May 3, 2007

Speech to WA Labor Business Roundtable: Meeting Australia’s Infrastructure Needs

MEETING AUSTRALIA’S INFRASTRUCTURE NEEDS – THE CHALLENGE AHEAD

Anthony Albanese MP

Shadow Minister for Infrastructure and Water

WA Labor Business Roundtable

Parmelia Hilton Hotel, Perth

3 May 2007

I’d like to acknowledge the Western Australian Branch for organising this Labor Business Roundtable here in Perth as a forum to promote the regular activity and connection between the Labor Party and business.

I’d also like to acknowledge my Parliamentary colleague and friend Senator Ruth Webber, and my future colleague Peter Tinley the outstanding candidate for Stirling.

There is nowhere better to discuss infrastructure and the challenges ahead than Western Australia.

I have a long commitment to developing sound policy on infrastructure. Indeed my first speech in Parliament was about infrastructure.

Eleven years ago, we were in a better position than today.

It is extraordinary that there is no official up-to-date record or database of the state of the nation’s economic infrastructure assets.

The Business Council of Australia, Engineers Australia, CEDA and others have all urged the Federal Government to plan for Australia’s future infrastructure needs. To do that one must start off with a record of what we have and were the gaps lie.

In 1995 John Howard gave a number of headland speeches, and in one of those he said he was “struck by the need to improve the coordination of infrastructure policy at the Commonwealth-State level”.

However, there has been no serious attempt to address that over the last 11 years. Later this year you will hear a negative mantra from the Howard Government about the prospect of Labor Governments at both the State and Federal level.

I see this as an opportunity because what we will have, if Kevin Rudd is elected as Prime Minister, is a once in a generation opportunity to stop the blame game and put in place the appropriate reforms to our Federal-State programs in areas where we have overlap, duplication, and conflict with regard to jurisdiction.

We do have too many regulatory bodies and overlapping regulation has to be tackled. We will have an opportunity to do just that.

You may expect from my title as Shadow Minister for Infrastructure and Water, that there if there is a Shadow then there must be a responsible Minister. There isn’t of course a Federal Minister for Infrastructure and that says a fair bit about the Howard Government’s priorities and their tendency to buck pass responsibility, not just to the States, but also between Ministers within the Government.

It is an important statement by Labor that we will have a Federal Infrastructure Minister, responsible for the overall coordination of our infrastructure program. Coordination and leadership are desperately needed given the challenges that Australia confronts.

Australia is ranked 20th out of 25 OECD countries for its spending on public infrastructure as a proportion of GDP.

The BCA estimates there is a $90 billion deficit in infrastructure in Australia. One could have an argument about whether that precise figure is correct or not, but what matters is that it is extraordinarily large and it is a constraint on productivity.

There is a clear case for the Federal Government to invest in infrastructure.

Investment in infrastructure generates higher returns than investment in other areas.

The Howard Government has accepted significant tax returns from resource rich states particularly from WA, but hasn’t returned even a small portion through investment back into critical infrastructure.

Saul Eslake from the ANZ Bank estimates that over the last 4 years there has been a windfall of some $263 billion to the Federal Government over and above what was originally estimated in the budget. This is an extraordinary figure that should have been invested to ensure that economic prosperity outlasts the mining boom.

We know that productivity growth has slowed over the last decade. Our productivity has fallen from 85% of US levels in 1998 to 79% in 2005. We’ve almost completely lost the relative gains we have made from the productivity boom of the 1990s. Slowing productivity, capacity constraints and our trade deficit all put inflationary pressures on the economy. And of course we have had consecutive interest rate rises – four since the last election.

We must ensure strategic investment in the good times, look after us in the not so good times.

The Governor of the Reserve Bank of Australia has clearly indicated his view, by encouraging government spending to be directed to the productive side of the economy – giving a clear message to the Treasurer as he thinks about next Tuesday’s budget.

Tuesday really is a test for the Howard Government. Will we see a massive election spending spree or will we see expenditure directed towards the productive side of the economy.

Labor has a clear position on these issues.

Last Friday I released the Report of the ALP Inquiry into the Financing and Provision of Australian Infrastructure at the ALP National Conference.

The report is consistent with Labor’s historical position as the nation building Party.

It has been the Labor Party that’s been prepared to take that vision forward because we see infrastructure as a platform for future growth.

We have outlined four key areas of infrastructure investment that are required.

Transport, including urban transport issues; Energy including ensuring our growth is sustainable and consistent with tackling climate change; Communications, where we have outlined our detailed broadband policy; and Water where we need to adapt to the impact of climate change and ensure water security into the future.

We believe there is a fundamental difference between our approach and the approach of the current government.

The current government sees spending on infrastructure merely as a cost, we see it as an investment – an investment that can increase GDP, business activity, export growth and living standards.

Under a Rudd Labor Government, Australia would have better long term planning and a Government that would play a leadership role in infrastructure.

To drive this, Labor would establish Infrastructure Australia. This would be a Commonwealth Statutory Authority and would coordinate the planning, regulation and development of infrastructure. This policy reflects a very conscious effort to take the politics out of infrastructure decision making.

Infrastructure Australia would conduct a national audit of our infrastructure assets and this would be used to identify gaps and to devise a National Infrastructure Priority List. Unfortunately, at the moment spending on programs is often determined and prioritised according to the margin in a particular electorate. 

We simply can’t afford to have National Party pork barrelling distorting decisions away from the long term national interest.

Infrastructure Australia would report to COAG about the nation’s infrastructure priorities and improve coordination between all tiers of Government.

It will involve representatives from the private and public sector, academics, and the relevant professions. And it will ensure that infrastructure decisions are guided by independent objective advice not short term politics.

I also want to take the opportunity to discuss infrastructure financing.

On the issue of financing there is, from time to time, controversial debate about Public-Private Partnerships. And the question has been raised about Labor’s approach to financing infrastructure and PPPs.

Firstly, it is important to say that we don’t regard direct public investment in infrastructure in the same way that the current government does. We see it as an investment and not merely as a cost. We recognise that if you put money into infrastructure, you increase economic returns to the government and, over the lifetime of the project, that investment can certainly be a benefit to the bottom line of the government’s economy and therefore the nation.

However, we also see a critical role for the private sector in the provision of infrastructure and acknowledge that the best approach can also be a combination of both public and private involvement.

Ideology alone should not determine which option is taken up. What governments need to do is look at specific projects, look at the financing options and then come up with the best option available. There are PPPs that are working extremely well and have ensured that the Commonwealth or States can provide infrastructure a lot earlier than would have happened if we simply relied on the public sector. The provision of schools in NSW provides an outstanding example of that and many roads projects including the M7 Westlink are examples of where PPPs have worked extremely well.

The other opportunity for financing is through infrastructure investment by superannuation funds. There is a natural synergy between superannuation which is about long term, secure investments with a consistently good rate of return, and infrastructure assets.

At the moment because significant opportunities aren’t being provided in Australia for capital available through superannuation funds to be invested in infrastructure, some of that capital is moving off shore.

The essential components are there: the nation has an infrastructure deficit, an ever-expanding pool of money, and good economic and social reasons for superannuants to get a social benefit from investment here in Australia.

Labor has been very encouraged by the meetings and discussions we’ve had with people involved in the superannuation industry about how we could encourage investment in infrastructure in Australia and we’ll be having more to say about that in the run up to the election.

And of course, we also build a nation by investing in our major cities – the economic powerhouses of the nation and where most Australians live.

The challenge of climate change means we must go further than ever before in promoting sustainability in our homes, our neighbourhoods and across our cities.

In December last year, Kevin Rudd announced the Major Cities Program to boost investment in major Australian cities. Australia is one of the most heavily urbanised countries on earth and the development of our cities desperately needs the involvement of the Commonwealth. Insufficient planning and investment in city infrastructure cuts economic growth and limits our quality of life.

Labor has a proud history of engagement in our cities, most recently with the “Better Cities” program. Better Cities saw the development of East Perth and Subiaco into the vibrant areas they are today.

There must be a renewed commitment by the Commonwealth to invest in Australian major cities.

Just this week, Kevin Rudd, Peter Garrett and I announced Labor’s Solar, Green Energy and Water Renovations Plan for Households – a scheme that offers practical solutions and makes it easy for every one of us to be water and energy efficient in our very own piece of infrastructure- the family home.

I’d like to conclude by spending a few minutes on WA infrastructure needs specifically.

There is nowhere better to come to talk about infrastructure challenges than here in WA.

The Labor Party has acknowledged the State’s special status when Kevin Rudd announced in February his intention to establish a specific fund for infrastructure investment in WA over the next 20 years. By setting aside 25 per cent of future Commonwealth Petroleum Resource Rent Tax revenue from the Gorgon Gas Development, additional resources will be invested in meeting infrastructure needs.

This specific policy recognises the extraordinary contribution this State makes to the national economy.

The announcement attracted positive media attention, although on the east coast the Treasurer, Peter Costello derided Kevin Rudd for giving special treatment to WA and wrongly said it would come out of the existing Commonwealth –State Grants.

There is a special case for WA to receive benefit given that a significant portion of the benefits to the economy is derived from here. That to me just seems to be common sense.

Let’s look at this in context. Last year, Canberra took $28 billion from Western Australia in taxes and royalties, but only returned $24 billion in funding and services.

By recognising WA’s contribution to the national economy through the creation of the Western Australian infrastructure fund, a Rudd Labor Government will be benefiting the nation, not just this great State.

There seems to be an attitude, nowhere better exhibited than in the area of water infrastructure, where we see the Commonwealth prepared to be a cheer squad for the Carpenter government and acknowledge that it’s been ahead of the game in terms of provision of infrastructure, yet not provide any federal support.

On the issue of water, the WA government acknowledged early on, the need to get ahead of the game in providing for the diminishing water supply.

However, the Federal Government needs to do much better than just give praise. It needs to provide support for water infrastructure. The Commonwealth Government set up a $2 billion dollar fund in 2004, and as of 2 weeks ago, more than $1 billion of that remained unspent.

It shouldn’t have taken an election year to get action on our water crisis and it shouldn’t take an election either to acknowledge that climate change is actually real and that we need to have adaptation to it in our economy.

Labor has already acted to relieve pressures caused by the water crisis. In WA we have committed to funding $49 million in the Harvey Water Piping Project. Also, it was Labor’s commitment to invest in the Managed Aquifer Recharge on the Gnangara Mound that has pushed Howard Government into finally committing part of the unspent Australian Water Fund on this important project.

I look forward to continuing to build relationships. I’ve got other meetings with businesses today here in WA as well as campaign activities with my friends from the electorate of Stirling and Cowan.

Infrastructure also fits with the theme that will be at the heart of the coming election. The Howard Government has been in office for 11 years, has run out of new ideas and is not up to the challenges of the new century.

Labor will be putting forward at the next election a dynamic team led by Kevin, committed to pursing the future agenda. That’s the divide in Australian politics. A tired Howard Government that’s out of ideas, out of touch and out of time and a Labor Party committed to nation building and securing our economic prosperity.

On the issue of climate change, on the issue of infrastructure provision, on the issue of skills and education for the nation’s people – the common theme is that Labor is prepared to meet the challenges of the future.

In these key areas we have a responsibility not just to ourselves today, but a responsibility to future generations and this challenge is highlighted by our approach to infrastructure.

Thank you again for the opportunity to talk with you this morning.