AusIMM Minerals Institute 15th Australasian Tunnelling Conference 2014



19 September 2014

The Hilton Hotel Sydney

Well, thank you so much for having me here this morning, and on the third day of your conference. A three day conference is a long conference and no doubt an important one. And I particularly welcome you all being here so early after a long dinner. No doubt last night at the Hilton Hotel many fine South Australian wines were consumed.

It is terrific to be here today. It's something that is going to be a very important part of the next few years of the Australian infrastructure landscape. It is fair to say that the Abbott government is the best friend the tunnelling industry has ever had. By that I mean over the coming years, in 2016, for instance, we will have across the country up to 10 tunnelling machines operating simultaneously throughout Australia.

We'll have tunnelling machines in Queensland, in Sydney, and this morning, in fact, we're going out to the WestConnex Stage One site to do an event with some of the Geotechnical drilling beginning out on that site. We'll have tunnelling on the NorthConnex project here in Sydney and WestConnex Stage Two. We'll also no doubt have tunnelling on the East West Link project in Victoria. We're very confident that project will proceed, we are very committed to it.

The Toowoomba Second Range Crossing will also have a tunnelling component that we expect to be underway by 2016 and, of course, here in Sydney, the addition of the New South Wales Government's North West Rail Link should mean at least four tunnel boring machines working away in Sydney.

So there is much work to be done by tunnelling machines in the coming years and, hopefully, with our broader agenda, what we can do is to create a longer-term pipeline, which means that skills being used over the next couple of years can continue to grow in Australia and create a longer-term pipeline for the industry.

It is an important time for infrastructure projects to be funded, committed to by government and to have the private sector involved because we do face some economic challenges with the tapering of the mining construction phase or the ‘mining boom’ coming to an end.

It means that we will potentially have lower growth and lower jobs growth. Because of this there will be quite a considerable drop off in private sector investment in the construction industry so we will need to fill that gap. We are doing this through very well targeted infrastructure investments mainly in our cities to unclog congestion and to get our cities moving.

Australia has traditionally had two phases of infrastructure investment, if you like. We had a phase where the private sector kicked in, usually in the resource sector, and we've gone through a new period of that over the last decade or so. And when that slows down, we tend to build cities and build the infrastructure in and around cities and we're currently moving to that phase.

In the Federal Government's budget in May, we committed very heavily to that agenda with a $50 billion pipeline of Federal Government expenditure across the country with major growth projects in each state.

Some of the projects I mentioned before—like WestConnex Stage One, to which we committed one and a half billion dollars. In the budget, we extended that commitment to Stage Two with a $2 billion concessional loan to the New South Wales Government to get on with the second stage of that project about 18 months earlier than it was expected to be conducted—pretty much simultaneously with Stage One. It's the first time that the Federal Government has ever used a concessional loan for a road project.

In Melbourne, we committed $3 billion to both stages of the East West project. Last week we announced the preferred tenderer with the Victorian Government for East West Stage One and last week again, we started geotechnical drilling for East West Stage Two just next to the Western Highway. The Premier of Victoria and I stood there last week as the first machine began boring.

In South Australia, we're building both projects on Main South Road. We're spending one and a half billion dollars on those two projects and we've got a study underway with the South Australian Government looking at what is the next project that we need to get on with to build the entire north-south corridor motorway in a decade, as the Prime Minister committed to.

In Perth, Western Australia, we've committed to the Perth Freight Link, which is for those of you not from Western Australia, the Roe 8 extension which will have a dedicated freight route from all the way past the airport to Fremantle Port. It will be a heavy vehicle tolled road which will have the benefit of not just a dedicated freight route with all the benefits that brings for the freight industry, but also it will take heavy trucks off surrounding freeways making those freeways a lot safer for commuters.

We're spending nearly a billion dollars with the Western Australian Government on that project and it is the first time that the private sector will have involvement in a Western Australian road project, which is a major economic reform.

In Brisbane, we are committed with the Queensland Government's upgrade to the Gateway North, again, unlocking quite substantial productivity gains in addition to the work on the Bruce and Pacific Highways, which of course, you would be familiar with.

So the government has got an extensive agenda when it comes to investment in road transport. We are also incentivising the use of sales proceeds by the States on new infrastructure projects through our Asset Recycling initiative where we will pay the States a 15 per cent bonus on the sale price of an asset if they use any sale proceeds for new greenfield productivity-lifting infrastructure. We've already seen the Victorian Government commit with their sale of the Melbourne Port to the Melbourne Rail Link project which will connect Melbourne's Tullamarine Airport with the metropolitan rail network.

As you see here in New South Wales, Mike Baird has said if he's successful in the next election, he will look to sell the electricity assets at 49 per cent and use the proceeds for various projects including another tunnel under the Harbour for public transport and, similarly, in Queensland where Tim Nicholls is talking about privatisation of electricity assets to use the proceeds to invest in—amongst other things—major public transport projects.

So I think we are funding the balance of heavy investment in our freight network which, of course, is in the interests of the Federal Government in roads. We are responsible for the national economy so we are very interested in ensuring that our road networks, our freight networks are operating as effectively as they ought to so we can be as productive as we need to be to ensure our prosperity. And, of course, we have committed in the first 12 months, to the second Sydney Airport here in Sydney which has been a debate that has gone on for some 40-odd years and we are very committed to delivering the second Sydney Airport. People should make no mistake about that.

We are beginning negotiations and we're in the early stages of discussions with the Sydney Airport Corporation that has the first right of refusal to deliver the second Sydney Airport. But the Government will use every lever it has got the capacity to use to ensure that the airport is delivered and work gets going as quickly as possible. It is a major productivity inhibitor in Australia when Sydney is locked up with the current restrictions around the Kingsford Smith Airport. But this is an important decision and the Government is absolutely committed to ensuring that the airport is delivered and delivered quickly and in addition to that we've, of course, announced around the second Sydney Airport site some $3.5 billion of infrastructure upgrades to support its development.

So there is a heavy agenda for your industry in the coming years. We want to ensure the work is sequenced appropriately and the state governments are working together efficiently to ensure that we have got tender processes which deliver the best value for taxpayers money, but will also ensure projects are delivered as quickly as possible.

We've also, in the first 12 months of the Abbott government, reformed the institutions involved in the assessment and delivery of infrastructure. In that respect we've taken what was a broken Infrastructure Australia model and put in place reforms which we believe will improve it substantially.

Infrastructure Australia was deemed in many instances by state governments to be acting in a political way in its previous form. Formerly, under the old Infrastructure Australia—the infrastructure coordinator was a direct appointment by the minister and that led to the states being suspicious of his motives and in many cases state governments weren't working at all with Infrastructure Australia. It was mainly—next to useless.

So what we've done is changed the legislation so Infrastructure Australia now has an independent board who appoints a CEO and they can go through that process in the coming weeks and months. We've asked Infrastructure Australia to work with the states to do an audit of Australia's infrastructure as it stands and to work with the states on a15 year pipeline plan.

So we've got some longer term thinking about what it is we need to ensure that Australia can grow in the coming decades and that governments can make decisions based on economics and social needs in relation to infrastructure, based on evidence. So that is the task we've set Infrastructure Australia.

Our third key infrastructure initiative over the past 12 months was asking the Productivity Commission to have a look at why infrastructure costs so much to deliver in Australia, why it takes so long and whether there are other ways for us to encourage private sector finance.

The Productivity Commission reported during the first half of this year and we released that report in July. Since that time we've been working quite closely with state governments to look at the recommendations that the Productivity Commission made to see where we can get improvements in the processes.

Particularly, the Productivity Commission talks about project selection as being a vital element of ensuring we get the best value for taxpayers money, that we have well scoped projects that are part of a broader plan, like protecting corridors for example. One of the reasons why we need your industry to be so effective and so good at its job, is because over the years state governments have sold off many of the corridors that were preserved for future growth for a cash grab at the time, which means that often—and certainly when it comes to building projects in and around cities—we have to go underground rather than use the protected corridors.

So there is a lot of work we think we can do with state governments to encourage better corridor protection for future growth. State governments are working away at that. In addition we've worked with state governments to develop a better way of judging projects. There is obviously a heavy focus on cost benefit analysis and we think that's fair in many cases but there are other factors which lead governments to make decisions about investment of taxpayers' money in infrastructure and we want to ensure that in project appraisals we are looking at other factors in a fair and balanced way.

As we know, if you need to build a tunnel, it costs far more than it does to build above ground. And that obviously impacts on cost benefit analysis. But, indeed, it may be the best way to ensure the environmental surroundings of the existing suburbs are protected by going underground. So there are other factors that we must take into account, and that Infrastructure Australia should be taking into account when it makes judgments on the use of taxpayers' money.

So the Productivity Commission's report is an important body of work and we think it will add quite a bit of value to the way we choose projects and the way projects are delivered so we get better value for taxpayers' money.

Through our reforms to the system we're ensuring that infrastructure assessments are more consistent, which will provide greater certainty to the infrastructure industry and the private sector more broadly. We are also developing a solid infrastructure pipeline to better inform government decisions and generate greater value for taxpayers' money into the future.

These changes won't just benefit the projects that were announced in the preceding and coming years, but also the next wave of infrastructure investment across the country for the next decade. It gives more certainty to the industry, so you've got a well understood path-line for the future.

Our record investment in infrastructure across Australia is a very important part of the Abbott Government agenda. We said before the election that we'd do four things. We've said that we would stop the boats arriving. We said that we would get rid of unnecessary taxes. We said we'd get the budget under control, and we said we'd build the roads for the 21st century.

When it comes to delivering infrastructure for the 21st century, we are very focused on it, in the three ways that I've outlined today. We appreciate very much the work that your industry does, and we hope you're as excited as we are. And, from the amount of work that you've got for the next couple of years to transform our cities so they can operate more efficiently, with less congestion, so people can get to and from work quicker, so they can spend more time with their family, I suspect you will be.

We want our cities to be more productive so people can have the lifestyle and prosperity that we want all Australians to enjoy, not just today but in the future. And that's what building Australia is all about. Thanks so much for listening to me. I hope your enjoy your last day at the conference, and I look forward to seeing your tunnelling machines on Australian roads in the next couple of years. Thanks so much.