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Accounting for the social benefits of regional transport development

Regional areas are very different to cities. From an economic appraisal perspective, understanding how investment in transport infrastructure benefits regional communities vs urban ones is a bit like comparing apples and oranges.

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19 April 2023 | 1 min read
Kapil Kulkarni

Infrastructure

Asia Pacific

Australia

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Why a more comprehensive approach to benefits estimation is needed

So when it comes to benefits assessment for funding, using the same criteria to measure the value generated in the city vs the country is inherently unfair. After all, a road built in a city will create benefits that are not as relevant to a country town. And vice versa.

Despite the clear differences that location can bring to the benefits conversation, many of the economic appraisal techniques used to determine whether regional and urban transport projects get funding are exactly the same. And they overwhelmingly favour the city.

And that’s why a more comprehensive approach to benefits estimation is needed. One that more fully accounts for social benefits.

Current state of play

Economic appraisal techniques for transport projects have progressed significantly in the last few decades. This has happened alongside advances in transport demand modelling technologies, which provide a much better picture of what communities will need into the future.

There are well-established approaches for quantifying the direct benefits of transport itself – getting people from A to B faster, reducing congestion etc – and these are included as a standard feature of state, national and international guidelines for project assessment.

For urban transport projects this works well. High population density, forecast growth and a wealth of existing transport usage data all feed the equation.

Drone aerial Lithgow train maintenance facility, Blue Mountains, NSW
A regional rail maintenance facility in the Blue Mountains region of NSW

But the approach doesn’t work so well for regional areas where we see a much wider range of trip purposes, population size does not create commuting peak issues, and people generally have far fewer transport options. The maths just doesn’t look as good.

By using the same approach for assessing all projects, regional transport benefits are being left on the table.

Investment in transport can enable a broad range of social and economic development opportunities and benefits for regional areas.

In the country, we need to go beyond the “urban metrics” of congestion, crowding, and capacity constraints.

Expanding the framework

Transport is a vital ingredient in improving social outcomes in regional areas. We know well-serviced, reliable transport options mean people can more easily participate in education, employment, public service, and social and recreational activities. More on that here.

These social benefits create additional economic uplift or avoided costs that can be anticipated and accounted for in a similar way to more conventional methodologies. Techniques to account for social value already exist in the social infrastructure sector. These could be adapted for regional transport.

Accounting for health, education, individual wellbeing (in addition to the more conventional benefits that transport brings) would give government a more complete picture of a project’s potential value. And this would level the playing field when urban and regional areas compete for transport funding.

A case in point

The Great Western Highway Upgrade Program in New South Wales is a great example of how transport-induced social benefits can be demonstrated and accounted for.

Investigation showed that the highway upgrade could increase health and education outcomes for local people by significantly reducing the travel costs associated with accessing the health care and higher education facilities that are only available in metro areas or outside their community.

For health, this was expressed as an estimate of the avoided mortalities that would result from people accessing health services more frequently, and earlier.

Reduced travel time combined with increased demand for health services could result in an estimated six fewer avoidable deaths per year.

In monetary terms, over a 30-year period (from full opening in 2030/31 to 2059/60) the aggregate net health benefit from the upgrade is estimated to be $450 million (present value).

Great Western Highway
Great Western HighwayGreat Western Highway, New South Wales

For education, projected time savings from the road upgrade were estimated to increase demand for higher education in nearby local government areas. This equated to an additional 13.5 graduates per year across the corridor population.

Expressed as a dollar value, the net education (human capital) benefit from the upgrade is estimated to be $41 million over 30 years (present value). Plus, each university graduate would contribute an additional $318,000 in lifetime productivity to the economy.

University-student-working.jpg

Next steps

Examples like the Great Western Highway Program show that social benefits can and should be taken into account when governments make funding decisions. And that the benefits for communities are material.

The question is not whether these benefits should be considered, but how we ensure appropriate assumptions and assessment techniques are applied. We need to embed these techniques into our various guidelines for cost benefit analysis.

Moving to a more nuanced approach when looking at regional transport benefits is the next step in our evolution of investment economic assessment and modelling.

By expanding the framework we can make better investment decisions and more fully appreciate the value that transport projects can bring, no matter where in Australia they are located.

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This article is a summary of an economic paper by the authors published by the Australasian Transport Research Forum. Read Accounting for the social benefits of regional transport investments – A case study from the Great Western Highway Upgrade Program to find out more about the benefits of using an expanded benefit framework to assess regional transport developments, including a detailed analysis of the Great Western Highway Upgrade.