3.2 Improve freight efficiency for industry competitiveness
Victoria’s prosperity is supported by businesses that move billions of dollars in goods every month – across the state, elsewhere in Australia and to overseas markets – including many items that people use every day.1
Businesses across metropolitan and regional Victoria will continue to need strong and flexible connections to their domestic and international customers, including through freight terminals and ports, to remain competitive. Freight companies and operators themselves need modern, adaptable infrastructure to nimbly respond to changing market conditions.
Keeping freight moving as efficiently as possible helps keep costs down, maximises trade and creates the environment for companies to grasp new opportunities.2
Long-term planning for, and investment in, Victoria’s freight infrastructure can support business operations in the face of economic transitions, technological change, and changing consumer behaviour. Freight connections also support greater resilience in a dynamic global marketplace, including in the event of major shocks, such as the COVID-19 pandemic, that disrupt trade and supply chains.
Freight volumes will continue to grow and place pressure on road networks
Growing freight volumes place pressure on the transport networks they use. However, this task has historically not been evenly distributed between road and rail. Most of Victoria’s freight is moved on the road network, with the feet of freight trucks increasing by 35% in the decade to 2017.3 By contrast, the volume of freight moved by rail has not changed significantly in decades, and has declined for some markets.4
Manufacturing remains a major contributor to the economy, with around 300,000 Victorians employed in manufacturing in early 2020.5 Many industrial and logistics precincts are in Melbourne’s outer suburbs, where they generate demand for transport and logistics services, industrial land and ports.
Location and transport connections are important factors for growing industrial sectors. Motorway network accessibility along with labour and land availability are two elements that heavily influence where freight distributors locate.6
The road networks in and near these places will need to move freight reliably and efficiently around the metropolitan area, connecting with regional and interstate producers, and international ports. But the city’s outer suburbs have underdeveloped motorways and freeways compared with established areas, limiting their capacity to accommodate extra freight. As these areas grow and develop, their land values rise, making further road expansion more expensive.
Retrofitting road networks can also be expensive. Early protection and purchase of land for future freight terminals and transport corridors can reduce this risk, keeping more freight options affordable.
A strong and efficient freight rail system can be safer, more reliable and less polluting than road freight. It can help reduce demand on freeways from road freight.7 Replacing trucks with rail can assist in relieving road congestion, pollution and maintenance costs, particularly in metropolitan areas.8
Ports and freight terminals are critical for prosperity and productivity
Ports are crucial freight gateways. They allow exporters, such as agricultural and natural resource producers and manufacturers, to access international markets9 and help importers keep costs low.10 While efficient ports benefit all Victorians, nearby communities and ecosystems can experience negative amenity impacts from freight movements, including increased transport network congestion, habitat loss, reduced air quality, and noise pollution. These must be considered and managed to keep port operations acceptable to local communities.11 Our Advice on securing Victoria’s ports capacity found the most efficient approach to expanding port capacity –
middle of the century – is simply not possible without community support.12 Freight precincts and terminals maintain a central position in supply chains, as they connect freight networks and customers. Intermodal terminals can support these connections by enabling the rapid, cost-effective transfer of freight from one transport mode to another, for example, between road and rail. Effective terminal operations and sufficient capacity are therefore essential building blocks for the overall efficiency of supply chains. They also ease the transport burden for ports, reduce impacts for neighbouring suburbs and are essential for increasing the amount of freight transported and distributed by rail.13
Protecting land gives Victoria more options
Freight terminals and port capacity are necessary to meet the growing freight demand and support the arrival of the Inland Rail project. The price of land has grown faster than the rate of inflation, and industrial land values in different areas of Melbourne increased from 25% to 105% in the five years to 2019.14
In such circumstances, any delay in acquiring land for a corridor can add materially to the cost of a project.15
Protecting future options by reserving land and corridors will yield substantial cost savings. These savings could be further increased if land is acquired early.16
Acquiring entire corridors usually requires governments to make large, upfront outlays, using funds that can be otherwise used for more pressing infrastructure priorities. However, substantial funds can be saved through reserving a corridor and then progressively acquiring the properties.17 The Victorian Government’s Principal Freight Network aims to protect freight operations, precincts and corridors from urban residential encroachment. First established over a decade ago, it does not currently reflect freight corridors that have since been developed in regional areas and metropolitan Melbourne. Iterative reviews – including one currently underway – are opportunities to update protections to reflect emerging priorities.18
Recommendations to move more freight, faster and more reliably
Infrastructure Victoria recommends four major infrastructure initiatives to help keep the freight network efficient. These are described in recommendations 63 to 66 below and are shown in Figure 22. We also make recommendations relevant to freight transport in advocating for changes in travel behaviour (see section 2.3), reshaping the transport network (see section 3.1), and enhancing market access and productivity in regional Victoria (see section 4.1).
Figure 22: Proposed freight infrastructure connects freight terminals and ports.
This map shows proposed future investments in freight infrastructure, including optimising freight capacity at the Port of Melbourne, protecting potential for a new Bay West Port, new road and rail networks connecting to freight terminals, and a rail and road corridor in outer Melbourne.