Apr 27, 2010

Address to the Financial Review’s Infrastructure Conference

Address to the Financial Review’s Infrastructure Conference

The Building Decade: the infrastructure challenge facing Australia

Hilton Hotel, Sydney

The Hon Anthony Albanese MP

The Minister for Infrastructure, Transport,

Regional Development and Local Government

Leader of the House

Member for Grayndler

Tuesday, 27 April 2010

Introduction

There’s a lot to get excited about in the infrastructure portfolio. I get to see our investments at work, in communities across Australia.

But one of the things I like most about infrastructure is its sense of imagination.

Think of Western Australia before Federation. Not much infrastructure there.

The first ever Premier of Western Australia, John Forrest, asked an Irishman, Mr C.Y. O’Connor, to be his engineer-in-chief.

Mr O’Connor asked the Premier to clarify if this portfolio covered roads and rail and ports.

The Premier’s response was daunting: “Everything”. Just build everything.

A decade later, Mr O’Connor had built the Coolgardie pipeline, the first of a series of vital infrastructure to support the colony’s development – a harbour at Fremantle, and the beginnings of rail and communication networks.

The pipeline was—and still is—a phenomenal achievement.

At that time, it was the largest pipeline in the world, carting water uphill, 600 kilometres to the dry Goldfields.

More than a century on, that pipeline is still transporting water to the desert.

It took imagination and guts.

Economic Stimulus

I like to think the Rudd Government’s Nation Building agenda also has a good dose of its own vision for Australia.

As the world was gripped by the worst financial crisis in 70 years – as stock markets fell, credit markets ossified, and private sector activity collapsed – the Government put in place a $42 billion Nation Building and Jobs Plan.

It was decisive, immediate action to address serious short-term challenges.

And it set about building infrastructure that could serve Australia for the next century.

…And the stimulus package worked.

In the September quarter of 2008, our nation turned the first sod on a record high of $9.5 billion of transport infrastructure projects.

That financial year, public funding for transport infrastructure construction was worth $644 for every single man, woman and child in Australia – almost 50 per cent higher than in 2006-07.

Australia was one of two developed economies in the world to avoid recession.

The IMF predicted “the increase in public investment will continue to support activity in the near term, while addressing infrastructure shortfalls in the long term.”

And last week, the IMF confirmed Australia’s growth outlook is stronger than other advanced economies as a whole.

And the enduring benefit of this extraordinary short term response was long term infrastructure to serve Australia when global growth resumes full throttle.

Infrastructure Deficit

We came to government knowing we had to play catch up on Australia’s growing infrastructure deficit.

Estimates before the global financial crisis put Australia’s infrastructure deficit as high as $770 billion.

Over the term of the former Government, public investment in infrastructure as a proportion of national income fell by some 20 per cent.

A remarkable indictment, given the opportunities presented by the resources boom.

Business was feeling its impact – supply bottlenecks, deteriorating export infrastructure, and the highest inflation in 16 years.

Families were feeling its impact.

Directly, in higher costs; indirectly, through measures such as urban congestion.

Nation building was absent from the Federal agenda.

This is remarkable when you consider Australia’s circumstances.

…A nation occupying a continent, in the fastest growing, most dynamic region of the world.

…A nation with natural strengths in agriculture and resources.

And when the Reserve Bank warned on 20 separate occasions that infrastructure and skill shortages were constraining growth.

A new national approach – first term reforms

When we took office, we immediately restored national leadership on infrastructure.

We appointed the first Federal Infrastructure Minister.

We established a Federal Infrastructure Department.

We set up Infrastructure Australia to drive evidence based infrastructure planning, investment and reform.

We conducted the first ever national audit of infrastructure.

We released the first national priority list and pipeline of projects.

And we developed and adopted a national PPP policy to encourage the private sector to partner with governments.

We then backed up these institutional reforms with record investment.

We set up the Building Australia Fund in our first budget.

We started rolling out the Nation Building Program with $36 billion for road, rail and port infrastructure.

We doubled road spending. We quadrupled rail spending.

We have invested in 8 of IA’s 10 ‘priority’ projects, as well as 6 ‘pipeline’ projects. We invested in urban water infrastructure.

Some $5 billion of funding was for metropolitan rail projects in our major cities.

We provided a $1.2 billion equity injection to the Australian Rail and Track Corporation for 17 freight projects to improve the speed, capacity and reliability of the interstate rail network.

Of these projects, 7 are already complete…8 are underway…and 2 are in advanced planning.

The ARTC’s total program will reduce freight times along the Melbourne to Brisbane corridor by 11 hours – a cut of almost a third.

When fully implemented, the Nation Building package will deliver 223 kilometres of new rail track, and modernise 2094 kilometres of rail.

Never before has a national government invested so significantly in rail infrastructure.

Nation Building for Recovery

Going forward, we are still focused on the long term as we nation build for the recovery.

I want to step through two fundamental infrastructure challenges driving a second term Rudd Government agenda, and expand on work we’ve begun in these areas.

First, the productivity challenge – how do we achieve long term productivity growth, and tackle bottlenecks and supply constraints.

The Prime Minister has envisaged a Building Decade if we are to reverse declining productivity growth.

This year, construction work starts on more than $20 billion worth of major road and rail projects.

Tomorrow’s discussion at this conference is also important – on how to spur greater private sector investment in infrastructure, particularly from the superannuation industry.

This is a timely discussion, as the Government’s stimulus package begins to withdraw, and there is a recovery in private activity.

But productivity is not just about investment, it’s about reforms that build a seamless national economy, that better plan infrastructure, and that use existing infrastructure more productively.

Today I’m releasing two major pieces of work by the Bureau of Infrastructure, Transport and Regional Economics that set out the national freight infrastructure challenge – in interstate freight and maritime activity.

These tell us to expect substantial increases in interstate freight growth between 2008 and 2030, along the north-south and east-west freight corridors.

Our national freight task is growing at 3.61 per cent each year – more than twice as fast as our population, and faster than average GDP growth.

While this is slower growth than we’ve seen over the last 30 years, we can still expect our freight task to double their 2008 levels by 2030.

Currently, 20 of Australia’s seaports conduct around 90 percent of the volume of shipping trade.

The number of export shipping containers travelling through Australian ports will increase 7.9 per cent every year from 2012-13, with non-container exports increasing 3.5 per cent each year.

That is why this year we are cracking a pace on the development of a national ports strategy for June COAG, with a national freight strategy to build on this work later in the year.

Why do we need a national ports strategy?

As an island continent, Australia’s ports are the fixed hubs of our supply chains. They are microcosms of intensive and competing activity.

…States and Territories have principal jurisdiction over ports and adjacent land use.

…The Commonwealth has key defence, quarantine and border security functions at ports.

…State, Territory and local governments make decisions around land development and road use.

There is regulatory inefficiency and overlap in planning, environmental approvals and competition.

And all 3 levels of government may finance, own or operate associated freight infrastructure.

So while much future investment in our ports will continue to rely on the private sector, national leadership will ensure more transparent, consistent and efficient regulation to provide the right investment conditions for our ports.

The strategy will not be a one size fits all approach…Nor will it be a Federal takeover…And it is not about new layers of bureaucracy over our critical commercial infrastructure.

Rather, the strategy will drive better ports planning, and encourage all levels of government and the private sector to plan for port growth and related freight infrastructure.

In metropolitan ports, where there is no shortage of competition for land use, this will require smarter planning of our cities and urban spaces to balance the needs of ports with the needs of communities.

The strategy will focus on four priority outcomes:

1. Better planning for ports and relevant infrastructure.

2. Greater protection of the ability for ports to execute their plans.

3. Improved landside efficiency and reliability.

4. And clearer, more transparent responsibilities at ports.

The next round of consultation with stakeholders on the draft strategy will start in coming weeks. And I will be actively engaging states and territories in the COAG Infrastructure Working Group that I chair.

But this is just one part of the picture.

For example, we are also working assiduously to get the new National Transport Regulators up and running by the end of 2012.

The National Transport Commission has begun drafting national law for heavy vehicles and rail safety. And the first cab off the rank, the National Partnership Agreement for maritime, will be brought to COAG for ratification in the middle of this year.

This work doesn’t always rate as it should in the short term cut and thrust of politics.

But they are critical reforms, reforms that will drive future prosperity, transform how we do business, and define how well Australia meets our infrastructure challenges in coming years.

Second, how do we best manage the infrastructure challenges of a growing community, and ensure our cities are sustainable and provide the quality of life and opportunity we want.

Well-planned and sustainable cities are a major infrastructure priority of this government.

The former Government had an ideological objection to investing in public transport infrastructure despite the rising economic costs of urban congestion.

Australian cities drive 80 per cent of our GDP, three quarters of our jobs, and provide a base for 70 per cent of our businesses.

The freight task in our capital cities is expected to grow by 60 per cent between 2009 and 2025.

The Rudd Government is reengaging with our cities because they are the engine room of our economy, and no government with a genuine commitment to boost productivity can ignore our cities.

Recently I released the State of Our Cities 2010 Report. Along with the 3rd Intergenerational Report, it shines a bright light on where we must focus our effort, and sets the stage for the national urban policy.

It is the most comprehensive document of its kind produced in Australia. It examines and measures how productive, sustainable and liveable our cities are.

And it is a step change in the way we approach urban infrastructure and planning.

There is enormous community interest in this issue.

One indicator is that as of last Friday, we’ve had 166,690 downloads of the full report from our website.

It is clear that there is substantial community support for the national government to engage in our cities.

While our five major cities are rated among the top 35 most liveable cities in the world—more liveable than Milan or London or New York[1] – we know the costs of urban congestion are real.

If we don’t act, the avoidable costs of congestion will double to $20 billion every year by 2020.

And the human, social and environmental costs such as less time with family are of as much significance as the economic cost.

We know we can better manage congestion.

The COAG Cities Taskforce agreed National Objectives and Criteria for Future Strategic Planning of Capital Cities.

By 1 January 2012, all States will have capital city plans in place to meet these criteria.

COAG has recognised that future Australian Government infrastructure funding will consider the extent to which jurisdictions have met the agreed criteria of having comprehensive plans in place.

Ladies and Gentlemen, the Australian Government’s exile from urban policy is over.

Conclusion

I’m going to wrap up where I started.

Like Premier Forrest, we have begun a decade of nation building.

Nation building to recovery…and positioning Australia to take maximum advantage of global growth as it returns.

So our agenda for reform is as full as it ever was.

The challenges are daunting, but all the stories your hear about this government’s punishing work ethic are true!

Our first term agenda has put in place solid new foundations for infrastructure policy in Australia.

And in the coming months I look forward to working closely with all levels of government, the private sector, and the community – on ports, on freight, on cities, and on building a seamless, productive economy. These issues will be at the heart of a second term agenda for the Rudd Government.

ENDS