Opening Address at Day Two of the 2014 Urban Development Institute of Australia SA Conference
29 August 2014
Novotel Barossa Valley Resort, SA
Thank you very much for having me this morning. I'm sure you had a terrific dinner in the Barossa Valley last night, one of the better wine regions, but not up there with McLaren Vale, of course. Not that we're biased in Mayo.
It's great to be here this morning. I was up on the 6am flight back to Canberra especially, Terry, for you, and my little fella's sixth birthday as well so it's a good day to have a conference.
The very title I was given to speak to, I think, says a lot about where this state is at: ‘The role of the Federal Government in South Australia's economic recovery’.
We're continuing with 23 years of uninterrupted economic growth in Australia. We've just been through 10 years—if not 15—of a sustained boom in our resources sector, where our resource sector has taken advantage of the opportunities throughout the globe. And for some reason, our state has been left behind.
For some reason, our state is now the state with the highest mainland unemployment, up near eight per cent. The highest youth unemployment across the country, including Tasmania, is in an area in the northern suburbs of Adelaide. We face significant challenges in South Australia, and what has been happening has not been working. It is the definition of insanity to continue to do something, which hasn't been working, in the future and think that it'll be a different outcome.
It is time that we started to think about why it is that we are being left behind. As a Federal Government, we were elected nearly 12 months ago next weekend, and we want to contribute to ensure that South Australia is competitive, because when states aren't competing as well as they ought to, then the whole country is dragged down. It costs us more in taxes, and it costs us that we don't have the contribution that we should have from a great state like ours.
What we've been trying to do as a government is ensure that the economic settings are appropriate or right for businesses to be able to prosper. In my area of infrastructure, that's a very important and key element of our growth strategy.
In the Budget, we had two main thrusts that we pursued in May. The first was to ensure that the fiscal conditions were being sustained; that we had a budget which was sustainable into the future. We made some tough choices so that we've got a budget that will be sustainable over the course as our population gets older and as there is more call on government resources for health and welfare services. They are difficult decisions and they're difficult policies to implement, and we will continue to argue that case for some time.
On the other side of the Budget, we had a big focus on growth, because Australia has gone through, as I said, a sustained period of economic growth driven in large part in the last decade or so by external factors: growth in our region; a demand for our resources. It's not unusual in our history that it has come to an end. Maybe more of an abrupt end than what we would have hoped, but it's come to an end, certainly, in the construction side of the mining growth phase.
What that means is that we will have a drop off in construction activity in the next two years which is quite substantial. A very substantial part of our GDP, some estimate up to eight per cent over the last decade, has been the growth in the mining sector and the construction activity in the mining sector. That drops off in the next year or so to two per cent.
There is a very substantial task for employment to create jobs and for economic activity. What we've been doing as a government is to firstly address red tape. We've targeted focus on addressing red tape. We've had our first red tape repeal day earlier in the year and we'll have a second one upcoming. We've got rid of unnecessary taxes, which were holding the economy back and we're focused very heavily on infrastructure investment. I think that we've done that in three ways since we were elected.
The first was in the Budget, where we put a record amount for a federal government into infrastructure—a $50 billion investment over the next six years across the country. The Federal Government is interested, of course, in infrastructure because it contributes to our macroeconomic performance in a substantial way, and that's why we are very interested in infrastructure and spending substantial amounts. That's why we target our infrastructure investment on lifting our economic performance; lifting our productivity so we're getting better economic performance.
We've done that in this Budget by looking across the country and investing in projects where it will not just ensure that cities work better, but it will mean we have better freight linkages throughout our major urban centres and our regions. So we're getting product from where it is, to what it wants to be. As a great trading nation, we need to get as much of that product out at our ports as we can, and we're going to need our cities to work as well as they can.
Here in South Australia, we're investing about $2 billion over the next five years. A billion of that on the South Road, with two projects on South Road: on the Torrens to Torrens section of South Road and the Darlington section of South Road. We've also paid for the planning study, which is unusual for the Federal Government to do, but we have done it. We paid for a planning study, which will be delivered to us in November from the South Australian State Government, on the remainder of South Road and the path forward to upgrade it in its entirety, as the Prime Minister committed to this time last year.
We recognise that that is a major corridor for Adelaide and it will help ensure that people can get around our city better, and that our economy will lift our productivity. We'll get trucks off local roads and focused onto where we want them, which is on dedicated freight networks.
We're looking to do that across the country. We've done the same thing in Perth. We're building a road in Perth which we're calling the Perth Freight Link. Roe 8, as it is known in Perth, where it will connect the existing Roe Highway right through to the port. There will be a truck toll as part of it. It will be a dedicated freight route. It will take thousands of trucks off the freeways which surround it and the highways that surround it and it will make it easier for commuters. And, of course, it will have the benefit of the urban uplift that that will allow.
The best example of that urban uplift is in Sydney with the WestConnex project. For those of you who know Sydney: Parramatta Road, which at the moment is a bottleneck. It's rated as heavily congested 14 hours a day. A tunnel will be built underneath Parramatta Road, and that will allow the urban redevelopment of that strip, which will bring additional benefits to that part of Sydney and also allow for better movement around that city. Something like 40 minute reduction in travel times between the western suburbs and the airport, which is very substantial.
So that's where, in the Budget, with state governments and the private sector, we focused very heavily on investing in infrastructure which makes a real difference to how our cities operate.
In the 12 months, we've also reformed the institutions in and around infrastructure. Infrastructure Australia, which was created by the former government, and it was a good idea, was failing because it had been politicised and it wasn't able to work with the states. We have changed the structure of Infrastructure Australia. The new Infrastructure Australia begins on Monday, 1 September, with a new board. The board will now have the power to appoint the CEO of Infrastructure Australia, whereas before it was appointed by a minister. Unfortunately, the perception of the state governments was that that appointment had politicised the very nature of it and state governments weren't working with Infrastructure Australia.
Now, as you would all know, being involved in this industry, the federal government doesn't actually deliver any infrastructure. We don't build roads, the state governments do. We don't build railway lines, the state governments often do or the private sector often does. So, it was absolutely vital that Infrastructure Australia was able to work with state governments, because otherwise they are, in effect, useless as an organisation.
We've asked Infrastructure Australia now, with the new structure, to do an audit of Australia's infrastructure stock and then work with the states to build a 15-year infrastructure plan for our country. What priorities will be required across each of our cities and regional areas in the coming decades to help drive our growth. We want that done on the basis of what is the best use of taxpayers' money to get the best output we can.
We are looking with the states to build a better model for judging projects, simply focusing on a business cost ratio (BCR), which often at the moment means there is a singular focus on a number that a model spits out. We want a broader assessment of that because there are other factors that governments need to consider when making decisions about infrastructure investments.
For instance, you would never ever invest in a public transport project if you were purely using a BCR as your guide. We are working with the states and Infrastructure Australia to put together a better model on how we can make those judgments, with more transparency for taxpayers on how we're using your money to build infrastructure with a dedicated pipeline into the future.
The third thing we've done in the first 12 months is we had a Productivity Commission report into public infrastructure, which was handed to us in late June and we released in early July. I've been working with state governments over the last month and a half, and yesterday we had a meeting with all the state ministers to work through a path forward out of the recommendations the Productivity Commission made.
The Productivity Commission focused very heavily on project selection, getting the system right to make sure we're making the right decisions, which relates to the point I was just making about how we are choosing projects. It talked about the procurement processes that state governments enter into; the cost of bidding, for instance, which is an issue for major projects in particular.
It talked about trialling different models of road funding across the country and looking at local examples of using higher productivity vehicles with dedicated road funds to better use the data that we collect on focusing investment. Better using the data that we collect in all these projects with post-project evaluations to see if we can do projects better in the future and help guide the model that we look at making judgments on in the first place.
The PC is a heavy bit of work, but it has many reforms in it which we think will make a difference in the time is takes to deliver infrastructure across the country and the cost which, when you compare to international environments, does seem higher in Australia for a variety of reasons.
Infrastructure is a very important area for our government, because we do have economic challenges. We've got great opportunities, but we need to be more productive. Infrastructure plays a very important role in ensuring that we are more productive.
We've got a very strong pipeline and we've got a plan to build on that with the Asset Recycling Initiative, which we think will help unleash another wave of infrastructure investment in addition to the amount that we've already announced. For instance, the Victorian Government, with its plans to sell the Melbourne Port, will build a metro rail line with the proceeds and the 15 percent additional bonus that we'll pay them for that investment, which of course is something in Melbourne has been talked about for a long time; a railway between the city and the airport.
Here in South Australia, I've spoken to and encouraged the State Government to look at the initiative, to look at projects like the Northern Connector, to see whether we can indeed fund it through an Asset Recycling Initiative or involving the private sector.
We have to think more innovatively about how we will deliver infrastructure in the future because the reality is, many of these infrastructure projects and the great need for infrastructure across the country is beyond the capacity of just the taxpayer alone to deliver. There needs to be the involvement of the private sector often, to ensure that the greenfield infrastructure that we're looking to develop is indeed developed.
So infrastructure, as I say, is a very important part of our agenda and we're very focused on it.
It is particularly important here in South Australia to try and drive a better economic performance because at the moment we are stuck in a rut as a state. Our unemployment level is unacceptably high, particularly in certain parts of the state. I think we have a sort of cargo cult fetish, if you like, of looking for a silver bullet government plan that'll fix the unemployment or the economic situation, by the government somehow investing in one industry or another and changing what has been a long-run challenge.
The reality is, there is no simple solution to creating a stronger economy, other than doing the hard, necessary work of getting rid of unnecessary regulation and reducing taxation where you can and investing in our people. There is no reason why we can't do that more often as a state.
As a Federal Government, we are very eager to help the State Government to do that through infrastructure and through other policies where we can help unleash the potential of what is, I think, the best state in our country.
Thanks so much for listening to me; I hope you've had a terrific time up here in the Barossa as part of the conference and that you enjoy the rest of the day. Thank you so much.