Page 163 - Week 01 - Wednesday, 26 February 2014
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This is one of the reasons that other congested cities are looking at light rail as well. The economic appraisal of Sydney’s CBD and south-east light rail project, for example, shows an expected $4 billion worth of benefits to be generated by the project over 30 years. That equates to a benefit-cost ratio of 2.5 or, put more simply, $2.50 worth of benefits for each dollar invested.
The assessment of the Canberra light rail project achieved a similar cost-benefit ratio, 2.34, or $2.34, in benefits for every dollar invested. It is important to note that this economic assessment only assesses traditional transport benefits, things like travel time savings, carbon emission reductions, vehicle operating costs and road accident costs.
Consultants specifically point out that intangible or newer economic benefits are not included in the assessment, but they note that these kinds of improvements will produce significant benefits to the Canberra community. So in fact the benefits are even greater than those that are acknowledged in this conservative assessment. There is a lot of work occurring around Australia right now amongst transport analysts and economists to try and properly monetise some of the more intangible benefits of light rail projects. As these are becoming clearer, light rail is starting to appeal to governments around the country, including to politicians of all persuasions.
Particularly appealing are the economy-wide productivity benefits such as those provided by agglomeration economies. Agglomeration economies occur when a city takes advantage of the productive advantages that arise from a spatial concentration of economic activity. This includes through benefits such as knowledge sharing and labour market pooling. These are benefits that arise as a side-effect of building a light rail corridor that is effective in increasing density and accessibility.
Put more simply, it means that around the light rail corridor we get a density of businesses. There are special economic advantages that arise from this, as the businesses all benefit from each other, use each other’s resources and skills, and share knowledge. It is now a well-documented economic advantage that can be quantified, but as I said, it is still not being used often in cost-benefit analyses in Australia.
The corollary to economic agglomeration is the fact that building a city with a focus on car use tends to damage the economy. It becomes more spread out, more difficult to service with infrastructure, there is less connection between businesses, less foot traffic to enliven public spaces and encourage small businesses, and more valuable land consumed with roads and car parks.
The light rail project of course will create jobs in Canberra both directly and indirectly. There are direct jobs, people who will work directly on the project like engineers and construction workers. On top of this there are what you would call indirect and induced jobs, people who supply materials for the project, for example. Light rail is of course an economic attractor. It well help attract opportunities like major conferences to Canberra. A first class public transport system is certainly something that is expected in a city hosting major forums or conferences.
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