What's happening to our freight industry?

Has anyone else noticed that 2008 is already shaping up to be a bad year for logistics in Australia?

Headline after headline has been appearing in the news lately showing major upheaval for Australian road and rail freight, particularly in the Eastern states.

First off was the confirmation that major train operator Asciano was going to pull out of its grain freight business, Pacific National, in New South Wales and Victoria (the closure is meant to take place this month). Asciano said the decision was because the business was too volatile, claiming that it was losing $3 million a month on its grain freight operations.

According to its website, Pacific National hauls the majority of grain in NSW, transporting it from over 260 grain storage facilities to more than 12 domestic locations across NSW and Victoria and to export ports at Newcastle, Port Kembla and Melbourne.

NSW Nationals leader Andrew Stoner called Pacific National's decision a "crisis" and blamed it on the Iemma leadership for failing to properly maintain rail branch lines.

"There's more to rail transport than just moving passengers around Sydney," he said.

But aside from the seemingly instant (but short-lived) satisfaction of blaming the issue on the government, the fact is that the closure will lead to extra trucks on the roads transporting grain to ports - putting even more strain on already under-performing road infrastructure.

To add to the woes, Transport Minister Anthony Albanese announced late in February that federal and state transport ministers - meeting as the Australian Transport Council - have agreed to lift fees and charges on heavy vehicles.

Registration fees for 69% of the nation's 365,000 heavy vehicles will rise between 1 and 10%, while 6% of the fleet will experience larger increases, to be phased in during the next three years.

He announced that as of 1 January 2009, the Road User Charge (the fee collected by the Commonwealth from fuel used by heavy vehicles) will be increased by 1.367 cents per litre and indexed to cover future road costs.

But what about the increased cost of freight to the food industry?

According to Liz Schmidt, from the Livestock Transporters Association of Queensland, the extra charges are too much for any freight company to bear without passing the costs on to clients.

"Across the period of the next few years where they are talking about introducing it, we see an increase of 300 and 400%, huge increases in the cost of registration," she said, as reported by ABC News.

"Some are going to $20,000 from about $6000 or $7000 and $9000."

"There is no way that livestock transporters or any transport company in the country can actually wear this cost - it has to be passed on."

The government also conceded the increase would have a flow-on effect, with Albanese admitting it would be passed all the way down to consumers.

"This will lead to a cost increase of around about 32 cents per week for the entire family grocery budget,'' he said (although exactly what he thought the average family budget was and how he arrived at this figure is a mystery)."

The increased costs to both the supply and distribution side of business will definitely add an extra pinch to business this year. And if the government cannot provide enough incentive for a replacement rail freight operator to fill the void left by Pacific National, road freight availability and demand could push prices up even further.