Scott Charlton, Chief Executive Officer

Scott Charlton, Chief Executive Officer, Transurban

Key points:

• The pandemic has accelerated many trends in the transport sector, with the rapid uptake of remote working, telehealth, and ecommerce likely to have lasting impacts. • Governments need to pave the way for trends like autonomous and electric vehicle uptake by reducing regulatory barriers. • Governments also have an opportunity to undertake ambitious reforms like implementing road user charging for electric vehicles to ensure the long-term funding model for our roads is equitable and sustainable.

I am really pleased to be here with Infrastructure Partnerships Australia, and I am pleased that we can come together, albeit virtually. I am looking forward to being able to talk to everyone again face to face at events like this, hopefully in the not-too-distant future. And despite all of these challenges, congratulations to Infrastructure Partnerships Australia for continuing to stage what is always one of the most important events on our sector’s calendar.

This year, obviously it is more important than ever to have a forum like this, to hear and discuss the ideas, opportunities, and challenges our sector is facing. It is stating the obvious to say that this year has tested us in ways we could not have imagined just over six months ago. The tragic loss of life, the upheaval in our daily lives and the economic impact have been immense.

I can honestly say that prior to COVID-19, we actually did have pandemic risk as one of our key risk areas, but we never

imagined it would play out like this has so far. I was part of the SARS environment when I was in Hong Kong. I do not discount for one moment the degree of challenges we are facing, but I have always been an optimist, and I am still extremely positive about the future.

We have faced crises before, and if you look back over history, each time we have emerged stronger. The current crisis has spurred new and creative ways of thinking and doing things, and has really accelerated some of the long-term trends that we have seen and talked about for quite some time. Crises like this help to bring them forward.

So, our children are now doing lessons via Zoom, doctor appointments are done over the phone, and our favourite restaurant meals are now being delivered by Uber. There’s even a nightly live stream of penguins coming ashore at Phillip Island in Victoria. Evidently, the penguins can avoid the curfew and somehow have gotten around the ring of steel, so hopefully as we see regional Victoria opening up, we will see more opportunity for tourism to continue down there, as well.

But the crisis has also embedded quite a few new buzzwords – of course, we have all heard the word ‘unprecedented’ thrown around a lot. I usually try to avoid these buzzwords. But ‘reimagined’ is one that has been frequently used lately, and it is probably appropriate to the challenges and opportunities in front of us.

Crises often lead to greater cooperation and they force people who might not normally work together to connect – and connect quickly. And with that cooperation, wisdom and diversity of the crowd come ideas and innovation. We also see trends being fast-forwarded – some that have inched along for years see overnight progress now.

We all know about working from home. Around 65 per cent of city workers in Melbourne, pre-COVID, worked from home at least one day a week. But within a matter of days, the CBD emptied out and everyone has been competing for bandwidth in their homes for almost six months now. We have seen huge advances in technologies and innovation in recent years that are changing the way we live, work and get around.

I am confident that we are going to see many of these accelerations, particularly in transport. COVID-19 is quickly turning the future into the present.

For example, take autonomous vehicle (AV) technology, which we all believe will revolutionise transportation as we know it, and offer enormous benefits in terms of safety and efficiency. The automotive sector has been hit hard by the pandemic, and there are estimates that the OEMs and suppliers will produce something like 7.5 million fewer vehicles this year. And over the short to medium term, the automakers have been forced to scale back their R&D activities to focus on core business or testing. A number have also pushed back their deployment plans for AVs from 2020 to beyond 2022 now.

But the disruption has also accelerated the use of AV technology in other ways. And, importantly, regulations are being fast-tracked to allow for this implementation.

Less than a year ago, a Silicon Valley robotics company called Nuro appeared to be years away from widespread adoption of driverless delivery vehicles. Now, these vehicles – or, as the company calls them, ‘street-legal delivery robots’ – are an everyday sight in Houston, Texas, delivering groceries to thousands of customers, avoiding human contact and reducing the spread of infection. Customers can open a vehicle’s door just by flashing a thumbs up sign, and retrieve their groceries.

In California, Nuro’s vehicles are also delivering medical supplies to temporary COVID-19 hospitals, while in Florida, another high-tech company has partnered with the local transportation authority and is using autonomous vehicles to collect COVID-19 tests from drive-through testing locations.

We have been watching China, where the policies and infrastructure are rapidly being put in place to support automated vehicles. Self-driving testing zones are now being expanded to pave the way for fleets of robotaxis. In June, DiDi launched a robotaxi service in Shanghai in a designated open traffic area that covers local business districts and downtown hotels. It is now targeting one million vehicles on this platform within a decade. Outside of Beijing, there is a 100-kilometre motorway expected to open next year, and its two inside lanes will now be dedicated just to autonomous vehicles. Now, of course, a number of regulatory hurdles will have to be addressed before AV technology can be deployed at scale. As I have spoken about before, there are more than 700 pieces of Australian legislation and regulation that would need to be catered for to enable the transition.

But because of the crisis globally, some rapid progress has been made to pave the way for these technologies. Nuro received an exemption from the National Highway Traffic Safety Administration to operate its robot vehicles on public roadways. This was the first exemption to the rules that require vehicles to have a driver who can take control. And while there are good reasons for regulations, especially when safety is a primary issue, we need to maintain this momentum that a crisis can present so we can realise the terrific benefits that AVs and other technologies will offer.

The push to get these delivery vehicles, such as those in the United States, is tied to another major trend that has been accelerated at phenomenal rates, and that is ecommerce and online shopping. In July this year, we commissioned a survey of 4500 people in locations where we operate – Sydney, Melbourne, Brisbane, Washington DC and Montreal. We really wanted the data, and to understand people’s views and

EXPECTED DECLINE IN PUBLIC TRANSPORT USAGE: SURVEY

INDUSTRY REPORT: URBAN MOBILITY TRENDS FROM COVID-19

TRAIN / SUBWAY BUS

PARTNERSHIPS 2020: THE RESET

behaviours around transport and lifestyle choices, and how they expect to work and travel once the risk of COVID-19 has diminished. And when it came to online shopping, 48 per cent said they were doing more during the pandemic, and half of those expected to continue shopping that way. Obviously, this reflects a lot of recent data around ecommerce, and it appears that older people, including myself, have joined this younger demographic in setting the trend.

Online sales ratios have nearly tripled globally over the past five years, even pre-pandemic. And in the last week of July, when most of the retail stores were still open in Melbourne, online shopping in Australia was up more than 160 per cent compared to the previous year. In the United States, UPS was delivering more than 21 million packages a day in June, which is 25 per cent more than the average daily volume just the previous year.

Before the pandemic, in January this year the World Economic Forum (WEF) predicted that demand for last-mile delivery would soar nearly 80 per cent globally in the next decade. The number of delivery vehicles in the top 100 cities would increase by 36 per cent to keep up with this demand. The WEF warned that without immediate interventions, congestion would rise by 21 per cent, meaning that the average commute time would increase by around 11 minutes in all of these cities, purely based on the last-mile deliveries.

On top of this, data shows that car use could return even stronger when the pandemic subsides. Public transportation use has dropped substantially during the tightest of the restrictions. Our survey showed that about 25 per cent of respondents expected to decrease their public transport use postpandemic, mostly due to concerns around health and safety (see Figure 1). And that will diminish over time as we become more comfortable with the health environment. Respondents said they would return to all other modes of transport very quickly. Monash University reported a very similar finding in a recent survey, with nine per cent of the state’s public transport commuters switching to car trips post-pandemic. Despite some claims that the office is dead, we also found that while the trend of working from home will continue, most people – around 86 per cent in our survey – expect to return to a workplace for most of their work (see Figure 2).

There are various different reasons for this, and if you get a chance to read our report on our website, I think you will find the different geographies interesting, as well as the reasons for [some people] wanting to return to their workplaces.

Based on these findings, as the CEO of Transurban, you might think that I would have every reason to feel positive. And for us, the answer is both yes and no. Sure, we believe our roads will continue to provide valuable transport options in the future. But as we have said before, the last thing that we need is a congested network. We build roads, not car parks. No-one wins when a city is stuck in gridlock.

This is a chance to look for opportunities. This is a time when we need to work together to ensure that we have a good mix of rail, road and active transport options to keep everyone moving. I am really pleased that a lot of the states are looking

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Figure 1

MOST EXPECT TO RETURN TO THE WORKPLACE: SURVEY

INDUSTRY REPORT: URBAN MOBILITY TRENDS FROM COVID-19

DOES THE OFFICE HAVE A FUTURE?

PARTNERSHIPS 2020: THE RESET

at infrastructure as part of the economic recovery. And even though people might have moved away from public transport at the moment, it is still going to play a major role going forward. So, it is good to see the investment continuing to be made there.

We need to continue to investigate the options that spread this load to avoid congestion. This includes tough issues such as price signalling, or broader policy changes such as staggered work and our school hours, which have previously been floated as solutions to help with some of the congestion.

We also want to make sure that we do not lose the gains we have made already, like removing freight curfews, which has allowed trucks to access distribution centres and move goods around the networks much more efficiently in suburban areas. Traffic congestion has had a major impact on freight productivity. It will be important to preserve these efficiency gains without compromising the amenity of neighbouring communities. This is also an opportunity to fast-track technologies to create more convenience and choice for consumers, and to meet their expectations around public health.

For example, the real-time capacity in trip planning that is available on Transport for NSW apps to help people decide when and whether to travel is a fantastic initiative. It helps to encourage physical distancing on public transport. A similar app is being planned for Victoria using heat map analysis, and it will send alerts to commuters about overcrowded transport services. And while we have seen drops in ridesharing, carpooling and car sharing in the short term, other initiatives like car subscription services offering longer-term use have seen a greater take-up. And, given that there may be a reluctance to carpool with strangers, community members might be happy to share a ride with colleagues or neighbours. Ridesharing apps could reflect this. I expect we will see some really interesting solutions and innovations in this space in the very short term.

One positive trend to observe in the sector is the increasing number of people who want to cycle. Our survey showed an increase of up to 27 per cent in cycling in most cities. The popup cycle paths appearing in Sydney, linking cycling routes with employment hubs, are an excellent example, as are our plans to widen footpaths to create more space for pedestrians. Most of our road projects include cycle paths, and sometimes we joke about it, saying they are just big cycle lanes with roads attached to them, given the public attention. But we are really pleased that we are being able to contribute to active transport. This is part of a very important urban design to help meet community expectations around having travel choices. And many of the new mobility service apps are already incorporating multimodal transport options, including bike parking and end-of-trip facilities into the offerings.

One of the other major trends in the transportation sector that we have been talking about for a long time is zero emission vehicles (ZEVs), which will have a substantial impact on reducing greenhouse gas emissions and addressing climate change. Pre-pandemic, big delivery companies like UPS, FedEx and Amazon had already started transitioning to electric vehicles. But this is another trend that actually appears to be accelerating. The range of ZEVs is expanding significantly,

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Figure 2

meaning that the economics continue to improve for electric vehicles, particularly around inner-city areas, compared to diesel or petrol vehicles. These companies are now stepping up the transition to electric vehicles as their preferred business model – not only to address climate change, but also to offset the growing costs caused by this surge of deliveries that we are continuing to see.

The need for charging infrastructure is also being addressed. In late July, General Motors announced plans to triple the size of its public fast-charging network in the United States. Transition efforts are not confined just to large delivery companies; Uber recently announced an almost $1-billion programme to help shift its drivers to electric vehicles by 2025, while AGL here has launched a subscription service for electric vehicles. Now, we know Australia has been relatively slow in its uptake of ZEVs, mostly due to cost and anxiety over range. We are a long way behind many other economies. At last count, around a dozen countries had set targets to phase out fossil fuel powered vehicles, with some actually banning sales of these vehicles within a decade.

Any discussion about increasing number of ZEVs must also factor in the impact on funding streams. As we all know, fuel excise is not a sustainable and fair funding mechanism as cars become more fuel efficient and ZEVs become widespread. I know that a couple of states are looking to address this and begin to transition the funding model in their budgets going forward. Governments are facing mounting debt – much more than we could have imagined – as they contend with the economic and social challenges that the pandemic has presented. This will hopefully be a trigger to assess what really is a sustainable transport funding model for the country going forward. We all know that reforming this model eventually is not a choice, but a necessity. The key issue is how we realise the most efficient policy settings to ensure that the system supports our transport requirements. It should not be driven by political compromise.

Recently, I have heard many claims about what will and will not change as a result of the pandemic: how the office is dead, and how bricks-and-mortar retail is finished – all these extreme points of view. But the only thing that I know from my age and history is that, like all crises, it will pass – even though we are not out of it yet. Sadly, there will be many other impacts to our communities and upheavals in our lives for years to come, but it is important to learn how to best operate in these circumstances – to doubt where we need to, but to look for the opportunities to meet the needs of our stakeholders.

Again, rather than speculate, we should look to the data and the trends we were already seeing prior to COVID-19 to inform our thinking about how to respond over the long term. The crisis has sharpened the focus on these trends, and has created an environment to rethink how we go about things and realise future benefits. So, while we are living in unconventional times, and conventional thinking may not give us the greatest outcome, we should not return to business as usual. There is an opportunity to retain what we have achieved through the crisis so far, accelerate these trends, and hopefully reimagine the future.

So, thank you, and I am happy to answer a few questions.

Adrian Dwyer: Scott, thank you very much. I did have a question loaded up about electric vehicles and how it might be the right moment to transition to road user charging for electric vehicles, but you already answered that in the latter part of your address. So thank you very much for your address today. It is certainly clear that governments need to seize this opportunity to reshape travel demand and lock in positive changes from this pandemic.

Laying down future tracks

The University of Wollongong is leading the way in research and training that provides solutions to deliver increased rail speed, and more efficient freight services nationally and internationally.

The Australian rail transport network is the sixth largest in the world. This poses significant challenges in the fields of engineering and advanced manufacturing to design, construct and maintain efficient infrastructure. The maintenance of existing railways, along with the development of heavy-haul networks with increased speed and axle loads, can benefit the national economy by increasing productivity. Australia’s rail industry will also require more skilled technologists to meet the needs of the rail sector during this transformation.

Advanced knowledge and practice skills

The Australian Research Council (ARC) Industrial Transformation Training Centre for Advanced Technologies in Rail Track Infrastructure (ITTC Rail) is the first rail training centre to be funded by the ARC. ITTC Rail is a rail engineering pioneer in Australia. It represents a unique integration of railway infrastructure expertise to develop a skilled professional workforce through a series of research and development, and training programs carried out in partnership with participants from all sectors of the rail industry. ITTC Rail research will transform Australia’s rail construction and maintenance technologies through specialist training of industry-focused researchers. It is providing solutions to deliver safe, reliable and cost-effective rail networks that will immensely benefit the nation’s transportation, mining and agriculture sectors. ITTC Rail is a collaboration among the University of Wollongong (UOW), University of Technology Sydney, Swinburne University of Technology, Queensland University of Technology, Curtin University, University of Sydney, University of Newcastle, University of Queensland and Western Sydney University, together with partner organisations, including the Australasian Centre for Rail Innovation, Metro Trains Melbourne, Bridgestone Corporation, SMEC Holdings, Innovative Technology Beijing, China Railway Eryuan Engineering Group, Ecoflex, GeoFrontiers, Polyfabrics Australia, NuRock, and Elasto-Plastic Concrete.

The centre’s key aims include: ► Creating innovative engineering solutions and products to provide solutions to major railway challenges that can enhance railway performance and extend infrastructure longevity. ► Developing a skilled professional workforce through a series of research and development, and training programs carried out in partnership with participants from all sectors of the rail industry. This will address the future technological requirements of the industry by rejuvenating higher-degree training.

► Advancing fabrication techniques and more resilient product development. The greatest challenge in cost-effective and long-lasting rail infrastructure is track degradation. ► Developing and implementing strategies to commercialise manufacturing, engineering and design innovations to help grow construction and manufacturing businesses servicing the rail industry. ► Assisting in reforming technical standards and regulations. ► Improving global competitiveness, and position

Australia as a global research and development leader in rail engineering.

Creating a unified network

One of the aims of ITTC Rail is the creation of a unified network across rail industry, academia and public/private bodies. The consortium of research providers includes nine universities spanning four states, along with national and international partner organisations.

ITTC Rail already has wellestablished relations with overseas research and development sectors of the rail and pavement industry, track component suppliers, and many academic institutions involved in rail research. ITTC Rail is already attracting international interest, such as Japan’s Bridgestone Corporation, which is interested in the centre’s work on using recycled rubber materials. Three Chinese universities – Beijing Jiaotong University, University of Shanghai for Science and Technology, and the Harbin Institute of Technology – are interested in collaborating with ITTC Rail. Indian railways are also interested in the centre’s work to improve railway efficiency. The Institute of Metro and Rail Technology (IHMRT) Hyderbad, India, approached UOW in 2016 regarding possible collaboration in rail industry training and sponsored research. In September 2019, UOW signed a memorandum of understanding to establish a mutually beneficial collaboration with the Dedicated Freight Corridor Corporation of India Limited (DFCCIL), paving the way for a wide range of research, teaching and consultation activities. The partnership recognises the key role that UOW experts will play in supporting India’s rail freight expansion. These links have established the centre as an internationally renowned research training centre and a prominent source of high-calibre PhD graduates.

‘One of the aims of ITTC Rail is the creation of a unified network across rail industry, academia and public/ private bodies’

Training, innovation and impact

ITTC Rail is a unique national centre for doctoral and postdoctoral training innovation – its research outcomes are focused on rail industry transformation. The industry partners of ITTC Rail have experienced staff to guide PhD students, especially during their oneyear placement in industry. Advanced postgraduate courses and professional development workshops will be developed at participating universities. Industry-driven collaborative research at ITTC Rail will enhance track infrastructure expertise, embrace new technologies throughout the integrated supply chain, and help to construct tracks for increased safety, stability and longevity. Interacting with the Advanced Manufacturing Growth Centre, ITTC Rail offers a one-stop shop for the training of young innovators.

The training centre’s four integrated research programs are: ► Track dynamics, advanced simulation and design innovation. This includes mitigating destabilising forces via mud hole and mud pumping alleviation, improving the life span of critical track components, digital designs for safer level crossings, and design software for higher axle loads and speeds. ► Materials selection and construction processes.

This includes improved steel and concrete components, smart sleepers and novel manufacturing processes adopting 3D printing. ► Sustainable rail infrastructure using recycled and nontraditional materials. This includes vibration mitigation and damage control through recycled tyre products, and innovative subculture stabilisation methods. ► Health monitoring, safety and reliability. This includes realtime track monitoring, digital simulation of track components, field data analysis and performance validation.

Proven track record

Among recent projects, researchers have been examining the factors that cause mud pumping on rail lines. Mud pumping occurs particularly in areas where the ground is waterlogged. It causes millions of dollars of damage to Australia’s rail network every year, and increases the risk of derailment. A pending international patent includes the use of recycled rubber tyres infilled with waste materials as a ‘shock absorbing’ layer for minimising the degradation of track components. Research-driven innovations that have been used to improve industry practices include the development of a landfill comprising recycled materials for reclamation work at Port Kembla, one of the busiest commercial harbours in New South Wales. Prefabricated vertical drains have also been developed to improve railway stability, in addition to design software for railways. These new developments have already been put to practice and tested in real-life conditions in Bulli, Sandgate, Singleton and Ballina. ♦