Prioritising Reform

Publication Date
25 June 2018

Good afternoon everyone, thank you for that introduction and to CEDA for inviting me to take part in this year's State of the Nation.

It's always a pleasure to take part in the State of the Nation—to pause and take stock of where we are as a country and what we need to do to meet the challenges of the future.

As some of you may know, my time as Chief Executive of Infrastructure Australia is up at the end of July this year.

This is my last major address as the organisation's Chief Executive, so it's a timely opportunity to reflect on the progress we have made in the infrastructure space over the past few years.

And in a sense, my time at Infrastructure Australia has also come full circle today with the release of our new report, Prioritising Reform.

In May 2015, Infrastructure Australia released the Australian Infrastructure Audit—the document that really set us on a path to guide nationally-significant infrastructure investment and reform.

The Audit is effectively the evidence base which—along with consultation with government, industry and the community—informs the development of the Infrastructure Priority List.

Many of you will be familiar with our Priority List. This is the authoritative consensus list of nationally-significant investments Australia needs over the next 15 years.

In addition to the Priority List, the Audit also underpins the infrastructure reform agenda which we put forward in February 2016 when we published the inaugural Australian Infrastructure Plan.

Developed through a long and consultative engagement process, the 2016 Plan made 78 comprehensive recommendations to address today's infrastructure gaps and meet the future needs of Australia's growing population.

It provides a reform and investment roadmap for Australia's governments to ensure our infrastructure drives productivity growth, improves our standard of living and delivers world-class services in our cities and regions.

The Plan proposes ambitious and politically challenging reforms—including regulatory, governance and market reform—that need buy-in from both Federal and State governments.

Some of our recommendations were challenging, but we were pleased to see the Plan prompt impassioned debate about our infrastructure future and our willingness as a nation to undertake much-needed reform.

At the time, we acknowledged that the national reform agenda we put forward would only be as good as the commitments and leadership that followed.

To keep up the momentum on reform and build on the evidence base presented in the Plan, we commissioned a series of more detailed advisory papers known as the infrastructure Reform Series.

To date the Reform Series has covered topics as diverse as value capture, public transport franchising, corridor protection, urban water, future cities planning and the case for infrastructure reform incentives.

All of these reports clearly identify the scale of reform necessary and the benefits to taxpayers and users of infrastructure services.

But while we have done our bit to advance the case for infrastructure reform, we also believe it's important to regularly report on the progress of the key recommendations in the Plan.

That's why today, we are releasing a progress report against the priorities in our 2016 Australian Infrastructure Plan.

Prioritising reform

This report examines what has been achieved since we released the Plan and urges Australia's governments to renew their commitment to infrastructure reform. 

Our focus is not on assessing each of the 78 recommendations specifically, but rather to highlight the areas where good progress is being made and some areas where it could be better.

We acknowledge too that some of these reforms are hard and will require multiples of the two years since we released the Plan to make real progress.

That being said, we have seen clear improvements in some areas. 

Heavy vehicle road user charging reform is progressing, a renewed National Freight and Supply Chain Strategy is underway and targeted funding for pinch-points and first- and last-mile issues has been allocated.

Long-term corridor protection is being actioned in some jurisdictions, and there's an increased openness to using government debt to fund projects.

At the city level, there's also better integration of transport and land-use planning.

A greater focus on land use planning and integrated land use and transport planning is a welcome improvement and critical to the success of major growth areas such as western Sydney.

Stronger collaboration

We are also pleased to see stronger collaboration with the states and territories, which has improved the quality of business cases.

When Infrastructure Australia was formed in 2008 we were the only agency of our kind in the infrastructure sector.

Since then we've seen most jurisdictions set up so-called I-bodies (or in the process of doing so)—specialist government agencies active in the infrastructure planning space.

This is a good thing and provides an excellent forum for us to collaborate to inform continuous improvement as well as reform priorities—and we do meet regularly.

This welcome development has also provided for a lift in the standard of business case development, with a more iterative and feedback-based model taking shape.

There is no question that we are unique in the world in having an independently developed list of priority investments, underpinned by an evidence base and a rigorous assessment process—using well developed cost benefit analysis.

Renewing the spirit of reform

But there are also instances where reform has stalled or failed to deliver its envisaged benefits.

We should remember that we undertook major microeconomic reforms before in the 1980s and 1990s which have led to 27 years of economic growth for our country.

Others have commented, and I would agree, that the lack of a recession has made us complacent. And this isn't just a matter for Australia's governments.

We also don't hear any strong voices from the business community as we did in the 90s in support of reform.

We need a spirit of bipartisanship in the national interest, cooperation across all levels of government, a business community willing to come to the table with constructive thinking, and an informed community engaged with the issues.

In releasing this progress report, our hope is to encourage Australia's governments to do just that, and renew the spirit of reform.

Planning for the future—national and state

Nowhere is this more critical than reforming how we plan for the future.

In the next 30 years, Australia will be home to 36 million people.

This rate of growth is equivalent to adding a new city, roughly the size of Canberra, each year for the next 30 years.

This growth is welcome, and the source of much of our economic success story.

However, the absence of a national population plan or settlement plan has fostered uncertainty and a lot of debate around how to manage Australia's growing population.

A national settlement plan would focus on how we grow, not how much we grow, and it would allow us to plan beyond political and budgetary cycles.

A nationally focused plan of this kind would create a broader economic vision for growth and allow state governments to develop better integrated land-use plans for the delivery of infrastructure, housing, education.

Many of the anxieties brought about by rapid population growth could be solved by identifying, at a national level, the best population pathway over the next 30 years… and then ensuring that the States develop long-term integrated land-use plans.

Project selection

A national settlement plan and long-term integrated state planning would also vastly improve our ability to choose and deliver the right projects.

My observation is that project selection has seen some good progress, but there remains significant room for improvement.

Over the ten years of Infrastructure Australia's existence, we've gradually developed a credible pipeline of future infrastructure investment.

The update to the List in March this year included $55bn worth of projects

At the same time, $25bn worth of projects moved off the list as they were well into delivery

Some very significant projects from the List, have been positively evaluated by the independent Infrastructure Australia Board, and are now under delivery.

These include: Western Sydney Airport, Inland Rail, Westconnex, Sydney Metro, Melbourne Metro Tunnel, Moorebank Intermodal Terminal, M80 Ring road upgrade, City Link Tullamarine Widening Project, Brisbane Metro, Bruce Highway upgrades, Forrestfield Airport link and Adelaide's North South corridor.

However, early stage announcements by governments and oppositions nationwide remains a concern.

After three years in the job, my observation is that governments and oppositions need to be more disciplined around proper planning, evaluating all available options, and seeking the solutions with positive cost-benefit ratios prior to a funding announcement.

Project funding must be conditional on identifying the best solution through a proper business case. Otherwise, we get the wrong projects or gold-plated projects, and we deny vital funding to other worthier investments.

We need bipartisanship around our big transport priorities, and cooperation across levels of government over the long-term to get the right projects moving.  

I know this does not fit well when infrastructure investment is a vehicle for redistributing taxes back to the states and territories and winning political favour.

However, it is critically important that we invest in the right project solutions at the right time and in the right place.

The best way to do this is to ensure that national, state and local planning aligns as much as possible… and that we logically and carefully choose projects that will deliver the most benefits to the community.

Progressing road reform

Aside from the need for reform in our planning, I would also like to touch on one of the most challenging, but vital, reforms we advocated for in the Plan—road funding.

Currently funding to build and maintain our road infrastructure is sourced from a mix of fuel excise and vehicle registration charges.

Fuel excise, which only applies to petroleum products, will not apply to the use of electric vehicles, in coming years the increased uptake of electric vehicles will see a substantial reduction in revenue.

In other words, we will be collecting less from users, using roads more, and limiting our ability to collect the revenue required to build and maintain our roads.

In the Plan we recommended that the Australian Government should initiate a public inquiry into how we fund roads and how we can develop a pathway to road user charging reform.

The Government indicated its support for an inquiry led by an eminent Australian in 2016, but an announcement has not yet been forthcoming.

As the funding challenge grows, and excise falls with the rise of electric and fuel efficient vehicles, we need to act to better link users of our roads with their maintenance and growth.

Road market reform has the potential to deliver significant improvements in network performance and address fairness issues, while also establishing a secure and sustainable source of funding for our roads.

Given the significance of this change and the scale of community consultation and consensus-building involved, it's vital that governments move forward on this important opportunity for reform

All the major economic regulators are on the same page—so we continue to urge governments to start the conversation with Australians about the future of road user charging.

Concluding remarks

I know I have traversed a lot of ground today, however if I can impress anything on you in my final public comments as the Chief Executive of Infrastructure Australia—it is that there is much more work to do.

Australians have never lacked vision. We have a long and proud reformist history from which to draw inspiration.

If we truly embrace the national reform agenda outlined in the Australian Infrastructure Plan, Australia will secure the social and economic benefits of great infrastructure for many generations to come.

Infrastructure Australia will deliver the next Australian Infrastructure Audit in 2019 and the next Australian Infrastructure Plan in 2021.

I wish my successor and the Infrastructure Australia Board ongoing success in moving the dial on infrastructure reform and taking the organisation into its next phase of delivery as the nation's independent infrastructure advisor.

It has been my great privilege and honor to be at the helm over this transformational period, and I would like to acknowledge the support I have enjoyed from governments, industry, the broader community and my whole team at Infrastructure Australia. Thank you.