Radio National AM with Sabra Lane



11 May 2017

Topics: The Coalition Government's record infrastructure investment

Sabra Lane: The Federal Government set aside billions in the Budget with money set aside for the Snowy 2.0 project and the new Western Sydney airport. Billions have also been earmarked for the inland rail project which has been talked about for decades. And another 10 billion will be funnelled into a new national rail program to fund priority regional and urban rail programs.

Joining me now to discuss it is Paul Fletcher the Minister for Urban Infrastructure. Minister, good morning and welcome to AM.

Paul Fletcher: Good morning, Sabra. Good to be with you.

Sabra Lane: Now Tony Abbott said when he was Prime Minister; the Commonwealth Government has a long history of funding roads, we have no history of funding urban rail and I think it's important that we stick to our knitting. Has the Government taken up crochet?

Paul Fletcher: Well there's a clear set of priorities for infrastructure articulated in this Budget: $75 billion of funding; $8.4 billion for the inland rail so that freight can move within 24 hours between Melbourne and Brisbane, get more freight off trucks and on to rail, increase the rail mode share; $5.3 billion in equity for the Western Sydney airport—so the Coalition Government has moved this project forward after it's been sitting around for many, many years for this very, very important project.

Sabra Lane: Sure, but ideologically there's been a huge shift in our funding rail projects.

Paul Fletcher: Well in terms of our $10 billion national rail program with money starting to flow from 2019/20, the logic here is that our large cities, as they grow, it's very important that people can move around efficiently and rail has a really important part to play in that. Now, rail projects are very expensive and so this will be a program under which the national Government can support funding for projects—as the Treasurer mentioned in his Budget speech—projects that would be eligible are likely to include a cross river rail in Brisbane, AdeLINK in Adelaide, rail to the airport in Melbourne, rail to the new Western Sydney airport, the Perth Metronet rail project. So as our cities grow, heavy rail is very important in moving people around efficiently—very large capital investments are going to be required. The projects take a long time to plan and that's why we've made a commitment over 10 years so that there's a funding source. We've got planning work underway right now.

Sabra Lane: Sure, but just on that, the national rail program that you're talking about—10 billion—but the Budget papers are pretty silent on exactly what those projects are right now. Why is that? When will voters know?

Paul Fletcher: Well precisely because we've got a careful and thorough planning process. We announced last year, as part of our response to the Infrastructure Australia 15 Year Plan, urban rail plans being developed by the Commonwealth for our five big cities and this $10 billion national rail program is designed to support major rail projects in our large cities and also connections between our cities and their surrounding regional areas.

Sabra Lane: To old political observers it sounds like this could become a huge slush fund.

Paul Fletcher: Very far from it. This is about a careful, thorough planning approach so that, with the long lead times of rail projects, we can work to identify where the projects are best needed, how they can best achieve the objectives; we can look at the use of other funding sources—because these are multibillion dollar projects, so this would be one funding source. Typically these projects are several billion dollars each. So other funding sources, we've talked a lot about value capture which is a funding source increasingly used on big rail projects around the world like the Cross Rail project in London. So this is about a long term, structured, planned approach to facilitate and support more extensive provision of rail in our big cities and connections between our big cities and surrounding regional areas.

Sabra Lane: The independent think tank, Infrastructure Partnerships Australia, points out the Government has cut infrastructure spending by $7.4 billion over the forward estimates and that infrastructure funding is at its lowest level in more than 10 years. What's your response to that?

Paul Fletcher: Well a very important point to make here, Sabra, there's a number of ways in which infrastructure is funded and you're seeing from the Turnbull Government a greater use of equity, a greater use of loans—that's quite a deliberate policy position.

Sabra Lane: How do you respond to that point alone, that it's fallen?

Paul Fletcher: The way I respond is that it has in fact increased when you include all sources of funding when you include equity and loans. So grants—direct grants to State Governments—is one way in which we provide funding for infrastructure projects, but another way is through the provision of equity. And let me remind you, in this Budget we've committed $8.4 billion in equity for the inland rail, $5.3 billion in equity for Western Sydney airport. There's equity going into other projects like the Moorebank Intermodal Terminal. So when you look at all the sources of funding that are going into infrastructure under this Budget, this is a commitment of infrastructure funding which stays at a very high level.

Sabra Lane: I'm glad you mentioned inland rail. Infrastructure Australia scored that project at having a marginal benefit compared with the cost and that's even including a range of claimed wider economic benefits. If it's so marginal, why are we risking taxpayers' money to build this?

Paul Fletcher: When inland rail was assessed by Infrastructure Australia, they recommended the project proceed. A benefit-cost ratio of 1.1 at a 7 per cent discount rate. And can I make the point, by funding this with equity as opposed to grants, if we were funding it with grants all of that money would be gone. When you fund with equity, of course, then you're building an asset.

Sabra Lane: On that project alone—sorry —if coal prices dropped- even Infrastructure Australia points out, there are a whole bunch of risks and if those things come to play, that is 8.4 billion wasted.

Paul Fletcher: The business case—the assessment by Infrastructure Australia recommended that it proceed, a positive benefit-cost ratio. It did note that there are risks—every big infrastructure project has risks—but it also has significant benefits, including to move freight around more efficiently. It's very important that freight move around efficiently, that's a key part of the economic benefits of infrastructure. Freight's somewhat less visible than passenger rail, but incredibly important. In the US, a lot of freight travels by rail; in Australia, east-west Sydney and Melbourne to Perth there's high rail mode share of freight—it's much lower on the east coast. And inland rail will be a means of achieving that so a 24 hour journey for freight from Melbourne to Brisbane, also getting some more trucks off the road and shifting the freight balance towards rail. So there are important economic benefits, important social benefits and this has been assessed and given a positive benefit-cost ratio by Infrastructure Australia.

Sabra Lane: Minister, thank you very much for talking to AM this morning.

Paul Fletcher: Thank you.