Sep 7, 2012

Keynote address to the IPA ‘Partnerships 2012: Infrastructure & Investment Conference’ – “Building the infrastructure agenda – the national land freight strategy”

The world faces troubling economic times.

Uncertainty within the EU, the slow US recovery and China’s weakening growth continue to affect international financial markets, consumer confidence and government budgets.

The Treasurer called the recent economic uncertainty a ‘white-knuckle ride[1]’.

It’s a good description.

It would be all too easy for governments in these situations to become gripped with fear – reacting only to the immediate threats and ‘hanging on’ for dear life.

To do so would be counterproductive and is not the approach of this Labor Government.

The challenge on infrastructure policy is to break the nexus between the electoral cycle which is short term and the infrastructure investment cycle, which is long term.

That’s why I am particularly passionate about today’s conference themes of economic reform, competition, sustainable funding and efficient infrastructure.

They are themes that sit squarely at the heart of my portfolio.

I’m proud of the long-term view this Labor Government has taken – and continues to take to boost productivity.

INVESTING IN PRODUCTIVITY

Today I want to outline how the Federal Labor Government is doing this through investment, regulatory reform and policy leadership.

On investment, we are delivering a record $36 billion through the current Nation Building Program.

No other Federal Government in our history has directed this much to improving our nation’s roads, rail tracks and ports.

The Bureau of Infrastructure, Transport and Regional Economics has calculated that our Nation Building investments will generate in benefits, more than two and half times their cost.

Every dollar invested under the Nation Building Program is returning $2.65 to the nation.

That’s a real productivity dividend.

I am proud that our infrastructure agenda extends far beyond the money we have injected through the Nation Building Program.

The Australian Government has made a concerted effort to rethink the way in which we identify future needs, prioritise projects and then fund them.

The game-changer in this process has been the creation of Infrastructure Australia four years ago.

IA has enabled us to prioritise our investments so as to maximise the economic return.

This can create some friction with State Governments if their pet projects are not given automatic support.

But what it has done is remove the politics from decision-making, so that funding decisions are based on national rather than electoral interest.

Infrastructure Australia has also had responsibility for ambitious reform work including the development of the first ever National Ports Strategy, National Land Freight Strategy and National Public Transport Strategy.

Recently the Council of Australian Governments endorsed the National Ports Strategy as representing a commonsense reform.

NATIONAL LAND FREIGHT STRATEGY

A logical extension of this policy framework is the National Land Freight Strategy that I am launching here today.

The Strategy is the result of broad consultation with both governments and industry – with seventy organisations and individuals providing submissions.

Freight is central to national productivity and international competitiveness.

Improved freight planning will increase Australia’s competitiveness, lower the costs of doing business, and improve use of our road and rail networks.

The National Land Freight Strategy provides a framework for a coordinated, national freight network of our ports and the road and rail that link them; to ensure that we get the best out of our existing infrastructure and identify what we need in the future.

It also makes a range of recommendations on matters including the use of more productive freight vehicles; dedicated rail freight infrastructure; and linking proposed ports with transport corridors needed for exports, including for our mineral resources sector.

The Strategy also seeks to establish mechanisms to develop a long term pipeline of infrastructure projects attractive to government and private investors and to ensure that the right investments occur at the right time.

The Government’s national urban policy indicated an expectation that by 2014 States would develop their own 20 year freight strategies that align with national directions, as part of the Nation Building 2 program.

It also indicated that the National Land Freight Strategy would inform future Australian Government investments and reform policies.

These issues will be discussed at the next meeting of the Standing Council on Transport and Infrastructure.

IMPROVING THE RAIL, ROAD AND INTERMODAL SYSTEM

The fact is that Australia faces an enormous freight task in coming decades.

Freight movements are expected to nearly double to 1,000 billion tonne kilometres by 2030.

The road and rail projects required to meet that demand have a long lead time.

We need to invest – and invest right now – if we are going to meet this expected growth.

And we are doing so.

Since coming to office we have embarked on the largest, most extensive modernisation of the nation’s Interstate Rail Network in almost a century, upgrading 3,800 kilometres of existing track and replacing the old timber sleepers with 3.4 million new Australian-made concrete sleepers.

Thanks to this investment, we can expect a seven hour saving on the trip along the busy rail route between Brisbane and Melbourne.

In response, Woolworths – one of the biggest freight carriers in the nation – has begun transferring from road to rail 34,000 tonnes of dry goods.

It is able to make that commercial decision because the line is now faster and more reliable thanks to nine new passing loops, better crossings and signalling systems, and the removal of tight curves.

It has not been an easy decision for Woolworths.

There are new transfer arrangements and new deals with rail carriers.

Woolworth’s decision is removing 1,000 B-double trucks from our highways, leaving the air cleaner and our roads safer.

Once the planned investments in rail are finalised by 2016-17, it is expected that the north-south interstate rail market will grow by over 30 per cent.

There are plenty of other examples I can give you.

For example, the rail trip across the nation to Perth which used to take 53 hours, can now be done in 44, thanks to track improvements such as extra passing loops.

That means it is now feasible for express trains to use the line, attracting business from large parcel carriers such as Star Track Express and Australia Post who are transferring Perth-bound deliveries from road to rail.

Key to the success of our National Land Freight Strategy is a growing network of transport intermodals.

This Government has committed to eleven intermodals either operating today or under construction around Australia.

In Sydney, we are bringing on line the Moorebank Intermodal Terminal.

It’s hard to over-estimate the importance to the Australian economy of the Moorebank freight transfer hub.

With Port Botany freight expected to grow at seven percent per annum, Moorebank will generate at least $10 billion in economic benefits, remove 1.2 million trucks each year off Sydney congested roads and create 1700 long term jobs.

The size of this unique site means trains up to 1.8 kilometres in length can operate at the terminal.

Moorebank is a perfect example of the Federal Government using its assets to unlock private.

Recently, with Finance Minister Penny Wong, I announced that the Government is seeking experienced people to form a board for a Government Business Enterprise to deliver the intermodal.

The GBE will oversee remediation of the site and manage the tender process to select the company or consortium that will design, build and operate the new facility.

Moorebank will complement our work disentangling the freight and passenger lines along Sydney’s northern and southern rail corridors.

It will also complement our big program of improvements at Port Botany.

These all form a broader investment program to create a seamless national economy.

We are carefully and deliberately targeting the bottlenecks and the congestion that costs our economy billions of dollars in lost productivity.

It is this same principle that will guide the second National Building Program to take effect from 2014/15 and which I will turn to now.

FOUR KEY THEMES TO GUIDE OUR INFRASTRUCTURE FUTURE

This second National Building program, to run until 2018/19, will focus on four central themes.

They are: Innovation, Moving Freight, Connecting People and Safety.

Through the Innovation theme, investment will be in smart infrastructure, planning, research, evaluation and compliance.

There is much that technology can offer to eliminate or at least forestall the need for more expensive transport infrastructure spending.

For example, smart infrastructure such as electronic signage on our urban highways has been shown to improve traffic flows by up to 15 percent, helping to curb congestion.

Through the Safety theme, the Australian Government will build upon the national leadership role in road safety, making significant investments in local roads and black spots.

The $500 million we have already spent during the current Nation Building Program is removing nearly 1500 black spots which in turn is preventing 4,000 crashes each year.

Under the Connecting People theme, we will pursue the productivity of our highways, roads and rail corridors while directly targeting ‘pinch points’ and alleviating urban congestion.

And through the Moving Freight theme we will further extend and connect our road and freight linkages – particularly at our ports and intermodal facilities.

State and Territory Governments recently put submissions to Infrastructure Australia and my Department for consideration, and these projects are currently being assessed against the themes outlined.

ENCOURAGING INVESTMENT

It is hard to envisage any Government having the financial capacity to completely meet all of the nation’s infrastructure needs.

That is why we have engaged in a deliberate, targeted program to attract private finance to public infrastructure.

More generally BITRE has found that construction of the nation’s infrastructure in 2010-11 was more than twice the level of a decade ago – in real terms.

Private sector infrastructure investment has grown by one-third under this Federal Labor Government, against a backdrop of the biggest global economic downturn in more than 80 years.

One way we have done this is through the establishment of the COAG Infrastructure Working Group.

With the advice of this group:

  • We have harmonised pre-qualification regimes in the construction industry, reducing duplication and red tape for those tendering;
  • We have reformed the process of alliance contracting and PPPs, driving greater value for money;
  • We are driving best practice in the procurement and the delivery of infrastructure.

This has meant greater private sector participation in the delivery of key infrastructure projects by making it simpler and cheaper for firms to bid on projects.

Another major initiative that is making it easier to do business in the construction sector is the National Infrastructure Construction Schedule (NICS).

Many of you here today would have been in an earlier IPA address in May when I launched the NICS.

The NICS provides greater clarity and certainty to industry by outlining the whole Australian infrastructure picture – from projects identified as potential priorities, to those in the planning and feasibility study stage, through to committed construction projects.

It collates the infrastructure commitments of all the different tiers of governments into a single project pipeline.

It also provides the information industry will require to place a tender.

This is the first time all this information has been available in one place, providing industry with a level of clarity not previously available.

Since its launch in May, 14 new projects worth over $1 billion have been added to the NICS, taking the total so far to 70 projects worth some $57 billion.

The NICS site is dynamic and will continue to be enhanced and adapted to improve its functionality.

Just this week an RSS feed has been added so that users will receive an alert when new projects are listed, or changes made to projects.

So far there have been almost 1 million hits on the NICS web-site.

In recognising the pressures of financing infrastructure, particularly in constrained finance markets, we created the Infrastructure Finance Working Group.

The group was made up of nine of the nation’s leading private and public infrastructure experts.

Its report, which was publicly released in June, calls for a suite of reforms to encourage greater private sector finance.

The Federal Government is now considering the recommendations.

One step we are already in the process of taking is changes to the Income Tax Assessment Act to further encourage private investment.

Shortly we will be introducing into the Parliament new tax provisions for infrastructure projects of national significance.

These will allow losses generated by designated projects to be exempt from the Continuity of Ownership Test and the Same Business Test and uplifted at the government bond rate.

LAUNCH OF ‘DISINCENTIVISING OVERBIDDING FOR TOLL ROAD CONCESSIONS’

Today allows me to release another publication in the continuing stream of work on patronage forecasting.

Last year, I had the opportunity to speak at the ‘Patronage Forecasting Symposium’ in Canberra – one which I know a number of Infrastructure Partnerships Australia members attended[2].

One of the key note speeches[3] was by Dr Robert Bain – a renowned international expert from the UK.

I’m pleased to say we have drawn on Dr Bain’s considerable knowledge by commissioning a new report entitled “Disincentivising overbidding for toll road concessioning”.

It is my pleasure to launch it here today.

It draws on international experiences, with recommendations on how we can discourage the situation where “overbidding” for future concessions might occur in toll road projects.

Addressing this issue of over-optimistic bidding is very important if we are to successfully engage with the private sector to help fund and finance our major motorways.

From today Dr Bain’s report will be publically available and I commend it to you.

REGULATORY REFORM

I mentioned earlier the improvements in road and rail productivity, resulting in part from investment – both from the public purse and from private partnership.

The remaining piece of the puzzle is smarter regulation.

The introduction of single national regulators for the heavy vehicle sector and for rail and maritime safety will generate up to $30 billion in benefits over the next 20 years.

At the same time, it will reduce the number of transport regulators across Australia from 23 to three.

Less red tape, less time spent complying, less confusion.

CONCLUSION

The American business guru Paul Meyer once said that “Productivity is never an accident. It is always the result of a commitment to excellence, intelligent planning, and focussed effort”.

There is no doubt we face uncertain times.

Yet this is no excuse for avoiding the hard work of microeconomic reform.

We must continue to work smarter in the way we approach our entire infrastructure environment – an environment that requires a holistic approach to planning, investment, construction and maintenance.

Only then can this nation really achieve its best.

Thank you.