Forecasted infrastructure spend seems to get a lot of air-time and cause a lot of debate. At its heart, infrastructure development fuels economic growth by providing increased production and productivity, profitability, international investment and employment. It is a key indicator used to determine national economic outlook, so there is no doubt that it is vital to our fiscal health. Why then, do we have a landscape littered with white elephants and broken promises – who exactly is in charge and are they really doing enough?
The most recent Federal Budget has outlined an increase in infrastructure spend to $50 billion by 2019-20, under the Infrastructure Growth Package, which aims to fast-track investment nationally. The package includes a number of sub-schemes;
- The Asset Recycling Initiative – whereby the Federal Government will contribute $5 billion over five years in the form of incentive payments to states and territories. The plan encourages the sale of existing assets and for the proceeds to fund new infrastructure. While it’s touted as a program to stimulate private sector investment, it feels more akin to a garage-sale…or robbing Peter to pay Paul.
- Targeted priority infrastructure investment for new projects and upgrades including major road and highway developments, black spot improvements and support for projects of national importance including the expansion of services to Sydney’s proposed second airport, as well as the airport itself.
In both schemes, and in line with the belt-tightening ethos of this year’s budget, there is a keen focus on partnering with the private sector in some way to expedite infrastructure improvement delivery.
Much of our current infrastructure pipeline has been developed under Public Private Partnerships (PPP). Federal, state or territory governments will consider a PPP for any infrastructure project with a capital cost of above $50 million. Information on this pipeline is published by Infrastructure Australia under the National Infrastructure Construction Schedule (www.nics.gov.au), which lists current and future projects by state, industry and timeline.
In principle this joint approach may seem fine; the private sector is regarded as more nimble and competitive than government (a difficult view to argue) and is far more adept at maintaining assets in the long term. In addition, the burden for development does not weigh solely on the taxpayers. The reality can be quite a different story, particularly in the case of roads.
Many of the nation’s PPP road projects of the last decade or so have been delivered on time and within budget. But these small miracles have failed miserably in terms of meeting forecast usage and revenue projections. This generally leads to financial difficulty for the operator, subsequent higher tolls and even fewer customers…and the beat goes on. What’s the point of meeting project completion targets and budgets if the endpoint is financial ruin, radically under-utilised infrastructure and still overcrowded secondary roads?
So…governments can’t go it alone but at the same time can’t quite make it work with the private sector either – then where does it go from here? It seems that even those within the system are at a loss. In 2008, Infrastructure Australia (IA) was developed as the industry body responsible for organising and prioritising infrastructure expenditure and was, until recently, headed up by Infrastructure Coordinator, Michael Deegan. Late last year the Infrastructure Australia Amendment Bill 2013 was introduced to parliament, recommending a re-examination and renewal of the process by which IA advised the government. Deegan was publically highly critical of the Bill (and its development process – it was drafted with no input from IA), via a 15 page submission to a Senate enquiry. He indicated that proposed changes would effectively empower a Minister to dictate direction to IA, negating the independent nature of the body. He also inferred that infrastructure planning could never be effective if constrained by politics. Somewhat unsurprisingly, the IA website advises that Mr Deegan is currently on extended leave.
While there’s undoubtedly another side to the story, Deegan’s take on the situation might just have merit. Planning infrastructure requires a long-term view. Not a five-year plan, not a term in office, but a serious commitment to a future that will facilitate further growth and reward with ongoing economic success twenty years from now. Doesn’t sound much like a politician’s now view does it?
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