Mar 3, 2016

Address to the Australian Logistics Council – “Infrastructure – Australia at the cross roads”

Randwick

Thanks for the invitation to speak to you today.

In the wake of the decline in the mining boom, our nation needs to diversify sources of economic growth.

While that involves seeking to create new industries, it also includes boosting productivity by ensuring our roads, railways, ports and intermodal facilities develop in ways that facilitate easy movement of goods and services.

I always find it instructive to meet the Australian Logistics Council because your members rely upon existing infrastructure to run their businesses.

You understand what works and, more importantly, you can help us identify the bottlenecks that hold back economic growth.

People don’t often use the words glamorous and logistics in the same sentence.

But your industry is fundamental to our economic prosperity.

If we want our economy to grow, and if we want it to produce jobs for our children, we must prioritise efficiency.

This requires great roads and railway lines.

It requires efficient ports and inter-modal facilities.

Above all, in a world of limited resources, it requires that governments direct scarce public money to the infrastructure projects that have the greatest potential to make your jobs easier, thereby making our economy more efficient.

PROCESS IS EVERYTHING

When I was preparing my remarks today, I reviewed what I said last year when we met at the Melbourne Cricket Ground.

My speech that day focused on the need for proper process when it came to deciding which infrastructure projects should attract public funding.

I noted that the former Labor Government had created Infrastructure Australia as one of our first acts to advise the Commonwealth on infrastructure priorities and assess costs and benefits, but that the Abbott Government had abandoned proper process, funding new toll road projects in the absence of proper analysis.

I argued that both sides of politics must take Infrastructure Australia’s advice seriously and commit to an agreed pipeline of projects to strip the politics out of nation building.

And on the way through, I also criticised Mr. Abbott’s absurd ban on investing in public transport.

Against that background, I was pleased last month when Infrastructure Australia released a report which:

  • Called for major projects to be properly tested and subject to cost-benefit analysis prior to receiving Commonwealth funding.
  • Updated Infrastructure Australia’s existing priority list.
  • Called on the Commonwealth to end its ban on investing in public transport.

The IA report is grounded in the same principles that I discussed here last year.

It’s not rocket science.

It is irresponsible to spend billions of dollars on major projects without conducting the requisite research into their viability.

In the private sector, evidence based decision making is business as usual.

It should be the same in the public sphere.

The IA report provides an important opportunity for the Turnbull Government to close the page on the make-it-up-as-you-go approach of the Abbott Government and return to evidence based policy that maximizes value for scarce public dollars.

I am hopeful that the Prime Minister and his new Infrastructure Minister will seize this opportunity and get things back on track.

It is in the national interest to decouple the long-term infrastructure development cycle from the short-termism of the political cycle.

STATE OF PLAY

Whatever happens in the future, there’s no way we can change the past.

For the past two years and five months, the suspension of proper process has contributed to a serious decline in infrastructure investment in this country.

Australian Bureau of Statistics figures released in January showed a 20 per cent reduction in public sector infrastructure investment between the September quarter of 2013, Labor’s last quarter in office, and the September quarter of 2015.

This decline came at the very time Australia should have been increasing public construction activity to make up for the decline in construction in the mining sector.

Importantly, it also came as the Abbott Government struggled to achieve progress on its few new infrastructure projects, mainly because of Mr Abbott’s decision to ignore Infrastructure Australia and evidence based policy making.

When he took office Mr Abbott cancelled all public transport projects that were not already under construction.

This included projects like the Melbourne Metro and Brisbane’s Cross River Rail – projects that had already been judged by Infrastructure Australia as worthy of investment.

They should be under construction now.

But in the 2014 Budget, Mr Abbott shifted the funding allocated to these projects by the former Labor Government to new toll road projects including Melbourne’s East-West Link, the Perth Freight Link and Sydney’s Westconnex.

The problem was that these projects had not been properly worked up.

There were no comprehensive business cases.

The results speak for themselves.

Melbourne’s East-West Link has collapsed and it has emerged that it would have yielded only 45 cents in public benefit for every dollar invested.

In anyone’s language, the project is a dud.

It should never have been funded.

Indeed, an Auditor General’s report released in December strongly criticised Mr Abbott for defying departmental advice to commit $3 billion to the project.

The Perth Freight Link is now on hold – halted by the Western Australian Supreme Court on environmental grounds.

This surprised few people in Perth, given the road was to have gone through an environmentally sensitive wetland.

It probably did not even surprise WA’s Barnett Government.

When it was announced in 2014, the WA Parliamentary Secretary for Roads, Jim Chown, told a Parliamentary budget estimates committee in Perth: “… at this stage we have not actually got plans that are worthy of public scrutiny’’.

The third of Mr Abbott’s big-ticket road projects is Westconnex in Sydney.

Its Budget has blown out from $10 billion to $16.8 billion.

There are also still serious problems with the design of this project.

In 2012, Infrastructure NSW wrote a report assessing Sydney’s infrastructure needs.

In a section called First Things First, the report addressed the city’s roads and noted:

In recent years, rapid demand growth at Port Botany and Sydney Airport has impacted on NSW’s transport networks, particularly around these facilities.

With growth forecast to continue, investment is urgently needed in land side infrastructure to allow access to these gateways.

The expert advice was unambiguous.

Yet Westconnex, as it is currently proposed, does nothing to improve access to the airport or the port.

When you put together the failures surrounding these three mega projects, it is no wonder infrastructure investment has fallen.

The Government ignored the experts, made arbitrary decisions and has been unable to deliver because of inadequate planning.

It is critical that Mr Turnbull learn from Mr Abbott’s mistakes.

He needs to follow through with his promise to fund rail and roads, not just roads.

He should reverse Mr Abbott’s spending cuts and work with Infrastructure Australia on projects that address actual needs and have been subject to the proper planning required to get them off the ground.

THE NEXT LABOR GOVERNMENT

While the folly of the Abbott approach to infrastructure development has been unfolding in Canberra, the Opposition has been working on an alternative vision ahead of the upcoming federal election.

Our starting point will be to bring Infrastructure Australia in from the cold.

We’ll expand its role beyond passive project assessment to make it an active player in the infrastructure market, working with the private sector to unlock private capital for investment in public infrastructure.

While there is no shortage of private capital in this country – including $2 trillion in superannuation funds – there has been real difficulty in finalising deals.

Labor sees scope for Infrastructure Australia to fill that gap using a similar model to the Clean Energy Finance Corporation.

Infrastructure Australia would administer a $10 billion infrastructure funding facility, using debt guarantees, discounted loans and direct investment to get projects off the ground.

Within 100 days of the election of a Labor Government, we will appoint an expert panel to formalise the arrangements concerning the fund, including the important details around its new funding mandate.

Adding project facilitation to IA’s role will allow it to not only identify good projects, but also work directly with industry to address impediments to the development of those projects.

The more private capital we can unlock, the quicker we will be able to begin to attack the infrastructure deficit that is holding back economic growth in this country.

INLAND RAIL

At last year’s ALC event, I remember talking to some of those present about the proposed Inland Rail Link between Brisbane and Melbourne.

It was clear to me back then that frustration was growing in the sector over the lack of progress on this important project.

That’s not surprising.

Prior to the 2013 election the Coalition vowed it would fast track Inland Rail.

A year later, people are still wondering what is going on.

It’s time to get moving.

The only funding ever allocated to Inland Rail was the $600 million the former Labor Government spent upgrading parts of the existing lines that will be part of the route and the $300 million it provided to advance the project.

The Coalition has not added a cent to that allocation, despite having handed down two budgets.

And while the 2015-16 Budget forecast investment of $100 million of that money this financial year, a Senate Budget Estimates Committee heard last month that only $29.1 million had actually been spent so far.

The upcoming 2016-17 Budget must take Inland Rail off the backburner.

ROADS

The same goes for the ongoing upgrades of the Pacific and Bruce Highways, both of which have slowed under the Coalition from the pace at which they were being rolled out previously.

On the Pacific Highway, for example, the Government cut its own 2014-15 Budget allocations by $130 million in its 2015-16 Budget.

The last thing we need in coming months is more promises and political argy bargy.

What we need is actual investment and real progress, just like that achieved with the Majura Parkway in the ACT, which is nearing completion.

This $288 million project, funded by the Commonwealth and the ACT Government, is already partially open and is allowing trucks to avoid the Canberra CBD, easing traffic congestion while also reducing trip times for movement of freight.

The Majura Parkway is expected to carry up to 44,000 vehicles a day, including 6000 trucks a day by 2030.

It’s great project – just the sort of investment that delivers genuine improvements and multiple levels.

We need more projects like it.

FREIGHT STRATEGY

Earlier I referred to the recent Infrastructure Australia report and its call for proper process on nation building projects.

That is a wise recommendation.

However, I am concerned about IA’s apparent ignorance of its own previous work.

Its call for a National Freight and Supply Chain Strategy ignores the fact that in September 2012, it produced the National Land Freight Strategy, which followed the January 2012 release of the National Ports Strategy.

The strategy, later endorsed by state transport ministers, was based on the notion that existing and future road, rail, intermodal, port and airport developments needed to fit together.

It ended the previous ad hoc, fragmented approach under which decisions had been made in isolation of decisions by other governments or other levels of government.

Features of the plan included the recognition of the need to preserve current and future transport corridors and to make better use of existing infrastructure.

Development of the strategy was a landmark for freight movement in this nation.

It requires governments to not only focus on developing efficient roads or railway lines, but that it also consider how these individual pieces of infrastructure fit in with the overall transport network.

Production of the National Land Freight Strategy complemented the National Ports Strategy.

I’ve got no problem with major documents like this strategy being updated from time to time.

But I am concerned that the Infrastructure Australia report reads as though there never was a National Land Freight Strategy or a National Ports Strategy.

Indeed,  I noted the ALC’s media release of 17 February in which you pointed out that the Government should be looking at the National Freight and National Port strategies to “identify the priority areas for action’’.

I would be very concerned if the production of a new report from scratch was to be used as a reason to do nothing on freight for another two years.

The work has been done. The sector was fully consulted.

The Government should just get on with the job.

I’m sensing a growing frustration in the infrastructure sector about Government inaction being masked by various inquiries into issues that have already been the subject of intense consideration.

I noticed your organisation’s recent submission to the House of Representatives Standing Committee on Infrastructure, Transport and Cities over its inquiry about the role of transport connectivity in stimulating development and economic activity.

Your submission was to re-submit your submission to the committee’s 2014 inquiry into infrastructure planning and procurement.

And your submission came with a covering letter from the ALC that said:

It is somewhat disappointing that so little has happened since 2014 that (the) ALC can reproduce a previous submission and ask that its recommendations be used.

MARITIME REFORM

Another issue on the current Government’s agenda that I know is important to your sector is maritime reform.

As you would be aware, the Senate last year rejected proposed legislation that would have ended any concept of preference for Australian shipping companies in the movement of domestic freight.

This would have allowed foreign-flagged vessels with crews paid foreign-level wages to undercut Australian operators, leaving them the choice of going broke or sacking their Australian crews and re-registering offshore.

Be in doubt: Labor believes it is Australia’s national interests to maintain an Australian shipping industry.

We reject the argument that it is acceptable to destroy one industry to advantage another.

Indeed, existing law – the former Labor Government’s Revitalising Australian Shipping package – provided tax breaks, training subsidies and other incentives to help strengthen the local industry.

While it was a good thing that the Senate cross benchers rejected the Government’s attempts to change the law, I have no doubt the Government will attempt to revive this legislation if it can.

In fact, since last November, the Government has sought to implement its agenda through the back door by abusing provisions of existing law allowing  the issuance of temporary licences for the use of foreign crews.

This move would have significant impacts on other modes of transport.

If shipping costs were suddenly slashed, road and rail freight providers would face an immediate change in their own businesses.

The change would pervert the market.

That’s why key members of your organization, including Aurizon, the ARTC, Brookfield Rail and Qube put their names to a joint submission to the Senate inquiry that considered this legislation last year.

That submission said:

The potential impacts that the Bill might have on land freight transport have not been properly considered due to a significant gap in the Regulatory Impact Statement prepared to inform the government and stakeholders of the expected impacts of the bill.

…. The assessment did not model the impact of any potential transfer of freight from the road and rail industries to shipping.

… There is potential for a significant transfer of freight from land-based transport to shipping under the proposed regulatory changes, which would inevitably damage land freight businesses and lead to job losses, including in regional areas and in Western Australia.

I agree.

If you employ truck drivers in this nation, you have to pay them Australian-level wages.

Train drivers also receive Australian level wages.

It should be no different if you operate ships to move freight around the Blue Highway than if you move goods on the Hume Highway.

Instead, the government wants to give shipping companies a leg up over rail and road freight operators who are required by law to pay Australian-level wages.

That’s just plain wrong.

It will destroy Australian jobs.

And, as the freight industry submission I just mentioned pointed out, the Government brought legislation to the Parliament on this matter without even bothering to conduct economic modelling to assess its likely ramifications.

CONCLUSION

This failure goes to underline the point where I began my contribution today.

Just as building an efficient transport network relies on proper research and process, process is also critical when changing laws.

Whether we are making laws or investing in billion-dollar projects, we need an evidence-based process that allows for proper consideration before decisions are made.

And we need governments to stick to that process – which is the main take out from the recent Infrastructure Australia report.

I’m pleased that Infrastructure Australia is doing what it can to get this government back on track after a two-year suspension of proper process and an unwillingness to invest in nation building.

That’s because I want what I suspect everyone in this room wants – progress.

The previous Labor Government created the right processes to conduct infrastructure development on the basis of evidence.

It also created national strategies for the development of a truly national approach to land transport, ports and urban transport.

After two years of mucking about, the last thing this Government needs is a further delay to rewrite the National Land Freight Strategy.

Now it is time to get on with it.

 

 

Contact Anthony

(02) 9564 3588 Electorate Office

Email: A.Albanese.MP@aph.gov.au

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