Good morning everyone.
Thank you Steve for that introduction, and to the team at Infrastructure magazine for inviting me to deliver this morning’s keynote. I want to join Steve in extending a very warm welcome to everyone here today.
And importantly too, acknowledge the traditional custodians of the land on which we meet, and pay my respect to the elders, past, present and emerging, of all Australia’s Aboriginal and Torres Strait Islander peoples.
Before I begin today, I thought I would explain exactly what we do at Infrastructure Australia. We were established in 2008 to drive better infrastructure outcomes for all Australians.
We have two core functions:
The first is to evaluate business cases for nationally-significant investment proposals seeking more than $100 million in Commonwealth funding and
The second is to set the agenda on the long-term opportunities for infrastructure reform that will improve living standards and national productivity.
That includes reforms to strengthen the security, resilience and sustainability of Australia’s infrastructure sector, in the face of mounting risks from changes in technology, user preferences, the economy, and the environment.
I should acknowledge at the outset that improving the resilience of the nation’s infrastructure assets has been an ongoing focus for Infrastructure Australia.
Resilience and sustainability was a key focus of the 2016 Australian Infrastructure Plan, our national reform and investment roadmap. We publish an Infrastructure Plan every five years, with the next due to be delivered in 2021.
The importance of planning for climate impacts was also built into Infrastructure Australia’s Assessment Framework for major projects several years ago. This framework underpins our work in developing the Infrastructure Priority List, which is published annually and advises governments on nationally-significant investment opportunities.
And finally, the need for comprehensive resilience strategies is also a key focus of the 2019 Australian Infrastructure Audit, a document which we released just last week, and is the subject of my presentation this morning.
About the 2019 Australian Infrastructure Audit
The 2019 Australian Infrastructure Audit is the second national Audit Infrastructure Australia has undertaken, after the first was published in 2015. Best thought of as an evidence base to guide infrastructure investment and reform, the 2019 Audit is the culmination of more than 12 months’ work by Infrastructure Australia. It’s an ambitious and expansive document, and presents a forward-looking view of Australia’s infrastructure challenges and opportunities over the next 15 years and beyond.
The Audit examines the infrastructure needs of the Australian community and industry – covering the major sectors of energy, transport, telecommunications, water – and for the first time, social infrastructure and waste.
The Audit is a truly collaborative document with 150 contributors and 5,500 people surveyed as part of our community research. It comes in at 640 pages With 180 identified Challenges and Opportunities, 350 infographics and more than 2,500 references.
Most importantly, the Audit brings together the views and experiences of industry. It is not solely Infrastructure Australia’s view, but a common benchmark from which to drive long-term investment and reform.
It’s notable then that a key challenge we identify in the 2019 Audit is that Australia’s infrastructure networks are facing unprecedented risks. Anticipating and mitigating against ever-changing risks to infrastructure is becoming increasingly difficult – particularly as our assets and networks are becoming more interdependent and more complex.
Yet broadly speaking, the Audit finds that Australia lacks comprehensive resilience strategies for our assets and networks.
With this in mind, my presentation this morning will canvas some of the risks facing Australia’s infrastructure assets and networks and the need for comprehensive resilience strategies, and explain why a whole-of-life view can lead to better upfront decision-making.
One of the decisive trends impacting how we manage critical infrastructure assets over the next 15 years is technological change.
Technology is more central to our lives than at any other point in our history. We rely on different forms of technology every day to communicate and share information – and to learn, to travel, to access services, and pay for things.
However, we should also note that technological change is also shaping consumer preferences – with Australians increasingly wanting more choice and flexibility in the services they receive.
For example, last year 90% of Australians accessed the internet through their mobile phone.Today, smart phone users can:
- Book an Uber or on-demand bus at the click of a button
- Access real time data to find out when the next bus or train is arriving and how busy it is
- Track delivery of a parcel and change the address at the last minute if you won’t be home &
- Even work out the most convenient route through a city by wheelchair or when travelling with a pram.
Digital connectivity has changed the way infrastructure services are delivered, and we are still only on the cusp of what’s possible. In the freight sector, it is estimated that autonomous vehicle technology could reduce delivery times by up to 40%.
Businesses and governments are using data to create more tailored experiences for customers, but equally privacy and data security are becoming increasingly important. With that, demand for greater information transparency has encouraged service providers to give people more choice over how their information is gathered, stored and used.
However, we must also acknowledge that as our digital connectivity increases, the nature, likelihood and consequences of risks to our infrastructure assets are also changing.
As the complexity of networked systems grows, so too does the potential for failures and disruptions that are more difficult to predict and have a larger impact.
Who could forget the Telstra outage just last month which impacted ATMs and EFTPOS machines across the country? According to National Retailers Association the five hour outage cost $100m in lost sales.
And with the growing reliance on digital systems to support operations across all sectors, cyber security is also an increasing risk. The Australian Government’s 2017 Independent Intelligence Review underscored the importance of having proactive security measures in place to secure our systems and data.
We know for instance, that the capability already exists for a cyber-attack to crash a car or home security system, or even switch off a power grid. As cyber threats become more complex and malicious, protecting critical assets, particularly telecommunications networks, will be a key challenge right across the infrastructure sector.
Australia’s infrastructure also faces economic risks from greater exposure to global markets.
Long known as the ‘lucky country’, Australia has experienced a record-breaking 28 years of uninterrupted economic growth. The size of our economy has increased by 130% in real terms since 1991 – largely driven by our growing population and significant export markets for our natural resources.
Over this period, we have increased our global economic engagement, while avoiding the economic crises that have affected other countries. And we are certainly benefiting from the shift in economic power towards the Indo-Pacific.
While per capita incomes across this region remain low, the region is leading the growth in the global economy, accounting for more than 60% of world economic growth in 2018.
However, the outlook is uncertain with significant trade tensions between the US and China that could have flow-on effects for the Australian economy. I note ratings agency S&P Global believes the odds of a recession in the US is 30-35%.
In addition, competition from growing and developing Asian nations could potentially impact demand for domestic supply chains and freight hubs – threatening the viability of existing assets.
We may struggle to compete with lower cost service providers, including developing nations that are growing and maturing their own service industries.
Another risks lies in the fact that Australia’s export economy is highly specialised, With minerals and fuels dominating our export mix, we are particularly vulnerable to unforeseen changes in prices and demand.
Climate change is also bringing significant risks for Australia’s infrastructure assets and networks.
Much of our existing infrastructure faces new and challenging conditions, such as higher temperatures, changed stream flows, rainfall, water availability and soil conditions, more intense bushfires, more extreme winds, and rising sea levels, causing coastal inundation and erosion.
Buildings and infrastructure assets across the country are needing to withstand more severe weather and changing temperatures.
With a large and diverse continent, the impacts of climate change on Australia’s different communities will be varied.
For example, coastal communities are already experiencing the effects of sea level rise. Our cities are experiencing the impacts of the urban heat island effect. Incidence and intensity of drought communities in inland areas are experiencing increasing bushfires are increasing in intensity and the season is increasing in length.
In Northern Australia, increased intensity of cyclones threaten not only road infrastructure, but also water and wastewater, energy and telecommunications networks.
Apart from the well-established impacts climate change will have on our natural environment, the Reserve Bank has also recently highlighted how it might affect our financial stability.
For example, insurers may face large, unanticipated payouts because of climate change-related property damage and business losses. Emissions-intensive industries might face reputational damage or new legal liabilities, and changes to regulation could make previously valuable assets redundant.
All of this could lead to sharp adjustments in asset prices, which would have consequences for Australia’s financial stability and long-term economic prosperity.
For this reason, the RBA has consistently urged the business community to factor in and disclose climate risk in public reporting. There is evidence of progress on this front with a sampled majority of ASX 100 listed entities saying that have considered climate risk.
Resilience is not well-reflected in planning processes
It’s clear then that our infrastructure networks face unprecedented risks from shifts in technology, user preferences, the economy, and climate change. However, the Audit finds that resilience is not well-reflected in planning processes.
And generally speaking, our current resilience strategies provide limited guidance for critical asset managers on how to manage risk and plan for greater resilience in the future. In particular, the Audit identifies that resilience planning suffers from a lack of information about the scale of risks, their impacts and the costs of addressing them.
As everyone here would be well aware, planning for resilience requires a comprehensive risk assessment, and an understanding of the potential social, economic and environmental costs of outages, damage, disruption or failure.
However, in some cases, risks are known but very technically complex and only a few people have the skills to assess them, or they may require expensive modelling to be commissioned.
In a rapidly changing environment, risks shift in nature and severity, complicating assessment. This can lead to reactive, rather than proactive, responses to both short-and long-term risks.
In addition to improving access to information, the Audit finds that there is a real opportunity for government and industry to work together to develop publicly available guidelines on risk and resilience planning.
Certainly, there is already some excellent work occurring in this space across the sector. At a local level, the City of Sydney’s Resilient Sydney strategy developed as part of the 100 Resilient Cities initiative. Nationally, the Australian Sustainable Built Environment Council, which provides high level guidance on resilience in cities, infrastructure and housing. And internationally, GRESB publishes an annual Resilience Report assessing the sustainability performance across the property sector.
However, the most recent published guidelines from the Australian Government, the Critical Infrastructure Resilience Strategy, was created in 2015 and does not reflect new dependencies and technologies such as the Internet of Things, blockchain and drones.
There is a clear opportunity to update this strategy to reflect more recent development.
A whole-of-life view can lead to better upfront decisions
Before I conclude today, I want to touch on the value of taking a whole-of-life view when it comes to critical asset management.
We certainly acknowledge that when it comes to construction of major projects, governments and industry alike want to avoid high cost solutions.
However, it is significantly more cost-effective to build with risks to sustainability, security and resilience in mind, rather than try and mitigate it later on. And when the whole-of-life costs of maintaining an asset are well considered and understood, in many instances there is a case to invest more up front to avoid or reduce future costs.
Retrofitting infrastructure to mitigate or avoid a known risk is more costly than initially building to address the risk. Better consideration of whole-of-life costs can be achieved through improved budgetary planning, including the use of whole of life contracting. Many of these benefits may also be achieved by placing responsibility for infrastructure construction and subsequent maintenance on a single client or provider.
Of course, building and operating assets more efficiently can also minimise the impact of infrastructure on the local and broader environment and reduce the total footprint of structures over their asset lives.
Looking to the future, we should embrace the opportunity to lead the world in applying sustainability-enhancing approaches to Australian infrastructure assets and networks.
At Infrastructure Australia, we really value opportunities like this to reflect on how we can better manage our critical assets – across energy, telecommunications, transport, water and social infrastructure.
Australia’s infrastructure is facing mounting risks from changes in technology, the economy, user preferences and the environment.
Developing comprehensive asset resilience strategies will need to be a key focus for the sector if we are to meet the challenges and opportunities ahead.
This is particularly important in a rapidly changing environment, where risks to our infrastructure assets and networks are shifting in nature and severity.
The 2019 Australian Infrastructure Audit is designed to help us all become more attuned to these kinds of challenges.
We are inviting public submissions in response to the Audit, and warmly encourage you to share your feedback as we begin work on the next Australian Infrastructure Plan, due for release in 2021.
It’s critical that we receive a diversity of views, as it will help us to identify the right infrastructure solutions to support Australia’s growth and development over the next 15 years and beyond.
Thank you, I would be happy to take any questions.