailers from which we purchase them, or otherwise delivered directly to our doorsteps from ports, freight depots or warehouses.

Yet, as we create more populous cities, it is fast becoming apparent that our existing planning regimes and approaches to development fail to adequately prioritise the movement of freight.

The congested state of many major freeways and key arterial roads, as well as traffic gridlock within cities themselves, is a constant source of annoyance for many Australians. However, more than simply being an irritation, these problems are symptomatic of a far deeper issue.

Capacity constraints in the road network are not only a problem for motorists – they also impose significant costs on the freight logistics industry.

The disruption to the supply chain that occurs because of road congestion, as well as capacity issues afflicting ports, airports and rail freight facilities all have an impact on the cost of moving freight – and ultimately, the prices paid for goods by Australian consumers.

Indeed, congestion on our roads alone is already costing the Australian economy some $16 billion a year. Without remedial action, that cost is projected to rise to more than $50 billion a year.

With the National Transport Commission projecting Australia’s freight task will grow by 26 per cent over the next decade, it’s clear that unless corrective steps are taken quickly, the safety and efficiency of Australia’s supply chains are at enormous risk.

Australia’s supply chains do not stop at state borders. Our economy is national – and accordingly a nationally consistent approach to infrastructure and the regulation of freight movement is required.

In an ideal world, a national economy should be managed by the national government. This includes the responsibility for the development of the infrastructure and regulatory settings necessary for the nation’s supply chains to operate safely and efficiently.

In many circumstances, the Australian Government has encouraged the development of individual pieces of infrastructure through financing.

However, many of the decisions relating to the planning and delivery of such projects are made by state and/or local governments.

This is the reality of Australia’s federal structure. Like all other industries, the freight logistics sector must work within the restraints imposed upon it by the Australian Constitution.

The unfortunate by-product of this constitutional reality can often be duplication and delay in achieving the sort of policy reform that industry – and the entire economy – badly needs.

However, recent policy initiatives announced by the Federal Government, including the formation of an Infrastructure Financing Unit within the Department of Prime Minister and Cabinet, appear to indicate a desire on the part of the Commonwealth to become more active regarding infrastructure and planning issues.

Certainly, it would be enormously helpful to the freight logistics industry – and to the economy more broadly – if the Federal Government could do more to ensure a greater consistency of approach to infrastructure development and planning issues among the various jurisdictions that play a role in such issues.

Of course, it is imperative that greater Federal Government involvement results in more consistent outcomes, and does not simply add to the complexity and cost of infrastructure development in Australia.

Over the last six months, ALC has worked closely with its members, freight logistics industry participants and governments at all levels to work through many of these issues, and develop a comprehensive roadmap which sets out many of the challenges being faced by industry, as well as identifying some practical solutions.

The resulting document, Freight Doesn’t Vote, represents ALC’s final submission to the Inquiry for National Freight and Supply Chain Priorities.

It recommends reviewing a number of regulatory practices that inhibit the efficient movement of freight, such as curfews and bans on freight vehicles, as well as identifying opportunities for the Federal Government to incentivise good planning practices and encourage the take-up of new technologies that can deliver better outcomes.

The submission does not shy away from recommending initiatives that may be politically challenging – particularly around greater Commonwealth involvement in planning, as well as road pricing and investment reform.

However, the reality is that Australia’s economy is being transformed by population growth, by technological change and by the changing behaviour of ever-more discerning and empowered consumers. Like all other industries, the freight logistics sector must adapt to an economy in
transformation.

Moreover, given the exponential growth of the middle class throughout Asia, and thus the importance of exports to Australia’s continuing economic performance, becoming a world leader in supply chain efficiency and safety is not merely desirable, but essential.

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