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Peter Anderson

Operators must keep pace with price hikes to survive 2018

February 2018

For Victorian freight operators, announcements on vital new road infrastructure were undoubtedly a key take-out from 2017, with the Victorian Government making good on numerous big-ticket projects that will pay dividends for the state’s economy. That year began with the establishment of the North-East Link Authority, which was tasked with identifying the preferred corridor for the Victorian Transport Association’s (VTA) priority infrastructure project for the state, and one that we lobbied hard for along with the Royal Automobile Club of Victoria (RACV) and other industry groups. Twelve months on, the corridor has been announced and the discussion is evolving into how it will be financed and constructed.

Similarly, contracts have been signed for the West Gate Tunnel, a $6.7 billion project that will widen and enhance the existing West Gate Freeway, and create direct access to the Port of Melbourne for freight operators via twin tunnels under Yarraville; and an elevated freeway connecting with Transurban’s other toll road, CityLink.

These projects are shaping up as major election issues the Government will have to confront when voters go to the polls in November. Combined, these are the most expensive infrastructure projects ever undertaken in the state’s history, with taxpayers exposed to construction costs of close to $25 billion, offset to some extent by the $4 billion Transurban will stump up to build – and toll – the West Gate Tunnel.

When you add on the cost of the Level Crossing Removal Program, the Metro Rail Tunnel project, regional road and rail improvement projects and other smaller-scale infrastructure works, it’s easy to see how upwards of $40 billion has been earmarked for infrastructure spending in Victoria over the next five years.
Numbers as sizeable as these are difficult for most people to comprehend, but the reality is that they will inevitably be budgeted and paid for via a combination of personal and business taxes, direct and indirect road-user charges, tolls, levies and other charges.

As always, the freight industry will be asked to take on a higher share of the bill, with industry associations like the VTA fighting hard to ensure our industry’s exposure to these costs is fair and equitable, and mindful of the many benefits we provide to state and national economies in the form of direct and indirect employment, and business and payroll tax contributions.

Operators will be directly exposed to rising costs to fund these and other projects, as well as further price hikes their suppliers will inevitably introduce to maintain positive balance sheets.
We saw early signs of this in 2017 in the form of stark increases to toll roads in Melbourne and elsewhere throughout the nation, as well as multiple infrastructure surcharge price hikes by the major stevedores, which was the source of much frustration and angst for operators servicing our ports.
Increases like this are likely to continue this year and next, and while the VTA will be working hard to ensure cost hikes are kept to a bare minimum, it is more important than ever that operators do their bit to pass these costs increases on to their customers throughout the supply chain, and that they educate customers about why they cannot absorb such increases.

A major focus of the VTA this year will be to further condition consumers of goods and services to expect and budget for higher consumer prices.

This is already happening to some extent, with the intense focus on the hip-pocket impacts of higher water and energy costs. So, it will come as no great surprise to consumers that they will inevitably have to foot the bill for higher transport costs.

For many operators, the consequences of trying to absorb these costs will be devastating. No one wants to see a transport operator go under for not passing on business costs that ultimately must be worn by the consumer. These and other matters will feature prominently in the annual VTA State Conference, which is being held early so as not to clash with other industry events and seminars scheduled for the middle of the year.

Our conference will feature a terrific line-up of guest speakers from government and industry, and I urge you to join us at Mantra Lorne, 18–20 March. To register, visit www.vta.com.au.

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