Aug 20, 2008

Address to Frontiers in Infrastructure Conference: Investing in a Productive Fut

Address to Frontiers in Infrastructure Conference: Investing in a Productive Future for Australia

Sydney, 20 August 2008

 

The Hon Anthony Albanese MP

Minister for Infrastructure, Transport,

Regional Development and Local Government

Leader of the House

 

Can I say at the outset that the theme for this conference – Frontiers in Infrastructure – is a timely and appropriate one.

Australia currently faces a number of infrastructure challenges, and the time to explore new frontiers to meet these challenges is well and truly upon us.

Australia’s size, our climate, and our scattered population means we’ve always needed to examine new frontiers to ensure our infrastructure supports our economic and social needs.

This can definitely be said of Ben Chifley, Australia’s Prime Minister of the 1940s, whose legacy to us is the Snowy Mountains Hydro Scheme.

In 1949, Chifley said and I quote:

 “The Snowy Mountains Plan is the greatest single project in our history. It is a plan for the whole nation, belonging to no one state, nor to any group or section. This is a plan for the nation – and it needs the nation to back it.”

Chifley’s rallying cry was in response to interstate bickering over the project, growing commonwealth-state rivalry, and criticism over the project’s construction by the Menzies-led Opposition who opposed the project.

As we all know, Chifley’s Labor Government overcame these obstacles, and turned the Snowy Hydro dream into a reality.

More than half a century on, the construction of major infrastructure projects continue to generate disagreement, discussion and debate.

Here in Sydney is a good example, where there is never a shortage of lively debate and commentary on the city’s train lines, tunnels and tollways.

Decades on from Chifley’s call to arms, governments today are still grappling with the same challenges that threatened to derail the Snowy River project.

We must engender more and stronger partnerships between the public and private sectors.

We must achieve greater levels of cooperation between the Commonwealth and the States.

And, we must ensure we invest in the right projects that drive higher productivity and greater prosperity.

Today I will talk to you about how the Rudd Government is responding to these critical challenges – by revolutionising the way we plan, finance and build our nation’s economic infrastructure.

Stronger partnerships between the public and private sectors

Modern and efficient infrastructure, be it roads, water, telecommunications or energy, are critical to sustaining our economic prosperity and advancing our quality of life.

Our road and rail networks provide vital links in the chain of production from raw material to finished product, and in the distribution of goods and services to consumers.

In 2005/06, our road and rail networks carried some 2.5 billion tonnes of goods, whilst transport specific businesses contributed $46 billion, or 4.6 percent of total GDP in 2006/07.

With the amount of freight being moved on our road and rail networks expected to grow dramatically over the coming years, it’s clear we urgently need to modernise our transport infrastructure.

We have made this a priority, because our infrastructure is in a parlous state.

For Australia to realise its economic potential, it requires well planned and properly financed infrastructure which can meet growing levels of demand.

According to the Committee for Economic Development of Australia, infrastructure bottlenecks are estimated to total approximately $25 billion. CEDA also estimates their removal could potentially raise Australia’s GDP by 0.8 percent per year.

Removing these infrastructure bottlenecks can only be achieved through close collaboration with all levels of government, and the private sector.

Since coming to office, the Government has sent a very clear signal that it is serious about working with the private sector when it comes to investment in infrastructure.

Our approach, as you would have seen over the past few months, is based on inclusiveness.

The only way to reach our infrastructure goals is for the public and private sectors to work hand in hand to deliver the infrastructure this nation needs to take us to the next level of economic growth and prosperity.

A key to achieving this is giving experts from the private sector a long overdue seat at the table.

You would be aware we have appointed a number of experts from the private sector to the board of Infrastructure Australia.

Infrastructure Australia is the new advisory body we established earlier this year to provide advice to Australian governments about our nation’s infrastructure gaps and bottlenecks.

Led by Sir Rod Eddington as Chair, the board includes Mark Birrell from Infrastructure Partnerships Australia; Phil Hennessy from KPMG; Heather Ridout from the Australian Industry Group; Ross Rolfe from Babcock and Brown; and Garry Weaven from Industry Funds Management.

These people bring with them a wealth of experience, a unique set of skills, and a different perspective in the planning, funding and delivery of infrastructure projects.

I’m sure they will compliment their public sector counterparts on the IA board, and together, be able to cut through and identify the critical issues facing Australia’s infrastructure.

And literally up the road in Sydney’s financial district, is the office of the new Infrastructure Coordinator, Michael Deegan. Locating Michael and his team here in Sydney sends a message about the linkages we want to create between Infrastructure Australia and the private sector.

But it’s important also in terms of accessibility to the people who we want to have input into that process – you.

We want to involve each and every one of you in infrastructure development and in the policy development that goes to the Cabinet that determines our priorities.

You’ve heard from a number of speakers this morning about the important role the private sector will need to play meeting Australia’s future infrastructure needs.

According to the latest ABN Amro report, between $380 billion and $455 billion will need to be spent on public infrastructure over the next decade.

It will be essential to encourage greater private sector participation if we are to meet this formidable challenge.

Public Private Partnerships

Public private partnerships (PPPs) are one way of delivering infrastructure investment.

Whilst it does represent a shift in thinking from traditional infrastructure procurement methods, the appropriate use of PPPs can provide significant benefits to the public sector, including access to specialists’ expertise, and the transfer of risk to those in a better position to manage it.

But in order to reap the benefits that PPPs have to offer, we need to put in place a simpler, more transparent system that takes the guess work out of the PPP process, and makes it easier for the private sector to partner with government.

As part of the Government’s commitment to work closer with the private sector, Infrastructure Australia has been asked to develop nationally consistent, best practice guidelines for PPPs.

Whilst we’d all agree no two infrastructure projects are the same, it’s clear investors need more certainty and consistency when dealing with the public sector on PPPs.

By achieving greater national consistency, reducing costs and removing disincentives to investment, we hope to encourage greater private sector participation in infrastructure projects, and to attract new entrants into the infrastructure markets.

In fact a number of industry sources have commented on the efficiencies that could be made if the process was made more consistent.

By streamlining the process, we hope to make investing in infrastructure more attractive not only to domestic investors, but international investors as well. The end goal is also improved services and better value for money, through optimal risk allocation, encouraging innovation, greater asset utilisation and integrated whole-of-life asset management.

Indeed, through Infrastructure Australia the public and private sectors have been working together to achieve these goals.

And for all jurisdictions to implement the guidelines, it is important that agreement is obtained at every step of their development.

That is why representatives from the States and Territories have been involved in the development of the guidelines, and they have worked hand in hand with Infrastructure Australia members to discuss, debate and resolve differences.

An overview of the guidelines will be submitted to COAG in October.

Following COAG’s endorsement, IA will hold consultations with industry before finalising the guidelines for submission to COAG.

Your input will be critical and I encourage you to have your say when the consultation period commences in October this year.

The Audit and Priority List

By the end of this year, Infrastructure Australia will also have completed a national audit of the nation’s infrastructure. All the States and Territories have now made their submissions to the audit, which will form the basis of the infrastructure priority list which will go to COAG in March next year.

The pipeline of projects created through Infrastructure Australia’s priority list will assist governments to match billions of investment dollars to infrastructure priorities.

It will also provide you – the development, construction and financing sectors – with the long term certainty you need to make best use of skills and resources.

It’s this priority list that will help guide future investments we make from the Building Australia Fund.

We have already made a $20 billion down-payment into the fund which will be used to build modern infrastructure such as roads, rail, ports, and communications.

Future budget surpluses may be invested into the fund with the first allocations to be made in 2009-10.

With the establishment of Infrastructure Australia and the Building Australia Fund, the Government has adopted a systematic approach to implementing our infrastructure agenda.

A new era of cooperation

Central to this approach is working closer not only with the private sector, but with the States and Territories as well. For too long, our ability to take a long term view of Australia’s infrastructure needs has been hampered by the blame game which has existed between federal and state governments.

The Rudd Government has reversed this situation, starting with the establishment of the COAG Infrastructure Working Group, which I Chair.

The Working Group, comprising representatives from all States and Territories, has met on a number of occasions and is playing an important role in the implementation of the government’s infrastructure reform program.

The need for national consistency

The Federal Government is also working closely with the States to reform many of our out-of-date transport regulations.

Despite the importance of transport to our national development, there has not been a national approach to transport policy.

Industry organisations, such as the Australian Trucking Association and the Australasian Railway Association have long argued for governments to make state-based regulatory systems more consistent.

Inconsistencies across state borders inhibit the efficiency of their industries, and add to the costs.

By way of example, Australia has seven rail safety regulators, three rail safety investigators and different rules in every state.

For rail operators who cross borders, dealing with multiple rules and bureaucracies is a major headache.

Contrast this with the United States which has a single rail regulator and investigator.

Truckies who travel from state to state are subject to different laws and have to put up with different frameworks for heavy vehicle access to the road network.

In the case of the maritime industry, at present there are more than 50 pieces of legislation and subordinate legislative instruments pertaining to maritime safety along with eight independent maritime safety agencies.

The result of this situation, among other things, is that States do not automatically recognise maritime qualifications granted in another state and different standards for boat building apply in each jurisdiction.

One of the key themes to emerge from the 2020 Summit was the need for Australia to move towards a national approach to regulatory arrangements.

It makes sense to move to a seamless national economy, underpinned by single national markets matched to a single set of national laws. Otherwise, we surrender a comparative advantage to our international competitors in the world economy.

Nowhere is this more evident than in the country’s transport sector.

Establishing the framework for a seamless national economy is of course easier to say than it is to do.

Nonetheless, Commonwealth and State and Territory Transport Ministers recognise the need for a more streamlined regulatory system.

That is why, together, we have set in train a number of initiatives to move Australia towards a truly national transport policy.

Development of a National Transport Policy

In July this year, all Australian Transport Ministers agreed to seek COAG support in October for an initial group of reforms to move us to a single national system for heavy vehicle regulation, registration and driver licensing, and for maritime safety regulation, as well as to establish a National Road Safety Council.

Ministers also agreed to undertake further work on options for a single, national rail safety regulatory and investigation framework.

A number of other initiatives that will be considered further in November and that are designed to improve the efficiency and integration of our national transport system include:

  • identifying a new set of national objectives to be used as the focus for investment in new land transport infrastructure in the future;
  • increased cooperation on urban transport, congestion and land use policy;
  • pilot studies into intermodal transport, livestock, grain, oil and gas, and coal supply chains to identify regulatory constraints and bottlenecks; and
  • measures to attract, train and retain transport workers.

These are more than just useful ideals.

They are key ingredients to a transport system that is not only safe and secure, but also one which is efficient, competitive and integrated, and able to support the nation’s social, economic and environmental prosperity.

Conclusion

I mentioned at the outset the legacy Ben Chifley left us.

He led a government that understood the long term economic and social benefits of investing in Australia’s infrastructure.

The Rudd Government is determined to leave a similar legacy.

Led by an equally determined Prime Minister, this Labor Government is revolutionising the way we plan, fund and build Australia’s infrastructure. But as I’ve said on a number of occasions today, we realise the only way to achieve this goal is through close collaboration with all levels of government, and with the private sector.

That, of course, includes all of you here today. Your attendance here today indicates you stand ready, willing and able to play an important role.

I look forward to your ongoing involvement and contribution, as we work together to invest in a more productive future for Australia.