IPA Partnerships 2013—Infrastructure & Investment Conference—Keynote Address
18 October 2013
Four Seasons Hotel—Sydney
It is a real pleasure to be able to join you today for your 2013 Infrastructure and Investment Conference so soon after I was here as an Opposition Spokesman.
It is particularly pleasing this time to be here representing the new Coalition Government as Minister for Infrastructure and Regional Development.
I'd also like to take this opportunity to acknowledge Assistant Minister Jamie Briggs who will take responsibility for some of the key elements of our Portfolio including our major urban roads investment programme, our commitment to innovative funding and partnership models for infrastructure projects, road safety including the Black Spots Program, delivering our community projects election commitments, and our responsibilities for territories.
This IPA Conference is one of the most important infrastructure forums in the country and I commend you for your vision and your work in presenting an innovative and visionary voice for the public and private sector in the national infrastructure debate.
What I want to do this morning is take the opportunity to outline the Government's plans in relation to infrastructure investment.
I know you have been taking a keen interest in our policy position and our election commitments.
This is evidenced by your report—The Blue Book.
I commend you for providing this analysis and your support for the reform of Infrastructure Australia—reform which is critical to delivering the infrastructure of the 21st century.
This Government is committed to ensuring that Australia has the productive infrastructure we need to meet the challenges ahead and reap the rewards of sound investment.
However, our debt and fiscal constraints hamper the governments' ability to fund and maintain nationally significant infrastructure. So we will have to be creative and think outside the box.
During the recent election campaign we announced our support for a number of major highway projects across the country and our plan for getting the inland freight rail project back on track.
Efficiency gains through improved infrastructure are all-important to unlocking our nation's potential.
Better infrastructure will provide access to new and emerging industries, to transport our cost-sensitive goods to markets here, and to ports in far-off markets, as well as link Australians to jobs, services and opportunities we haven't dreamt of yet.
As I have said many times before, any failure to deliver key infrastructure improvements will curb growth and see national productivity stagnate. Our economy will simply grind to a halt.
Spending on infrastructure has a higher return on investment than spending in most other sectors and demonstrates clear value for money.
Construction is the fourth largest contributor to GDP and employs one million Australians.
In fact, the Australian infrastructure statistics yearbook for 2013 by the Bureau of Infrastructure, Transport and Regional Economics (BITRE)—which I am pleased to be able to launch here this morning—makes for interesting reading.
For instance, in 2011–12 infrastructure spending by the private sector was 11 times higher than it was 20 years ago.
Current expenditure has declined slightly from that peak but investment remains at historically high levels.
The growth in expenditure in infrastructure has been particularly strong in the transport sector, with its share of investment growing from 45 per cent a decade ago to 55 per cent today.
Once again private expenditure has led the way, having grown by over 400 per cent in the 10 years since 2001–02.
The Yearbook is a valuable resource and copies are available in the foyer. I encourage you to add one to your conference showbag.
What the Yearbook demonstrates is that our spending on infrastructure is as critical today as it ever has been to support the Australian economy and to help support growth in Australia's productivity.
As economic power shifts towards Asia, Australian goods and services face increased competition from rapidly developing low-wage economies, a factor which also creates new opportunities and new markets.
In addition, our tax base is declining as our population ages.
These and other structural changes, such as increasing demands on the health and welfare sectors and demographic shifts are placing additional pressure on our economy—including the infrastructure and transport sectors.
Given these shifts, getting the infrastructure and transport planning, prioritisation and funding right is imperative.
The Government is working with state and territory governments to accelerate the delivery of major roads and highway projects. The first step in achieving this is to provide certainty of funding for our critical infrastructure projects which include:
- $6.7 billion upgrade with Queensland of the Bruce Highway;
- $5.6 billion to finish the duplication of the Pacific Highway;
- $1.5 billion to the WestConnex project in Sydney;
- $1.5 billion for the East-West Link in Melbourne;
- $1 billion to continue the Gateway Motorway North upgrade in Brisbane;
- $700 million for the Toowoomba Second Range Crossing;
- $686 million to finish the Gateway WA Project in Perth;
- $615 million to build the Swan Valley Bypass on the Perth to Darwin Highway;
- $500 million for the upgrade of South Road in Adelaide;
- $405 million for the F3 to M2 Link project in Sydney; and
- $400 million to continue the Midland Highway upgrade in Tasmania.
Importantly we have also committed $300 million to finalise plans, engineering design and environmental assessments for the iconic Melbourne to Brisbane Inland Rail project.
When completed this new freight corridor will link Brisbane to Melbourne through central west NSW.
This important initiative will support the national freight task so that industry can readily move freight across and between port, rail and road networks and onwards to customers here and abroad.
It will also open up opportunities in regional communities along the route.
You have heard me say many times that freight movements in Australia will double over the next 20 years—and treble along the eastern seaboard.
Knowing that challenge awaits us requires meticulous planning now—and investment now… including new ways of attracting investment to make it happen.
It requires planning across all modes to make the most of the efficiencies and advantages each mode offers.
And that includes freeing-up capacity on Australia's metropolitan rail networks.
To do this requires the separation of freight and passenger traffic and establishing dedicated metropolitan rail freight networks.
With that in mind, the Government has made a commitment with Queensland to investigate a new 24/7 dedicated freight connection from the Acacia Ridge Intermodal Terminal to the Port of Brisbane as part of the Melbourne to Brisbane Inland Rail project.
We do so recognising that developing a network of intermodal terminals in the right places is crucial to supporting investment in laying down tracks so that industry can readily move freight by rail and road networks to customers.
Here in Sydney, the delivery of a major intermodal facility at Moorebank will improve efficiency and productivity for Sydney and for the freight task nationally.
The Moorebank Intermodal Terminal will provide a rail shuttle between Port Botany and the south west of Sydney and include warehousing and a separate terminal for interstate freight.
In the long run, it will help free up congestion on Sydney's roads, ultimately creating a more efficient supply chain.
Another key link will be WestConnex—one of Australia's biggest transport projects.
The day after being sworn-in to office, Prime Minister Abbott and I joined NSW Premier Barry O'Farrell and Roads and Ports Minister, Duncan Gay, to release the business case executive summary supporting the construction of WestConnex.
The 33 kilometre WestConnex motorway linking the CBD, west, south-west, airport and port is expected to deliver $20 billion worth of economic benefits to the NSW economy.
It will improve people's commute times, create new jobs, boost economic activity in Western Sydney and help breathe new life into the Parramatta Road business and residential areas.
As these commitments show, there is, and inevitably always will be, a need for ongoing public investment in infrastructure. We do not shy away from that.
However, private sector investment remains fundamental in securing a sustainable future.
Now that is easier said than done. Investor confidence is shaky with over-blown patronage forecasts contributing to some well-reported commercial failures, including the Sydney Cross City Tunnel, Lane Cove Tunnel and Brisbane's CLEM 7.
A study of five Australian toll roads found that actual traffic volumes were, on average, 45 per cent less than forecast in the first year of operation.
We recognise that getting patronage forecasting right, including improved modelling, is one of the keys to boosting investor confidence.
The Bureau of Infrastructure, Transport and Regional Economics is investigating the causes of these over-optimistic forecasts and the Head of Bureau, Gary Dolman, has explored the issues in an article in your conference magazine.
Initiatives to reduce the risk to investors from being misled by over-zealous forecasts are an important step towards restoring investor confidence.
These initiatives include:
- improving data collection using new technologies;
- the development of guidelines for toll road modelling;
- the provision of reference models from state governments;
- improved commercial vehicle data; and
- further research into the public's willingness to pay for using toll roads.
Looking across the board, levels of private sector ownership and investment in transport infrastructure vary across modes and jurisdictions.
Private operators—such as airport and some port owners—will need to make significant infrastructure investment to meet the growing freight and transport tasks of the 21st century.
And that is part of the reason why we have announced an overhaul of Infrastructure Australia's structure and priorities.
The reforms are designed to better coordinate long-term projects, support better planning and give greater certainty to investors and the construction sector.
In line with other Government Boards, Infrastructure Australia will be led by a Chief Executive Officer, responsible to the Infrastructure Australia Board.
The new CEO position will be responsible for delivering the strategic objectives of Infrastructure Australia and its policy reform program.
The Government will also task Infrastructure Australia with undertaking a new, evidence-based audit of our infrastructure asset base, to be run in collaboration with the states and territories, many of whom now have an infrastructure advisory body of their own.
Infrastructure Australia will be asked to develop a 15-year pipeline of major infrastructure projects to be revised every five years based on national, state and local infrastructure priorities.
The Government believes that Infrastructure Australia should not just rely on submissions from states, territories and others but should be working pro-actively alongside them to identify critical projects across the country.
Moving forward we need to build more modern infrastructure, and to identify the right projects that will best contribute to Australia's productivity growth over the next decade and beyond.
A key plank in the Government's approach is to maximise private sector investment in infrastructure.
The F3 to M2 project is a good example.
This project includes an upfront contribution from both the New South Wales and the Australian Governments, and significant capital investment from the private sector which is supported by user charges.
We will also look at how we invest in other projects going forward. There is much to do and we need to work in partnership with the private sector to deliver the infrastructure our society expects, our industries need and our people deserve.
The fiscal constraints that beset the Federal Government, and those of the states and territories, makes private investment a necessity—not an optional extra.
Modern projects to launch this country into the next phase of economic prosperity will not be built without private capital.
So we must be focussed on delivering critical infrastructure, ensuring we are getting value-for-money for our investments and be dedicated to embracing and increasing innovation in project delivery.
The Government will play our part. But to move forward, we must be in partnership with the construction and investment communities. This co-investment of not only capital, but of shared will and vision, will be the basis for building our nation and improving the living standards of our people.
I look forward to working with you to deliver the road and rail projects to take Australia forward and to driving the growth and productivity reforms necessary for Australia to meet the challenges and opportunities of the 21st century.