Action for Public Transport (N.S.W.) Inc.

Action for Public Transport (NSW) is a transport advocacy group, which has been active in Sydney since 1974. We promote the interests of beneficiaries of public transport; both passengers, and the wider community. We make the following submission on the draft document Appendix A, T7 Risk and Uncertainty Assessment, released for public consultation in January 2021.

Comments

Case Study 1 relates to the High Speed Rail Study - Phase 2 report, prepared by AECOM for the Department of Infrastructure and Transport in 2013. The draft Appendix says that this study "reported a point estimate BCR of 1.1 using a 7% discount rate".

The Case Study ATAP proposes to use in the Appendix uses the same 7% discount rate, which was much too high at the time and is utterly unrealistic in today's world. The Grattan Institute has pointed out:

The cost of money is usually inferred from government borrowing costs, signalled by the 10-year Commonwealth bond rate. Back in 1989, when it seems that the 7 per cent discount rate was established in Australia, the risk-free rate was 6.8 per cent in real terms; in 2017, it was 0.8 per cent. Discount rates should reflect such a dramatic change^*.

We realise that both Case Studies in the draft Appendix are intended to assist practitioners conducting sophisticated mathematical procedures as part of the Assessment Process. Nonetheless, the example conveys a false picture. APTNSW is concerned that the results of the exercise once printed could take on a life of their own, and be cited inappropriately. We hope that ATAP can identify an alternative Case Study that does not have this disadvantage.

Conclusion

APTNSW thanks ATAP for the opportunity to comment on this document.