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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