The Implications of Insufficient Funding from Governments into Transportation Infrastructure

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Figure 2. Australia government investments in rail and road, 1989-90 to 2012-13

Private Sectors Financing Infrastructure Maintenance

Privatization strategy can also be used in freight infrastructure maintenance in order to ease the problem of insufficient funding. As government capital is mainly collected from taxes and tariffs, infrastructure investment is principally cross subsidized from these factors. Introduction of privatization can end the cross-subsidizing relationship by relying on private capital market instead of taping public assets. Freight infrastructure therefore have enough resources to undergo maintenance and replacement. With high standard transportation infrastructure, it increases Australia’s comparative advantages in terms of more efficient infrastructure and services and potentially improves Australia’s reputation.

Supply Chain Shut Down

Shut down of supply chain cycle is another challenges caused by insufficient government funding. The supply chain is designed to be an end-to-end process involving all activities from sourcing to manufacturing to distributing (Dittmann, 2014). All processes and activities within the supply chain are required to participate and collaborate in order to ensure the cycle is running. The chain will fail to function if the alignment between supply chain processes disconnected. Similarly, in the current freight industry, the problem with lack of new and maintained infrastructures due to insufficient funding is distinct. This potentially interrupted the process of distribution. Goods and services are therefore not able to get into or out of Australia and products cannot reach to customers. The linkage between end user (customers) and distributers is disconnected and hence will negatively affect the next supply chain cycle. As the disconnection shut down the chain, the market is no longer stable and maintained. Imbalance of money cycle is resulted. Australia’s GDP will therefore decrease and may ultimately affect national economy.

Application of deregulation to solve supply chain shut down

Deregulation is introduced in order the solve the problem of supply chain shut down. Due to insufficient funding from governments, existing infrastructures are not capable to cope with the current pressure of freight industry. Increasing number of freight infrastructure users exit the market due to inefficiency. However, introducing deregulation such as, removing the barriers of entry and lowering pricing can potentially regain and attract lost users. The implication of this strategy not only provides a better range of equipment and operations, it also improves service levels and attracts customer incentives.

Conclusion

Insufficient funding from governments has resulted in a lot of challenges to freight and logistic industries. These challenges not only may affect Australia’s reputation and national GDP, it may also potentially affect citizens living standards and quality of life. Fortunately, the introduction of privatisation and deregulation have ease the current pressure on freight infrastructures. No doubt these strategies have eased the problem in short-term, however, in order to solve the problem effectively and efficiently, the government will require to have better planning on long-term solutions regarding freight transportation infrastructure.

References

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