CEDA State of the Nation 2013: Infrastructure: An essential ingredient for productivity
25th June, 2013
Thank you Professor Martin. Good morning ladies and gentlemen.
Thank you for the opportunity to address you today on the importance of infrastructure to Australia's productivity.
It really goes without saying that infrastructure delivery will be a vital part of improving productivity in Australia.
Unsurprisingly research has shown that infrastructure has a positive effect on economic growth but what is interesting to note is that infrastructure spending has a higher return on investment than spending in most other areas.
However, with our infrastructure deficit reported at somewhere between $700 and $800 billion and urban congestion set to cost the economy $20 billion by 2020, the impact of not providing the infrastructure we need will skyrocket over time.
Productivity will continue to decline as congestion rises, impacting on economic growth, not to mention its social toll, adding to the stress and anxiety of daily life.
Balancing a federal budget after years of Labor deficits will require heavy expenditure restraint, but the task will also benefit from growth on the income side.
Better infrastructure creates a more productive economy and, therefore, also a stronger budget.
Investment in infrastructure is a vital ingredient for productivity and a return to balanced budgets and debt repayments.
The Coalition has committed itself to delivering the modern infrastructure that a first-world 21st century country deserves.
To this end we have already announced commitments to major projects across the country - $1.5 billion for the WestConnex project in Sydney, $1.5 billion for the East West Link in Melbourne, $1 billion for the next stage of the Gateway Motorway North upgrade in Brisbane, $500 million for the Darlington section of South Road in Adelaide, $5.6 billion to finally finish the Pacific Highway duplication, $400 million for the Midland Highway in Tasmania and $700 million for the Toowoomba Second Range Crossing.
And the Coalition has more announcements to make for priority road projects, including in Western Australia, and the Bruce Highway in my home state of Queensland in the weeks ahead.
As you may be aware the Federal Budget last month announced the quantum of government investment in road and rail over the next five year program which they will call Nation Building 2. The program is set at $24 billion over five years. This compares with $36 billion over 6 years in the Nation Building 1 program.
But this year's announcement includes over $4 billion provided for Council roads that has not been previously accounted for in Nation Building or AusLink. In real terms, the road and rail infrastructure budget has been halved.
As a government, and as a nation, we need to place a higher value on ensuring that we have a modern and integrated multi-modal national transport network.
The Coalition has a track record of investing in worthwhile projects to grow our economy, build our communities and connect our regions.
In May 2002, the Coalition announced its plan to create a revolutionary new national land transport policy. When AusLink was introduced in 2004 it represented the most significant change since federation to the way national transport is funded in Australia.
The Coalition remains committed to the programme and to its important components, including Roads to Recovery and the Black Spot program.
At the last election the Coalition also committed to a Bridges to Renewal program which was designed to acknowledge the burden on predominantly local governments that ageing bridges pose and tap into the significant productivity gains that can be realised by this investment.
In fact, economic analysis of a similar initiative in NSW, called Bridges for the Bush, has found that upgrading just five of their Higher Mass Limit deficient bridges alone will remove 8,000 heavy vehicle trips from their freight task.
That equates to more than $200 million in economic, social and environmental costs over the last 30 years.
However, clearly given the sheer size of the task ahead of us, and the current budgetary position of Commonwealth and State Governments, government investment alone is not going to be enough - it's going to take a combination of better targeted government funding, together with private sector investment and regulatory reform to encourage investment and improve productivity.
In terms of targeting investment, the Coalition has already announced that it will task Infrastructure Australia with creating a 15-year rolling infrastructure plan of pipeline projects, reviewed every five years to provide a timetable for future priorities and investment.
This will be created collaboratively with the states and territories and will provide a comprehensive and evidence-based framework to encourage investment.
The Coalition will also require that all major Commonwealth-funded infrastructure projects to undergo a full cost-benefit analysis by Infrastructure Australia.
At the same time, the Coalition is keen to work with the private sector to facilitate greater investment in projects where there is a sufficient revenue stream to attract their interest.
In this respect, some recent developments have been encouraging, like NSW's announcement on the F3 to M2 'missing link' project in Sydney and the funding plan for WestConnex. I also like their unsolicited projects arrangements. These models have potential for wider application.
In Australia, infrastructure investment by super funds has been of serious interest to policy makers for a number of years. It is estimated that in 15 years we could have $5 trillion sitting in superannuation accounts across the country, ready to be invested.
However, superannuation funds have had a limited role in infrastructure and when I meet with super funds and other private sector investors they lament the fact that there aren't the projects ready and suitable for their investment. So much so, that many are looking overseas to invest our retirement savings rather than in our own backyard.
While I have often said there is no 'silver bullet' and no one policy that will stimulate the unprecedented levels of investment required to provide the sort of infrastructure Australia needs to improve its productivity, a new approach is required.
We do need to look at all the options and find innovative ways of structuring financing and risk allocation to get the maximum value for investment and a larger number of projects underway.
There needs to be a political will to get projects under construction.
By harnessing private sector investment where possible, and better targeting government investment, we will be better able to provide the necessary transport links to get our products and produce to markets near and far and link our people to where they need to go in an efficient manner.
Providing the infrastructure for the future will certainly help improve our productivity.
Finally, can I make a few comments on regulatory reform in transport and the role that will play in improving productivity levels in Australia.
As you may be aware, the Coalition is committed to reducing red tape for business by $1 billion per year to improve our international competitiveness and maximise value for money in projects.
It is a bewildering fact that some construction companies suggest that around 40% of funding for infrastructure projects is spent before any bitumen is laid.
Community consultation and protecting our environment are certainly important and expected but the fact that projects take years to get through the planning and approval process is something that needs to be addressed.
The Coalition has also announced that it will implement a 'one stop shop' for environmental approvals to try and cut through this layer of red tape.
A report by the Business Council of Australia found that resources projects are 40% more costly in Australia than in the USA, hospitals cost 62% more, schools 26% more and airports a staggering 90% more.
To put it simply: doing business in Australia is getting more complicated and more expensive, but less productive.
In my own portfolio, I am concerned about the lack of competitiveness and productivity in our shipping industry under Labor and the flow on effect that has to industries like sugar, mineral sands and cement, not to mention the containerised movement around our coast of products manufactured in Australia.
From the 1 July last year a new three-tiered licencing arrangements came into effect from which abolished the old licence and permit system.
Without going into the detail of the reforms, suffice to say that during the parliamentary committee processes many shipping companies raised concerns about increasing red tape and costs that would be incurred under the new requirements.
Some companies are reporting container rates from Melbourne to Brisbane at almost twice the cost of that from Singapore to Melbourne. Others have reported an almost doubling of bulk freight rates on the east west route. This cost impact is having a serious flow on effect to sectors of our manufacturing industry, which as we know, is already struggling to compete.
When it is cheaper to ship sugar from Thailand or cement from China than around our coast, there is something going seriously wrong with our regulatory arrangements.
Should the Coalition be successful at the forthcoming election, I will be seeking to address these seemingly unnecessary burdens on the shipping industry.
There can be no doubt that Australia's shipping industry must play a more important role in our freight network. With the domestic freight task set to double over the next 20 years, and treble along the eastern seaboard, our shipping industry needs to do more, not less.
Shipping has the capacity to move large quantities of cargo across vast distances in an efficient way and we need to ensure that it is a productive part of our transport network.
In conclusion, infrastructure clearly has a role to play in driving productivity in Australia.
We need 21st century solutions if we are to have a 21st century infrastructure system.
The importance of better road and rail networks that actually link into ports to get products to markets - here of overseas - in the most efficient way possible cannot, and must not, be under-estimated.
Infrastructure is intrinsically linked to the growth and recovery of the Australian economy and rest assured that the Coalition will continue its strong track record of infrastructure investment and will seek to facilitative
further investment from the private sector where possible.
Our miners will continue to mine and process resources for the world. Our farmers will continue to produce food and fibre for an ever-hungrier world.
But they will only be competitive if our infrastructure system is world-class.
We have to ensure that our infrastructure is geared to meet those growing demands and that our communities can share in that growth.
Thank you, again, for the opportunity to address you today.
[ENDS]
