Keynote Address: The Infrastructure Sustainability Council of Australia—Gala Dinner and Awards Night
20 August 2014
Dolton House, Jones Bay Wharf, Pyrmont
Well, thank you, Antony, and thank you all for being here. Congratulations on the inaugural awards dinner and all of the firsts that you're achieving tonight.
It's a terrific evening, and I'm sure the certification process has been thoroughly enjoyable for all those who are about to be rewarded with the certificate and for those who win the awards, congratulations to them as well.
Infrastructure is obviously a vital part of the Government's agenda. Nearly 12 months in, we are working feverishly to ensure we've got productive infrastructure to build a stronger economy and sustainable infrastructure to ensure that we are stronger in the future than we are today.
Australia's got an economic challenge that we inherited last September. We've gone through a period of extraordinary investment in the mining industry, which is not historically unusual, but it is coming to a rapid end, which again is not historically unusual. We now need to pick up the pieces from the public infrastructure perspective and invest heavily in public infrastructure. We need to build the capacities of our cities and our regions to ensure that we can be as efficient and as productive as we ought to be, to ensure we've got a stronger economy in the future.
The reality is in the last decade the mining industry construction phase has contributed a significant portion of Australia's GDP. In the next two years, that drops off quite substantially and that has an impact on jobs. It has an impact on our productive capacity and unless it's addressed, we'll be weaker than we are today and our standard of living will suffer.
The Abbott Government is very focused on working with state governments to implement a very heavy infrastructure agenda. And I would put it that we are doing so in three ways.
The first is that we have implemented in the Budget a very strong pipeline of projects over the next five years. We invested $50 billion in the budget in productivity lifting projects right across the country, including our $11.5 billion growth package with projects here in Sydney, Melbourne, Adelaide, Perth and in Brisbane.
Projects which are focused on unlocking our cities, unlocking the gridlock, if you like, to ensure our cities work better and more efficiently, people can get to and from work quicker and that our product can get to market. We are proudly investing through the budget process in projects which will help achieve that.
Here in Sydney we used the first ever Federal Government concessional loan, a $2 billion concessional loan, to bring forward the construction of WestConnex stage two by 18 months, to bring in line WestConnex stage one and WestConnex stage two. This will bring synergies and ensure that we're getting the delivery of that project quicker, to ensure people can benefit from the projects and our economy benefits from all the jobs that will be created in construction and the benefits it will bring in efficiencies to the network when it is delivered.
In Perth, we are, with the Western Australian Government, delivering the first ever priced road with the Perth Freight Link. It will be a dedicated freight route through Perth, along the Roe Highway, taking freight from the north of Western Australia—our great engine room of our economy—right through to the port, with a truck toll to ensure that it is sustainable in its delivery.
It will be the first time in Western Australia we've had the private sector involved in a road project or an infrastructure project. It will deliver efficiencies. It will deliver a freight route which will ensure that not only will big trucks get to market quicker, more effectively and efficiently, it will take big trucks off local roads and ensure the commuters can get travel around their freeways that surround Perth safer without having to compete with those big trucks.
We are focused on not just investing heavily but investing in projects which bring with it economic reform to ensure that the network is more efficient in our cities.
The other point in the Budget which I think is worth discussing in this room, particularly, with sustainability in mind, is the Asset Recycling Initiative. Of course, we know that there is a reluctance of the private sector to invest in greenfield infrastructure projects. There has been over time examples where investors have failed in their investment, and there is nervousness about investment by investors into greenfield infrastructure assets. We need to find a way to break that deadlock to get money from brownfield existing assets into new greenfield assets.
What we've done is develop a $5 billion fund, which state governments will have access to, if they decide to sell one of their assets and use the proceeds, importantly, of that sale in new greenfield infrastructure projects. If they do that, they will have access to 15 per cent of the sale price from the Asset Recycling Fund and that will deliver another wave in the pipeline of infrastructure projects across the country, particularly it will deliver new public transport projects.
In Victoria, you've seen the Victorian Government indicate that they will sell their port and use the proceeds for, amongst other things, the Melbourne Metro line, which will be a railway line from the city to the airport, funded by the Asset Recycling Initiative. If it does not go ahead, it will not be funded. Let's be clear about that.
Equally, Mike Baird has indicated that if he's successful at the next election, in March next year, he will seek to sell the electricity assets—49 per cent of his electricity assets—and with the proceeds invest, amongst other things, in another crossing of the harbour. That will again be a public transport project, which will not go ahead unless the Asset Recycling Initiative passes the Senate.
We think it is a very important proposal, which will unlock capital in Australia to build the next wave of infrastructure to ensure our cities operate as effectively as they can.
Add to that the investment that we've already made with public money into improving the road network across the country, which we should say, when it comes to public transport, is actually a vital investment also. Fifty per cent of public transport miles are travelled by bus in Australia, and if you've got a more effective road network you've got a more effective public transport network for that reason. We think we are, in the pipeline sense, investing very heavily in the right places to get Australia moving and ensure our economy is stronger.
In addition to that we've set about reforming institutions. We passed, at the end of June, legislation in the Parliament to reform Infrastructure Australia. Establishing Infrastructure Australia was a good move by the former government. The problem was unfortunately it was politicised from the beginning to the point where the state governments wouldn't work with Infrastructure Australia and it had an ill-defined role. Unless the state governments work with Infrastructure Australia it is next to useless. The state governments deliver infrastructure projects in Australia, and unless you have Infrastructure Australia working with state governments it has no role at all.
What we have set about doing with the reforms, which begin the week after next on the 1st September, is have the board appoint the CEO of Infrastructure Australia, rather than the Minister, which will take another step away from the political streams and make Infrastructure Australia more independent.
It will define Infrastructure Australia's role more directly. We want Infrastructure Australia to play a vital role in planning the next 15 years of the infrastructure pipeline with state governments. What we will need and what Australia will look like in 15 years' time. We will ask Infrastructure Australia to work with state governments to define what we want Australia to look like in the sense of the infrastructure in 15 years' time. They are conducting as we speak an audit with state governments on what the needs across Australia are so they can then begin the task of building a 15 year pipeline.
We will ask Infrastructure Australia to work with the states on defining a better tool in judging projects. There is concern amongst the states, which has come through to the Productivity Commission review process, about the current tool being too focused on purely one number that's drawn from a BCR calculation. We will work with Infrastructure Australia, and my department's doing a lot of work on this at the moment, to build what we think will be a better model to give taxpayers greater transparency in judging how their governments are making decisions on their projects.
For instance, under the current decision making if you're just purely focused on funded projects on the basis of the BCR, you would never fund a public transport project in Australia. So we need to have a broader look at what it is you want to take into account and therefore the transparency we want taxpayers to have.
The third thing that the Government has done when it comes to infrastructure is initiate and have the Productivity Commission do a thorough review of why infrastructure projects cost what they do, why they take as long as they do, and are there chances for alternative financing to be sure we get more infrastructure into the future.
The Productivity Commission has done that, they started that work in November and they presented a report to the Government a couple of months ago and we released it in the beginning of July. For the last month or so, I've been travelling the country talking to state governments and industry today with a round table with Engineers Australia, which was very useful to get their feedback about what reforms we should take into account from the recommendations the Productivity Commission has made.
Next Thursday, there will be a special meeting of the state ministers that the Deputy Prime Minister will host in Parliament, along with myself, to work through with state governments on what the steps forward are to get improvements to our system, to ensure we are getting best value for taxpayers, to ensure we are choosing projects, which will help build a stronger Australia into the future. To ensure that we are planning properly, that we are selecting projects properly and that we are indeed implementing projects when they've been selected as efficiently and effectively as we can to get the best value for taxpayers money to make the most of what is ultimately a finite resource the taxpayers purse.
Thank you so much for having me this evening and listening to me for a couple of minutes.
Congratulations Antony and your team on all the work that you're doing.
I wish you luck with the continual assessment of projects into the future. I'm sure there will be many more seeking your endorsement as the tool grows in its reputation and the role it will play in the future of infrastructure across Australia.
Thank you so much.