Roads to nowhere: rail and roads funding puts politics ahead of growth

by Marion Terrill

Australian governments have spent unprecedented sums on transport infrastructure in the past decade, and while important projects have been built the overall investment has been poorly directed, according to a new Grattan Institute report.

Roads to riches: better transport spending finds that although our large cities are the engines of Australia’s economic growth, governments have not prioritised vital urban freight and passenger routes.

Grattan’s analysis of government budget papers shows that too much money has been spent on the wrong projects in the wrong places. In particular, governments have spent up big in electorates where federal elections are won and lost, funding roads that are not very important to the economy, but are popular with local voters.

In some cases return on investment has been staggeringly low: project evaluation showed one highway upgrade yielded a return of eight cents for each dollar spent.

“One difficulty is that there is little to prevent politicians committing to projects on the basis of weak or undisclosed business cases – and particularly during election campaigns,” says Grattan Transport Program Director Marion Terrill.

“There isn’t enough publicly available information on potential projects, so the public can’t hold politicians to account or be confident that funds are spent wisely.”

Oversight mechanisms aren’t working. Since 2012 over half of Commonwealth infrastructure spending has gone to projects where Infrastructure Australia has not published an evaluation. States have spent billions more with little transparency.

A better approach would be for an independent body to assess all infrastructure proposals rigorously on a like-for-like basis. The assessment of the net benefits should then be tabled in the parliament, and only then should governments be able to go ahead and commit public money.

Once governments are only building projects where the community benefit clearly outweighs the cost, their second step should be aim to build all such projects.

Read the report

For further enquiries:
Marion Terrill, Transport Program Director
T. 03 8344 3637 E. media@grattan.edu.au