ECONOMIC DEVELOPMENT QUARTERLY
The Strzelecki Track, if sealed, would provide a vital piece of enabling infrastructure to support the growth and development of tourism activity in the Outback region and beyond. Regional and remote communities could benefit from the income generated from drive tourists( on stopovers), as those passing through often buy local tourism products and services, and basic travel necessities like fuel, food and other supplies. Drive tourism provides a number of benefits to businesses, including: opportunities for new business start-ups; increased demand for new products and services; opportunities for business collaboration; and additional income and employment.
The analysis undertaken by SC Lennon & Associates using REMPLAN Economy Software shows that when the proposed sealing of the Strzelecki Track is complete, and after allowing three years for‘ ramp-up’, there is a potential for an uplift of $ 7.1 million per annum in visitor spending in year 1 as a direct result of sealing the road. This is expected to increase to around $ 17.4 million per annum after a further 7 years( i. e. in Year 10- expressed in present values).
" The analysis of wider economic benefits revealed that sealing the Strzelecki Track has potential to deliver a‘ value add’ to the economy in the order of $ 87 million in year 10 after a ramp-up period."
In addition to the estimated economic benefits to the tourism industry, estimates were made on the economic uplift to other keys sectors – namely mining, the beef cattle industry and the road freight industry – from sealing the Strzelecki Track, based on the productivity enhancements that the project could deliver.
The analysis of wider economic benefits revealed that sealing the Strzelecki Track has potential to deliver a‘ value add’ to the economy in the order of $ 87 million in year 10 after a ramp-up period. If this is projected out over 40 years and discounted at a rate of 5 % per annum, the present value of the benefit stream is $ 1.4 billion. Given the nature of the assumptions that have had to be made, the tolerance should be around +/- 30 %. Hence the range is between $ 1.0 billion and $ 1.8 billion.
In a separately-commissioned cost-benefit analysis of sealing the Strzelecki, the South Australian Government Department of Planning, Transport and Infrastructure estimated the present value of direct transport benefits( from travel time savings, accident cost savings and vehicle operating cost savings) to be $ 1.3 billion. Hence, consideration of the wider economic benefits, as summarised above, has a potential to double this figure to between $ 2.3 billion and $ 3.1 billion.
IN CONCLUSION
CBA when applied to evaluating road projects in rural and remote areas only tells part of the story. The technique focuses on direct user benefits and externalities but it tends to under-value the real purpose of building roads in rural and remote areas, which is to underpin the productivity of the regional economy, not to mention social cohesion in these areas.
There exists a sound methodology for estimating wider economic benefits in terms of the productivity dividend associated with a road project in rural and remote areas. In so doing, as demonstrated by the example of the Strzelecki Track, the true value of the productivity dividend delivered to the regional economy can be assessed and articulated. Only then can road funding be programmed and priorities set on a sound basis.
REFERENCES
Austroads( 2016), Reforming Remote and Regional Road Funding in Australia
Austroads( 2014), Updating Environmental Externalities Unit Values
Queensland Government, Department of Transport and Main Roads( 2011), Cost Benefit Analysis Manual
REMPLAN( 2017), Economy Software, December 2017
SC Lennon & Associates( January 2018), Economic and Community Benefits of Sealing the Strzelecki Track, prepared on behalf of Regional Development Australia Far North, The Outback Communities Authority and The Flinders Ranges Council, http:// www. rdafn. com. au / publications
ABOUT THE AUTHORS
Sasha Lennon( B. Ec., Grad. Dip. Advanced Economics, M. Journalism, ACEcD) is a Brisbane-based consultant specialising in economic development strategy and policy formulation. He is the Director of SC Lennon & Associates Pty Ltd. Go to www. sashalennon. com. au.
Roger Gibbins( Grad. Dip. Economics, M. Urban Planning, Dip. Applied Science( Town Planning) is a Melbournebased freelance consultant specialising in economic impact assessment and business case preparation. He is an Associate with SC Lennon & Associates Pty Ltd.
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