Partnerships 2014: IPA Infrastructure and Investment Conference

Speech

WTS021/2014

12 September 2014

Grand Hyatt, Melbourne

Thank you Adrian (Kloeden—Chairman, Infrastructure Partnerships Australia).

It is a pleasure to address this conference again, and a great honour to open Partnerships 2014.

The exceptional calibre of speakers that follow me and the wide-ranging agenda demonstrate a depth of understanding about our future infrastructure challenges that few can emulate.

I congratulate IPA for its leadership in the national infrastructure debate

Before I begin I would like to acknowledge:

  • I also extend a warm welcome to Mr Aubrey Layne, Secretary of Transportation, the Commonwealth of Virginia, whose international perspective will be of immense value to us all.
  • And of course, The Hon. Mark Birrell.

Mark as you know was the founding Chairman of Infrastructure Partnerships Australia until 2013.

Two weeks ago I was pleased to appoint him as the new Chair of Infrastructure Australia.

On 1 September, the Coalition Government's governance reforms for Infrastructure Australia began.

Now IA is a truly independent advisory body, with a CEO responsible to a Board.

And the Government will welcome and value its considered advice on the infrastructure needs of this country into the future.

As you would be aware, Infrastructure Australia has been given a mandate to identify Australia's long term infrastructure needs for a rolling 15-year plan to be updated every five years—to get ahead of the political decision making by assessing projects before choices are made and announced.

Undertaking the assessments before the political process—having better information before the decisions are made—is something that has not happened in the past.

Our shared stake in Infrastructure investment

Mapping Australia's infrastructure direction has never been more important.

Demographic changes, transitioning from resources-led investment to broader sources of growth, participating in the rise of Asia and a rapidly increasing freight transport task are among the critical issues Australia must address.

A failure to invest in infrastructure will limit our ability to grow as a nation and develop our social and economic fabric.

It is therefore a huge responsibility, as well as a privilege, to be the Minister for Infrastructure and Regional Development in a government that is focused on delivering the infrastructure Australia needs rather than just talking about it.

The Prime Minister wants to be known as the Infrastructure Prime Minister and I am honoured to be part of a leadership team that is genuinely committed to making the right decisions so that we all have the opportunity to live in a stronger and more prosperous nation.

The Coalition Government was elected with a strong agenda, including fixing our competitiveness and delivering the economic infrastructure needed to create more and better jobs, higher living standards and greater opportunities for all Australians.

These commitments included:

  • fixing the Budget;
  • strategic investment in building the infrastructure of the 21st century;
  • reforming Infrastructure Australia; and
  • tasking the Productivity Commission with examining the delivery of public infrastructure to find ways to reduce costs and provide better value for tax-payers' dollars.

These promises are being delivered well within our first 12 months of government. 

These goals, as well as all those others we had coming into government, are not achievable unless we fix the Budget we inherited.

The 2014–15 Budget put in place structural reforms that will ensure the sustainability of key government responsibilities such as welfare, health and education.

The Budget also contains the biggest ever contribution by a federal government to building the infrastructure.

Our $50 billion Infrastructure Investment Programme includes crucial road, rail, intermodal and port projects—and despite what the Opposition claims, this is $16.4 billion more than Labor promised and without the caveats on many of Labor's proposals, which would have prevented them from happening.

The $50 billion figure itself is impressive, but our Treasury analysts tell us it will also leverage more than $125 billion in new infrastructure investment.

And, for the first time, state and territory governments will be able to access additional infrastructure dollars when they elect to recycle their mature government-owned assets and spend the money on productive new infrastructure.

They will then be better able to spend their own money on infrastructure where they have particular expertise and responsibility, such as roads, railways, intermodals, ports and urban public transport systems. 

We are also reforming the way that infrastructure projects are selected, assessed and procured, and finding ways of encouraging greater private sector investment.

Infrastructure is expensive. We need new ways to fund and maintain it. You would have seen in the papers this week deliberations about the cost of Australian-built submarines to the public purse. I am aware of speculation they could potentially cost taxpayers $80 billion or more.

Putting that into perspective, the high speed rail study shows that building that network between Brisbane and Melbourne would cost in the order of $114 billion. Decisions as significant as these are on the taxpayers, and cannot be taken lightly…especially when we have a current debt legacy with an interest bill of $1 billion a month—rising to $3 billion a month.

Getting on with the job

Despite this debt legacy, we are getting on with the job.

Our first 12 months in Government show the Coalition is serious about linking infrastructure financing, investment and reform with productivity.

We are becoming recognised as a world leader in encouraging the innovative expansion of private sector investment and engagement in transport infrastructure.

Often when infrastructure is discussed, it is in the context of financial costs, but rarely in terms of benefits and opportunities.

Yes, costs are large, often prohibitively so, but when I look at infrastructure across Australia I also see great opportunities…opportunities that need better infrastructure to be unlocked.

That is why we need to make the right decisions—even if they are costly.

Let me mention several projects in terms of their benefit and their progress, and how we are delivering on our commitments.

Firstly, East West Link Stages One and Two, here in Melbourne.

The Australian Government is providing $3 billion to the overall East West Link project.

This includes $1.5 billion to fast-track delivery of the western section.

This will ensure that Melbourne commuters get the benefits sooner of spending less time stuck in traffic and more time being productive or spending with their loved ones. 

East West Link is expected to reduce travel times by 20 minutes for up to 100,000 vehicles each day.

The eastern section alone will bypass 23 sets of traffic lights.

I am amazed that anyone could be opposed to this project and condemn Melbourne to gridlock.

We recently announced our preferred bidder, a Consortium, for the delivery of the Eastern section of the East West project, which is running to schedule.

In Sydney, we are progressing the WestConnex and NorthConnex projects.

WestConnex is one of Australia's largest transport infrastructure projects—which recognises Western Sydney as a region with its own purpose and identity, rather than as a dormitory suburb of Sydney's CBD.

The financing of the project is innovative and our historic concessional loan of up to $2 billion brings WestConnex forward by around 18 months, essentially delivering the M4 East and M5 East at the same time.

The M4 widening is expected to be completed in 2017; the M4 East and M5 East in 2019; and the M4 South in 2023.

The design and construction contract for the M4 Widening is expected to be awarded later this year.

NorthConnex will ease congestion on Pennant Hills Road—often cited as one of Sydney's most congested roads—and return local streets to local communities by removing up to 5,000 trucks a day from the road and providing a free flowing continuous road between the M1 and M2.

The Environmental Impact Statement is out for comment until mid-September, and construction is expected to commence early next year, to be completed in late 2019.

During the election campaign last year, the Coalition committed to making a decision on the site for a second Sydney Airport in our first term of government. 

In April this year we made good on that commitment, announcing that Badgerys Creek would be the site for Western Sydney's airport.

The decision ended 40 years of uncertainty and debate.

It will be good for economic growth and good for jobs, both in Western Sydney and nationally.

Our approach to building this new airport is ‘road and access infrastructure first’—we don't want to create a situation where we have an airport but no convenient way to get there.

To that end, the Government, in partnership with the New South Wales Government, will spend more than $3.5 billion for significant road infrastructure upgrades in Western Sydney.

The tender for Stage 1 of the Bringelly Road upgrade was advertised in July and proposals Round 1 of the Local Roads Package closed at the end of August—Construction on The Northern Road is expected to begin next year.

Development of an airport is a complex, long term infrastructure project.

The Notice to Consult has been issued to the Sydney Airport Group—the critical first step to meet our obligations under the right of first refusal process to choose the owner and operator for the new airport.

We are continuing to work towards an airport being operational by the mid-2020's.

Over to the west, the Perth Gateway project is ahead of schedule. The proposed new Perth Freight Link will provide a new freight connection between the Roe Highway and the Port of Fremantle.

By the end of this month, Main Roads Western Australia will have finalised the business case for the entire project.

Our investment is a major milestone in infrastructure delivery for Western Australia because it is likely to be the first time we will see a heavy vehicle user charge implemented for a specific project.

Early works and planning are also underway on:

  • the Gateway Motorway widening in Queensland;
  • the Midland Highway in Tasmania;
  • two sections of the South Road in Adelaide; and
  • Tiger Brennan Drive in Darwin.

In addition to these commitments we are upgrading major regional highways.

At $6.7 billion, fixing the Bruce Highway is the largest financial commitment of our $50 billion investment.

Our plans include more than 60 separate projects, making it also one of the largest construction endeavours underway.

And the duplication of the Pacific Highway within this decade is on track, with the Government making good on its commitment of $5.64 billion and the 80:20 funding split for the construction of the long Woolgoolga to Ballina section.

Despite years of work, just 60 per cent of the Pacific Highway four-laning project is complete.  I'm told 1700 workers are on site, 7 per cent of whom are indigenous. This is great for regional NSW.

Other regional highways undergoing work include:

  • the $1.6 billion Toowoomba Second Range Crossing, probably the largest single road project in regional Australia and potentially the first PPP—and upgrading the Warrego Highway west of Toowoomba;
  • the Western Highway and Princes Highway duplications in Victoria;
  • the Great Northern Highway and North West Highway upgrades in Western Australia; and
  • Australia's longest shortcut—the Outback Way, traversing Queensland, the Northern Territory and Western Australia.

As I said, we haven't been just talking—we have been working with the States to deliver the transport infrastructure the nation needs.

Government's priority rail freight project

A priority for this Government is developing the capacity of freight rail to meet the forecast growth in freight, particularly along the eastern seaboard.

The Melbourne to Brisbane Inland Rail—the Government's number one rail freight project, and one of Australia's most important and ambitious long-term projects—is being revived under the Coalition Government.

We want to see it completed in the next ten years. 

Inland Rail will make rail freight costs more competitive with road freight, and provide real choice for transport operators.

Over the next four years we have committed $300 million to commence important pre-construction works, but we also want private sector investment in the Inland Rail.

Our aim is to achieve the best balance of public and private sector funds, realising that for Inland Rail to be attractive to the private sector, the business case must stack up and the service it delivers must meet the needs of users. 

This is a key part of the work being undertaken by the Implementation Group I established, being chaired by the former Deputy Prime Minister John Anderson. 

Any decisions on further funding will be taken once the Government has considered the Implementation Group's report at the end of this year.

And, while the Inland Rail is our priority freight rail project, the 2014–15 Budget has invested $3.6 billion in other rail projects.

The list comprises $1.6 billion in freight rail and intermodal projects including the Advanced Train Management System trial, as well as intermodal projects in Melbourne, Sydney and Perth, rail revitalisation in Tasmania, and work on improving lines in Adelaide and port rail connections in Sydney and Perth.

Boosting productivity and reducing regulation

Financing is a critical part of building better infrastructure.

Governments cannot afford to do it all, particularly when weighed down by billions of dollars of inherited debt.

We have put in place a policy agenda to:

  • target investment in productive infrastructure;
  • complete projects faster;
  • partner with state governments; and
  • leverage more private sector investment.

We are developing innovative financing models, which as I mentioned earlier, will help build much needed infrastructure over the next decade.

Reforming Infrastructure Australia is a key part in our productivity agenda.

The Infrastructure Australia Amendment Act 2014, which commenced on 1 September, delivers on part of our election commitment to achieve greater independence and improve transparency for this expert advisory body which will be energised by its newly appointed Board.  A second piece of the legislation was introduced into Parliament last week to deliver the final stage of the IA reforms.

Work on the promised national infrastructure audit has commenced in consultation with state and territory governments and will feed into the 15-year infrastructure plan, expected to be delivered in early 2015. 

I expect both the audit and the plan to present comprehensive advice on the nationally significant infrastructure we currently have, and the infrastructure we need over the next 15 years. 

The Government will give detailed consideration to Infrastructure Australia's advice on these needs to help inform decisions on future infrastructure investment.

This includes implementing our commitment to ensure that every project with a Commonwealth contribution of $100 million or more (apart from Defence projects) undergoes Infrastructure Australia's robust scrutiny and analysis.

Infrastructure Australia will publish its reports on its website as transparent advice for the Government to consider when allocating its infrastructure funding.

The Coalition Government is also pursuing strategies to drive longer term infrastructure financing reforms to inform the Government's delivery of critical infrastructure, to ensure value for money for taxpayers and to maximise productivity.

The Productivity Commission Inquiry into Public Infrastructure has examined a range of factors to reduce costs, drive better competition and encourage greater private sector involvement in infrastructure.

The Government's response to the Productivity Commission will take into account consultations with industry—including with many of you in this room. 

We acknowledge that many of these reforms require implementation by other jurisdictions, but we are working closely with them to put in place a suite of reforms that will ensure better value for money and reduced timeframes for the delivery of infrastructure. 

I anticipate the Government will respond formally to the inquiry later this year.

Other strategies to drive longer term reform include the Taxation Review which is underway and the Federation White Paper, which is soon to start.

In our first year in government, through negotiations with the states, we have already leveraged new streams of private sector investment to get new projects underway sooner.

While the private sector has a large pool of capital available, and is willing to invest in the right infrastructure projects, there has been a limited appetite to invest in greenfield projects with unproven commercial history.

That is why we have been working with state and territory governments and the private sector to look at ways of appropriately balancing or sharing risks with the private sector to see new projects brought to market.

Through the Asset Recycling Initiative we will support the transfer of mature public infrastructure assets to the private sector by offering the States 15 per cent on the sale price so long as the proceeds are invested in new productive infrastructure.

This initiative will encourage the private sector and the super funds to partner with governments in building and delivering vital transport infrastructure, including much-needed public transport investment.

Another key government priority is reducing the regulatory burden imposed on the Australian economy by $1 billion each year to increase Australia's productivity and international competitiveness.

This commitment recognises that capital is mobile, and that unnecessary red and green tape drives up business costs, as well as the costs to individuals.

We have already had our first special Parliamentary Day dedicated to the abolition of red tape and another in scheduled for next month.

My portfolio is currently advancing a number of important regulatory reforms in the aviation, maritime and transport security sectors.

Reality check on local government funding

I have spoken at length about the new paradigm the Coalition Government is putting in place to deliver infrastructure.

Delivering that infrastructure at the community level—where it is often most important—can only be done in partnership with local government.

My knowledge of the workings of local government, and my responsibility for regional Australia and local governments in this portfolio, reinforce my high regard for Australia's councils and the tough task before them.

I understand that councils do not welcome our decision to freeze the annual indexation of Financial Assistance Grants for three years, as their contribution to help get the nation's budget back on track.

I want to put this decision in perspective.

We have not reduced funding to local government—in fact this year's funding is $30 million higher than last because of population adjustments.

Funding has been maintained, it is just the indexation that been temporarily paused.

The $2.3 billion of Financial Assistance Grants that I announced on 18 August is for local government to spend entirely on their local priorities.

The 2014–15 Budget also contained extra funding for existing and new programmes, which include:

  • the expanded $565 million Black Spot and $248 million Heavy Vehicle programmes;
  • the new $300 million Bridges Renewal programme; and
  • the new $1 billion National Stronger Regions Fund for which we are currently finalising the guidelines.

On 28 August, the Government ensured that the $2.1 billion Roads to Recovery programme funding for local communities across Australia will be delivered.

This occurred despite the roadblocks put up by the Opposition and the Greens.

We are pleased that we were able to assure the crossbench Senators of the importance of this programme and we thank those in this room who helped secure the passage of the Bill.

There will be an extra $350 million available in 2015-16 to double the R2R funding to every council in Australia.

This brings total funding for the programme to $2.1 billion over the 2014–15 to 2018–19 period.

Conclusion

Thank you for the opportunity to outline the Coalition Government's commitment to, and strategy for, better infrastructure in Australia.

We are committed, our strategy is viable and we have got down to business as we said we would.

I wish you a challenging and enlightening conference.

Thank you.