Competition Policy and Railway Investment in Australia

Posted by D. Daniel Sokol

The appropriate role for antitrust varies across regulated sectors.  A new working paper on the Austrlian railroad sector, Competition Policy and Railway Investment in Australia, by Nick Wills-Johnson of Curtin Business School sheds light on how competition policy affects investment in the sector.

ABSTRACT: This project sought to examine the impacts of National Competition Policy (NCP) on investment in Australian general freight and passenger railways, and more generally to assess the rationale underlying NCP and related economic reforms applied to Australian railways. It does not appear that NCP and related reforms have yet had a negative impact on investment. Indeed, vertical separation may have improved investment, at least that being sourced from the public sector. However, there are some intrinsic issues associated with the application of economic regulation which could in the future retard investment, and with the predominantly public sector origin of much of recent investment. In particular, the case for economic reform seems to be weakly made: there are few rents of the type economic regulation can moderate in the logistics chains served by rail in Australia, and there seems only limited scope for sustainable competition in the above-rail task.