Q&A at the AFR Infrastructure Summit

HOST: Obviously we’ve heard a lot in the last couple of – or yesterday and today about obviously the Infrastructure Pipeline Review. We had your Opposition colleague Bridget McKenzie here yesterday banging the drum about, you know, it's a 90-day review, it's taken 167 days. Why has it taken so long? Obviously, there’s negotiations with state and territories. Is it a case of political messaging, or do you just have to twist their arms a bit instead of agreeing to pay more money?

CATHERINE KING: Well, you know, the first thing, as I said, this mess was created over a decade. And it’s going to take time to clean up. So, the 90-day review was delivered to me within the 90 days and we’re now working with states and territories. The projects [indistinct] with 800 projects, they are complex and trying to work with the states to really understand the cost pressures has taken some time. But that is nearing conclusion now.

But I don’t apologise for that. I think it is important to get that right, to have that dialogue with states and territories, to undertake those negotiations and work it through. I could have just thrown it all out there and thrown it up in the air and said, “See what happens.” But that’s not the way we do things.

HOST: Is it a change of expectations? Obviously, over a long period of time the states just expect the Commonwealth is going to fund – significantly fund extra projects. Is it a sort of changing or a managing of expectations and saying, “Look, you’re not going to get everything,” and also, you know, “Your Bruce Highway upgrade used to be 80-20 now it’s [indistinct]”?

CATHERINE KING: Well, there’s a couple of things. I think we are investors, we’re not just a bank. I think that’s important to understand. We’re co-investors in infrastructure, and that partnership is important to us. But we are co-investors in making sure that we drive productivity, that we improve live-ability, we build infrastructure projects as well. So, the convention of 80-20 for regional and rural projects, it’s always been 50-50 in our cities – well, it hasn’t always been, the convention has been 50-50 in our cities. There’s also the sort of incentives for managing cost escalations have not always been there and our view very simply is it’s important that we get more investment into those regional and rural roads but that we share the risk of those fairly.

HOST: There seems to be the suggestion that obviously with the long-term former Coalition Government that particular pet projects were thrown on the list and it helped to contribute to the blowout in cost. Are you saying that many of these projects will not see the light of day? So, when you do release the – it’s a shame you couldn’t do it today, but anyway, we can’t have everything – is it going to be one of the ones where are they going to be killed off permanently rather than delayed or kick the can down the road so to speak?

CATHERINE KING: So, the review has recommended a mix of things. So [indistinct] that needed to be cancelled, so there are projects that will just be removed from the list entirely. And that’s – we did that back in the October Budget as well. There were some projects we cancelled. They’ve also recommended that there are projects that are important projects, but we simply don’t know at this point in time how much they are going to cost because that planning work has not been done. They’ve been placed on the list, an announcement has been made about we’re going to invest X billion dollars in some cases in this project, but we simply don’t know how much they’re going to cost. Now, nobody in business would do that.

HOST: We don’t want to see another Inland Rail, do you?

CATHERINE KING: No, because of that. So, what we – what they have recommended is really that the Investment Pipeline be split into sort of two areas – that you have investment in planning, so you make that upfront commitment for planning. That’s why we’ve boosted the money for the major business cases, and that the project continue, but only money be committed to planning at this stage. Hold on to the money for construction but until you know what the actual costs or as near as we can the actual costs are going to be, don’t release construction money or say what the construction money is going to be. Leave that in the pool, leave that in the state’s pool to be allocated later on. So, they’ve recommended that.

They’ve recommended projects that should continue but there’s some risks with them and those risks need to be managed carefully. And then they’ve just recommended others that just continue. So, some of those we’ve actually been releasing quietly through this process when states have come to us and said, “Look, there’s an urgency about this.” We’ve just been releasing money for that project.

HOST: You’re saying the headline figure of $120 billion [indistinct] but obviously the total number of projects will not be. Can you give us a ballpark figure about the projects [indistinct]?

CATHERINE KING: Look, not at this stage. We didn’t have a target with that. You’ll see that when we release the review. We deliberately didn’t have a target about that. One of the things we will do is there are a lot of multitude of projects that are all along the same road corridor, and there’s been, again, sort of a perverse thing where any the states have needed to change or re-scope a particular project they’ve had to come and seek approval from us. I think that’s administratively burdensome to them. So, actually making sure we’re looking at the corridor as a whole and seeing it as a rolling series of investments to improve a corridor and thinking about it like that rather than a series of small projects. A little bit of that as well. That’s the sort of thing that will reduce the number of projects, so the money will still be there, but the number of projects won’t be as evident as the IMP as previous.

HOST: We’ve heard a lot since the pandemic about the massive rise in supplies and, you know, obviously supply chain constraints and that stuff which contributes to a blowout in costs. Obviously in this assessment how much can be attributed to, I guess, the new reality of the new normal of building supply materials and how much can be attributed to projects, have properly not been planned or assessed?

CATHERINE KING: There’s a lot of the latter. A lot of the latter. And a lot of focus on announcing things and then not really understanding the cost of those and then not actually managing the pipeline in a way that allows you then to build and have some surety about what you’re going to be up for going forward.

The review found – you won’t be surprised – that a large number of the projects in terms of into the pipeline in the lead-up to the 2016 and the 2019 election campaigns.

HOST: Okay. Look, we heard a lot yesterday obviously about Infrastructure Australia. The best intentions when it was set up that it was going to be the advisory body that governs [indistinct]. It’s fair to say that it’s been sort of, I guess, sidelined in some ways by successive governments, projects being announced, not going through the IA process, state governments doing their own assessment of projects. Obviously, there’s the review of IA wanting to, I guess become more relevant again. I guess the obvious question is, you know, a project that comes up like the suburban rail loop, why wasn’t that put through the IA process, and shouldn’t it have a proper cost benefit analysis before it [indistinct]?

CATHERINE KING: Well, the Suburban Rail Loop is going through the IA processes. Obviously, we made a commitment during the election campaign from Opposition for the early works package of Suburban Rail East. So, it's a very constrained project that we are investing in. It's that early part of it.

HOST: But isn’t that a classic example of a politician committing to a project before it’s properly –

CATHERINE KING: We were pretty clear about how much that was going to cost, and that is our capped contribution, that’s $2.2 billion. That’s the amount of money we have, and I said very clearly any future investment in suburban rail, there’s a lot of work to do with Infrastructure Australia and the state government on that.

But on suburban rail, and rail projects struggle, to be honest. They struggle on cost benefit. They are very, very costly. If you look at – and I use this example all the time – we are in the process of wanting to build a million homes. We want to build – we don’t want to see our cities just continue to sprawl out as they have done where there is poor infrastructure on green field sites. We actually want to build housing around our public transport networks. And what suburban rail actually does is very similar to Metronet has done – obviously it is linear, but this is a loop. But it has seen the Western Australian Government deliberately invest in heavy rail and rail stations that are built around new suburbs or expanding suburbs, changing industrial land into housing land, building recreation and commercial opportunities. So actually, trying to build around your actual rail network. And really, that’s what suburban rail is also trying to do – is taking those linear rail lines that are in Victoria currently, building the loop around, linking those suburbs and building really new suburbs within them. And that’s really what suburban rail is. Whilst it’s a public transport project, it is actually also about housing.

HOST: It’s a pretty staggering price tag on it, right?

CATHERINE KING: It is a costly project. It will be. And it will take a long, long time to build, but you’ve got to start somewhere, and that’s what we’ve said – we’ll invest in those early works. We need to really understand the costs before we put any further investment in. The state, of course, will ask us for more, but we’ve said to them clearly, we want to get a much better handle on the costs before we actually commit anything further to it. But I think it is an important project when you think about, we want to build housing around our public transport hubs because that is really what it is about. It’s actually activating those really – often, you know, they’ve been, you know, quite older suburbs that are established, actually activating those in a different way.

HOST: Obviously [indistinct] will be formally assessed by Infrastructure Australia. What happens if they come back and say, “Look, it’s pretty expensive. It’s taxpayers’ money. We don’t know whether it does stack up.” What do you do?

CATHERINE KING: Well, we will certainly take that advice into consideration. One of the things that has not happened previously is IA has not been part of the Budget process. Now that might surprise some people. They did not provide advice to the government when they were making decisions about investing. That is not [indistinct]. It didn’t happen in the last decade. It started to happen when we were in government. But it did not happen. I have now brought them into the budget process.

HOST: But you have [Indistinct] sorry, you have the final say, don’t you?

CATHERINE KING: ERC has the final say. I tried. I tried but the ERC and cabinet has the final say on whether we invest.

HOST: Okay, there are a few questions coming in, but I did want to ask you quickly obviously while we’ve got you here about the Qatar decision. Obviously, there’s been a lot of press in the last couple of months about Qantas and making it look like the government’s standing up for Qantas instead of other airlines. In October the airlines, Qatar asked to explain its reasons rather than a formal review. What did you tell them, or what did the department tell them?

CATHERINE KING: Well, I mean, I don’t know, because I wasn’t in the room. It’s part of the bilateral air services agreement anyone can ask for a review, so they are private meetings that occur. But may I say very clearly, I had – I did not take the commercial interests of either Qantas or Virgin into consideration when I was making that decision. I took the national interest into consideration. And that national interest, as I’ve said very publicly before, includes how is aviation overall recovering after Covid. What are the important elements of aviation do we as a nation need to make sure we have in times of emergency. We’ve had to use that recently with evacuating people out of Israel and out of Gaza. What are the – what do we need as a nation to be able to hold on to. What is happening in terms of competition overall. They are some of the things I took into consideration when we were asked for basically unprecedented amount of access by Qatar Airways into our aviation market.

Now, these are bilateral agreements between governments. They are not – they are not commercial arrangements between the government. They are not – they are bilateral agreements between government to government. And that’s the decision I’ve taken. You know, they will, I’m sure, request access in the next – at some point again, and I will again consider that and I will take the matter –

HOST: Will it be a different decision next time do you think?

CATHERINE KING: I’ll take the national interest into account, as I always do.

HOST: A lot of politics is perception. And the average punter would look at that and it looks like the government is protecting Qantas –

CATHERINE KING: I understand that’s how some journalists decided to write about it.

HOST: No, I’m saying it’s the public perception.

CATHERINE KING: I understand that’s how a lot of journalists chose to write about it.

HOST: All right. Well, maybe they’re just putting the views of what the public said.

CATHERINE KING: Sure. And I very, very clearly did not take the commercial interests of either Qantas or Virgin into consideration whilst making that decision. It was based on the national interest.

HOST: Right. The national interest seems like a very sort of big umbrella term kind of thing. A lot of people’s experience with Qantas in recent years has been price gouging, cancelled flights, lost airlines, that kind of thing. Do those factors come into play when you’re making – when you’re thinking about making decisions relating to –

CATHERINE KING: No. Again – again – so again [indistinct], they are issues that are incredibly frustrating. Incredibly frustrating for consumers. They are issues that in Opposition we spoke pretty strongly about. I don’t remember – I don’t remember any government standing beside baggage handlers or people were being sacked from their jobs. I was standing there telling, you know, how terrible Qantas was in terms of doing those things. So they are things that are frustrating for consumers and they are issues that we are trying to address through the Aviation White Paper, particularly in terms of consumer rights, how airports are performing. And Qantas, as I have said publicly time and time again, has to do better. It is letting its customers down and it has been for quite some time. And that needs to improve.

HOST: Okay. Could talk on that issue for a while. I think I’ve got my colleague down the back there [indistinct] with a question. Can we just get a microphone to her and I’ll try and read some of these questions.

JOURNALIST: Yeah, just a quick question on Infrastructure Australia. You made – you just mentioned that rail projects are very expensive to build. I was just wondering, is that a hint that in the future when you’re looking at other projects even if a project hasn’t been given clearance by IA, the Government may still decide to award it funding? That is, can you commit to not building any projects unless they receive approval and have had their cost benefit analysis reviewed by IA?

CATHERINE KING: Well, IA is the government’s adviser. So, they provide advice to government. The government needs to consider that advice and then it makes the decision, and nothing has changed about that. But what I have done is actually make sure that we’ve got Infrastructure Australia – what I’m trying to do is actually providing that advice to government when we are making – at the time we are making those investment decisions. That is what we’re trying to do, is to bring them into the decision-making process so that advice is provided directly to government at the time of making the decision.

JOURNALIST: There’s a lot of concern raised yesterday about the poor planning of infrastructure projects, notably the Inland Rail and Snowy 2.0 and, you know, just led to huge surges in costs. And, again, you also mentioned that being an issue today. I mean, what can the government do to ensure that there is much better planning before projects actually start getting built?

CATHERINE KING: A couple of things. Also during construction but also building in gateway accesses. You know, I think that’s important. We don’t really do that at the moment. So ensuring we do that. But I think the lesson from Inland Rail, which I have heard loudly and clearly as we move to high speed rail and the High Speed Rail Authority, is you have to do that work first. Get your governance structures. Get your planning processes and your planning approvals right. Get those in place. Ensure that you’ve got as best a handle on the costs as possible and ensure that when you are ready to start construction you are actually ready to start construction. Inland Rail started without us even knowing where it was going to start and where it was going to end. Like, that just seems extraordinary to me.

HOST: Just a follow-up question on high speed rail, obviously we’ve talked – we had a [indistinct] chat with Kerry Schott yesterday on Inland Rail, about the costs doubling. You know, up from 16 to 31 billion. We had the gentleman from the High Speed Rail Authority here yesterday. Is Australia [indistinct] sort of experience in the UK as well with the building of high-speed rail and it had to cut all the final section up to Manchester, the price tag is pretty staggering. And it just seems like it’s going to be a bottomless pit and realistically, are people really going to want to hop on a train for 3 hours to go from Sydney to Melbourne when they can fly? And they’d only do that if the cost – the tickets were cheap, and I assume they’re not going to be to cover the cost. Is it really a realistic option for the [indistinct]?

CATHERINE KING: Well, it’s the reason we focused on Sydney to Newcastle first. There are currently people who are commuting that section substantially and paying quite a lot of money in tolls, for example. So their costs for transport are already quite high. So that section is really the section we are concentrating on first. Obviously the High Speed Rail Authority will look to start, you know, the planning and the land acquisition for the remained of the corridor. But, really, their task is that Sydney to Newcastle element to really show that we can do this in this country.

I’ve visited both High Speed Rail 1, obviously which has been a very successful project, but through Covid it’s had some challenges and it’s now just working its way back up. And High Speed Rail 2 in Birmingham. I don’t just talk about high speed rail is not just, again, about a rail project. That is in and of itself important and it’s not just about changing commuting times; it’s actually about building new cities or redeveloping or expanding our cities. Newcastle and the Hunter region is going through an enormous transition.

What I learned in going to Birmingham is you can see that High Speed Rail 2 is really – there are companies relocating their headquarters out of London into Birmingham. People are not necessarily commuting daily to London. They are, in fact, actually moving and living and putting their businesses in Birmingham and then maybe once a week, once a month, going into London to transact business.

So it actually isn’t necessarily about, you know, the amount of passengers on [indistinct] the actual speed of the journey. That will be important, but it’s actually about the – it’s an economic development opportunity for Newcastle and the Hunter, and that’s how I see it.

HOST: Is there a ball park figure [indistinct]?

CATHERINE KING: At this stage – and, again, I think that is the work that the High Speed Rail Authority has to do. They are in the process of being established. We’ve established the board. They’re recruiting for a CEO at the moment. They’re establishing their governance structures. We are doing all of that. Not particularly exciting work for politicians – there’s no ribbon I can cut for that. But I’m being very cautious and very careful about announcing costs or time line because of exactly what happened with Inland Rail.

HOST: But surely it sounds like it’s going to be in the ball park of the suburban rail loop?

CATHERINE KING: It will be – you know, there’s no doubt that heavy rail is expensive and it will be an expensive project. But we’re just doing that work now. Until, you know, we’ve got that very clear idea about where – you know, where it is, how the planning is going to work, how the financing mechanism is going to work – we’ll look to, you know, private investment in this as well. It’s not just a government grant program. That’s not how we’re thinking of this. How it might be funded differently. So all of that work is currently underway. And my view very firmly is if Inland Rail taught us anything, let’s get all of that right before we start even thinking about construction.

HOST: No worries. I think we’ve got some other questions coming in here. There’s a question from Phil Davies about, Minister, yesterday we discussed the importance of freight and supply chains. What plans do you have to achieve greater national system outcomes from our transport freight [indistinct] and infrastructure. A nice cheeky question.

CATHERINE KING: Yeah, two. Two things: one, we’re actually undertaking a look at the freight and supply strategy at the moment. Not the whole thing; it’s just seeing how has it been working, what do we need to – what are the settings we’ve learned post Covid that we might need to change. The Australian Rail Track Corporation obviously is the – you know, we own a large portion of the rail freight network. That is really struggling with maintenance, investment and building resilience into that. So, there’s some work we’re doing with that at the moment.

The Bureau of Infrastructure, Transport and Research Economics is also looking at the moment at freight resilience overall. It’s done its first phase of work and its second phase of work. It will be, again, alongside Infrastructure Australia, advising us about where are the freight networks where there are risks associated with climate change in particular that we need to have further investment in. Again, that will be part of the advice that comes to government about where our investments go.

HOST: We’re almost out of time. But I think there’s one more question. Every jurisdiction has decarbonisation and transition obligations. Queensland has the Olympics and incredible growth pressures and we have a national housing crisis and skills shortage. Minister, how is the Commonwealth providing top-down direction for pipeline prioritisation [indistinct]?

CATHERINE KING: Yeah, so this issue, I mean, is really a substantial one about how – and, really, it goes to both productivity and the liveability of our suburbs. So the investments we want to make are really about how do we ensure that those suburbs are not so much that we are in every street and neighbourhood building roundabouts or culverts or painting lines and bike paths, which is one of the projects in the IIP at the moment, but we are actually connecting those suburbs into the main pathways or channels, whether it be through public transport, whether it be through active transport or whether it be through road transport into where people have to work or where freight is to go.

And so, trying to work out the infrastructure policy statement in that way, that they’re the sorts of connections we’re trying to make and they’re the investments we’re trying to make, that requires us to work in partnership with the states and territories about how we unlock those projects. You know, we’re not investors in – you know, one of the things that has really changed the way Melbourne works, for example, and the way people move about is the removal of level rail crossings. And we’ve not been a co-partner in that at all. There’s been no – I think there might be one or two the Commonwealth has invested in. But that would have been, I would have thought, one of the areas we might have looked at with the states and territories to look at level crossing removal and how we connect people better. So that’s the sort of work that we’re trying to do through the infrastructure policy statement and going forward we’ve got investment [indistinct].

HOST: Just final quick one before you go: yesterday we heard a lot about energy versus transport projects. Energy projects, a lot are tied to particular targets, like 2030 climate targets. There’s not real much room there to kick the can down the road. Is it your fear or are you going to make sure that road and transport projects aren’t sort of sidelined [indistinct]?

CATHERINE KING: So, I think it’s important to, you know, recognise we have got constraints in terms of – at the moment we’ve got constraints in terms of labour, but that is the reality of it, and we are all scrambling – everyone’s scrambling around to get the workforce. And obviously the work we’re doing in migration is really critical as part of that as well.

But what we’ve got is we’ve got the land transfer pipeline, which is the work I do. Chris has got Rewiring the Nation, a large bucket of money that he’s got for transmission infrastructure. There is also the National Water Grid Authority and the work on water infrastructure that Minister Plibersek does as well. All of that work is continuing. We work very closely together in terms of where we are with all of the projects. But that has been part of the work that I’ve had to do in terms of the infrastructure pipeline is to make sure that I am smoothing that, making sure that we’ve got – we’re actually able to deliver that in a sustainable way at the same time as Chris is building transmission infrastructure –

HOST: [Indistinct] the capacity there the workers or construction companies, all the rest?

CATHERINE KING: There’s plenty of work to go around. I think I’d say that’s fair to say. And there’s plenty of work to go around and there will continue to be plenty of work to go around. But that is –

HOST: But is there the capacity to deliver the projects?

CATHERINE KING: Yeah, and that’s part of the challenge that we’re all working through at the moment through our – you know, the work we’re doing in skills, the work that we’ve done with, you know, free TAFE, for example. There’s a reason that construction is one of the free TAFE courses that we’ve done. So, we are working across government on all of those issues and that, you know, from migration to the skills pieces, the university pieces to the work that we’re doing in smoothing the pipelines and looking at those projects. All of the work the government is doing is make sure we all move forward together on those.

HOST: Look, I think we’re out of time. Ladies and gentlemen, please thank the minister, Catherine King.