Oct 28, 2015

Speech to the the Rail, Tram and Bus Union National Conference – The Politics of building better cities

Sydney

It’s great to be back with you at the Rail, Tram and Bus Union.

As you know, since I last had the chance to address you, there have been a few changes on the federal political scene.

We have a new Prime Minister.

A new Cabinet and Ministry.

And a new policy approach – one that purports to recognise that public transport and urban efficiency are directly related to economic productivity and therefore are core business for the commonwealth government.

Of course, the Labor Party has followed this approach since the Whitlam era.

So it is a good thing that after all these years, the Liberal Party has seen fit to join us in the 21st century.

Suddenly, everyone in Canberra is talking about cities and trains – topics that just a few weeks ago the Coalition said were none of our business.

Indeed, it was difficult to avoid Malcolm Turnbull’s tweeting selfies from trains and trams as part of his strategy of stalking Tony Abbott.

But as Shakespeare said, “action is eloquence’’.

I will judge the new Prime Minister’s dedication to cities and public transport on his actions, not his self promotion.

Malcolm Turnbull must fund public transport, not just ride on it.

Things have also advanced on the Labor side of politics.

We’ve finalised our national platform at this year’s conference in Melbourne.

And while our opponents have been busy undermining and knifing each other, we’ve been developing serious policy on infrastructure and transport, particularly in the critical area of project financing.

A Labor Government will invest directly in public transport and cities.

But, as Bill Shorten announced earlier this month, we’ll also create a $10 billion infrastructure financing facility to help unlock the billions of dollars of investment available in private sector investment.

We’ll also restore Infrastructure Australia to the centre of government activity to ensure funding decisions on big projects are made on the basis of demonstrated public benefit, not on political considerations.

THE INFRASTRUCTURE LANDSCAPE

Before I flesh out those ideas, let me take stock of where this nation stands in terms of infrastructure development after two years of Coalition government.

You can best sum up the situation with a single figure.

According to the Australian Bureau of Statistics, public infrastructure investment has plummeted by more than 20 per cent between the September quarter of 2013 and the June quarter of 2015.

That’s a funding reduction of one dollar in five.

We should not be surprised.

As soon as Tony Abbott took office, he cut more than $4 billion in funding that had been allocated by the former Labor Government to public transport projects.

That included great projects like the Melbourne Metro, Brisbane’s Cross River Rail  and Adelaide’s Tonsley Park and Gawler projects.

Planning for additional light and heavy rail in Perth also stopped.

Mr Abbott shifted that money to proposed toll roads including the East-West Link in Melbourne, Sydney’s Westconnex project and Perth Freightlink – all without cost-benefit analysis.

This breached his 2013 election promise to fund no infrastructure project worth more than $100 million without a published cost-benefit analysis ticked off by Infrastructure Australia.

Mr Abbott also cut $100 million from Tasmania’s Midland Highway upgrade and cut the upgrade of Victoria’s M80.

He cut investment in smart infrastructure through Infrastructure Australia’s Managed Motorways program on roads like Melbourne’s Monash Freeway.

In the 2015 Budget, the coalition cut $2 billion in infrastructure spending over 2 years, from their own 2014 Budget projections.

The 2015 Budget was the first I can remember in nearly two decades in Parliament that did not include a single new major infrastructure project.

No wonder traffic congestion is worsening.

A recent Infrastructure Australia update of the National Infrastructure Audit warned that without action, congestion would cost the nation $53 billion by 2031.

That’s bad news for the increasing number of people who live in drive-in, drive-out communities in the outer suburbs of our cities and commute to work in central business districts.

These workers have been literally watching their quality of life slipping away on a daily basis like the white lines in their rear vision mirrors.

Mr Abbott refused to lift a finger to help.

What is truly amazing is that Mr Abbott racked up this woeful record at the same time he was claiming that he wanted to be known as “the Infrastructure Prime Minister’’.

He told us that under the Coalition there would be cranes in the sky and bulldozers on the skyline.

Two years later there are no cranes.

No bulldozers.

Just bulldust.

The only hole this Government has dug is the one in which they buried Tony Abbott’s prime ministership.

This is a pitiful record.

LABOR’S RECORD

It is completely in contrast with the record of the former Labor Government.

We doubled the roads budget.

We built or rebuilt more than 4000km of rail track.

When we took office, Australia was 20th on the OECD in terms of infrastructure investment as a portion of GDP.

When we left office, Australia was 1st.

We also created Infrastructure Australia as an independent adviser to government and the Major Cities Unit within my former department to drive urban policy.

We initiated the greatest infrastructure project of our era – the National Broadband Network.

Malcolm Turnbull is now ruining this visionary project by insisting that fibre should not be connected to people’s homes and businesses, but to box on a street corner.

Last week we learned the Government had bought 1800km of copper wire for the project.

Copper wire – the technology of choice in the era of the horse and cart.

In the competitive and technology-driven 21st century we must connect fibre to the home or business.

Let’s get it right the first time, rather than doing half a job and being forced to retro-fit later at greater expense.

Compared to what Labor had planned, Malcolm Turnbull’s NBN offers broadband access at half the speed, for twice the price.

That’s not good enough.

It will let down our nation and make it harder for us to compete globally.

On infrastructure funding, the former Labor Government also put in place innovative financing arrangements.

For example, we devised ways to deliver the Melbourne Metro and Brisbane’s Cross River Rail project using availability payments.

We were also able to use a $405 million commonwealth contribution to Sydney’s F3 to M2 project, along with equivalent NSW Government contribution and an extended concession arrangement, to seal a deal with Transurban to deliver and operate the project.

Labor has a great story to tell on Nation Building.

NEW ERA

I will always struggle with the political wisdom of political parties removing elected prime ministers.

But at least the dumping of Tony Abbott offers the possibility of a common sense approach to infrastructure and cities.

But after two years of complete inaction on infrastructure, there’s a lot of catching up to do.

And the early signs are worrying.

For instance, it is hard to know exactly which minister in the Turnbull Government is actually responsible for cities and infrastructure.

At least five of Mr Turnbull’s ministers lay claim to having some level of responsibility in this policy area.

But it is unclear who is in charge.

First up there is the Minister for Cities, Jamie Briggs.

Then there’s the Minister for the Environment, Greg Hunt, who is the senior minister to whom Mr Briggs reports.

There is the Minister for Major Projects, Paul Fletcher, who reports to Deputy Prime Minister and the actual Infrastructure Minister Warren Truss.

Somewhere off to the side is Josh Frydenberg, who as Minister for Northern Development, is also talking about infrastructure.

If you are having trouble following this, don’t feel bad.

Even the ministers themselves are confused.

Last week in Question Time I asked Mr Briggs a question about the Melbourne Metro.

You would think the Melbourne Metro would be core business for the Minister for Cities.

But I was told the correct person to ask was Mr Hunt.

Mr Hunt had no idea.

After an embarrassing few moments of people looking around and pointing at each other, it was Mr Truss who ultimately offered a non-answer to my question.

A day later, the Prime Minister informed the Parliament that he was in charge of cities.

This confusion points to the potential for dysfunction.

We’ve got a squad of ambitious ministers here – each trying to elbow the others out of the way.

You can have all the enthusiasm in the world for cities, but unless you get the administrative details right, it’s very hard to deliver in a meaningful way.

I am very worried that, whatever Mr Turnbull’s intentions on urban policy, his convoluted administrative arrangements are a recipe for failure.

Much has been said lately about the need for bi-partisanship.

In the spirit of bi-partisanship I urge the Prime Minister to revisit the lines of responsibility on urban policy.

I say this on the basis of my own experience as a driver of urban policy in the previous Labor Government.

I want good policy outcomes.

I’m also concerned that the Minister for Cities is working within the Department of Environment, rather than the department that actually drives infrastructure spending – the Department of Infrastructure and Regional Development.

This does not make sense.

I suspect it is a symptom of another problem facing the Government – ongoing disunity.

It’s no secret that the Liberal Party is split between supporters of Mr Turnbull and supporters of Mr Abbott, who is further to the right on the political spectrum.

We also know that Deputy Prime Minister Truss opposes commonwealth involvement in urban policy and public transport.

While the new Prime Minister has been talking up the need for commonwealth investment in public transport, Mr Truss has been talking it down.

In a bizarre media statement released on October 8, Mr Truss tried to discredit the Melbourne Metro and the Cross River Rail projects by claiming they had not been the subject of planning.

There were no business cases, Mr Truss said.

And no-one knew how much they would cost.

This is nonsense.

On the Metro, for example, the former Labor Government provided $40 million in the 2009 Budget, which enabled the Victorian State Government to produce a business case in 2011.

The former Labor Government provided $3 billion for the project in the 2013 Budget.

Unless he’s been asleep for the past decade, which is of course possible, Mr Truss should know all of these facts.

I suspect the Minister is attempting to push these projects off into the distance even as Mr Turnbull’s ministers are engaging in talks with states aimed at getting them off the ground.

Perhaps he should consider the observation of Bob Dylan who advised in his classic The Times They Are a Changing:

Your old road is rapidly aging.
Please get out of the new one if you can’t lend your hand

Mr Truss is also at odds with his colleagues over the proposed Badgerys Creek Airport.

A fortnight ago Mr Turnbull said the airport would not work properly unless it was connected to a railway line.

But last week, Mr Truss, releasing an EIS into the project, insisted the airport would not be big enough to justify a rail connection.

It seems Mr Truss doesn’t understand that the new airport, which is due to open in 2025, offers the best chance in decades to drive significant jobs growth in western Sydney.

Properly developed, the Badgerys Creek Airport will attract a range of aviation-related businesses that could produce literally tens of thousands of jobs in coming decades.

That’s tens of thousands of high value jobs in an area often identified as having high unemployment rates.

But the development of a western Sydney Aerotropolis requires a link to public transport.

Mr Truss’s backward-looking position demonstrates an appalling lack of vision for this nation and hangs a lantern on his ongoing contempt for public transport.

He is not singing from the same song sheet as his Liberal Party Coalition colleagues.

Whether this impedes progress in cities and infrastructure policy will become clearer in coming months.

FUNDING OPTIONS

We could start by taking a grown-up approach to the concept of debt.

Thanks to Mr Abbott’s wildly exaggerated alarmism about debt and Budget deficits, Australians have been led to believe that government debt is a sin.

But governments have been borrowing money since governments were invented.

There is a significant difference between borrowing money for capital investment and borrowing for recurrent spending.

That’s an important distinction.

While Australians don’t take out bank loans to buy the weekly groceries, millions borrow money to buy homes.

They don’t decide that because they can’t pay cash upfront they will rent for the rest of their lives.

They borrow money because they know that in the long-term, buying a house will make them better off.

In the same way, when governments consider how they will fund infrastructure, they need to consider not just the costs, but the benefits of the investment.

For example, if building a new bridge or railway line boosts productivity and drives job creation that increases government revenues via taxation, then those economic benefits should be factored in to the decision about whether to borrow money to proceed with the project.

Playing politics with debt for capital investment is irresponsible.

I do note that in his interviews last weekend Malcolm Turnbull took a position on infrastructure financing completely consistent with Bill Shorten’s Labor policy announced earlier this month.

At the time Mr Turnbull rejected it.

If he is now supporting our approach we welcome it.

PRIVATE INVESTMENT

Public investment alone will not bring us anywhere near addressing our infrastructure deficit.

A real challenge facing this nation is to enlist private investment.

As I mentioned earlier, the former Labor Government was moving in this direction when we lost office.

In Opposition, we have continued this work, leading to Bill Shorten’s recent announcements about new ways to unlock private money.

Our starting point is that right now, $2 trillion is sitting in superannuation funds in this country.

The funds want to invest in assets that have long-term, reliable income streams.

But they and their banks struggle with the high-upfront costs and long lead times in the infrastructure development market.

The next Labor Government will take a more activist role in working with the private sector to provide support for good projects in ways that mitigate risk.

We’ll use a mixture of loans, loan guarantees and direct investment.

We will also enhance the role of Infrastructure Australia to make it an active participant in infrastructure markets.

It will continue with its current role in analysing projects to see whether they stack up.

It will then work directly with private companies and investment funds to see whether government investment can be used in ways that will give them and their banks greater comfort in committing to projects.

Infrastructure Australia will be in charge of a $10 billion financing facility and will work on the basis of injecting the least amount of money required to get projects under way.

It’s a model based on the successful Clean Energy Finance Corporation.

Because risk is involved, it is critical that we fund the right projects – those that will produce economic returns for investors and productivity and lifestyle returns to the community.

We can’t take this approach if we are choosing dud projects that enhance our political prospects but which provide no returns.

That’s why Infrastructure Australia will sit at the centre of our approach.

Importantly, within 100 days of taking government, Labor will appoint a special panel to create the rules around Infrastructure’ Australia’s financing mandate.

VALUE UPLIFT

I note that the RTBU has commissioned SGS Economics and Planning to produce an extensive report on the need for Australian governments to consider the use of value capture to fund projects.

The premise here is that governments have a right to capture a reasonable part of the benefit accruing to property owners by the provision of public transport projects.

It notes that value capture is likely to be most successful in Sydney, Melbourne, Brisbane and Perth where demographic trends and economic growth outlooks are likely to support long-term growth in property values.

It proposes mechanisms like tax increment financing combined with the issuance of bonds and extra rates levies on non-domestic property owners whose business benefit from the new piece of infrastructure.

This is a complex area that requires serious consideration and an open mind.

I congratulate your organisation for producing this report as a serious contribution to the national debate about funding infrastructure.

I look forward to a public engagement on the entire report.

I’m convinced that we can use a value uplift model with regard to the Sydney Airport.

I referred earlier to the fact that the current Transport Minister does not believe that Badgerys Creek Airport should be connected to Sydney’s rail network from the day it opens.

This is an absurd position.

The best option is an extension of the existing passenger line from Leppington to the western line near St Marys via Badgerys Creek.

Indeed, this would complete a loop line around Sydney and would be worth building even if we weren’t building an airport.

However, the commonwealth and the NSW State Government are in dispute over who should pay for a rail link.
They should put aside their squabbling and put on their thinking caps.

The line could be funded at minimal public cost by understanding that the land around the airport will be more valuable if the airport is served by a railway line than if it is not.

The commonwealth can capture this uplift value by factoring in the rail line to the lease price of the airport.

The airport operator will then be able to lease out land to aviation-related businesses in the area at higher rates than could be achieved if the airport had no rail access.

The existence of the rail link would also increase land values of the employment lands in the nearby precinct owned by the NSW government.

The NSW government should factor in that uplift value to its contribution to the rail line.

This is not rocket science.

It simply requires flexibility in thinking.

CONCLUSION

I’d like to thank you for inviting me here today.

We are meeting at a moment in time of real interest to those who are interested in infrastructure, cities and public transport.

We now have a government that says it wants to improve the productivity, sustainability and liveability of cities; led by a man who says he believes connectivity is critical in urban Australia.

We’ll see if he can back up those words with actual investment.

But let me leave you with this thought – one that will ring true to many people in this room because you have hands on experience in public transport.

In my electorate in Sydney’s inner-west and in the Prime Minister’s electorate in the inner-east, public transport is already available.

Services must be improved. And under Labor, they will be improved.

But the real challenge for governments in this country now and in coming decades is to get public transport to the places where it does not exist.

I’m talking about the outer suburbs of our cities where the lack of public transport means people spend too long commuting to and from work in the city.

That means less time spent with their kids.

Less time spent enjoying sport or hobbies and contributing to their communities.

Less time saying hello to their neighbours.

This is eroding the richness of Australian family and community life and threatens to worsen social disadvantage by denying people access to employment.

That’s not something that we should tolerate.

Labor’s agenda for Australian cities is not only about lifting economic productivity, which is important if we are to create jobs and economic growth.

It’s also about people.

People and the way they live their lives.

Labor wants to build up our nation.

But we also want to build up our people.

ENDS

 

 

 

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