Saturday, January 24, 2009

Our recession threat and its impact on public transport

With opinions varying on what's in store for Australia's economy, it's worth reflecting on the effect the economy has on public transport.

Here's a few possible consequences of a slowing economy on public transport.

Recruitment and retention of key staff, eg train drivers Operators and maintenance companies should find staff retention easier. No longer will the big money in mining lure eastern states workers. Wages pressure may also moderate and the effect of the 'skills shortage', impacting industries from bus drivers to maintenance will lessen.

Unemployment and a reduced labour participation rate Should boost off-peak patronage on all modes, especially if households sell their second or third car. This increases the importance and use of local public transport, especially suburban buses.

Reduced tourism, overseas student recruitment and retail activity May affect the CBD and some student-dependent suburban centres. These groups have high public transport usage so patronage may also suffer, especially if retail and catering staff numbers fall.

Reduced immigration Would reduce the rate of household formation and thus housing development. Especially in outer areas a slower pace of growth would reduce pressures to extend bus routes to new areas.

Reduced business activity The Australian car industry, propped up by fleet and government purchases, is in for more hard times. Consumers might stick with small cheaper to run imports, despite lower petrol prices. Lower business activity (eg fewer taxis, tradesmen, couriers) may lower traffic volumes during the day and even provide relief for crawling trams and buses.

CBD employment and office vacancy rates Fewer full-time jobs, especially in the CBD, will reduce our very high rates of patronage growth. In a perverse way, decision-makers who did not predict the 2005 - 2008 patronage boom may heave a sigh of relief as 'train crush' stories no longer feature in the papers. Demands on infrastructure may be less and fewer improvements may be proposed. Job suburbanisation or casualisation is also bad for our existing transport network since driving is so much more competitive outside the CBD and 'business hours'.

Reduced environmental consciousness Historically green consciousness and activism peaks towards the end of long booms. During good times few people worry about the economy and environmentalism surges. But during a recession 'it's the economy stupid' and 'the environment' becomes less urgent amongst decision makers. Given that the environment is an often quoted justification for public transport investment, this reduced emphasis makes it harder to successfully advocate improved public transport.

The evaporation of private capital for big infrastructure projects Ambitious projects (eg the Very Fast Train and various road tunnels) often get proposed by entrepeneurs and financiers after generous tax write-offs. However during leaner times such projects are considered risky, credit is tighter and growth projections are less rosy so financiers lose interest. Big ideas die and emphasis instead turns to holding on what we have. However this applies to freeways as much as public transport, so the net effect in modal shift may be negligible.

Less favourable government budgetary position Every person who loses their job makes the government at least $30k pa worse off (from less tax revenue and more benefits paid). Company tax and stamp duty revenues also fall. Governments also lose heavily if they 'play business' and bail out failed companies or finance dodgy public/private partnerships. The effect of all this are 'across the board' cuts, which affect public transport since it is majority government-funded. Infrastructure spending, maintenance, staffing and service levels are the main casualties, if the 1990s experience is anything to go by.

Big 'recession-busting' infrastructure projects In contrast to the above two points, governments facing recession may be willing to follow Keynesian-style economics and go into deficit to 'stimulate the economy'. Major capital infrastructure benefits (which provide jobs and build for the future) may be funded. Sometimes these involve public transport, such as the Cranbourne electrification. However these have long lead times, and recent government policy has instead been to provide one-off cash bonuses to certain groups such as pensioners and first homebuyers since these can be spent quickly. While the federal government has invited submissions for infrastructure spending, few asked for projects will proceed since the money's already been spent.

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