Keynote Address at the Project Management Institute Conference
09 September 2014
Crown Casino, Melbourne
Thank you, Paul. Thank you to all of you for having me part of your conference. Can I pass on the best regards of the Prime Minister, who was unable to be here today, unfortunately, but sent me in his place. He's wishing you well for a great conference, as I am. Thank you very much for having me as part of what is two days of a pretty hectic conference reading through your agenda.
Infrastructure is an absolutely vital part of the government's agenda. In the Budget, we sought to achieve two main aims. The first was to address the challenges of fiscal sustainability into the long term. We put in place a series of measures, which are still being debated as I'm sure you're aware, through the Parliament to address what was an unsustainable Budget.
But on the other side of the Budget, we sought to put in place a growth strategy, an economic growth plan to build a stronger and more productive Australia.
The reality is over the last decade or so, we've had a unique set of circumstances, which have seen the Australian economy grow through a construction boom in the mining sector and as that construction boom comes to a conclusion, it has reasonably serious ramifications for our GDP, for jobs and for our national income.
The Government is seeking through its infrastructure agenda to invest heavily in productive infrastructure to fill that gap, but also help build a stronger Australia for the future. I think we've done that in three main ways in what is now the first 12 months of the Government.
The first is through a strong infrastructure pipeline, which we put in place through the Budget with a $50 billion contribution to infrastructure projects over the next six years, leading to, according to Treasury, investments of some $125 billion when you take into account state and private sector spending on infrastructure projects.
This is a pipeline which the industry has been calling for. It will have ramifications for our productive capacity. There are projects right across Australia. Major tunnelling projects in Sydney with the WestConnex project stages one and two which we funded in the Budget. Projects in Brisbane around the Gateway North and the Toowoomba Second Range. In Perth, with the Perth Freight Link—for the first time having the private sector involved in a road project in Western Australia.
In South Australia, with two projects on South Road to build a North South Corridor in a decade, as was committed by the Prime Minister. Here in Melbourne with East West Stage One and East West Stage Two, which we funded through an additional one and a half billion dollars in the Budget, making our contribution $3 billion.
This morning, I can announce alongside the Victorian Treasurer that the Victorian Government has today narrowed down the preferred tenderer for the East West Link Stage One to a final tenderer and that is the East West Connect consortium. They will now negotiate the final contract over the coming month with the Victorian Government and will be in a position at the end of this month or early in October to sign final contracts and get on and build that very important project here in Melbourne. That is a significant and terrific announcement today from both the Australian and Victorian Government.
The second area where the government has worked to achieve our aim in respect of infrastructure is by reforming the institutions. The establishment of Infrastructure Australia by the former government was a good decision, but it was badly implemented. Infrastructure Australia had fallen out with the states. It had no relationship with state governments to speak of, which, in effect, makes it completely and utterly useless because in the end, the Federal Government doesn't deliver infrastructure projects in Australia. The state governments do, as many of you in this room would know.
Infrastructure Australia needs to have a strong relationship with the states. The states saw it as politicised and they didn't trust it.
When we came to Government, we put in place a series of reforms to Infrastructure Australia, which we think will help ensure its independence and define its role more clearly so we can have a lasting impact on the infrastructure pipeline into the future.
It is now, as of September 1, operating with an independent board, which will appoint a CEO rather than the old system where the Minister himself appointed a CEO, which questioned the accountability of that CEO or infrastructure coordinator, as it was known.
We've set it on the task of doing an audit of Australia's infrastructure needs and asked it to work with the states to quickly develop a 15-year pipeline to identify priorities across each of the states so we've got a known and obvious pipeline for the future based on good research. The final area where the Government has paid significant attention in infrastructure was through a review by the Productivity Commission into Public Infrastructure to see how we can drive costs down and how we can get projects delivered more quickly, and to consider alternative ways to finance projects so we can have more infrastructure delivered.
The reality is that the federal and state government Budgets today, and they will be tomorrow, have finite resources and we need to find ways to encourage more often investment by the private sector into greenfield infrastructure. One way that the government has sought to do that is through the Asset Recycling Initiative in the Budget which is a $5 billion which will encourage states to spend money on infrastructure.
Some have tried to claim that this fund has been about trying to force the states or bribe the states to sell assets. Indeed, what it is actually about is to say to the states when they've sold an asset, we want you to use that money for new greenfield infrastructure. This will help break that issue where private investors are looking to invest in infrastructure, but don't want to take a greenfield infrastructure risk by encouraging the states to use their balance sheet more effectively and then rewarding new greenfield infrastructure with an incentive payment.
We believe that will help build a stronger pipeline for the future and unlock more investment in Australian infrastructure. That's why it's a very important measure that we are sure will pass the Senate in time.
The Productivity Commission report, which was handed in July to the Government and we released, basically focused on project selection. It focused on the procurement process, the tendering processes of the states. It considered road-funding models, and it said to the government we needed to work with the state governments better on implementing a system where we are choosing and implementing infrastructure project decisions more effectively.
When the report was released, we went through a process of speaking to all the state governments. I've spoken individually with each state government over the last two months and we had a meeting of state ministers just a couple of weeks ago to consider the reforms, because in the end, it really is the state governments which need to put in place many of these reforms, because, as I said earlier, they deliver upon infrastructure projects.
From the Federal Government's perspective, we are already doing some of the recommendations the Productivity Commission made. For instance, we've got Infrastructure Australia reviewing projects over $100 million. We are putting in place the Australian Building and Construction Commission again to have a tough cop on the beat when it comes to the construction industry to resolve some of the industrial relations issues that bedevil that industry.
We are working very hard with the states to improve the system through the recommendations that were made.
One of the issues that were raised at an industry briefing that I had about the Productivity Commission Review, with Engineers Australia hosting a roundtable a few weeks ago, was that the system needs better and more effective skilled professionals to make the decisions in and around procurement and the tendering process.
I think this conference plays a very important role in fitting in with some of the Productivity Commission's work and some of the feedback that we've received that we need to continue to build our capabilities to ensure we've got the best project management experience delivering what is a substantial body of taxpayers' money for infrastructure projects.
In addition to that, what the state governments are really focused on is: how do we get a better system of choosing projects? How do we put in place a better system of judging how governments are making these decisions in the first place?
We've worked closely with the state governments. My department has worked closely with state government to look to build a broader project appraisal system that Infrastructure Australia can use to make judgments about why we're making decisions on infrastructure projects in the way that we are.
Of course, economic factors are a very important aspect of why you are choosing one project over another, but there are a range of other factors that governments need to consider. The broader project appraisal documents, which we released for consultation last Friday, seeks to begin that process of having more comprehensive assessment of the productivity contributions a project has made through the investment the governments are looking to make in the first place.
There was a concern from the states, and the Productivity Commission looked at this as well, that there was too much of a narrow focus on simply looking at a BCR single number that spat out through a model rather than looking at some of the broader factors that governments need to consider when they're making decisions on project selection.
In the end, we think this document will help ensure transparency that we are through Infrastructure Australia having a more transparent system of project selection that people can be more confident of the decisions that have been made by governments that they are based on a longer term plan of where we're trying to invest in infrastructure build the capacity of cities.
For instance, the Government early in its term ended a 40 year indecision period by deciding to build the second Sydney Airport. But not just did we decide to build the second Sydney Airport, what we did with the New South Wales Government firstly was put in place a comprehensive infrastructure plan which will service the needs of the growth that will occur in Western Sydney and ensure that when the airport is built and ready to operate, the infrastructure supporting that airport will have the capacity to support that growth. Getting ahead of the game for once rather than trying to catch up, as often we do throughout Australia.
Certainly choosing projects better, planning for the long term more effectively. Protecting corridors is an important element of the work we are doing for state governments to ensure we've got a better system. These are all recommendations the Productivity Commission has focused on and these are a real focus of this government, working with the state governments to ensure we have a better system of selection and a better system of implementation of projects, so we're getting better value for taxpayers' money and we're delivering more infrastructure which is, of course, the aim.
As I said at the beginning, this is a major area of the Government's agenda. We had four main commitments last September when we went to the election. We said we would stop the boats arriving. We said we would get rid of unnecessary taxes. We said we would bring the Budget back under control, and we said we would build the infrastructure of the 21st century.
We are getting on, as today's announcement in respect of the East West Link shows, with delivering the infrastructure that we need for our growing cities to lift our productivity, to reduce congestion, to ensure that we've got as strong as economy as we need to grow into the future, to ensure our prosperity of the next generation of the prosperity that we've been able to enjoy can be passed on for future generations.
Thanks so much for listening. I hope you have a terrific conference.