Aug 22, 2007

Bringing National Leadership to Infrastructure Development

AUSTRALIAN FINANCIAL REVIEW INFRASTRUCTURE SUMMIT

Sydney Harbour Marriott, Circular Quay

BRINGING NATIONAL LEADERSHIP TO INFRASTRUCTURE DEVELOPMENT

ANTHONY ALBANESE MP

22 August 2007

Check against delivery

For a PDF of this speech, please click here.

In around ten weeks Australians will vote to determine who will govern Australia for the next three years.

Elections are important events.

They are an opportunity to focus Australians on ideas, policies, and outcomes.

Election campaigns also illuminate a weakness in our system of Government.

The focus of an election campaign is often on the next three years, rather than the next decade and beyond.

Given the current political climate, there is a case that the Howard Government stopped governing well before its term had expired.

For the great challenges facing the nation – climate change and the water crisis, education and skills, and addressing our infrastructure deficit – a focus on the electoral cycle of 3 years, let alone the desperate attempt to concentrate on the next 10 weeks is totally inadequate.

Infrastructure development needs long term planning and a long-term vision for the nation.

Comprehensive and integrated planning is at the heart of successful infrastructure development, and whilst such planning can be difficult, it must be pursued with vigour in a cooperative environment, and it must be constantly reviewed and improved.

This can only be achieved if infrastructure is planned and coordinated at the federal level.

Labor’s approach to infrastructure planning and coordination

This week the Prime Minister has signalled that future surpluses should be directed to establishing funds which would use earnings for economic and social infrastructure.

This of course is a direct copy of Labor’s proposal for a “Building Australia Fund”.

Labor has proposed for 2 years that future surpluses be placed in the Building Australia Fund and be managed by the current Board of the Future Fund. Earnings would be available for infrastructure projects that are essential to secure our future prosperity.

The Howard Government’s adoption of part of Labor’s agenda is welcome, but there remains a critical weakness in the approach as outlined by the Prime Minister.

There is no vehicle to drive the coordination of infrastructure development that the business sector and others in the community have been calling for.

Labor will create an independent statutory authority Infrastructure Australia to set infrastructure investment priorities on a national rather than a political basis.

Importantly, under a Rudd Labor Government there will be a Federal Infrastructure Minister.

Infrastructure Australia will be established within the first 100 days of the election of a Rudd Labor Government and will bring national leadership to infrastructure development in Australia.

It will be an independent Commonwealth Statutory Authority comprised of representatives from all tiers of government and key stakeholders.

By operating at arm’s length from Ministers, Infrastructure Australia will ensure decisions are no longer based purely on political interests or the margin of a particular seat.

We believe important infrastructure decisions that shape our nation’s future must be taken fairly and objectively; they must take into account economic, social and environmental objectives; and they must be sensitive to long term challenges such as climate change, and the changing age and distribution of our population.

If we are to move forward, it is critical that we have a clear understanding of the adequacy, capacity and condition of our current infrastructure assets.

Therefore one of the 3 divisions of Infrastructure Australia will deal with auditing the adequacy of the nation’s infrastructure, identifying weaknesses and prioritising projects.

Based on its audit of the state of the nation’s infrastructure and our future needs, Infrastructure Australia will have a deadline of 12 months from the election of a Rudd Labor Government to produce its first National Infrastructure Priority List.

Importantly, in assessing infrastructure proposals, Infrastructure Australia will be well positioned to identify any barriers to implementation and refer these to the Federal Infrastructure Minister.

Another division of Infrastructure Australia will deal with policy and regulatory issues, driving reform on legal, tax, planning, and infrastructure finance matters.

And the last will evaluate the business cases of projects, project financing options (including PPPs) and manage the probity process.

This division will be tasked to provide a one-stop-shop for business in working though the various approval processes that exist across government for infrastructure projects of national significance.

Infrastructure Australia is the embodiment of what is missing in current government practice and what remains missing in current government proposals – a driver of coordination and reform.

The nation is faced with circumstances where we have strong demand for infrastructure development and a substantial supply of capital.

The challenge is to put these together – all that is needed is leadership.

 

Investment in our Major Cities

Another distinct difference between the ALP and the Coalition is our commitment to infrastructure investment in Australian major cites.

There is a substantial productivity dividend for the entire nation from more efficient, accessible and liveable major cities.

And so there is a legitimate role for the Commonwealth in the provision of both economic and social city infrastructure.

Today places like Pyrmont are living proof of the benefit of the federal government investment in major cities that occurred through the Better Cities Program administered under the Hawke/Keating Labor Government.

The program’s success rested not so much in the magnitude of the investment as it did in the impetus created by the provision of seed funding.

You would be hard pressed to find many people or assessment reports that are damning of the Better Cities Program.

Australia needs a renewed role for the Commonwealth in our cities.

Major cities, and in particular capital cities, are Australia’s economic powerhouses. They represent incubators of productivity and innovation.

ABS data shows that Australia’s 8 capital cities contributed to 78 per cent of the nation’s economic growth between 2001 and 2006.

Without adequate infrastructure in our cities, economic performance and our quality of life are compromised.

The Australian Government simply cannot afford to miss an opportunity to invest in the wealth generating hubs that are our cities.

Through the Major Cities Program, a Rudd Labor Government will provide leadership and support practical urban infrastructure programs that will drive productivity and improve our quality of life in partnership with State and Local Governments, local authorities, and the private sector.

Kevin Rudd has already announced a number of initiatives that will address the needs of some 18 million Australians who live in our capital cities and towns on the coast.

Take for example Labor’s $500 million Housing Affordability Fund to address the cost of developing new infrastructure such as water, sewerage, transport and parklands.

The provision of urban water infrastructure is another area requiring national leadership.

John Howard has made it abundantly clear that he does not see a leadership role for the Commonwealth in the provision of urban water.

A National Water Plan that leaves out 18 million water users is not a national plan, nor is it a satisfactory response to our water crisis.

Through the Major Cities Program and the National Strategy on Urban Water, Labor will support major projects, fix ageing infrastructure and assist households to deliver water efficiency.

Cooperative federalism – planning infrastructure systematically A policy of national leadership in cooperation with the States is needed to address infrastructure.

The absence of national coordination has negative economic consequences and Australians are ultimately the losers.

As a nation, we experience this loss through diminished quality of life – hours wasted in traffic jams, water restrictions, power surges when the mercury rises, and slow internet speeds when we need to be connected the most.

In infrastructure terms, this means sorting out our transport networks, securing our water supply, getting our energy markets right, and making sure we have world class telecommunication networks.

Regulatory duplication, overlap and inconsistencies across jurisdictions must be resolved

The federal government is best placed to create the right policy framework and governance structure to solve infrastructure problems that so often cross jurisdictional borders.

Grandstanding to secure short term political advantage against the States undermines this important job.

We can no longer afford to work in silos. A systems approach is needed.

This requires effective communication and collaboration between agencies and industries and between different levels of government.

The current scattering of responsibility over a plethora of government departments is a recipe for inaction and confusion.

If we weren’t working in silos we would be building the infrastructure of the future as well as building the skills of Australians who will operate or occupy that infrastructure.

Once COAG was driven by cooperation.

Today it is paralysed by the blame game.

The COAG process has broken down and must urgently be re-invigorated.

In an attempt to grab a headline we regularly see members of the federal coalition willing to undermine the COAG process and the agreements they’ve collectively reached.

Most recently the issue concerned Canberra grabbing control of the nation’s ports.

Under the Competition and Infrastructure Reform Agreement established at the February 2006 COAG meeting, it was agreed that State regulatory regimes should be harmonised.

Such agreements should not be discarded when politically convenient.

The States must be seen as partners in prosperity, not targets for electoral gain.

Infrastructure financing – matching priorities with investment capital

Finally I’d like to turn my attention to the important area of Infrastructure financing.

Long term planning and coordination creates policy and investment certainty and makes the provision of large and costly infrastructure projects achievable.

Indeed, long term infrastructure spending must be seen as an investment and not just a cost.

Ideological dogma should be rejected in favour of choosing the most suitable funding vehicle based upon what delivers best value for money and what works.

Public Sector Financing

Australia’s investment in public infrastructure is in decline.

Australia ranks 20th out of 25 OECD countries for its investment in public infrastructure.

Private investment in infrastructure is important and welcome.

However, the Federal Government must accept its share of responsibility in systematically developing the infrastructure that generates wealth for the entire nation.

Saul Eslake, the ANZ Chief Economist, estimated that since the start of the mining boom the Federal Government has reaped a budget windfall of some $398 billion over the 9 years to the end of the forward estimates.

This week has seen a further budget windfall as a result of the mining boom. Private sector financing

Federal Labor is in favour of private investment in infrastructure and PPPs when they are determined to be the best option for a particular project.

The Government has an important role in ensuring such projects can be delivered by facilitating private investment.

We appreciate that to meet the private sector investment demand we must also create an appropriate environment to encourage and accommodate investment.

This includes the correct fiscal environment, standardisation of procurement and tender processes, minimisation of red tape, and practices that ensure that companies whether they are large or small can legitimately compete for infrastructure projects on offer.

Through Infrastructure Australia, Federal Labor will expedite the standardisation of tender processes and contract documentation between Commonwealth and State jurisdictions for the use of PPPs and other relevant procurement options.

Infrastructure Australia will develop best practice procurement processes to maximise value for money, transparency and public accountability when evaluating differing procurement options.

Superannuation funds

One of the most significant changes to occur in the financial and investment markets in Australia over recent times has been the growth of superannuation funds.

Superannuation funds are now estimated to hold over $1 trillion in investments.

Today, Australia is faced with a situation where we have a strong demand for infrastructure development and a substantial supply of capital.

With the right leadership we can put these together.

Australia needs to create an investment environment that will allow superannuation funds to finance infrastructure.

Superannuation funds are well suited to infrastructure investment that offer a long term, secure investment option with consistently good rates of return.

We have an ever-expanding pool of money looking for somewhere to invest.

Importantly, national coordination achieved through Infrastructure Australia will allow infrastructure priorities to be matched with available capital.

Conclusion

The ability of the federal government to undertake infrastructure reform and coordinate both infrastructure planning and investment will determine whether Australia will have the sustained productivity growth necessary to meet future challenges such as climate change, and the changing age profile and distribution of our population.

By definition this will require leadership and mutual cooperation between governments at the State and Federal levels.

We must work hard to end the blame game and allow the COAG process to reach its full potential.

We must cease looking at infrastructure investment through the prism of a three-year election cycle and our infrastructure investment decisions must be above domination by short term political consideration.

Australia needs to invest in infrastructure based on national priorities, not electoral priorities in marginal seats.

Infrastructure Australia will ensure that occurs.