Landmark Speech - Address to Infrastructure Partnerships Australia, Sydney
Posted on Wednesday, 2 May 2012
THE COALITION’S PLAN FOR THE INFRASTRUCTURE OF THE FUTURE
For most Australians, there are few more infuriating things than never being able to get a seat on the train or the bus to work; or having to leave for work earlier and earlier because the traffic jams just keep getting worse and worse.
Infrastructure matters because it helps to determine our quality of life as well as our country’s productivity and prosperity. If we can’t readily get to where we need to go, so many of the things we take pleasure in become that much harder. If we don’t have enough dams, we can’t water our gardens. If ships are banked up outside our ports, the goods we need don’t turn up on time. If the airport has monster queues, we try to avoid travel.
Infrastructure has made modern civilisation possible. Without sewerage and clean water, cities would still be places where people died young. Without power, there would be no large scale industry and none of the goods that we take for granted every day. Without railways and highways, most people would still be the prisoners of the village they were born in.
For most people, expanded ports, better railways, more roads and bigger air terminals have been the visible signs of a stronger economy and greater prosperity. They meant more trade, more customers, better goods and more leisure. Conversely, crumbling roads, unreliable ports, and unsuitable railroads were a sign of civic failure.
The provision of better infrastructure has, quite rightly, become one of the key tests for any government: more so, perhaps, for state governments which have always had the principal responsibility for it in Australia; but increasingly, also, for the Commonwealth, which is invariably held responsible for the overall state of the nation.
By any standard, Australia’s infrastructure is inadequate. Our trains are no faster than 100 years ago. Our big cities are still linked by two lane highways. No major dams have been built for 20 years. Our urban motorways mostly start and end in suburban streets. We often give the impression of being much better at arguing about big developments than getting them built.
Over the past decade, infrastructure improvements have not kept up with population growth. State Labor governments have been more inclined to employ public servants than to invest in roads and rail, especially when that’s meant braving local protests. The result has been frustrated commuters, more expensive goods and services, and an economy less able to compete against rivals that have planned ahead.
Since 2007, there has been very little significant new road infrastructure commenced in Sydney or Melbourne. There has been serious new infrastructure in Brisbane but mostly thanks to Brisbane City Council, the one local government in the country big enough to invest in major capital works.
The lines of ships outside our ports have got longer, not shorter. Sending most cargoes by rail has got harder, not easier. The Hume Highway between our two biggest cities is about to be duplicated, finally, but that’s the result of commitments made by the former government, not by the current one.
The Rudd-Gillard government’s most notable contributions to infrastructure have been roof insulation that’s caused house fires, school halls built at double the normal cost and a National Broadband Network that’s digging up streets so that families can pay three times the current price for broadband speeds they don’t necessarily want or need and that could be delivered sooner at vastly lower cost.
If the $4.4 billion that the NBN is due to spend in the coming financial year were on budget, the government would be unable to predict a surplus. But to move the NBN off-budget, the government has had to assume unrealistically high take up rates to generate a commercial rate of return.
Thus, even the government’s construction ambitions have been caught up in the spin and general untrustworthiness that taints almost everything it does. If the Treasurer predicts a surplus in next week’s budget, Australians can be confident that it will be based on cooked books, like the pretence that the NBN is not really government spending.
This government solemnly promised that it would not fund any infrastructure project without a cost benefit analysis. In practice, there has not been a single cost benefit analysis published prior to any of this government’s infrastructure commitments.
Every single programme and project has gone ahead because it has suited the government’s political agenda. Whether it actually met the long term economic needs of our nation has never been the government’s main concern. The result is an infrastructure spending gap that Infrastructure Partnerships Australia estimates would cost $800 billion over the next decade to fill.
There is a better way. The Coalition has a plan for Australia’s infrastructure of the future. It’s a key component of our overall plan for a stronger Australia. If implemented, the Coalition’s plan should mean that our economy improves and that people’s lives get better. If implemented, our plan means that new infrastructure would be less a political trophy with which MPs might beguile their electorates than part of a specific design to give our country the best possible return for the billions that it costs.
Outside the Territories, the Commonwealth’s infrastructure responsibilities were originally limited to defence facilities and, later, to soldier settlement irrigation works. First with telecommunications and the rail line to Western Australia, then with the Snowy Mountains Scheme and national highways, and finally with the Howard government’s Auslink programme, the Commonwealth has steadily become the key element in many, if not most, large infrastructure projects.
The Howard government’s instinct was to leave infrastructure to the states, other than national highways and telecommunications. The relative success of the Commonwealth in discharging its responsibilities; compared, at that time, to the relative failure of the Labor states in discharging theirs, led to strident demands for the Commonwealth to be more involved in infrastructure as it did for more Commonwealth involvement in public schools and hospitals.
In 2004, the Howard government announced Auslink, a $16 billion programme over five years, to support productivity-boosting transport projects. A further $22 billion was allocated in 2007.
Earlier, in 2001, the Howard government had established the $300 million a year Roads to Recovery programme. This has become a key element in local councils’ capacity to maintain and upgrade more than 650,000 kilometres of local roads. So far, the current government has largely continued both these programmes.
What’s been missing, though, is a long term vision for Australia’s infrastructure needs and a comprehensive plan for achieving it.
This matters because inadequate infrastructure and the convoluted regulatory systems that make new infrastructure more expensive lead to higher costs, longer travel times and millions of working hours lost in frustrating traffic jams or waiting for trains that never arrive. Goods that rely on inefficient transport networks cost more to ship to consumers, which means higher prices in shops.
By definition, people sitting in traffic jams, even using their mobile phones on hands-free, are less productive than those that are actually at work. If people spent less time travelling, they could spend more time working as well as more time with their families. If work journeys were quicker, there’d be less “dead time” in the working day and a significant improvement in output per hour.
The current government is more accustomed to link productivity with training than with investment in transport infrastructure but provided it’s responsibly funded and done in accordance with the best available cost-benefit analyses, infrastructure spending is a strong contributor to productivity growth.
A decade ago, the World Economic Forum ranked Australia among the top ten most competitive and productive economies in the world. This was driven by a series of microeconomic reforms, such as privatisation, more flexible workplaces and national competition policy impacting on telecommunications, transport and utilities.
By contrast, Australia’s worsening infrastructure inadequacies, the Forum says now, have been a fundamental element in Australia’s recent productivity decline.
Infrastructure spending is important, even when money is tight, provided it has a strong economic outcome. It can’t just be building for building’s sake. The problem with the Rudd/Gillard government’s infrastructure spending is that it has invariably been driven by political rather than economic priorities.
When it comes to delivering productivity enhancing infrastructure, the government has been more talk than shovel. Only 14 per cent of the stimulus, not the school halls and certainly not the roof batts, was spending that directly enhanced Australia’s economic capacity.
In 2008, infrastructure minister Anthony Albanese said that all infrastructure decision making would be based on “rigorous cost-benefit analysis to ensure the highest economic and social benefits to the nation over the long term.”
He also declared that the government had a “commitment to transparency at all stages of the decision-making process” and that Infrastructure Australia would routinely undertake a “proper cost-benefit analysis” of projects to ensure that “value for taxpayers' dollars” was achieved.
Only a year later, the government failed to release cost-benefit analyses for any of the 15 big projects selected for funding in the 2009 Budget. Some of them were not even on Infrastructure Australia’s priority list. A subsequent National Audit Office report found that before Infrastructure Australia had come to any conclusions about the 28 “pipeline” projects that it had identified, the government had already announced funding for 10 of them.
Not only has the government failed to deliver on due process. It’s also failed to deliver on its commitments to get things built. Its biggest single project by far, the NBN, is over-budget and way behind schedule. The latest figures show that it’s only passed 18,000 houses and that only 12 per cent of these are actually using fibre. To meet the target of 760,000 houses passed by the end of the year, it will have to pass over 3100 houses a day – or 100 times its performance up till now.
NBN Co currently has 1300 staff earning on average $148,000 a year, the highest pay of any business in the country. That’s one staff member for every five customers. As Churchill might have said: never has so little been delivered to so few by so many at such expense.
The government’s promise to duplicate the Pacific Highway by 2016 is almost certain to be unfulfilled because it will require, according to the latest estimates, $7 billion more than has been committed.
In 2007, the government promised $150 million to start planning to connect the expressway at Hornsby to the Sydney Orbital but cancelled this funding in last year’s budget. The South Sydney Freight Line was supposed to be finished early in 2010 but is still not completed. In 2007, the government promised to “get moving now” to build the missing link from Brisbane’s Gateway Motorway to the Bruce Highway. Five years on, the department says, merely, that “planning is nearing completion”.
The government has recently committed to build a government-owned and run inter-modal freight hub at Moorebank in Sydney even though this will cost more and take longer to build than the private sector alternative planned, literally, for the other side of the street. Along with the NBN and the $10 billion fund for clean energy proposals that banks won’t touch, this is another victory for Labor’s born-again socialists.
The Gillard government’s recent attempt to renew debate about Sydney’s second airport, without officially naming a preferred site or a timeframe, looks more like a ploy to defuse a Greens challenge in Labor’s inner city seats than a serious proposal.
Action is urgently required to improve air travel in and out of Sydney. For now, though, this has more to do with addressing the traffic gridlock around the airport at peak times and making better use of other airports than it does with building a new one that couldn’t be operational for many years.
After nearly five years of a government that’s wildly over-promised and massively under-delivered, Australians are looking for reassurance that our infrastructure needs will be planned for and met.
The Coalition will task Infrastructure Australia with preparing a rolling 15 year national infrastructure plan with designated priorities based on published cost-benefit analyses. There will be a published cost benefit analysis for any infrastructure project to which a Coalition government commits $100 million or more.
As well, the Coalition will have the Productivity Commission examine possible means to get more private funding into high priority infrastructure projects. While the need to repay Labor’s debt will limit the immediate scope for more Commonwealth infrastructure spending, the Coalition will ensure that existing funding is better directed and helps to leverage other funding into the projects that Australia most urgently needs.
Also, the Coalition’s recent commitment to a one-stop-shop environmental planning approval process should make it easier to maintain standards while more quickly approving new infrastructure projects.
Australia’s largest construction company, Leightons, has just published a position paper: “Australia’s Top 12 Infrastructure Priorities”. These are the projects that, on Leightons’ assessment, would add most to overall economic development and to Australia’s liveability and productivity.
Leightons’ list is: Sydney’s M5 East duplication, the second airport, the missing link from the M2 to the expressway at Hornsby, and the north west rail link; Melbourne’s second CBD bypass, the Port of Hastings, the metro rail link and a third airport; Queensland’s Bruce Highway duplication and the copper string power line between Townsville and Mt Isa; South Australia’s northern connector; and the Perth Airport freight access project.
According to Leighton’s CEO, Australia is a country that once complained about the tyranny of distance but is now unready to take full advantage of being at the centre of world growth.
Every Sydney-sider understands the need to link the Anzac Bridge to the expressway at Strathfield. This vital missing road tunnel had become a manifestation of the syndrome to which state Labor governments were increasingly prone: BANANA or build absolutely nothing anywhere near anyone.
There’s no doubt that Sydney, Melbourne, Brisbane and Perth each need an integrated motorway network and improved urban rail systems under comprehensive metropolitan transport plans. The Pacific Highway in Northern New South Wales urgently needs to be duplicated. Eventually, a dual carriage way between Melbourne and Adelaide would be the last link in a vital chain: the four lane highway that should finally join our big eastern cities.
There’s no doubt that rail freight bottlenecks need to be eliminated and port infrastructure upgraded especially for coal and iron exports. The Bruce Highway along the Queensland coast needs major upgrades to service big increases in population and the resources boom as does the highway linking Perth to the Pilbara. The highway between Hobart and Launceston needs upgrading to four lanes. Within a decade, inland rail will be needed from Melbourne to Brisbane.
And yes, Australia does need faster broadband so that tele-commuting is an alternative to commuting. As Telstra has just confirmed, this doesn’t require fibre to the home and is more likely to be provided by a competitive market than a government infrastructure monopoly. The Coalition’s broadband will be national, not nationalised. It will be available sooner and at much less expense to taxpayers.
Under the Coalition, Infrastructure Australia would assess all these projects, publish cost benefit analyses for them, and provide a recommended order of priority for Commonwealth funding. If the government varied Infrastructure Australia’s priorities it would need to argue a national interest case for doing so against the yardstick of what makes the most economic sense.
Within 12 months of taking office, a Coalition government would declare what its priorities would be and, in consultation with the states, announce construction timetables. Where the states’ own infrastructure priorities adhere to the Commonwealth’s, a Coalition government would work constructively with them to fund projects as quickly as possible.
I want to see cranes in the sky and bulldozers on the ground because that means economic growth.
While the current government prefers to fund its infrastructure priorities off-budget even though they’re Commonwealth-owned, the Coalition is determined to explore responsible mechanisms for getting more private investment into infrastructure projects so that they can go ahead more quickly.
At the last election, the Coalition promised to have the Office of Financial Management consider the provision of infrastructure bonds to unlock up to $20 billion for private infrastructure investment with wider public benefit.
These tax concessions have been used in the past to help fund privately owned infrastructure such as Sydney’s Eastern Distributor. Especially in the wake of commercially unsuccessful projects such as the Cross City Tunnel, what’s needed is the best contemporary way to renew private sector investment in vital projects at the lowest cost to taxpayers.
Without a new means to encourage private investment, there could be a very long wait even for infrastructure that could be expected to contribute strongly to economic growth. The Productivity Commission would be the best source of policy advice on this, as it has been on reforms to disability services and aged care.
The best way to reduce cost of living pressures, while maintaining and improving the services that Australians want, is to return as swiftly as possible to strong economic growth.
Under the current government, GDP growth has been due to higher population, not higher productivity. Headline GDP growth has masked stagnant GDP per person. Since 2007, this has increased by under one half a per cent a year, compared with two and a quarter per cent a year increases over the life of the Howard government.
Hence the longer the Gillard government lasts, the more the Howard era looks like a golden age of prosperity, that’s now been lost.
Economic growth enabled the Howard government simultaneously to reduce taxes, to improve services and to deliver budget surpluses. Economic growth is the foundation of prosperity and productivity improvements are the foundation of economic growth.
That’s why better infrastructure is so important and why the Coalition has a plan to bring it about, even in these much tougher times.
There is nothing wrong with our country that a change of government wouldn’t improve. We are a great country and a great people let down by a government that’s going from bad to worse.
We know that we are capable of more because that’s what we’ve achieved in the recent past. My vision is for the 21st century infrastructure that we need to restore the hope, reward and opportunity that should be Australians’ birthright.