Auditor-general finds rail freight support reporting 'deficiencies'

The VAGO looked at the Mode Shift Incentive Scheme, a rebate available to four Victorian agricultural freight handlers, and the Port Rail Shuttle Network and infrastructure project aiming to reduce trucks on Melbourne's roads.

In its report Auditor-General Andrew Greaves found some reporting measures for the Mode Shift Incentive Scheme were "deficient' while others had been overstated.

Mr Greaves also found the government was unlikely to achieve it's target of 30 per cent of containers on rail by 2050, without significant further intervention.

The report follows the Auditor-General's 2020 investigation into the troubled Murray Basin Rail Project, which found "governance arrangements had been suboptimal."

The latest report, into the Effectiveness of Rail Freight Support Programs found neither the MSIS or shuttle project had "fully realised the government's intention to move more freight by rail," Mr Greaves said.

"Although the MSIS has kept some containers on trains that would have likely gone to trucks, it has not increased rail's share of container freight in regional areas," he found.

"Delays in delivering the shuttle network facilities and services mean the social, economic and environmental benefits from diverting metropolitan containers from road to rail are also delayed."

In his report, Mr Greaves found the government had been told about two-thirds of containers, now carried on rail, would go back to road if the MSIS was axed, which is the government's plan.

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He said in early 2022 the Department of Transport and Planning (DTP) advised the government up to 30 per cent of freight, under the MSIS, would remain on rail if the scheme was dropped.

The Auditor-General found the share of rail freight going into the port by rail was now less than half its 2013-14 peak.

"The volume of freight carried by train has stayed static over this time," the report found. "This means that trucks have carried most of the 30 per cent growth in the port's container freight trade."

Mr Greaves was scathing into DTP annual targets for the number of containers moved by rail under the MSIS, finding officials had overstated the figure.

"This performance measure is deficient, because these volume targets do not show whether the proportion of freight moved by rail is growing," he found.

"This means the measure gives no insight about the extent to which the scheme is meeting the government's goal to shift freight from road to rail."

The Auditor-General also found since 2018-19 the government had overstated the number of rail container movements, under the scheme by about 5.6pc.

"This also means container movements by rail over the four full financial years from 2018-2019 to 2021-22 are nearly 18pc below target, not the 13pc below target that the public reporting suggests," Mr Greaves found in his report.

"The department's public reporting did not include any explanatory notes to disclose the inclusion of freight movements that do not meet the definition of the performance measure for the scheme," he said.

"This is a significant deficiency."

Adding container movements that were not supported by the scheme made it impossible for Parliament and other users of public reporting to assess actual performance against the target.

The Auditor-General was equally critical of the progress of the shuttle network, seen by the government as a replacement for the MSIS.

Service start dates across the three sites were delayed by 17.6 months on average, although construction at Altona was nearly complete.

"The department's recent advice to the government confirms that the shuttle network is unlikely to deliver the expected volume of metropolitan container freight by rail unless the government approves further interventions and investments," Mr Greaves found.

"The government has publicly stated over recent years that it expects the shuttle network to move 30 per cent of Melbourne's forecast container trade (or 1.8 million containers) by rail by 2050 ... but without the shuttle network operating, truck trips will continue at current or increased rates for longer."

Delays made it "more challenging" to attract freight customers to trains, away from entrenched and dominant truck operators, he said.

A 2022 consultancy report also found the commercial viability of the shuttle network was not certain.

Among the challengers were pricing, access and operating arrangements and that trucks would retain a significant competitive advantage over rail, based on current pricing and operating models.

Initially the new on-dock terminal would not operate on weekends, only during daylight hours and no freight paths from the Somerton or Dandenong South intermodals could be allocated, until a rail operator was appointed for those sites.

There was no rail link to Webb Dock East, the port's third major international container terminal, after the new stevedore started operations in 2017.

"The new container terminal at Webb Dock now accounts for just over a third of all international container trade through the port," Mr Greaves said.

"This growth is a challenge for the government's policy intent to move more freight by rail because the lack of a direct rail connection means all freight from Webb Dock must travel by road.

"The department's shuttle network viability study states that the lack of a rail connection at Webb Dock is a critical challenge to the success of the shuttle network."

The current 30 pc share of container trade was forecast to grow to 50pc in a decade.

A state government spokesman said the report acknowledged the role of the MSIS in maintaining a significant amount of container freight on rail instead of on Victoria's roads.

"We're getting on with delivering the Port Rail Shuttle Network, with services from Altona SCT Logistics Hub and the Port of Melbourne already underway, taking trucks off local roads and boosting our exporters," the spokesman said.

"We will continue to work with the rail freight industry to move more freight by rail, boosting our economy and supporting our state's growing population."