Economic conditions and transport demand

The Issue

In 2007 and 2008, Arup prepared patronage forecasts for the Airport Link M7 toll road (Airport Link) to support Brisconnection’s successful bid to the State of Queensland for the finance, design, construction, commissioning, operation and maintenance of the toll road. However, upon completion of Airport Link, demand fell well short of the Arup forecasts.

Synergies prepared an independent assessment for legal proceedings about whether the economic forecasts, assumptions and parameters used in the patronage forecasts were reasonable, taking into account the conditions prevailing at the time Arup forecasts were constructed.

The Solution

Synergies prepared a report on the economic factors relevant to forecasting patronage on a toll road, with particular reference to the impact of congestion on toll road demand and the inherent difficulties of forecasting demand.

We then examined the relevant economic conditions that applied at the time that Arup prepared its traffic forecasts in 2007-08.  Our report concluded that, over the period when Arup prepared its forecasts, there were widespread expectations that the buoyant growth exhibited by the Brisbane economy in the previous decade would continue at least until the Airport Link was expected to be opened in 2012.

However, in the period between 2008 and 2012, the Queensland and Brisbane economies went through significant changes in ways that were not reasonably foreseeable at the time the traffic forecasts were generated. In particular, the rapid economic growth was brought to an end by the Global Financial Crisis (GFC), which was associated with a reduction in household expenditure in favour of increased savings, an important driver of economic growth.

In conjunction with this, there were significant changes in the usage of Brisbane’s roads and transport networks which were not generally predicted in 2008. These changes appear to have been influenced not only by the GFC, but also by the policy approaches developed by Queensland Governments to address the anticipated looming congestion crisis.

The Benefits

Following the opening of Airport Link, there was intense criticism of Arup’s forecasts, leading to legal action being taken against Arup.

Our report presented evidence-based analysis about the economic outlook that was reasonably expected when Arup initially prepared the transport patronage forecasts, and on the impact of dramatically changing economic conditions on these forecasts.

While the anticipated economic conditions were not the only relevant issue, our report assisted in the legal process to resolve this matter.