Governments shouldn’t play politics with infrastructure funding

by Marion Terrill

Published by the Sydney Morning Herald, Monday 4 April

With a federal election looming, we can expect to see plenty of hard hats and fluoro vests on the evening news, along with promises of new freeways and rail lines.

But voters should think twice before accepting politicians’ promises of a transport infrastructure bonanza, especially before spending plans can be independently evaluated. When politicians buy votes by spending on projects that don’t stack up, the vast majority of us lose. The Grattan Institute’s new report, Roads to Riches: better transport investment, shows just how poorly Australia has been served by this approach to transport infrastructure spending.

Australian governments spent unprecedented sums on transport infrastructure in the past decade – more than 1 per cent of GDP since 2009. But mostly, they have not spent wisely.

Investment has not put cities first, though they are the engines of national economic growth. Our largest cities are increasingly congested yet government spending on new transport infrastructure has largely bypassed them. Only 43 per cent of new investment in road and rail infrastructure has been spent in our four largest cities, though they account for 60 per cent of economic activity, nearly 60 per cent of the population, and 64 per cent of population growth.

It’s not that NSW has not had its share of investment. The Commonwealth has spent up big in NSW, one of the states where federal elections are won and lost – in the past seven federal elections, one of the major parties gained an average of five seats from the other.

It’s rather that Sydney has suffered at the expense of country NSW. Although 23 per cent of the nation’s economy activity is based in Sydney, only 5 per cent of Commonwealth transport investment over the past decade was in Australia’s biggest city, while 27 per cent was elsewhere in NSW.

Too often, money has been spent on country highways that are not especially important to the national economy, but are popular with local voters. A case in point is the New England Highway, where more was spent per vehicle kilometre than on the far more heavily used Pacific Highway. While the people of New England no doubt value this highway, and why wouldn’t they, everything comes at a cost. The cost here is all the better choices forgone – the better infrastructure that could have been speeding the movement of goods in and out of Port Botany, reducing commuter snarls in peak hour, or establishing viable public transport for people in Sydney’s outer suburbs.

We can do better. Governments should not be able to commit public money to a transport infrastructure project before tabling in Parliament a rigorous like-for-like evaluation of its benefits and costs, conducted by a genuinely independent body. Governments could then make – and defend – decisions on the basis of a clear and public rationale for investment.

Once governments are only building projects where the community benefit clearly outweighs the cost, they should build all such projects. Quality assessment, not arbitrarily imposed budgetary limits, should determine the level of investment. In other words, if a project would deliver net benefits to the community, the government should build it.

More disciplined selection of transport infrastructure projects would mean less wasteful spending and better transport networks, built where and when they will make the most difference. That would be worth voting for.