Speech to Master Builders Australia – ‘Investing in The Public Interest’ – Parliament House – Wednesday, 20 June 2018
In the weeks leading up to the Federal Budget, it’s always instructive to have a close look at the Budget submissions of important industry groups like Master Builders Australia.
Your organisation can always be counted upon to cut to the heart of issues affecting infrastructure policy in this country.
This year, I found myself agreeing with your pre-Budget calls for action in areas including housing affordability, red tape reduction and skills development.
But I was particularly taken by your call for the Government to deliver stable infrastructure investment to provide certainty.
I quote from your website:
“The model for delivery of publicly funded infrastructure must be sustainable and delivered in a consistent way that incentivises greater participation from both State and Territory Governments and the private sector.”
Budget 2018 delivered neither stability nor incentive.
It delivered cuts, delays and a funny money funding model for Melbourne Airport Rail that assumes railway lines build themselves.
I’m pleased to have the opportunity to speak to you today so I can take you through the figures and also give you a glimpse of how the next Labor Government will take a different approach.
In the weeks leading up to the Budget, leaks to newspapers suggested the Government was going to reverse nearly five years of cuts to infrastructure investment.
But when the Budget was produced the picture was different.
- Nothing for construction of Melbourne Airport Rail
- Nothing for construction of Western Sydney Rail.
- Grants funding falling off a cliff from $7.2 billion in 2017-18 to $4.5 billion in 2021-22.
- Not a dollar of new infrastructure investment anywhere in the Budget.
- Indeed, Pages 137 to 144 of Budget Paper Number 2, tell the story – zero after zero after zero for state after state in program after program.
To be fair, there were new projects from previously appropriated but unallocated funds.
But the funding is on the Never Never.
- Only 1 per cent to be invested in the next 12 months.
- 85 cents in the dollar won’t be invested until 2022-23 at the earliest.
If the people of Australia want to see the projects announced in Budget 2018 under construction, they will have to re-elect the Turnbull Government not once, but twice before most of the money will flow.
After the 2017 Budget, the independent Parliamentary Budget Office produced an important report about the trajectory of infrastructure investment under the Coalition.
It found that Federal infrastructure grants to the states, expressed as a percentage of GDP, will halve from 0.4 per cent to 0.2 per cent within a decade.
So despite the pre-budget spin, nothing has changed.
Budget 2018 was a triumph of spin over substance.
Australia needs new infrastructure investment now, not a decade from now.
We need it in our cities to tackle traffic congestion.
Infrastructure Australia warns that without action now, traffic congestion will cost the nation $53 billion by 2031.
We need to invest in our cities.
We need to invest in our regions, to drive economic growth and promote decentralisation.
And we need it in our rural areas, to ensure that producers can get their products to market or to our ports as quickly as possible.
I want to turn now to the Government’s ongoing obsession with off-budget funding of projects.
For several years the Turnbull Government has attempted to attract more private investment in public infrastructure projects.
That’s a worthy aim if you can get the formula right.
But the Coalition can’t get it right.
Three years ago it created the Northern Australia Infrastructure Financing Facility. It has not delivered any major projects.
The NAIF has become known as No Actual Infrastructure Fund.
In last year’s Budget there was the IFU – the Infrastructure Financing Unit.
It has not financed a single project.
This year’s new idea is the notion that public transport projects can build themselves without public investment.
The Budget documents say the $5 billion promised for Melbourne Airport Rail Link is likely to be provided in the form of an equity funding arrangement.
This is an extraordinary proposition.
Off-Budget funding can work for some projects, like toll roads or in the case of the Moorebank Intermodal. Indeed, I support its use for the Western Sydney Airport.
But for this method to work, projects must cover not only operating expenses, but also a commercial return on the capital investment.
There is no public transport service in this country that covers its operating expenses, let alone the cost of construction.
Melbourne Airport Rail is a worthy project.
But the Federal Government’s proposed funny money funding model won’t deliver this project.
It is sham funding.
Concern about off-budget funding extends beyond the Opposition.
Adrian Dwyer, Infrastructure Partnerships Australia CEO:
“Ultimately there are only two ways to pay for infrastructure – tickets and taxes. We can’t finance our way out of a funding problem. I’m worried that what we might see in budgets is a financial vehicle for a project when that isn’t right for the project.”
Marion Terrill, Grattan Institute:
“If infrastructure projects are never going to make a commercial return, the government should stop pretending they will. And if they are worth building at all, the government should fund them transparently on-budget.”
While the Government talks a big game on infrastructure, Labor in Government will deliver real money for real projects that will make a real difference.
When people ask me what a Federal Labor Government would do, I simply say look at our record.
- Average annual investment in the nation’s transport, energy, telecommunications and water infrastructure increased from $29 billion under our predecessors to $57.7 billion.
- Per capita transport infrastructure investment climbed from $132 to $265.
- We doubled the roads budget.
- Built or upgraded 7500km of road.
- Invested more in public transport than all other previous Commonwealth Governments combined.
- When Labor took office Australia was 20th in a list of developed nations in terms of infrastructure as a proportion of GDP. When we left office, Australia was 1st.
The next Labor Government will continue to build on our record as the party of nation building.
Your industry has a direct interest here.
Right now, your industry is building the homes our nation needs to meet Australia’s strong population growth.
You are building houses in the outer suburbs and apartments closer to city centres.
But the Federal Government is not backing you by providing the infrastructure investment required to service these communities.
Infrastructure Australia is a proud creation of the former Labor Government.
- It has introduced evidence-based decision-making.
- Better decisions and greater value for money.
- I have concerns about Government attacks upon IA’s independence, particularly relating to Cross River Rail.
- But it’s a good thing that the Federal Government has retained Infrastructure Australia. It serves the public interest.
Considering the positive effect that Infrastructure Australia has had in imposing a greater level of rigour on funding decisions, it makes sense to expand its mandate.
The next Labor Government will introduce new pre-conditions for Federal infrastructure grants to better serve the public interest.
- The training of apprentices.
- The use of smart technology.
- Integration of transport projects with active transport options.
And on procurement.
One of the key concerns raised with me by mid-tier construction firms is their inability to access work on major public works projects.
The problem is that states tend to let contracts for entire projects, which are of such scale that only very big firms can tender.
I want to see smaller companies, particularly local companies, have a genuine opportunity to get a piece of the action.
A Labor Government will require states to create such opportunities in contracts that would require lead contractors to reach down the chain to smaller companies.
When Governments spend large amounts of taxpayers’ money on major projects, they take the opportunity to extract full public benefit.
Public benefit is served not only by the completion of new railways and roads, but also by involving local businesses and workers in delivery of the project.
As a bonus, there is no shortage of evidence to suggest that greater involvement of mid-tier construction companies leads to savings to the public purse by fostering greater competition.
There’s an old saying to the effect that if you fail to plan, you are planning to fail.
I like to turn it around into the positive.
When you plan well, you are planning for success.
Once again, thanks for inviting me to speak to you today.
Your organisation was established 11 years before Australia even was a country.
You’ve contributed to the building of a nation, and I look forward to continuing to engage with you in the public interest.