Nov 22, 2016

Speech to Masters Builders Australia Dinner – Investing in the Future

We meet at an important time in the evolution of the national economy.

Australia is continuing its move out of the investment stage of the mining boom.

We need to create new industries.

And we need to stimulate existing sectors to secure the new jobs necessary to maintain or improve living standards.

Standing in our way is an infrastructure deficit built up over many years of inadequate investment, particularly during the Howard era, when windfall tax gains driven by the mining boom were squandered on middle class welfare rather than Nation Building.

Addressing this infrastructure deficit is critical if we are to reshape our economy.

The new Australian industries of the future will go nowhere without the railways, roads and ports they will need to get their products to market.

Similarly, no business, new or existing, will thrive in the 21st century as long as it is shackled by a 19th Century copper-based communication system.

It is important that we make the right investment calls now.

It’s about jobs for the future.

My message tonight is that now is the time for the Commonwealth to lift infrastructure investment right across the nation.

There are two reasons.

The first is that if we choose the right projects – those that provide a return to the public – we can extract productivity gains that will allow us to get more out of existing resources.

Those gains will also set up new waves of growth into the future.

But there is also a short-term imperative.

You don’t create entire new industries overnight.

During this period of economic transition, we must seek to maintain economic activity and sustain employment.

Government investment in the right infrastructure projects will do just that.

EXPERT VIEWS

Of course, for decades governments have used public works to drive economic growth.

An example is the former Labor Government’s use of economic stimulus in response to the Global Financial Crisis.

Our investment kept Australians employed and kept our nation out of the recession that caused so much misery overseas.

It came in a period when we were already lifting infrastructure investment to make up for the deficit we inherited from the Howard era.

During our six years in office, the former Labor Government increased per capita infrastructure investment from $132 to $225.

When Labor took Government in 2007, Australia was 20th on a list of OECD nations in terms of infrastructure investment as a proportion of GDP.

When we left office, Australia was 1st.

But times have changed.

The difference between then and now is that current options for economic stimulus are more limited given our very low interest rates.

Indeed, in recent speeches two Reserve Bank Governors – the incumbent Philip Lowe and his predecessor Glenn Stevens – have warned that the effectiveness of monetary policy as a means of economic stimulus is limited in current circumstances.

Both have stressed that the Government should consider borrowing to fund good infrastructure projects that provide a solid public benefit in return for the investment.

THE GOVERNMENT

That’s why it is disappointing that the current Federal Government has significantly reduced infrastructure investment since it took office.

Australian Bureau of Statistics figures show total public sector investment fell 20 per cent in the Government’s first two years in office.

More recent figures confirm the downward trend.

In its 2014 Budget the Government committed to $8 billion in infrastructure investment in the 2015-16 financial year.

It even spent public money producing an extravagant propaganda video  pointing to its Budget as evidence of record investment.

But the facts have caught up with the rhetoric.

The Final Budget Outcome document for 2015-16 shows the Government invested $5.5 billion on infrastructure – $2.5 billion less than planned.

And that included a $490 payment to the Western Australian Government as compensation for movements in the carve-up of GST.

In the previous financial year, the Government underspent its Budget by $1 billion.

So it is clear then that whatever the Government says it is going to spend, it is having great difficulty getting the money out the door.

Whether the cuts are being made by choice or because of incompetence, the outcome is the same – the Government is failing to step up to the task of economic stimulus.

Fancy videos and press releases don’t create jobs or economic activity.

You need to actually invest, not just talk about it.

This Government’s reduction in investment has been achieved via a combination of scrapping, delaying and slowing down projects.

Scrapping, delaying and slowing.

It scrapped all public transport projects not underway when it took office, including the Melbourne Metro and Brisbane’s Cross River Rail project.

It delayed commencement of projects like the M80 in Melbourne and Adelaide’s South Road.

It slowed investment in the ongoing Bruce and Pacific Highway upgrades.

Instead of scrapping, delaying and slowing, Australia needs to initiate, bring forward and speed up infrastructure development.

THE WRONG PROJECTS

I mentioned earlier that former reserve Bank chairman Glenn Stevens had advocated consideration of increased government infrastructure investment on what he called “the right projects’’.

Mr Stevens was correct to make that distinction.

In politics there is always a temptation for governments to invest on the basis of the electoral map, rather than according to which projects provide the greatest benefit to the entire economy.

But the good news is that a process exists to allow us to identify good projects.

When the former Labor Government took office in 2007, we created Infrastructure Australia.

Its task is to assess infrastructure proposals and advise the Government about which projects provide the greatest return for the investment.

By the time we left Government in 2013, IA had conducted rigorous analysis of most major projects on the infrastructure landscape.

It had determined which projects were the right projects and the order in which they should be delivered.

However, the incoming Coalition Government ignored the IA priority list.

It scrapped the public transport projects Labor had funded, including those which had been positively assessed by Infrastructure Australia and declared ready to go.

And it redirected that funding to proposed toll roads which had not been properly assessed and were not ready to go.

One of those was Melbourne’s scrapped East West Link proposal, which would have produced only 45 cents benefit for every dollar invested.

Backing bad projects makes no sense.

CONGESTION

Rapid population growth is continuing to drive strong demand for housing in this country, particularly in the outer suburbs of our major cities, where housing is affordable.

At the same time, employment growth is strengthening in and around CBDs of our major cities.

As a result, more and more Australians are facing longer commuting trips and traffic congestion is acting as a hand brake on economic growth.

Indeed, Infrastructure Australia has warned that without government action now, traffic congestion will cost the nation $53 billion a year by 2031 in lost productivity.

We must act.

It’s not just about the economy.

It’s also about the Australian quality of life.

It’s a tragedy that many working parents spend more time in their cars traveling to and from work than they spend at home playing with their kids.

Part of the answer is increased investment in public transport.

We need to build the Melbourne Metro, Brisbane’s Cross River Rail Link, AdeLINK, the Perth METRONET and the extension of the Sydney rail network to the proposed Badgerys Creek Airport.

We also need better roads, particularly in outer suburban areas.

We have an opportunity to get ahead of the game here; to guide development in ways that work for the community.

That is why in the election campaign, Labor committed to work with developers and the NSW Government to upgrade Appin Road in Western Sydney.

This is another example of getting ahead of the game – delivering the infrastructure before the congestion develops.

I’m pleased to say that the Government has adopted this initiative.

URBAN POLICY

Let me turn to the broader issue of urban policy.

Four out of five Australians live in cities.

That’s why for many years Labor has held the strong view that there is a role for the Commonwealth in working with states to promote urban productivity, sustainability and liveability.

In Government we focused heavily on urban policy, creating a Major Cities Unit and working with other levels of government to provide policy leadership on issues including planning, active travel and urban design as well as direct investment.

We allocated more money to urban public transport than all previous Commonwealth governments combined.

It’s a shame that when the Coalition took office, Tony Abbott abandoned cities policy.

However, his successor, Malcolm Turnbull, says he is interested in cities.

He has proposed the creation of UK-style City Deals to enhance co-operation on urban development between different levels of government.

However, I am concerned that so far, we are yet to see exactly what the Prime Minister is talking about when he mentions City Deals.

The three announced so far – for Townsville, Launceston and Western Sydney – are light on detail.

Indeed, all were announced after Labor came up with specific investment proposals for infrastructure in those cities.

City Deals could provide a genuine opportunity to achieve better outcomes.

But only if they are done properly.

If they are simply used as a mechanism to cover up for policy shortcomings, they won’t work.

The critical component in City Deals is local engagement.

Yet in the case of the Western Sydney proposal, for example, local councils in the area have not even been consulted on the plans.

Commenting on City Deals earlier this year Ken Morrison from the Property Council said:

We want to see City Deals implemented in Australia, but the deals must be based on rigor. We don’t want to see quick deals, we want to see good deals that draw out the economic strengths and potential of a city and drive change where it is needed. Both sides of politics must resist the temptation to turn City Deals into a ‘pork barrel’ or a prize to be awarded to marginal seats.

I fear this is occurring.

Rather than engaging in a matching funding exercise, the Government should be focusing on proper process, using international best practice as its guide.

CONCLUSION

Let me finish on a note of optimism.

I’ve got great faith in this country and its ability to be successful in a highly competitive world.

We are a lucky country.

We have been blessed with mineral resources that have helped sustain economic prosperity and rising living standards.

We have high living standards, including good health and education systems.

We have fantastic natural resources which boost our quality of life and make our nation attractive to visitors from around the world.

And across a range of fields, we have skilled, creative people with the ability to innovate and take the nation forward.

But to take full advantage of all of these positives, we need to ensure our infrastructure is fit for purpose.

We must take a mature approach to investing in the national interest.

That requires all levels of government to work together and with the private sector to ensure that the investment of today creates the prosperity of tomorrow.

Contact Anthony

(02) 9564 3588 Electorate Office

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

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