Sky News Live, Beattie and Reith with Peter Beattie and Peter McGauran



15 May 2017

Topics: The Turnbull Government's record $75 billion infrastructure commitment

Peter Beattie: Minister, thank you for joining us tonight. Paul, can I get to the heart of this? Anyone driving to the studio knows how bad the Sydney traffic is. So you've inherited a problem with a number of our major cities. Sydney in particular. So what can the Federal Government do? What are your priorities and how are we going to do something about better planning for the future for our cities?

Paul Fletcher: Well, look, there's quite a number of things that we're doing in this budget and as part of a broader process. So this budget, 75 billion for infrastructure through to 2026–27. Now that includes 5.3 billion for Western Sydney Airport, of course 8.4 billion for inland rail. It also includes a $10 billion National Rail Program. Money for that will start to flow from 2019–20. And so the idea there, for example, is that there are a number of major rail projects in planning at various stages around the country. Projects like potentially rail to Western Sydney Airport, potentially rail to Tullamarine Airport in Melbourne, Cross River Rail in Brisbane, the Metronet project—rail projects—or set of rail projects in Perth, AdeLINK in Adelaide. So these are all projects which are designed to get large numbers of people moving around quickly. There's no doubt that heavy rail in particular can move people more efficiently than any other mode of transport. It's also extremely expensive.

Peter Beattie: It is.

Paul Fletcher: And that's why there's a role for the Commonwealth to work with state governments. That's why we've established this National Rail Program. But also to link it to planning. So one of the things we announced last year in response to the Infrastructure Australia 15 year plan was that we wanted to do urban rail plans for our five big cities to reach a view as to what was some of the key priorities in each city over the next 10, 20, even 30 years from a rail perspective.

Peter McGauran: But a number of premiers, particularly in Queensland, Victoria, have been critical of you, in that you haven't been fully transparent in regard to that billion dollars of rail projects and they're terming it a slush fund.

Paul Fletcher: Well it's very consciously an attempt or a strategy of saying let's establish a source of funding for rail projects in particular, over the next 10 years or more. Some of these projects, for example, are five to 10 years out, but there are very long lead times and it's important to plan them properly. And so that's why we've quite consciously taken this approach. That's why it's linked to these rail plans that we've committed to work on for our five big cities and we've also said as part of that 10 billion, a proportion of that will also go to funding for rail projects to improve connections between our cities and Australia regionally.

Peter McGauran: True, but clearly Minister, you're not yet ready to list those projects in detail. You want to remain flexible, do you?

Paul Fletcher: We do, but we also want to go through a thorough planning process. You've talked about Infrastructure Australia. They have a very important role as the independent advisor to the Commonwealth Government and I do want to recognise that they were put in place by the previous government. We've maintained them; in fact we've strengthened their roles so we've now said that the Commonwealth will require an Infrastructure Australia assessment before we put more than $100 million of Commonwealth money into any project. So that's important governance and that is because we need to direct finite Commonwealth spending to areas of where we're going to get the greatest return.

Peter Beattie: Well let's come to the issue of housing. If you look at Sydney and Melbourne, housing is off the Richter scale. It seems to me that if there could be better rail links to cities like Wollongong and Newcastle, let's just talk about Sydney for a minute, that could reduce pressure on housing because people could live there, and with a fast train get to the city. How long is that sort of planning going to take before there's some fruition and where do you see that in your funding priority?

Paul Fletcher: Well it's certainly very important. And indeed, in this budget, there's 500 million for regional rail in Victoria. So we've identified for example, the line to Geelong as one of a number of lines. So that's very much about exactly that idea. How can you provide funding to improve rail services between a very big city like Melbourne and surrounding regional areas? As we know, a lot of people live in surrounding regional areas, not just Geelong, but many other parts of Victoria, or in Sydney, Central Coast, Blue Mountains. Brisbane, it might be Sunshine Coast, it might be Gold Coast. So you've got a lot of people choosing to live someway away.

Peter Beattie: Who may want to work in Brisbane or Sydney or in Melbourne.

Peter McGauran: But Peter, as a former premier, is this music to your ear? That the Commonwealth, for the first time, seems to be stepping into …

Peter Beattie: To be frank, it's been one of the gaps and I can remember Steve Bracks and I, in the past, in another life, trying to get the federal government to do this. So yes it is music to my ears.

Peter McGauran: And it has raised questions, Peter.

Peter Beattie: But the problem is getting the state government to work with the federal government and the councils and it seems to me, Peter, one of the things the federal government has to play a leadership role and a coordination role.

Paul Fletcher: Look I think there is certainly a role for the Commonwealth and of course the state governments have primary responsibility for the rail networks in each city and each state. But what we want to do is work with them in support. So what we've said- one of the specific things we've said is that as part of this process where we've committed to spend $10 billion over 10 years on the National Rail Program, we've said first of all that we want to allocate and we've committed $30 million for a business case for rail between the City of Melbourne and Tullamarine Airport. But in terms of surrounding regional areas, we've committed $20 million. What we want to do is call initially for expressions of interest on ideas to improve rail connectivity between a capital city and surrounding regional area, and then we we're going to select up to three of those and put money in on a matching basis to develop them up to a business case.

Peter Beattie: So the state has to put some in. So if you take the Cross River Rail link in Brisbane which is as you know is quite important for Brisbane and the State Government had a lot to say about the Budget. So they could be one of the proposals that comes in?

Paul Fletcher: I think Cross River Rail is more at the centre of the network. Here we're talking about a connection to a regional area. So it might be aligned to the Sunshine Coast, it might be aligned to Wollongong or Newcastle. And we're interested in proposals in a couple of areas. One might be proposals for potentially new lines and that may come not just from state governments but from other …

Peter Beattie: The private sector.

Paul Fletcher: The private sector. But the other is proposals likely to come from state governments for improvements to existing lines where there might be for example a 10 or 20 minute saving that could be achieved for- if the line gets realigned, if a bridge gets strengthened.

Peter McGauran: But you must admit, Minister, that if you're able to achieve this it will be a radical redrawing of federalism because that's how state infrastructure ministers speak or state transport ministers speak, but we now have a Federal Minister speaking about rail lines to urban centres.

Paul Fletcher: And look, one of the key reasons that we have committed funding to this National Rail Program is because of the importance the Turnbull Government is attaching to our cities agenda.

Peter McGauran: Yes, exactly.

Paul Fletcher: Now our cities are our large and growing percentage of our population. In fact as Infrastructure Australia pointed out last year our national population is growing strongly, our four bigger cites are growing at a faster rate than our national population and so one of the reasons why rail is important is because of that proven capacity to move large numbers of people efficiently and so as part of making our cities function more efficiently, rail has a strong and growing role. I mean if you look at the statistics the percentage of people using rail has been increasing. That's true in all of our big cities, well certainly the great majority of them, yet in some cases we've seen significant extensions of the rail network. In New South Wales at the moment we're seeing a very significant extension. In WA over the last 15, 20 years we've seen significant extensions. But what we anticipate, what all the advice we're getting is, is that over the next 10, 20, 30 years as the populations of our large cities continue to grow that rail will continue to be increasingly important and there will need to be growth.

Peter McGauran: Understood. Now, if I can turn to the financing issues.

Peter Beattie: Just one thing. I wonder if I could ask this …

Peter McGauran: Of course.

Peter Beattie: Because we want to come back. The Cross River Rail link in Brisbane, I've got to ask you this. Where is the Federal Government on that? Where is the funding? What's the future of that?

Paul Fletcher: So where we are on that is that we announced 10 million last year for planning work, working with the Queensland Government which of course is putting 50 million. That work is underway right now. There's a business case which is with Infrastructure Australia. They're going through an assessment process. I'm told that they'll have their assessment concluded later this year. And so what we have said is that National Rail Program is a funding source that would be available for Cross River Rail if it proves up.

Peter McGauran: So you're not ruling it out as Premier Palaszczuk would have us believe?

Paul Fletcher: No, what we are saying is; here's a funding source, the National Rail Program. Cross River Rail is a project which is potentially able to access funding there, as indeed potentially AdeLINK in Adelaide, the Perth Metronet, the different elements of Metronet. So the intention is that this is a commitment of spending on rail but with planning to be done to identify which projects will ultimately be funded.

Peter McGauran: Money, the funding. The private sector's confused or concerned. There's not a great deal of clarity about their buy-in. How are you going to develop these public private partnerships?

Paul Fletcher: Well certainly we are very keen to have the greatest possible role for the private sector in infrastructure. There is no doubt that there is more demand for infrastructure than governments, Commonwealth or state or local can fund. And so where the private sector can operate infrastructure we're all in favour of that. And if you look at some of the developments over the last 10 or 20 years, most airports have gone from public ownership into private. Ports in the last five years, Port of Melbourne, Port Botany. So there's a range of infrastructure which is in private hands.

Peter McGauran: But government had built in the first place …

Paul Fletcher: Yes.

Peter McGauran: And I suppose this is my key point, Paul. When governments put up ports or electricity grids for something or they're just swamped with offers and we've seen record prices in the last few years, so the private sector will buy- superannuation long term investments will buy the infrastructure. You've already said that with Badgerys Creek not surprisingly the Government's got to build that airport. It could be 20–25 years of the private sector investing in it.

Peter Beattie: Sydney Airport was given a chance to but decided not to.

Peter McGauran: Correct, absolutely, and for good reason. Really, is the private sector going to fund any of these projects either solely or in partnership with you?

Paul Fletcher: Let's talk about Western Sydney Airport. So, first of all as Peter Beattie rightly says Sydney Airport Corporation, the owners of Kingsford Smith, had a right of first refusal. They had a very thorough look at it. In the end they chose not to take it up which is entirely their right.

Peter McGauran: But that's going to be the case for a lot of your rail too.

Paul Fletcher: So then what we've said is the Government is going to build it so we're going to establish WSA Co. They will then go to the market in a procurement process. So we expect that a leading construction company or more likely a consortium of them given the scale of this project, will come forward and will be selected. There'll be a competitive selection process.

Peter McGauran: True, but paid for by government.

Paul Fletcher: That's true.

Peter McGauran: My question is at what stage can the private sector assist the Government in its $75 billion infrastructure fund?

Paul Fletcher: And so what I've also said as have other ministers in relation to Western Sydney Airport is that we certainly envisage that once completed we would expect it will return to private sector ownership at some point. All of the other major airports around Australia are in private ownership. But that greenfields risk is something that private sector investors are often reluctant to take on. Some of the regulatory risks associated with building an airport from scratch.

Peter McGauran: And rail? What about rail?

Paul Fletcher: As you know the challenge with rail is that in Australia at least, the farebox, the revenue generally only covers about 30 per cent of the operating costs. So if you can't even cover your operating costs you're not going to generate a financial return. You're not going to get much interest from the private sector in something that doesn't generate a return.

Peter McGauran: You think the Government is going to basically have to build all the rail and at a later stage sell it?

Paul Fletcher: What we've talked about a lot is something called value capture. One example of that is the increase in the value of the land around stations. London's massive Crossrail project, not Cross River Rail, but Crossrail, about a 16-billion-pound project, about 30 per cent of that is being funded out of so called value capture measures.

Peter Beattie: How do you get the money out of that, Paul? Because I see the Inland Rail, there was a projection saying it wouldn't be profitable until 2062. How do you get the money out of this value? And I understand the concept where land value clearly goes up. How does government get that indistinct?

Paul Fletcher: Well, there's a range of mechanisms that are used around the world and indeed we've seen one with Gold Coast Light Rail which was that there was effectively a rates levy put on by Gold Coast City Council towards the cost of the light rail. The argument being well look this benefits the entire city. It's going to rejuvenate the area along the rail line as indeed it's done. It's been a very successful project.

Peter McGauran: So people should pay a fee for it?

Paul Fletcher: Yes.

Peter McGauran: And apartments, everywhere, all new apartment buildings close to the railway line.

Peter Beattie: We did this in Raymond Street in Brisbane when we redeveloped the rail line. Well we planned to give the council the power to increase their rates.

Paul Fletcher: And so one of the things that we've consistently been saying in terms of our Commonwealth funding for infrastructure is if it's going into for example a rail project going forward we will be interested in seeing a value capture plan.

Peter McGauran: Thank you.

Paul Fletcher: And that means amongst other things, is the land around the station being rezoned so that it will support apartments, shopping centres, some open space; community facilities? Increasingly Australians are showing an appetite for that mode of living but we need to give them the good public transport to facilitate it.

Peter McGauran: Well we wish you will. He's answered that issue very well about the private investment.

Peter Beattie: And I think you'll get support from people like Anthony Albanese who may have had differences along the line about this, but has been committed to infrastructure for some time.

But anyway, Paul, can I thank you very much. I wish you well on it because the quality of our cities will depend on how you can lead and provide some leadership for the states, so good luck.

Paul Fletcher: Thank you, Peter. Thank you, Peter.

Peter McGauran: Thank you, Mr Fletcher.

Peter Beattie: We'll be back in a minute. We'll be talking to the CEO or a representative from Infrastructure Australia.