If you asked businesspeople to nominate Australia’s biggest economic challenge, you might guess they would name tax rates or the budget deficit.
But you’d be wrong. According to an Australian Institute of Company Directors’ survey of 833 directors last July, the problem that most worries businesspeople is Australia’s low level of infrastructure investment.
Eight-five per cent of the company directors said they believed current levels of infrastructure investment, particularly in regional areas, were too low. The issue topped the list of concerns ahead of the budget deficit, the ageing of our population, education and tax reform.
But it’s not just the business sector. The Reserve Bank has made repeated calls for additional investment in railways and roads to generate economic activity and jobs, and take pressure off the housing affordability crisis.
With the 2017-18 budget looming, it’s time we started listening to the experts.
Investing in the right infrastructure projects has two important economic benefits. In the short term, construction supports economic activity and jobs. But over the medium to long term, building the right projects unlocks productivity gains that fuel further job creation and greater prosperity.
Take freight in Sydney. The former Labor government established and funded the Moorebank Intermodal Company and appointed Kerry Schott as chairwoman to drive the project, which has now begun construction.
This is a sound project, allowing for the transfer of freight from road to rail. It will reduce traffic congestion by eliminating 1.2 million truck trips a year through the city, providing a link to the port and the north-south rail corridor.
But if the government funded the Australian Rail Track Corporation to have a separate loop line near Moorebank and to complete the duplication between Mascot and Port Botany, it would be far more productive. It makes no sense that a train can be held up for the “last mile” into the port if another train is exiting along the same track. These simple upgrades would cost $200 million and repay the investment many times over. It’s a no-brainer.
Good infrastructure projects equal jobs — now and in the future. That’s why we need to invest now. We should also invest in urban public transport to reduce traffic congestion that the experts warn is a handbrake on productivity growth.
But we must also invest in regional infrastructure — better freight rail, better roads and a fibre-based broadband system powerful enough to allow regional businesses to overcome the tyranny of distance.
Now is the time to progress high-speed rail by creating an authority to co-ordinate across jurisdictions, preserve the corridors and engage with consortiums that have a proven record of construction and operation of such a nation-building project.
Far from shaping the future, the Coalition has reduced infrastructure investment. There is no $50 billion program, as the government claims. The Department of Infrastructure and Regional Development, which is actually rolling out the program, values it at $34bn over the government’s first five years in office with another $8bn set aside for some unspecified period in the future.
Australian Bureau of Statistics figures show total public sector infrastructure investment fell by 20 per cent in the Coalition’s first two years in office.
More recent ABS figures show that in the 12 quarters in which the Coalition has been in office, total quarterly public sector infrastructure investment has been lower than it was in every single quarter under the previous Labor government.
While the government frequently re-announces ongoing projects devised and funded under the former Labor government, it has failed to achieve progress on any new transformative projects.
It is yet to lay a single sleeper on the Inland Rail project. This freight rail link between Brisbane and Melbourne would allow producers to get their goods to port more quickly. During the 2013 election campaign the Coalition promised it would commence construction by 2016.
Part of the problem is the government’s refusal to take expert advice.
When it came to office, it funded road projects without business cases by transferring funds from public transport projects that had been approved by Infrastructure Australia, such as Melbourne Metro and Cross River Rail.
Meanwhile, the government’s Northern Australia Infrastructure Fund, created two years ago, has not funded a single project and the government is now proposing to create an infrastructure financing unit within the Department of Prime Minister and Cabinet.
None of this is needed. Infrastructure Australia already exists to assess projects and advise on funding models. The government must use next month’s budget to change direction on infrastructure investment.
As the respected industry group Infrastructure Partnerships Australia has pointed out, there is no shortage of private capital available for investment in infrastructure projects, provided they stack up.
And as the Reserve Bank has pointed out, low interest rates mean it’s a good time for governments to borrow for new infrastructure projects, provided they are properly assessed and will boost productivity.
It’s time to get on with it.
This piece was first published in The Australian on Monday, 17 April 2017: http://bit.ly/2ogRiOE