Feb 26, 2008

A New Deal on Infrastructure





Minister for Infrastructure, Transport

Regional Development and Local Government

26 February 2008

It is a pleasure to be back at Infrastructure Partnerships Australia’s policy address again, particularly with one important word deleted from my title.

That is of course the word “Shadow” immediately proceeding Minister.

Last time I addressed you, I was Shadow Minister for Infrastructure, a position I held from 2006.

On 3 December last year I was given the opportunity to implement Labor’s infrastructure agenda, not just discuss it.

Our plans for infrastructure have benefited from years of consultation with stakeholders, such as yourselves.

Ideas have been refined, difficulties anticipated, challenges overcome, and advice incorporated.

This process means that we are confident that our approach to establishing the fundamentals for infrastructure provision is sound.

Our infrastructure reforms will make a difference.

And that is why I entered politics – to contribute to Government policy and make a difference.

I am passionate about infrastructure development because it can have a lasting impact beyond the usual political timeframe.

If there is one thing the last election was about, it was a coalition that had lost its way and had been reduced to short term fixes, and a reinvigorated Labor Party led by Kevin Rudd with long term plans for the future.

On infrastructure, skills and climate change, the Rudd Labor Government is pursuing an agenda that will last well beyond the three year electoral cycle.

The productivity lever

To put the infrastructure debate into context, the Reserve Bank of Australia has delivered 20 separate warnings about capacity constraints causing inflationary pressure on the economy.

The Rudd Government has moved quickly to heed the advice of the RBA and is taking action to boost the nation’s productive capacity.

Indeed, national coordination of infrastructure is a key element of the Government’s five-point plan to lift productivity, fight inflation and sustain economic growth.

The five-point plan addresses both demand side and supply side pressures on inflation.

First, we will ensure the Government takes pressure off demand by running a strong budget surplus.

Second, we are committed to examining all options to encourage private savings, such as through the First Home Saver Accounts.

Third, on the supply side we are implementing our plan for tackling chronic skills shortages through Skills Australia.

Fourth, we will seek to lift workforce participation through practical measures including the removal of disincentives to working hard.

And fifth, we are providing national leadership to tackle infrastructure bottlenecks.

Indeed, Australia’s physical infrastructure — including transport, energy, communications and water assets — is the foundation stone upon which our economic future will be built.

We know that when our infrastructure networks are under-funded, overstretched or out-of-date, this restricts the prospect of improved living standards.

And over the longer term we are left ill-equipped to respond to the challenges of climate change, an ageing population, and increasing globalisation.

New leadership

As part of our five-point plan to fight inflation, the Government is offering a truly national, long term approach to the provision of infrastructure – the fresh ideas of new leadership we promised before the election.

We have been working hard since coming into Government just 86 days ago to put in place the right policy structure to support our infrastructure plan.

That policy structure is Infrastructure Australia.

It says no to the blame game.

It says no to short-term perspectives.

And it says no to a disjointed, piecemeal approach to infrastructure.

In short, the Commonwealth is back in the business of nation-building.

And we know that nation-building requires coordinated solutions.

For the first time since Federation the Commonwealth Government has an Infrastructure Minister and an Infrastructure Department.

On Thursday of last week, I introduced into the Federal Parliament the Infrastructure Australia Bill 2008.

New leadership on infrastructure takes a two-pronged approach to tackle bottlenecks.

We are committed to lifting investment in new infrastructure while at the same time making better use of our existing infrastructure assets.

The Rudd Government also recognises the importance of Commonwealth involvement in the development of our major cities.

Australia is one of the most urbanised countries in the world – with over 64 per cent of the population living in our capital cities.

Our cities are critical to the economy, with ABS data showing that Australia’s 8 capital cities contributed to 78 per cent of the nation’s economic growth between 2001 and 2006.

Our economic prosperity will in great part depend on the ability of our cities to operate successfully.

Inadequate infrastructure in cities leads to problems like urban congestion.

The Bureau of Infrastructure, Transport and Regional Economics estimates urban congestion will cost families and businesses nearly $20 billion by 2020.

Many working parents spend more time commuting in their cars, than at home with their children.

Also, with the freight task set to double by 2020, the greatest impact will be in urban areas.

You can’t have a policy for moving goods, without a policy for moving people.

We cannot address climate change without addressing the sustainability of our cities.

Lifting investment – long term solutions

Strategic investment is required to overcome our infrastructure backlog that in the areas of land transport, water, and energy alone is estimated to be worth $25 billion.

Backlogs are costing us 0.8 per cent of GDP in lost production – the equivalent of $8 billion a year.

Investment is needed to meet future challenges.

Without action the total length of congested roads is likely to treble by 2020.

It is estimated that $30 to $35 billion worth of investment is required in the nation’s energy sector by 2020.

And about 80 per cent of Australians who live in our cities are now subjected to long-term water restrictions.

The task ahead can seem overwhelming without a clear picture of investment needs and timeframes.

This is why one of Infrastructure Australia’s immediate tasks will be to undertake a national Audit to determine the capacity and condition of Australia’s nationally significant infrastructure.

The Audit will identify gaps, impediments and bottlenecks, as well as take into account expected future demand. This information will inform the development of the Infrastructure Priority List to guide future investment decisions.

Infrastructure Australia’s first priority list will be completed within 12 months and presented to the Council of Australian Governments by March 2009.

The timeframes are ambitious, but necessary.

This work will allow us to make decisions based on evidence, and allow a better matching of investment dollars with the nation’s infrastructure priorities.

Making better use of our existing assets

While there is no doubt that investment in new assets is necessary, we must recognise that it will take time before new infrastructure is built.

However, there is much action that can be taken in the short-term to help ease infrastructure bottlenecks.

Streamlining guidelines, legislation and regulations across jurisdictions can allow us to more efficiently use our existing infrastructure.

Access and pricing issues associated with the use of existing infrastructure can sometimes mean it is cheaper to duplicate assets rather than to share existing ones.

Issues such as these inevitably impact on productivity and hurt our economy.

I do not underestimate the complexity of this task.

With national leadership and coordination, however, it is achievable.

The Productivity Commission estimates that implementation of competition and regulatory reforms affecting transport, energy and export infrastructure regulation and planning, has the potential to provide savings of around $10 billion, and add to national output by up to 2 per cent of GDP.

We must harness such potential – not hold it back.

These infrastructure reforms are important elements of COAG’s National Reform Agenda which has been for too long hindered by the blame game.

At his first COAG meeting on 20 December 2007, the Prime Minister vowed to end the blame game and reinvigorated the Commonwealth’s commitment to the National Reform Agenda.

The COAG Infrastructure Working Group that I Chair will have its second meeting in Brisbane next Thursday.

And at the next COAG meeting in March, the Working Group will deliver an implementation plan, including details on the scope of the National Infrastructure Audit.

Getting structures right

Infrastructure Australia will be a statutory advisory council consisting of 12 members drawn from industry and all levels of government.

It is significant that 5 of the 12 members, including the Chair will be from the private sector.

Involvement of the private sector from day one is a sign of the importance this Government places on partnerships in the delivery of infrastructure.

Three members will be drawn from the Commonwealth, three from the states, and one from local government.

We know that we will be most successful when we draw on the expertise that exists across the spectrum.

Infrastructure Australia will be supported by the new Office of Infrastructure Coordination – a office within my Department operating from Sydney.

It will be led by the Infrastructure Coordinator.

Chair of Infrastructure Australia

Today Infrastructure Australia takes another step forward.

I am pleased to announce that Sir Rod Eddington will be the inaugural chair of Infrastructure Australia.

He brings formidable experience to this role.

His career began in transport and aviation in 1979, and he has worked in the aviation industry both in Australia and abroad.

During his 5 years service as CEO of British Airways, he led the airline’s turnaround during tumultuous times.

In 2005 he was awarded a knighthood by the British Government for his services to civil aviation.

Sir Rod Eddington was jointly commissioned by the UK Government to examine the long-term links between transport and the UK’s economic productivity, growth and stability, within the context of the government’s broader commitment to sustainable development.

The seminal report – The Eddington Transport Study was launched on 1 December 2006.

More recently, the Victorian Government has engaged Sir Rod Eddington to develop options for Melbourne’s east-west transport link.

Upon concluding the East-West Link Needs Assessment in Victoria, Sir Rod Eddington will commence as Chair of Infrastructure Australia.

As a West Australian with broad experience and networks across the nation and indeed across the globe, he personifies the importance the Rudd Government places on Infrastructure Australia.

His experience, his ability to cut through and identify critical issues, and his ability to be innovative when seeking solutions will be imperative to the success of Infrastructure Australia.

I have no doubt that he will bring great leadership to the task and I am very pleased that he has accepted the important role as founding Chair of Infrastructure Australia.

Financing Infrastructure

There is no doubt that overcoming our infrastructure backlog and preparing for the future will require substantial investment.

The pipeline of projects created through Infrastructure Australia’s Priority List will provide the construction, development and financing sectors with the long term certainty they need to make best use of skills and resources.

Infrastructure Australia will make recommendations on financing options for individual priority projects.

In determining the best financing option, the Government will not be driven by ideology.

Sometimes public provision will be required, sometimes private, or a combination of both.

The Government will fulfil its obligation to fund some nationally significant infrastructure.

But we recognise that public investment will not be enough.

Superannuation funds should also be encouraged to invest.

Superannuation funds now hold some $1.4 trillion in assets – more than Australia’s annual GDP – and they are seeking to create a balanced portfolio of investments.

With national leadership, money typically invested into equities and even offshore infrastructure, could be directed to fixing our infrastructure bottlenecks.

The Government has an obligation to invest taxpayers’ money strategically as well as make way for others to invest.

Encouraging private investment means making sure approval processes for infrastructure projects are not unnecessarily long, costly or complex.

Last week I announced at the National Press Club that best practice, nationally consistent guidelines for PPPs will be finalised this year.

Nationally consistent, best practice PPP guidelines will make it simpler and less expensive for local and international financiers to invest in Australian infrastructure.

Firms can spend up to $30 million on bids and engage hundreds of staff to finalise complex tenders.

Not only does this lock out some smaller investors and businesses but it also places a great burden on the public sector involved in evaluating these bids.

It’s money that would be better spent on improving project outcomes.


Since coming to office last November, the Rudd Labor Government has moved quickly to respond to the nation’s growing infrastructure challenges, restoring infrastructure planning to the heart of national economic management.

I invite you to have input to the journey.

Whilst I have announced Sir Rod Eddington as Chair of Infrastructure Australia, the full membership will be made known at a later date.

Of the 400 people in this room, there may be one or two of you who have not expressed an interest in the Infrastructure Australia Statutory Advisory Council.

We cannot have a Council of 400 members but I want to make it clear that Infrastructure Australia will have participation well beyond the 12 Council members.

Infrastructure Australia will host or co-host forums to maximise input from the sector including people in this room.

The objective is to harvest the ideas that participants have.

This will ensure that our infrastructure reforms benefit the nation through current and future generations.

This represents Labor’s new deal on infrastructure.