Budget infrastructure spending serves mainly political goals
Published at The Conversation, Wednesday 13 May
Tony Abbott famously told Australians he wanted to be known as the infrastructure prime minister and in the 2013 election campaign committed to “retain and strengthen the role of Infrastructure Australia, to create a more transparent, accountable and effective advisory body”.
In contrast to last year’s $11.6 billion Infrastructure Growth Package, this budget has only three big transport infrastructure announcements. One is the claw-back of $1.5 billion from Victoria for the shelved East West Link, while offering to provide the full $3 billion the Commonwealth originally promised if any Victorian government decides to proceed with the project. Another is the decision to give $499 million to Western Australia, nominally for road infrastructure but effectively replenishing state coffers after the Premier complained about a shortfall in GST revenue. The third is the decision to establish a $5 billion Northern Australia Infrastructure Facility with concessional loans for ports, railways and electricity.
The first two of these are notable for several reasons. First, they both give preference to roads, rather than to whatever project can show the most compelling case for fixing an identified problem. It’s no surprise – the PM has insisted that the Commonwealth will only fund roads, not urban rail.
Second, both announcements appear to serve political goals. The East West Link decision locks away in the contingency reserve the funding previously allocated to the controversial Melbourne project. By earmarking the money for a resurrected East West Link, or perhaps a Transurban alternative to the western part of East West Link, the Commonwealth has put a clear hurdle in the path of the current Labor government’s access to the funds.
Meanwhile, the money for Western Australia appeases the Colin Barnett Government after COAG recently rejected its request to change the formula that determines the states’ shares of GST revenues.
The two announcements beg the question: is a piece of infrastructure really needed or is it being built to buy popularity? Until Infrastructure Australia was set up in 2008, there was no systematic approach to infrastructure needs or coordination across governments. The new body was set up because “infrastructure investment needs to be determined objectively and according to long-term need, not short term political interests”, as then infrastructure minister, Labor’s Anthony Albanese, put it, and it has bipartisan support.
Infrastructure Australia evaluates the need by publishing an Infrastructure Priority List for projects seeking more than $100 million from the Commonwealth. Four categories of approval range from “ready to proceed” to “early stage”, depending on how nationally significant and well-developed they are.
The big announcements in this year’s Budget do not appear on the Infrastructure Priority List as “ready to proceed” or even “threshold”. East West Link does appear, but is only ranked in the third of four categories. The Commonwealth seems not to be listening to its own independent advisory body.
Part of the problem is that the public doesn’t have access to an up-to-date Infrastructure Priority List – the most recent is from December 2013. Without up-to-date independent assessments, the transparency and accountability guarantees that motivated Minister Warren Truss to overhaul Infrastructure Australia last year are missing. The newly constituted body is required by law to publish evaluations of proposals received on its website each quarter, infrastructure plans within fourteen days of providing them to the Minister, and a review of its cost-benefit analysis method within six months of the legislation coming into effect. None of this has happened.
The issue matters. The scale of the money alone is huge – the Commonwealth is spending $5.5 billion this year on transport infrastructure, rising to $7.6 billion in 2016-17 and $10.3 billion the year after. The Productivity Commission has identified an urgent need to overhaul procedures for assessing and developing public infrastructure projects. Just last week, two state auditors general separately raised significant concerns about major transport infrastructure critical to their states. NSW’s Grant Hehir spoke of “significant levels of non-compliance” with the government’s external assurance mechanism for large construction projects, while WA’s Colin Murphy said that “Main Roads could not demonstrate that its projects and activities to address congestion have made the best use of resources”.
Whether or not big transport projects add up, governments should not overlook the considerable benefits available from smarter use of the infrastructure we already have. In a mature transport system, adding new roads and rail is very expensive and gains can be modest. Improving rail signalling to increase throughput, regulating traffic flows onto freeways, improving road access into ports, and encouraging public transport users to travel outside peak times are changes that can delay or remove the need for heroic and costly projects.
However, if there are such projects that are demonstrably the most cost-effective way to solve a real and important problem, then the case should be submitted to Infrastructure Australia, assessed, and published. With unemployment creeping up and little growth expected in business investment, if there is a time for the Commonwealth to commit to well-considered and cost-effective new infrastructure, then it is now.