Grain group pushes for regulation of Australia's rail networks

by World Grain Staff
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MELBOURNE, VICTORIA, AUSTRALIA — Grain Producers Australia (GPA) said the ACCC must have an ongoing, active oversight role of Australia’s rail freight networks, supported by an appropriate regulatory framework, if the takeover of Asciano by Brookfield is to be allowed to proceed.

Canadian-based Brookfield Asset Management Inc. is leading a group that has agreed to pay A$8.9 billion ($6.55 billion) in cash and stock for Asciano Ltd., the Australian rail and port operator. The deal is expected to be complete before the end of the year, subject to regulatory approvals. Brookfield currently operates the only rail freight network in the southern half of Western Australia.

Andrew Weidemann, GPA chairman, said if there ever was an example of how not to do things, it would have to be the lease of the grain rail freight network in Western Australia to Brookfield that enabled the company to extract monopoly rent and leave WA’s grain growers worse off.

“Grain growers in Western Australia have highlighted the way their rail asset has been allowed to decline through insufficient maintenance expenditure, all while they are forced to pay more in charges to use the network,” Weidemann said. “The regulatory environment is clearly inadequate, the grain industry is losing value and this appalling situation can only reduce public support for foreign investment, at a time when Australia needs to encourage investment and grow economic activity.”

A similar situation to this in Victoria existed some years ago, when the rail freight network was privatized and the result was that the network fell into disrepair, rail services became uncompetitive and much grain was forced onto the road.  Eventually,  the Victorian government had to resume ownership.

Successive governments have been forced to spend large sums of money in rehabilitating the Victorian network, with much more still required – all while the challenge of getting grain to port has become the industry’s biggest bottleneck and a major loss of supply chain productivity, GPA said.

“Australia must learn from these examples and declare ‘no more,’” Weidemann said.

ACCC chairman Rod Sims is already on the public record highlighting the ACCC’s concerns about the future of monopoly infrastructure assets and the need for tougher regulation before assets are privatized.

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