High Speed Rail In Australia - Does the Emperor Have Any Clothes?
Key Takeaways
- Infrastructure Australia has reviewed the HSR Stage 1 business case, showing a benefit-cost ratio of 0.8 to 1.05 at best and as low as 0.2 under reasonable assumptions.
- Newcastle's population of 180,000 is too small to anchor this system, and 60% of the route must be tunnelled through protected areas at enormous cost.
- The same amount of money could provide all six Australian capital cities with sufficient funds for light rail, BRT, cycling networks, or housing around existing stations, delivering far greater benefits.
- Australian cities are low-density by international standards, with room to densify where infrastructure and jobs already exist, making the housing argument for HSR (58% of benefits) unconvincing.
- Construction emissions are massive, while mode shift from cars is small, and no flights are replaced.
- The project is being rushed to meet political timelines, violating the "think slow, act fast" principle that prevents megaproject disasters.
- Starting construction in 2027 faces a significant workforce shortage increasing risks.
- HSR is the Prime Minister's pet project with weak bipartisan support. When cost blowouts occur, political support could collapse, and the project risks mid-construction cancellation.
- The strategic case for the whole line is also weak.
- Australia should redirect the talented people working on HSR to infrastructure investments that will deliver genuine value for taxpayers.
Introduction
Australia has debated high-speed rail for decades. The dream is compelling: sleek trains connecting Brisbane, Sydney, Canberra, and Melbourne down the Eastern seaboard, transforming travel and opening up regional areas for development.
The current government has established a High Speed Rail Authority (HSRA), which provided the business case for Stage 1, Sydney to Newcastle, to Infrastructure Australia (IA) for review at the end of last year.
The project is now seeking $667 million for further development.
IA has published its review. The findings are not encouraging.
This blog examines whether Australia should proceed with high-speed rail based on that review. A few months ago, I wrote a blog about making smart decisions on HSR projects. It outlined key questions any HSR proposal should answer. In this blog, I'll assess how Australia's HSR stacks up against those questions.
Two points before I begin.
First, I'm a fan of HSR. I've travelled on multiple HSR trains across different countries and loved it. If Brisbane (population 2.5 million) were where Newcastle (population 180,000) is, this would be a blog about why Australia needs HSR immediately. The problem isn't HSR as a concept; it's HSR for Australia.
Second, I know people who've worked on the business case, including the CEO of the HSRA and people at IA. They're top-tier professionals. This critique is possible because of their transparency and professionalism. My criticisms target the project itself and the political decision-making driving it, not the people doing the work.
Let's examine what the numbers actually tell us.
The Benefit Cost Ratio (BCR) problem
The business case hasn't tried to produce one single BCR number. Instead, it provides a range based on different assumptions. This is the right approach given the uncertainties involved.
Using a 4% discount rate, the BCR sits between 0.8 and 1.05. The net present value ranges from negative $10.5 billion to positive $2.6 billion.
That's already concerning. A BCR below 1.0 means the project destroys economic value rather than creating it. Even at the top end, a BCR of 1.05 is barely viable.
But it gets worse.
Using upper-bound capital cost estimates and lower-bound housing supply estimates, the BCR drops to 0.2 at a 4% discount rate. At a 7% discount rate, it falls to 0.1.
Why is the BCR so low?
Two fundamental problems stand out when you compare this to successful HSR projects around the world.
First, Newcastle's population is too small. At 180,000 people, it simply cannot generate sufficient demand to justify a multi-billion dollar HSR connection. Even with aggressive population growth projections, the city remains too small to anchor this system. Successful HSR projects connect major population centres, think Tokyo to Osaka, Paris to Lyon, or Madrid to Barcelona. Newcastle isn't in that league.
Second, the geography is terrible for HSR. The proposed alignment traverses nine national parks, four nature reserves, two regional parks, one State Conservation Area, and one State Forest. Environmental and topographical constraints mean that of the 194 km route, 115 km must be tunneled, 38 km requires bridges and viaducts, and only 41 km can be built at surface level.
Tunneling 60% of the route will make construction extraordinarily expensive.
Is the BCR the final word? No. Sometimes strategic considerations justify projects with marginal economics. This is only Stage 1, with future stages planned to connect Brisbane and Melbourne.
But strategic benefits only matter if they're real and if this project is genuinely the best way to achieve them. I'll address the strategic case towards the end of this blog.
For now, the numbers are clear: on pure economics, this project fails.
Is HSR better than the alternatives?
One of my key tests for any HSR project is whether it represents the best use of available funds compared to alternative investments. Opportunity cost matters. Every dollar spent on HSR is a dollar not spent on something else.
So how does this project stack up?
We don't have a final price tag yet, but the project will cost tens of billions of dollars. Based on similar projects and the challenging geography, we're looking at north of $30 billion for Stage 1 alone.
That's an enormous amount of money. Let's look at some alternatives.
Public Transport Alternatives
The cost of stage 1 is enough to give all six Australian capital cities a light rail, bus rapid transit, or other significant public transport project that would serve far more people than a Sydney-Newcastle HSR line.
Active Transport
For the same money, we could give every Australian capital city a comprehensive, world-class cycling network. Protected bike lanes, bike parking, and end-of-trip facilities throughout every major city.
The health benefits alone would be substantial. The environmental benefits would be immediate, not decades away. And unlike HSR, these networks would serve everyone, not just those traveling between two specific cities.
Housing Solutions
If housing affordability is the goal, and the business case claims housing as 58% of total benefits, there are far better ways to spend the money.
Australia's major cities are low-density by international standards. They have room to densify around existing train stations. The money could fund social infrastructure, schools, libraries, parks, community centres, that would support denser development.
Aviation Decarbonisation
Perhaps you're worried about aviation emissions and see HSR as the solution. Stage 1 doesn't replace any flights, it's Sydney to Newcastle, not Sydney to Melbourne or Brisbane.
But even for future stages that might replace flights, there's a better alternative. Singapore has just mandated a Sustainable Aviation Fuels (SAFs) levy. Australia could invest in SAF production capacity, mandate their use, and implement similar funding mechanisms for a fraction of HSR's cost.
The benefit? SAFs decarbonise all flights, domestic and international, not just the routes HSR might eventually serve. It's a solution that scales globally, not just along Australia's east coast.
Are these better ways to spend the stage 1 money?
Unequivocally yes.
Are we falling for shiny object syndrome?
Much of the public advocacy for HSR boils down to a simple argument: China, Japan, and Europe have high-speed rail. Australia should too.
It's seductive logic. Those countries have gleaming trains traveling at 300+ km/h. They look modern, efficient, and impressive. Who wouldn't want that?
But this is infrastructure envy, not infrastructure planning.
Japan built HSR connecting Tokyo (population 14 million) to Osaka (population 19 million). France connected Paris (population 11 million) to Lyon (population 2.3 million). Spain linked Madrid (population 6.6 million) to Barcelona (population 5.6 million).
Australia is proposing to connect Sydney (population 5.3 million) to Newcastle (population 180,000).
The fundamentals that make HSR viable elsewhere simply don't exist for this route. But politicians have fallen for the shiny object anyway.
The Institutional Problem
Governments don't create High Speed Rail Authorities intending to shut them down when the numbers don't work.
The HSRA's job is to deliver a HSR business case and beyond. Even with the best intentions and the highest professional standards, that creates inherent bias. The organisation exists to make this project happen.
This isn't a criticism of the people involved, they're excellent professionals doing their jobs. It's a criticism of the structure.
The Political Trap
Infrastructure Australia faces a similar constraint. The project has strong backing from the Prime Minister. IA operates within a political reality where recommending against the project would be extraordinarily difficult, regardless of what the evidence shows.
Again, this isn't about the quality of people at IA. It's about the political environment they operate in. When a Prime Minister champions a project, agencies face immense pressure to find ways to make it work rather than recommend stopping it.
The Runaway Train
The result is predictable: this project looks like a runaway train that's extremely difficult to stop.
Australia is falling for shiny object syndrome. We're pursuing HSR not because the business case stacks up, but because it looks impressive and other countries have it.
Should transport policy be reshaping settlement patterns?
Transport policy can sometimes help reshape where people live and regional economies. In specific circumstances, this makes sense. Australia's expensive housing market has led some to argue that HSR could help by distributing population to more affordable regional areas.
It's an appealing idea. But does it hold up?
The Housing Numbers
The business case claims land use change as its primary benefit, 58% of total benefits come from housing. The project expects 46,000 additional households due to better accessibility. Another 52,000 to 104,000 households would result from smaller average household sizes as population redistributes across more available dwellings.
So we're talking about 98,000 to 150,000 households total.
That's not a radical transformation of Australia's settlement patterns. For context, London's Elizabeth Line (formerly Crossrail) has delivered around 70,000 additional homes, with another 70,000 expected in the coming decade. Similar scale, but the Elizabeth Line serves a city of 9 million people.
Australia's HSR Stage 1 would cost a similar amount to serve a city of 180,000 people.
The Density Reality
Australia's major cities are low-density by international standards.
Brisbane, Sydney, and Melbourne have enormous capacity to gently densify. They don't need HSR to unlock housing potential, they need planning reform and infrastructure investment around existing stations.
Do the environmental benefits justify the investment?
Many HSR advocates point to environmental benefits as justification. Trains produce fewer emissions than cars and planes, so HSR must be good for the environment, right?
Not so fast.
What Infrastructure Australia Says
Here's the key quote from IA's review: "The economic appraisal monetises the proposal's expected residual emissions of 1.3 million tonnes CO2e which does not align with IA's Guide to assessing greenhouse gas emissions or relevant state government requirements to monetise direct, indirect and embodied emissions. Including the impact of all emissions would be expected to materially reduce the BCR."
Translation: the business case only counts some emissions, not all of them. When you include construction emissions, the concrete, steel, tunneling, and earthworks required, the environmental case gets much worse.
These construction emissions need to be offset by operational savings. That only happens if HSR actually replaces high-emission travel.
The Mode Shift Reality
Stage 1 connects Sydney to Newcastle. It doesn't replace any flights, there aren't regular commercial flights between these cities now.
The business case expects small mode shift from cars. Small mode shift means small operational emissions savings. Those savings need decades to offset the construction emissions.
The Future Stages Argument
Proponents will argue that future stages connecting to Melbourne and Brisbane would replace flights and deliver real emissions reductions.
Perhaps. But even then, it would be better to invest in SAFs.
Don't build HSR for the environment. If you care about emissions, invest in solutions that actually deliver meaningful reductions.
Are you following the "think slow, act fast" principle?
"Think slow, act fast" is a principle for megaproject success. Spend the time upfront getting the planning right. Then, once construction begins, execute quickly and efficiently.
It's a lesson learned from megaproject disasters around the world. Projects that rush planning inevitably face cost blowouts, timeline delays, and scope changes during construction. The HSRA CEO has even spoken about this principle on a recent podcast, acknowledging its importance.
Unfortunately, Australia's HSR is doing the opposite.
The Constrained Timeline
Infrastructure Australia's review includes this revealing statement: "Infrastructure Australia recognises the substantial amount of work undertaken by HSRA in a very constrained timeframe."
That's polite bureaucratic language for "this has been rushed."
Why the Rush?
Political imperatives are driving the timeline, not project requirements.
The current government wants to show progress. The Prime Minister has championed this project. There's pressure to demonstrate momentum, to commit funding, to break ground before the next election cycle.
The Consequences
What happens when you rush planning on a project this complex?
Costs blowout and timelines continually slip.
Is the timing right for your context?
Even if a project has merit in principle, timing matters. Building at the wrong time can turn a viable project into a disaster. So when does Australia plan to start construction?
2027.
That's a problem.
The Workforce Gap
The business case identifies significant workforce gaps from 2029 to 2036 across New South Wales. In Heavy and Civil Engineering Construction, exactly the skills HSR requires, demand for workers is expected to exceed supply by 35%.
Olympic infrastructure projects are already ramping up for the Brisbane 2032 Olympics. Both projects will be competing for some of the same limited pool of skilled workers.
When demand exceeds supply, wages rise. Contractors increase prices to secure the workers they need. Less experienced workers get promoted faster than they should. Projects take shortcuts because experienced supervisors are spread too thin.
The result? Higher costs and increased risk of mistakes.
The International Competition
It's not just domestic competition for workers. International resources won't be available either.
Canada is developing its first HSR line. Europe has significant HSR expansion plans. If Australia is building HSR at the same time as multiple other countries, where will the specialised expertise come from?
Australia will be paying premium rates for less experienced workers and consultants. That's not a recipe for project success.
What does this mean in practice?
Construction costs could be higher than estimated. Timeline delays become more likely.
The Sensible Alternative
Here's the thing: if HSR truly has strategic value for future generations, there's no need to rush.
Preserve the corridor now. Protect it from development that would make future construction more difficult or expensive.
Then build when the timing makes sense. Building five years later doesn't change the strategic value. But it dramatically changes the execution risk and likely costs.
Can you maintain political stability and policy continuity?
Megaprojects take a long time to complete. They span multiple election cycles and often outlast the politicians who championed them. Policy continuity is an essential requirement.
So what are the political prospects for Australia's HSR?
Not good.
The Prime Minister's Pet Project
HSR is closely associated with the current Prime Minister. It's his signature infrastructure initiative. His legacy project.
That creates a problem.
When a project is so closely tied to one leader, its fate becomes tied to that leader's political fortunes. If the Prime Minister faces leadership challenges within his own party, HSR becomes vulnerable. If Labor loses government, HSR becomes very vulnerable.
The Weak Business Case Problem
Projects with strong business cases can weather political changes. When the economics are compelling and benefits are clear, opposition parties think twice about cancelling them.
But HSR doesn't have a strong business case. That's a target-rich environment for political opponents.
The opposition doesn't need to argue against HSR in principle. They can simply point to the numbers and say, "This specific project doesn't stack up. We'll redirect the money to projects with better returns."
When Projects Hit Trouble
The real test comes when projects encounter difficulties. And given the challenges this project faces, workforce shortages and rushed timeframes, it will encounter difficulties.
When costs blow out and timelines slip, political support evaporates quickly.
Even Labor might reassess if the project runs into serious trouble. A new Labor leader might see HSR as the previous leader's problem, not their own. This is what happened with HS2 in the UK.
The Strategic Case
Sometimes a project with weak immediate economics can be justified by strong strategic benefits. Stage 1 might not stand alone, but if it enables a highly beneficial future network, then accepting a low BCR makes sense.
Does that argument work for Australia's HSR?
The Full Network Business Case
We do have a business case for the complete HSR line, dating back to 2013. It showed a BCR of just over 1.0 for the full Brisbane-Sydney-Canberra-Melbourne network.
That's viable, technically. But barely.
Let's examine the main arguments.
The Housing Argument
Proponents tout HSR as a solution to Australia's housing affordability crisis. Build housing in regional areas, connect them with HSR, and relieve pressure on expensive city housing markets.
It's appealing in theory. In practice, it doesn't hold up because Australia’s major cities have plenty of scope to gently densify.
Community Acceptance Uncertainty
There's another problem with the housing argument: will the impacted communities actually accept the scale of development proposed?
The business case assumes tens of thousands of new homes in regional communities. Many regional communities will resist that scale of change.
If they do, the housing benefits don't materialise.
Mode Shift and Carbon Emissions
Many people argue for HSR to replace domestic flights.
This assumes flying will continue to produce significant carbon emissions. That assumption is increasingly questionable.
Sustainable Aviation Fuels can significantly reduce emissions. Electric and hydrogen aircraft are in development. By the time a full HSR network is completed, possibly in the 2050s, aviation could be at or near net zero emissions.
If that happens, one of the main arguments for HSR disappears.
Travel Time Savings
Without significant mode shift from cars and planes, travel time savings will be modest. Most people traveling Sydney-Melbourne or Sydney-Brisbane today fly. The travel time benefit possibly exists, but it's not transformative for the costs of the project.
Productivity and Wider Economic Benefits
Just under a quarter of Stage 1's benefits come from wider economic benefits, agglomeration effects, labor market improvements, and productivity gains.
These are real benefits. But are they the best way to boost productivity?
Almost certainly not. Productivity gains come from enabling economic activity in the most productive parts of the economy. In Australia, that's the major cities, Sydney, Melbourne, Brisbane.
You get more economic benefit from enabling people to live and work productively in the major cities.
The Nation Building Argument
Proponents will say I'm lacking vision. They'll call HSR a "nation building project" and "multi-generational infrastructure."
These are slogans, not benefits.
Nation building projects need to actually create genuine economic value, enable growth, improve quality of life.
Proponents need to answer this question clearly: Why is spending circa $200 billion on HSR the best way for Australia to invest its infrastructure budget?
Not "Would HSR be nice?" or "Don't we deserve HSR like other countries?" but specifically: What makes this the highest-value use of $200 billion?
If they can't answer that convincingly, with rigorous analysis and clear evidence, then the strategic case fails.
My Challenge
I'm a self-confessed HSR fan. I've ridden it across multiple countries and loved it. I want to be convinced that Australia should build this.
But if proponents can't convince me with evidence and analysis, what chance do they have of maintaining broad political support? Especially when the project inevitably hits problems.
When those problems come, and they will, political support will collapse unless there's a genuinely compelling strategic case. Empty slogans about nation building won't be enough.
Strategic considerations can sometimes justify projects with weak immediate economics. But the strategy needs to be sound. Australia's HSR strategy isn't.
Conclusion
Australia's high-speed rail project fails the most basic test: does it represent the best use of taxpayer money? The answer is clearly no.
With a benefit-cost ratio as low as 0.2, this project could destroy economic value.
The problems are fundamental, not fixable with better planning or tweaks to the design. Newcastle is too small to anchor a multi-billion dollar HSR system. The geography requires 60% tunneling, making construction costs astronomical. The housing benefits can be delivered far more cheaply by building around existing stations in cities where people already want to live. And the environmental case collapses when you account for construction emissions and the likely decarbonisation of aviation.
Meanwhile, Australia faces genuine transport challenges that desperately need funding. Our cities need better public transport. Our cycling infrastructure is inadequate. Our most productive urban areas are constrained by poor connectivity and insufficient housing.
For the cost of this HSR project, we could transform transport in every Australian capital city. We could build light rail networks, bus rapid transit systems, and world-class cycling infrastructure. We could enable tens of thousands of homes near existing stations with the schools and libraries to support them. We could fund sustainable aviation fuels that would benefit all flights, not just domestic ones.
The talented people working on this project deserve better. They should be redirected to projects that will actually deliver value for Australians, projects with strong business cases and that will deliver benefits both today and for generations to come.
Sometimes the brave thing to do is to stop a project before it becomes a disaster. This is one of those times.
The emperor has no clothes. It's time someone said it out loud.