How the new PM can get better bang for our transport bucks - Grattan Institute

Anthony Albanese is proud of Infrastructure Australia, the body he set up as infrastructure minister in the Rudd government to help elected representatives who struggle “with the need to take a long-term, nonpartisan view” of infrastructure.

Yet in the heat of the 2022 election campaign, that same Albanese promised $2.2bn for Victoria’s controversial Suburban Rail Loop, a project without a business case and that has never made it onto even the most preliminary stage of Infrastructure Australia’s priority list.

Plenty of water has passed under the bridge since Albanese established Infrastructure Australia, but the prize has become even more compelling. With a mountain of debt to contend with, and a big infrastructure wishlist, it’s all the more important today that infrastructure investment supports productivity, and that every dollar counts.

Infrastructure Australia needs to be reconstituted under a flag of integrity. And the new Prime Minister has crafted the mechanism to bring this about.

Albanese set up Infrastructure Australia in 2008 as a statutory advisory council to government, with 12 members from industry and governments. His goal was to “delink the infrastructure investments cycle – which is, by definition, long-term – from the electoral cycle, which is much more short term”. The body was overhauled by then-Minister Warren Truss in 2014, making it an independent entity with a board appointed by the minister.

Whatever the merits of the Coalition’s 2014 overhaul, Infrastructure Australia’s critics now claim it’s not listened to. As shadow minister, Labor’s Catherine King said the agency had been largely sidelined by government. She had a point: of 22 transport projects worth $500m or more which have received federal funding since 2016, only six had a business case published or assessed by Infrastructure Australia at the time of commitment. In the most recent federal budget, 38 projects received $250m or more in federal funding, but only eight of them had been evaluated by Infrastructure Australia as nationally significant and worth building.

It was Albanese – as shadow minister himself – who on the floor of the parliament in 2014, proposed a pact that, if it had not been voted down, would have stomped on much of the wasteful and politicised spending on infrastructure that followed. He proposed that, before approving federal funding of $100m or more for an infrastructure project, the minister must consider Infrastructure Australia’s evaluation of the project, including a cost/benefit analysis, and the priority of the project. In other words, there couldn’t be a major funding commitment if there hadn’t been a proper appraisal of the project.

Eight years may have passed, but it’s not too late.

If legislated, this law change would have two powerful effects. First, it would reinstate the threshold for evaluation by Infrastructure Australia to $100m, where it was until its relaxation to $250m 18 months ago. Even a $100m threshold is high; much of the federal infrastructure spend is made up of small projects that are never subject to this threshold, such as roundabouts, overpasses, and carparks. Most of these probably shouldn’t be funded by the federal government at all, but if they are, they should be scrutinised properly too.

And second, this law change would halt premature commitments of public money to infrastructure projects; instead, when ministers made investment decisions, they’d have a much better idea of what they were committing to.

Defenders of the status quo may argue that it’s governments, not bureaucrats, who are elected to make decisions, and that they face the voters every three years for judgment. But under a beefed-up Infrastructure Australia, the decision to invest in a project would absolutely remain with the government. What would be different is an enforced discipline: ministers would no longer be able to make funding commitments on the hoof. Prematurely announced projects are much more prone to cost overruns, so an additional benefit would be fewer nasty budget surprises.

The election result means the writing is now on the wall. Independent MPs want to include pork-barrelling in the remit of a new federal anti-corruption body, on the grounds that it is misuse of public money for political or private gain. Regardless of where that proposal ends up, a simple reform of Infrastructure Australia offers a way to stem the flow of rorts at its source.

This is a question of what Albanese wants his legacy to be. The best time to make a tough decision is before the decision becomes tough. He should act now, so he can be prouder still of Infrastructure Australia – and so that taxpayers get better bang for their transport bucks.

Marion Terrill

Transport and Cities Program Director
Marion is a leading transport and cities expert with a long history in public policy. She has worked on tax policy for the federal Treasury, and led the design and development of the MyGov account. She has provided expert analysis and advice on labour market policy for the Federal Government, the Business Council of Australia, and at the Australian National University.

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