Speech: Infrastructure Partnerships Australia New Zealand Infrastructure Symposium Dinner
29 June 2015
Aria Restaurant, Sydney
Thank you, Chairman of most things in Australia at the moment, it's great to be here. Minister Joyce, thank you for your remarks. Mark stole my gag about the cricket, but we're of course we got onto the superiority of rugby, its obviously been a long time that we've struggled to knock you off in the rugby. And I think sadly, more importantly, talking about competition, it's been a long time since we've knocked you off in the economic performance. The performance of the New Zealand economy in recent years has been remarkable.
Since John Key came to power in 2009, the turnaround in the economic performance of New Zealand has been like nothing we've seen, I don't think for very many years, and we are caught behind the ball in this circumstance. I think the latest growth figures in New Zealand in 2014 growth was at 3.5 per cent, that's a full percentage point higher than where Australia's growth is at. In the first quarter of this year, New Zealand's growth is at 3.2 per cent, again higher than our growth. Forecast growth over the next four years is somewhere around 3 per cent, faster than US, UK, Japan, and Australia's forecast. Although we have plans to catch up and get ahead.
John Howard used to say that economic reform is like a never-ending footrace; if you fall behind your competition will sweep on past you. But we never thought it would come from New Zealanders sweeping past us. So we have some work to do, and I think you saw with the remarks from Minister Joyce why New Zealand is getting ahead—they've got a plan, they know where they want to go and they have since day one, the direction they want to take New Zealand. And I think that's very important from a government's perspective. You've got to know where you want to go because you'll never win the daily battle in the eyes of the respective our media, or even in the eyes of most people who don't pay a lot of attention to the daily political battle.
But they do pay attention to what makes a government tick, and what is the direction that a government is seeking to take. And I think if you think back during the 11.5 years of the Howard Government, while on a daily basis it wasn't always the most positive news cycle for them, overwhelmingly people knew where John Howard wanted to take Australia, the direction that he and Peter Costello economically wanted to take our country. I think you're starting to see the same after 20 months of the Abbott Government; you're starting to see a government that is very focused on firstly getting our house in order, and that's what last year's Budget was all about. As difficult politically as it was, we needed to make tough decisions to ensure that our house was back in order to the best of our abilities with the Australian public.
But it's about, this year, investing in the confidence of the times that we face. And Steven put it very well about the unique opportunities our generation in this zone of the world now have in front of us. The free trade agreement the Abbott Government has pursued is very much on the same line as what New Zealand has been pursuing—playing to our strengths, playing to the capacity of our economy to adapt to its time. And the time right now is like no other, with three billion people on our doorstep moving from poverty into the middle class—600 million alone in India, a market which Australia has barely yet touched, barely yet touched with the resources that- as Prime Minister Modi said at the beginning of the year, India needs what Australia has. But to get that product to those markets we've got to have a very well functioning domestic economy. We need to ensure that we've got the infrastructure, the regulatory settings required to make our innovators, our entrepreneurs, to create that capacity for them to grow, to create jobs, and to make the most of the times that they see.
So, the Budget we delivered just a couple of months ago was very much focused on that, with that in mind, with creating the circumstances for business to grow, to invest in itself, to take a chance—or as Joe said on the Budget night speech, to have a go. Because there's been no better time. We need to have some faith in our own abilities, and the government needs to have faith in its people to be able to make the most of their own talents. So, we invested in small business in the Budget very proudly because we think small business has a great story to tell, has a great opportunity for the future. So, the tax cuts that we included in the Budget for small business were about creating innovation, they were about investing in our own people.
Importantly, one of the things that we've been very much focused on from day one was infrastructure. And the Prime Minister said, and continues to say, that he wants to be remembered as an infrastructure prime minister. To do that it will take not only large amounts of public investment, and that's why we've put $50 billion on the table. As Mark says, when you are dealing with six states and two territories to deliver a lot of that infrastructure investment, it will also take a great deal of a reform effort. Because the very nature of infrastructure in Australia is changing very quickly, how we deliver infrastructure and how we look at infrastructure is changing rapidly. I think it's out-pacing very much the culture that exists in transport departments within the states. Some states are adapting quicker to that change than others, but it is a change which is happening very quickly.
New South Wales, of course, is the leader. You've got a leader in Mike Baird in New South Wales who knows the direction he wants to take and has driven that change over the last few years on how New South Wales looks at infrastructure and how it delivers infrastructure, and what the planning for infrastructure should look like into the future. Mike Baird really has been the driver here in Sydney in creating that environment so we've got not only improved ways for attracting investment into infrastructure, but also on how we can use the existing infrastructure to better unlock future opportunities.
And the Asset Recycling Initiative, which the Federal Government has put in place, the 15 per cent bonus payment to the states when they use a mature asset to invest in new infrastructure very much had a genesis in the work that Mike Baird did with the Botany and Newcastle ports, using the proceeds of sales into new infrastructure, into greenfield infrastructure. It was in essence an attempt, or continues to be, to break the nexus or the issue that we have with getting investment into greenfield infrastructure. So we're trying to encourage the use of brownfield infrastructure investment into new greenfield infrastructure. And you're seeing that play out with WestConnex stage one, and WestConnex stage two; you'll see more in Perth with the sale of the Fremantle Port that the West Australian Government's just announced; in Melbourne with the sale of the Melbourne Port, albeit with a few little domestic political issues Mr Chairman playing out in Victoria. You're seeing this change in the way that we're thinking about investing in the infrastructure, and that's really important. Because as Minister Joyce said, governments can't fund the infrastructure needs all on our own anymore.
Last year in Australia, we took in revenue related to infrastructure around $19 billion across the country. We spent about $22 billion. The sources of revenue that we've used to fund infrastructure in the past, where they used to earn more than they received, and that's why you had organisations like the AAA constantly asking for hypothecation. No longer is the case. Fuel excise, for instance, which is a major contributor to the Federal Government's budget, is a source of revenue which will slowly diminish in time because cars are becoming more efficient. They're using less fuel. They're proudly using less fuel. In fact, governments want them to use less fuel, we're encouraging them to use less fuel on one hand, on the other hand we've got a diminishing revenue source. We do need to start to have a community wide discussion, and it may be a bilateral discussion as well because I'm sure New Zealand has the same issue with their fuel excise as well, where we start to talk to the community about how it is that we are going to fund infrastructure, make decisions in respect to infrastructure in the future.
In respect of how we chose infrastructure; we are doing work through Infrastructure Australia on a 15 year plan, and it's important work, out of the audit—the first ever audit of Australia's infrastructure stock—and we want to have a plan out by the end of the year. But we do have to have a discussion about not just how we fund new mega projects in Sydney and Melbourne, and of course Australia's greatest city of Adelaide, but also how do we get the maintenance right? How we fund and make the choices about how we maintain the existing stock and get the best out of our infrastructure into the future and get the best value for taxpayer's money?
Later this week, Wednesday this week, I'm going to be in Oregon where they launched the first, that I'm aware of at least, network wide pricing regime—per kilometre pricing regime, where 5500 cars in Oregon will, rather than pay their tax from fuel excise as is the case at the moment, they will pay a per kilometre based charge. And the system has been put in place and it launches this Wednesday. It will be fascinating to see how that will work. But I think this is an area where, with Infrastructure Australia and with state governments, we need to start putting more emphasis and start to have more of a broader discussion with the community about if we want to get the best infrastructure stock in the future, you want to get best value for your taxpayer money, rather than the gradual unfairness is starting to develop in the system where if you have a older, say, Holden Commodore from the last decade versus a brand new Prius and you're driving on the same route, you are paying far more if you are in the older car, of course, to use that same road as you are in the new Prius.
There is a unique unfairness starting to develop. And the reality is in Australia that our transport system is the last unreconstructed market that we have. It is a discussion with the country we'll begin to need to have, and it's a discussion we'll have with our New Zealand counterparts.
The common market, of course, we'll always be interested in talking to New Zealand about how we make trade plainer and easier between our countries. We are very close. We are, of course, culturally very close, we're economically very close, we're great friends, and, of course, we'll continue to work very closely with the New Zealanders. One challenge we do have though, as Mark alluded to, we struggled to get a common market within Australia on infrastructure, let alone work internationally on doing that. But it is something that I think we are happy to have ongoing discussions about, and I'm sure we will.
Thank you for the opportunity today. This is a terrific forum, and other great contributions from Brendan and the team in the IPA. It's always good to hear how other countries are doing things. It's particularly good to hear how New Zealand continues to grow. It gets stronger and stronger and hopefully not too far ahead of us so we can catch up quicker than what we were hoping we would be able to. It is always good to be at these functions and have the opportunity to speak, so thanks so much for listening.