Australian House of Representatives Hansard for 14th May 1997
AUSTRALIAN NATIONAL RAILWAYS COMMISSION SALE BILL 1997
_________________________________________________________________
Main index
Previous article
Next article
Index above
Article information
PDF version of this page
_________________________________________________________________
Mr SHARP (Hume--Minister for Transport and Regional Development)(9.31
a.m.)--I move:
That the bill be now read a second time.
Australian National's operations, in common with many other government
owned railways, are characterised by a large and increasing debt and a
declining market share. The performance of rail stands in stark
contrast to the road transport sector, which has been very successful
in addressing customer needs and therefore increasing its market
share.
To a large extent this situation reflects the fundamental problems
arising from government owning and operating businesses that are more
efficiently conducted by the private sector. In particular, government
rail authorities have in many cases over the years largely operated as
monopolies, have often been subject to political interference and have
not been placed on a fully commercial footing. Under these
circumstances, pricing, operating and investment practices tend to be
unresponsive and inflexible. If real reform is to be achieved in the
rail sector, it is vitally important that the inherent deficiencies
associated with government ownership be replaced by a dynamic market
driven approach.
The problems confronting AN, however, have been substantially
magnified by the establishment of the National Rail Corporation. In
particular, AN has been left with very large debts while the large
bulk of its profitable operations have been transferred to NR.
Furthermore, AN has been required to provide NR with significant
services at well below cost.
The government became aware of the extent of AN's problems shortly
after taking office. I commissioned the independent Brew review, which
revealed a situation requiring urgent remedy. Increasing debt, a loss
of business and escalating taxpayer subsidies were aspects of AN which
the former government both ignored and failed to address. I want to
make it clear that the financial mess at AN was not the result of AN
staff or management, but the result of decisions made by the former
government which left AN in an impossible position.
As a result, I announced on 24 November last year a $2 billion reform
package to rejuvenate the rail sector. The reforms will impact through
the separation of the management of the interstate rail track network
from above track operations.
The major benefit of structural separation lies in replacing the
incentives for anticompetitive and uncommercial behaviour with an
incentive to maximise the number of operators on the network. The
Commonwealth's role will concentrate on controlling and managing
economically efficient and non-discriminatory access to the interstate
rail network. This will allow the interstate rail network to operate
largely as the roads do now: government owned, but open, upon payment
of an access fee, to anyone licensed to operate a vehicle over the
network. Such a change can only be of benefit to the users of rail
transport and indeed to the economy as a whole.
This bill is the first legislative step in achieving this important
component of micro-economic reform. The injection of private sector
expertise into rail operations will reduce costs, improve service
responsiveness and increase rail market share.
The proposed bill
The Australian National Railways Commission Sale Bill 1997 gives
effect to the government's decision to sell the non-interstate
mainline track rail assets of Australian National in whole or in part.
It provides a flexible framework to facilitate:
authority and mechanisms for the sale, including authority to repeal,
replace or amend rail agreements with South Australia and Tasmania
following their agreement to sale arrangements; and
reduction of AN to an entity charged with dealing with any residual
functions and the balance of assets and liabilities not included
above, or not able to be disposed of in the short term, and resolving
outstanding litigation and disputes prior to abolition.
A viable rail industry
AN has been offered for sale as a single unit or by component parts
such as interstate passenger operations, vertically integrated rail
freight operations in South Australia and Tasmania or railway
workshops.
AN's rail operations have been restricted in their operation by
corporate overheads and the burden of debt. Recognising that this
arrangement is not sustainable, the government has decided to offer AN
for sale free of debts and liabilities.
It is proposed that companies be established under the Corporation Law
to be the vehicles through which the sales occur. The assets of AN
necessary for the operation of each component of the AN business will
be transferred into a company by ministerial direction listing the
assets, or classes of assets. The shares in the company will be sold
to a new rail operator. The liabilities of AN would be retained and
paid out by AN or transferred to the Commonwealth.
Thus, the bill proposes flexible arrangements for the transfer of
assets, liabilities and contracts between AN, the Commonwealth and a
new rail operator. To provide maximum flexibility to a purchaser, it
is not proposed that any staff transfer to private sector purchasers.
Instead, it is proposed that staff be made redundant on sale or
closure of the part of AN in which they work. There will be no
requirements or arrangements in the sales process for the transfer or
re-employment of employees and general industrial relations
legislation will determine award provisions.
The new operator will not be burdened by existing liabilities or
inappropriate staffing structures and can develop arrangements
consistent with a viable transport company.
Incentives to improve infrastructure
The states have interests in a large proportion of AN owned land under
the 1975 agreements, which transferred railway assets to the
Commonwealth. It is proposed that the land revert to the states for
them to lease to a new rail operator. It is important that the sale
arrangement create an incentive for an injection of funds to improve
and maintain the rail infrastructure. Ownership of infrastructure is
considered a key part of providing this incentive.
To achieve an infrastructure ownership arrangement under land lease,
the bill proposes that railway land fixtures such as track, signalling
equipment, culverts, buildings, et cetera be severed from the land by
the sales legislation for sale to the new operator with above track
assets.
Agreements with the States
The Commonwealth has legislated a range of agreements with the states
over the years. Some of these need to be amended or repealed to allow
the sale to proceed. The government is negotiating with South
Australia and Tasmania on these issues and is confident of reaching
agreement.
The shares in each new company established to operate a business
previously within AN will become part of a sales agreement between the
Commonwealth and a private sector purchaser. The bill proposes that
the Minister for Finance be authorised to sign an agreement with the
purchasers of these new companies.
It is envisaged that these sales agreements will be a key mechanism by
which Commonwealth commitments under the agreements with the states
will be honoured. Sales negotiations with prospective purchasers
cannot be finalised until the parliament agrees to the sale and new
agreements have been reached with South Australia and Tasmania. The
bill thus proposes that:
I be empowered to enter into new agreements with the states;
.those agreements be given legislative force through regulation able
to be disallowed by either house of parliament;
the various acts authorising current agreements with the states be
repealed on the day on which new agreements take effect; and
any agreement executed in this way be approved and its performance and
observance by the Commonwealth be authorised.
AN financial obligations
The bill proposes a range of provisions which are intended to both
protect the Commonwealth from default by AN as a result of the loss of
assets and revenue generating capacity and guarantee the debts of AN
in order to protect companies which have contracted or loaned funds to
AN in good faith.
These proposed provisions include the expansion of Commonwealth
guarantee powers and provisions to enable the Commonwealth to
discharge AN obligations from funds appropriated for this purpose.
Amendments to the Australian National Railways Commission Act 1983
AN is established and operated under the Australian National Railways
Commission Act 1983. The bill proposes a range of amendments to the
act to enable the commission to assist the Commonwealth in
implementing its rail reform objectives in relation to the commission.
It also provides a power of direction which enables the Minister for
Finance to direct AN in the disposal of its assets and liabilities.
Through the sale process, AN will shed all its rail operations other
than the ownership and management of interstate track. The bill
proposes transitional arrangements, including allowing flexibility to
reduce the structure and size of the commission as the business
contracts and providing the means to transfer residual assets,
liabilities and contracts to the Commonwealth and to abolish the
commission when it has wound down sufficiently. The bill also proposes
the amendment of a range of existing legislation to facilitate the
sale and in consequence of the abolition of AN.
Conclusion
The future of rail in Australia lies with using our current system
much more efficiently and effectively, through encouraging the
participation of the private sector, introducing competition and
providing a greater customer focus. It is possible for the rail
industry to operate profitably, and this will require substantial
programs of cost reduction and capital investment by the private
sector, accompanied by improvements in service quality. It is these
initiatives that will give us a viable long-term rail industry in
Australia.
The legislation underpins the government's rail reform package and is
essential to its implementation. The reform package has a number of
elements but, in particular, seeks to revitalise rail transport by
separating the provision of access to essential infrastructure--the
interstate track--from the provision of rail transport services, which
is more appropriately the role of the private sector. Passage of the
legislation is crucial to the attainment of the government's timetable
for the sale as it will enable the government to sell AN assets and
services, clearly signalling the government's commitment to reform. It
will also directly increase participation of the private sector in the
rail industry.
AN is losing money and is in an unsustainable and declining financial
position which is unlikely to be improved in the current environment
of uncertainty. The extensive restructure required to generate an
efficient and profitable rail system is best able to be achieved
through government divestment and the injection of private sector
transport expertise. This is also the best long-term guarantee of
employment in the rail industry.
Prompt passage of the bill will mean that elements of AN can rapidly
be divested and will thereby reduce uncertainty for AN, its staff,
other participants in the rail industry and the community. Delays in
sale will unnecessarily increase taxpayer liabilities and adversely
effect the government's budget strategy. I commend the bill to
honourable members and I present the explanatory memorandum of the
bill.
Debate (on motion by Mr McMullan) adjourned.
--
Arthur Marsh, telephone +61-8-8370-2365, fax +61-8-8223-5082
arthur@dircsa.org.au
.endofsig