Good morning everyone. Thank you for that introduction and for inviting me to deliver the opening address at this year’s Infrastructure Investment Summit.
Firstly, I would like to acknowledge the traditional custodians of the land on which we meet here today, and pay my respect to the elders, past and present, of all Australia’s Aboriginal and Torres Strait Islander peoples.
It’s timely to be here this morning talking about investment opportunities, as debate about the role infrastructure investment should play during the current challenging economic conditions continues.
Infrastructure investment is well understood as a potential driver of economic productivity over the short to long-term, as recently highlighted by the Reserve Bank Governor, Phillip Lowe.
Certainly, over the short-term, direct investment can create a significant economic dividend. However, the long-term economic uplift of infrastructure investment is not guaranteed unless investment is well directed, and supported by a well-defined policy framework.
The selection of beneficial projects, which drive long-term productivity and quality of life improvements, is therefore vital.
Infrastructure Australia has an important role to play here.
For those who aren’t familiar with what we do, Infrastructure Australia was 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
The second is to set the agenda on the long-term opportunities for infrastructure reform that will improve national productivity and quality of life.
The independent advice we provide on opportunities for infrastructure investment and reform is increasingly important, as Australia’s infrastructure needs are changing rapidly.
We are facing a changing climate, a re-ordering of the world economy and a reshaping of global institutions and norms.
Closer to home, our population is growing and changing, and the structure of the economy is shifting and rapid technology change is fundamentally reshaping our day-to-day lives.
Today, I will outline some of the future trends that will play a decisive role in how Australia grows and changes over the next 15 years and beyond.
I will also talk about Infrastructure Australia’s role in advising governments, industry and the community in how to meet the challenges ahead, including our work in developing the Infrastructure Priority List.
Finally, I will reflect on quality project development that investors should look for, and reflect on some of the emerging investment opportunities we see across the infrastructure sector.
Long-known as the ‘Lucky Country’, Australia has enjoyed a record-breaking 28 years of uninterrupted economic growth.
However, our economy is undergoing structural shifts, as we move away from manufacturing and resources towards knowledge and service-based industries.
In fact, professional services industries were the largest contributors to the GDP of Sydney, Melbourne, and Brisbane in 2016-17.
And our economy is becoming increasingly urbanised, with most of our jobs now located in our cities.
Of course, this also reflects the scale of population growth occurring in our largest cities, which will play a decisive role in shaping our country in coming years.
By 2034, Australia’s population will grow by 24% to reach 31 million – with more than three quarters of this growth projected to occur in Sydney, Melbourne, Brisbane and Perth.
This offers enormous economic opportunities, but as with all jurisdictions, the risk is that our infrastructure fails to keep pace with demand – impacting on productivity, quality of life and the liveability of our cities and regional centres.
As well as population growth, the structure of where we live and work is also changing.
Infill represents three quarters of growth in Sydney and Melbourne, and two-thirds in Brisbane.
So too, the structure of the workforce is also changing, moving from the middle suburbs to the inner core, challenging the capacity of legacy transport networks.
As a result, our national productivity and global competitiveness is increasingly reliant on the quality of our urban infrastructure networks.
Another factor that will play a decisive role in coming years is rapid technological change.
While technology has underpinned substantial progress over the past century, the speed of change today and its impact on the way we live and work is unprecedented.
And whether it be 5G mobile technology, on-demand transport, automated and connected vehicles, drones, artificial intelligence, virtual and augmented reality, genomics, telehealth or digital education, to name just a few – there is no sector untouched by its continuing advancements.
The benefits are immense: from improving quality of life and providing better access to services, to enhancing the efficiency of our infrastructure and developing brand new industries.
However, the pace of change also creates challenges for the way we plan, design and deliver infrastructure, and Australia has not always been on the front foot in this regard.
We also need to be wary of the fact that rapidly changing technology risks leaving some sections of the community behind.
Many advances in services are occurring in areas with the highest levels of concentrated demand and commercial viability, meaning there is a risk of a growing gap between the quality of services received by those inside, and outside, of our major population centres.
Crucially, preparing for these changes requires more than just keeping pace with demand.
And for governments at all levels, as well investors from the private sector, we need to be smarter in our decision-making, and prioritise strategic investments that seize the opportunities in front of us.
Infrastructure Priority List
I want to turn now to Infrastructure Australia’s work in maintaining the Infrastructure Priority List.
The Priority List is a consensus list of nationally-significant investment opportunities that address critical gaps in our nation’s infrastructure.
It is based on data from the Australian Infrastructure Audit, and submissions from state and territory governments, industry and the community.
And importantly, the Priority List is a ‘living document’, which means it is continually updated as we assess new submissions.
The current Priority List is the largest and most diverse list of investments Infrastructure Australia has produced in our decade-long history.
Spanning across sectors, the Priority List today identifies 125 nationally-significant proposals and a $60 billion project pipeline, made up of 22 Projects and 103 Initiatives.
Projects are proposals for which we have seen and assessed a fully-developed business case, whereas initiatives are early-stage proposals that require further development.
I’m pleased to share that, in the past four years, we have assessed projects totalling more than $100 billion of infrastructure investment.
That’s $100 billion of Australian infrastructure investment that has been through our rigorous evaluation process, bringing confidence in investment decisions for government, industry and the community.
The Priority List is underpinned by the Infrastructure Australia Assessment Framework, which provides detailed guidance on how a business case should be prepared and how we evaluate proposals.
I would strongly encourage everyone here to take a look at our Assessment Framework, which is currently available on our website.
The Assessment Framework is important because it establishes a consistent process for assessing business cases for nationally significant projects, but it also provides a valuable insight into what good project development looks like.
And for many of you in the room, who are actively seeking to expand your infrastructure portfolio, it is an insight into what you should be looking for in potential investments.
We have a five stage approach:
Stage 1 – Understanding and estimating the cost of the problem or the value of the opportunity
It is important to establish the root cause and the boundaries of the issue, so that a range of specific solutions can be identified.
Stage 2 – Identifying a range of possible solutions
What is the Base Case? In other words, what would happen without the project?
The investment options should include better use of existing assets, new technology, etc.
It is important to remember that project options are often not mutually exclusive.
The best performing options could be a combination of other options or components of them.
Filtering options using increasingly quantitative options analysis, including rapid economic appraisal
Stage 3 – Developing a business case for the best performing options
The proponent develops a business case to identify which of the potential options is recommended based on an evidence-based approach.
Stage 4 – Evaluation by IA
We evaluate our business case submissions on three criteria:
- Strategic fit
- Social, economic and environmental benefits
After we complete our evaluation, we publish a summary on our website for transparency.
We also provide feedback to proponents to help improve future business cases.
Stage 5 – Post completion reviews
It is important that we take learnings from our projects, and that means we need to measure whether the results predicted in the business case actually occur.
Like the Priority List, the Assessment Framework is also regularly reviewed to ensure it remains fit-for-purpose and consistent with national transport guidelines.
For example, the most recent update provides further guidance in the areas of land use costs and benefits, post-completion reviews and the treatment of climate change risks.
The latter is particularly important, and essentially asks project proponents to show whether they have considered climate change risks in identifying a potential infrastructure problem or opportunity.
Climate change is bringing significant risks for Australia’s infrastructure.
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.
Looking to 2020 and beyond, investors should be looking for proposals that take these risks into account, and have comprehensive resilience strategies that reflect whole-of-lifecycle benefits and costs.
Sustainability and resilience considerations need to be fed back into the planning, design and operation of assets and networks.
It is significantly more cost-effective to build with risk mitigations for sustainability, security and resilience, rather than try and mitigate them later on.
Looking to the future, we should embrace the opportunity to lead the world in applying sustainability-enhancing approaches to Australian infrastructure assets and networks.
I want to turn now to the key opportunities highlighted in the current Priority List.
Key themes of the Priority List
As you would expect, given the projected population growth I mentioned earlier, Australia's cities and public transport needs are a major focus of the Priority List.
We have highlighted the need for continued investment – over and above what is already underway – to improve rail network capacity in Sydney, Melbourne and Perth to meet unprecedented demand as those cities grow.
We also identify a number of additional opportunities to improve connectivity between capitals and neighbouring cities.
This includes improvements to rail capacity on the Melbourne–Geelong and Brisbane–Gold Coast rail lines, as well as rail upgrades on lines from Sydney to the regional centres of Newcastle and Wollongong.
Upgrading this infrastructure will be key to enable our satellite cities to develop stronger economic and employment foundations and links to our bigger cities.
In addition to public transport investment, the Priority List highlights the need to ensure that existing infrastructure is used more efficiently, with a focus on the use of sensors and data analytics, to secure service improvements.
For example, on urban roads, Intelligent Transport Systems – or ITS – are already collecting, storing and analysing data on traffic counts, travel times, congestion, incidents and faults through sensors at intersections to enable better management of traffic flows.
In the Priority List, we highlight these kinds of targeted investments as part of a broader program of network optimisation.
This simply refers to the opportunities for low cost/high value investments which address capacity constraints.
Embedding technology in existing infrastructure can also provide operators with rich data on network performance and use, which in turn drives improvements in efficiency and reliability.
An example of this approach is a proposal to optimise CBD motorways here in Sydney.
This is a new addition to the Priority List this year, and it focuses on getting more out of our existing assets to improve the performance and capacity of the road network.
The Priority List includes other examples of this type of initiative across the country, demonstrating that we can do more with what we have, rather than needing to build costly new infrastructure in all cases.
Beyond addressing existing infrastructure gaps, the Priority List is also about ensuring we stay one step ahead of emerging challenges.
Many of our recent additions to the Priority List reflect the need for forward-thinking, ambitious solutions to support Australia’s future prosperity – such as the delivery of a national fast-charging network for electric vehicles.
This has been identified for the first time as a national priority, recognising that the increase in EV take-up has both environmental and productivity benefits for Australia, but only if supported by strategic infrastructure investment.
While some people may be skeptical about the pace of change, Infrastructure Australia sees the mainstream uptake of EVs as an inevitable shift.
Large manufacturers are shifting investment away from internal combustion engine vehicles and focusing instead on EVs, and overseas, governments are legislating to reduce their reliance on combustion vehicles.
Our analysis suggests that, by 2040, EVs will account for 70% of new vehicle sales and 30% of the vehicle fleet in Australia.
Meanwhile, we currently have less than 800 charging stations, about 70 of which are fast-charging.
This compares to over 6,000 petrol stations.
And while much EV charging will be done in the home, there is quite a significant investment opportunity here for public charging stations.
We also want to see investment in network infrastructure to ensure that the electricity generation and distribution network can provide reliable electricity supply for additional electric vehicle chargers.
Responding to this and the broader challenges of energy security, we also highlight the need for investment in the connectivity and reliability of our National Electricity Market in the medium to long term, and optimisation in the near term.
As with all the initiatives identified in the Priority List, our focus at this stage is on defining the problem, with the next step being for proponents to develop a range of solutions to address it.
In a rapidly changing environment, selecting the right infrastructure projects is a complex task, but an essential one if we are to get the most of out of future investments.
For governments, well-developed business cases ensure that limited public funds are directed towards projects that deliver the best value for taxpayers and the best outcomes for the community.
And equally, for investors, good quality project selection is vital to deliver a strong return on investment.
For our part, Infrastructure Australia remains focused on ensuring governments at all levels, as well as investors, have a selection of high quality proposals to choose from.
Today’s Summit will canvass many of the emerging opportunities in infrastructure – across transport, energy and greenfield developments.
Alongside these opportunities, I would also invite each and every one of you to also consult the 2019 Infrastructure Priority List to understand what we see to be the key nationally-significant issues that should be addressed, and our Assessment Framework to see what a well-developed business case should look like.
We are in the process of developing the 2020 Infrastructure Priority List, which is due for release early next year, and look forward to sharing that with you in due course.
I would also encourage you to look out for the 2019 Australian Infrastructure Audit, which Infrastructure Australia is pleased to be releasing next Tuesday.
The Audit is a forward-looking view of the key infrastructure challenges and opportunities we are facing right across the country.
Looking in detail at the major sectors of transport, energy, telecommunications, water and for the first time social and waste infrastructure, the Audit examines what Australia’s infrastructure needs are, and strategically assesses the drivers of future demand.
Alongside the Infrastructure Priority List, the Audit will help shape the next 15 years of Australian infrastructure planning and investment, and we look forward to sharing it with you in just a few days.
Thank you, and I hope you enjoy the rest of today’s proceedings.