Australian infrastructure at the crossroads

Acknowledgement of country

I begin by acknowledging the Gadigal people of the Eora Nation as the traditional custodians of the lands on which this conference is being held.

I extend that acknowledgment to all other Indigenous Australians joining us here today.

Being built as it is upon our lands, infrastructure has a distinct obligation to consider the impacts of our developments on Indigenous Australians, their histories and their cultures.

That is something that we carry through all the work we undertake.

I also acknowledge the range of elected members and ministers who have spoken across this conference, and I thank the hardworking team at the AFR for putting this event on.

Introduction

Great nations are built by great infrastructure

At its best, infrastructure is city moulding and nation shaping. It plays an essential role in creating jobs, building our communities and keeping us connected with one another, especially in our regions.

Western Sydney Metro. Cross River Rail. Perth’s Metronet. The Bridgewater Bridge. Suburban Rail Loop. The Tanami.

Infrastructure creates jobs, it boosts productivity, it gets goods to market, it shapes how we interact with our cities and with each other.

You can see that perfectly right here in Sydney.

In the last century, Australians built the Sydney Harbour Bridge to bring two halves of the city together.

Now, we are building the new Western Sydney Airport to connect the west with the world.

Two very different infrastructure projects, but two that have changed the lives of thousands and will do so for generations to come.

More than 1,600 people worked on the construction of the Harbour Bridge.

So far, the construction of Western Sydney International Airport has supported around 5 and a half thousand direct jobs.

Of these jobs, half have gone to local workers, and a third have gone to learning workers, apprentices, giving thousands of young residents skills that will set them up for a lifetime of work.

Away from the airport site itself, the delivery of the project has already injected over $400 million across the region through contracts awarded to Western Sydney businesses, including small and medium enterprises and family businesses.

By 2031, the airport will support almost 28,000 direct and indirect jobs, as well as boosting the economy, driving productivity, and putting downward pressure on airfares.

Right now, Western Sydney Airport is over 60 per cent complete and on track to open for aircraft by late 2026.

The runway is laid, the terminal is topped out and they are working on a world class, state of the art baggage handling system to ensure your bags get to your destination.

The last Commonwealth Labor government rebuilt a third of our interstate railway network, started planning Western Sydney Airport, delivered the initial funding for Inland Rail, committed more to urban passenger rail than all previous Commonwealth governments combined, and established Infrastructure Australia to ensure that the decisions made by the Commonwealth were backed by cost/benefit analysis and reflected the important role the Commonwealth has to play as a co-investor.

We are extending that legacy with High Speed Rail – an ambitious project, starting with the stretch from Sydney to Newcastle, as well almost 350 road and rail projects underway across the country – from Tiger Brennan Drive in Darwin to the Bass Highway in Tasmania.

Over recent years, the states have continued to do a good job in investing in their priorities – removing level crossings, upgrading local road networks and building transformational public transport systems – sometimes in partnership with the Commonwealth, as is the case with Metronet in WA, and sometimes on their own as Queensland did with Cross River Rail.

But in my view; under my predecessors, Commonwealth decision making lost its way when it comes to infrastructure, and its management (or lack thereof) of the pipeline failed to help constrain costs or ensure value for taxpayers money.

The infrastructure investment program expanded from roughly 150 in 2012-13 to nearly 800 in 2022. Not necessarily an issue in itself, but when the majority of projects start to look more like a local government capital works program, you have to question what the role of Commonwealth investment is – is it nation building or is it a re-election strategy?

Australia’s infrastructure investment pipeline has become a house built on sand. And our government has been left with the difficult task of shoring it up.

Now is the time to refocus the infrastructure pipeline in a better and more coordinated way – including ensuring we don’t unnecessarily add to labour shortages and cost pressures in the economy.

What we have done so far

Since coming to Government last year, we have begun the hard work of putting Australian infrastructure back on solid ground and reorienting our investments towards those projects that shape the nation, our cities and our regions.

You can’t undo the damage of a decade in months alone.

But Australians voted for us because they wanted government done differently – and that is what we have set about doing.

First, we re-established working relationships with each of the states and territories.

After a decade of headbutting and politicised fights, we have worked hard to get the jurisdictions pulling together.

Of course, this does not mean there will be no more fights – particularly as different jurisdictions head towards elections – but it does mean we are talking.

In the October Budget we took hard decisions to start to smooth the pipeline and address immediate cost pressures.

We have also continued to support our trusted delivery partners in local government to enable them to deliver the projects that so many of our communities depend upon – including by boosting the final round of Local Roads and Community Infrastructure funding by $250 million in our first Budget.

We did a significant piece of work to understand what had gone wrong with Inland Rail and we are now tightly managing this project to deliver the sections between Beveridge in Victoria and Parkes in NSW by 2027, while undertaking the planning, scoping and costing work required to give us assurance that the rest of the project is ready for investment and construction.

When complete, the southern sections of the project will connect with intermodals at each end to build resilience and improve supply chain productivity between Melbourne, Perth, Sydney, Newcastle, the Illawarra and Adelaide.

Inland Rail, I remind everyone, had blown out to $31 billion under a Coalition Government that managed to build less than 10 per cent of the required tracks.

Next, we have sought to bring proper process and planning back into the infrastructure portfolio by boosting the funding for Major Projects Business Cases.

The extra $200 million invested in early planning will mean that Governments have a better range of information and a clearer picture of costs and benefits in front of them when it comes time to make a final funding decision.

Infrastructure Australia

To further enhance our selection of the projects, our government has also set about reforming Infrastructure Australia.

Guided by the advice of independent reviewers Nicole Lockwood and Mike Mrdak, we have sought to reshape Infrastructure Australia into the expert advisory body we need now more than ever and bring it into the Budget process.

We have introduced legislation into the Parliament to implement the findings of the review. We seek to define IA’s mandate, refine the work they undertake, strengthen their evaluation functions and function as they should do as the Commonwealth Government’s adviser on infrastructure investment.

If implemented, these changes will provide IA with a clear purpose and streamlined functions that align with the Australian Government’s strategic infrastructure priorities.

While I want to acknowledge the work that the hardworking staff at IA are already doing to improve their offering.

I am disappointed that the Liberals and Nationals are teaming up with the Greens to hold this legislation up in the Senate with amendments that are frankly unworkable.

There is no precedent for this kind of requirement, where IA would be required to table advice and every interaction with government within 10 days of giving it, anywhere across Government.

Not only would this interfere with the longstanding practices of Cabinet confidentiality, it would also infringe on Commonwealth-state relations and undermine commercial in confidence information.

I understand that the Liberals and Nationals don’t want a reformed Infrastructure Australia because they don’t want to hear any independent advice – that’s why they sidelined it for a decade.

The IIP Review

The IIP Review I commissioned to get a clear picture of exactly where the Commonwealth’s infrastructure investment program stands, where the cost pressures are, and what projects can and can’t be delivered and by when – is nearing conclusion.

After receiving the review, I have been doing the hard work of negotiating with the states and territories to ensure we have a sustainable pipeline going forward.

It’s unsurprising that those who wasted a decade and caused these problems are now condemning me taking the time to make sure we get this right.

While I will announce the government’s response to review in the coming days, the findings are already clear.

Through their forensic study, the reviewers found an estimated $33 billion dollars of known cost blowouts on projects in the infrastructure investment program. And they said there was a high chance that this would blow out even further.

This is a stunning amount of money. It’s enough that we could pay the cost of what it took to build Melbourne’s West Gate Bridge 30 times over. And that’s after adjusting for inflation.

Of projects not yet in construction, where not a single sod has been turned, they found $14.2 billion of known cost blow outs.

They found that it would simply not be possible to deliver the current ten-year pipeline of projects within the $120 billion Commonwealth allocation.

Significantly, they found that, without making significant immediate changes to program settings, the Australian Government cannot afford to meet identified cost pressures, nor add any new projects to the pipeline in the next ten years.

If we continue as we currently are, we cannot commit to any new projects for the next ten years – until 2033.

This is because, in the words of the reviewers, “There are projects in the IIP that do not demonstrate merit, lack any national strategic rationale and do not meet the Australian Government’s national investment priorities.”

I am sure we will hear a lot in coming weeks about infrastructure cuts. But the reality is that no funding will be cut from the $120 billion pipeline.

We’re not cutting funding, we’re cutting the lies and we’re cutting the waste. We are seeking to manage the pipeline in a sustainable way, manage cost pressures and ensure we are not adding to inflation.

We need more nation building projects like Western Sydney Airport, and fewer car parks and new roads that lead nowhere but marginal seats.

I know that there are some – and you might even have heard from one of them yesterday morning – who say we should ignore this report.

They claim that infrastructure spending has no impact on inflation – despite the warnings of the IMF and the Reserve Bank.

They claim that we can just keep going on with project costs escalating, timelines slipping, and Australians losing ever more faith in the ability of their government to deliver infrastructure. They are the same people who have been on national TV calling for spending restraint

They argue that if we continue to ignore the problem, it will all go away.

I say to them, that is exactly the kind of thinking that got us into this mess to begin with.

We must acknowledge reality and we must get back on solid ground. That is what the IIP review will allow us to do and I will have more to say on this in the coming days.

Policy Statement

I know though, that getting back to that solid ground though is only the start of the challenge.

We then have to set the guard rails to make sure we never get into this position again.

As part of our government’s response to the infrastructure review, today I release our new Infrastructure Policy Statement.

This document recommits the Commonwealth to focusing on delivering nationally significant land transport projects in partnership with our stakeholders, and taking a strategic view of its investments and the infrastructure pipeline.

What does “nationally significant” infrastructure mean?

It means a Commonwealth contribution to a project of at least $250 million, or it means they are situated on or connected to the National Land Transport Network or key freight routes and it means they align with our broader national priorities – such as housing or critical minerals.

Projects don’t have to tick all those boxes, but they must tick some of them.

On top of that, we will identify further priorities for our investment:

• Productivity, meaning investments that cut congestion, help us move around our cities and regions, and ensure our supply chains are strong and resilient.
• Liveability, meaning we build equity into the heart of where we live and ensure our networks remain safe for travellers and workers.
• And sustainability, meaning we reduce our emissions and encourage more sustainable ways to travel.

We are also reshaping how we fund projects. The 100 per cent Commonwealth funded, or 80/20 percent funding split is no longer the default – we are returning to a preference of 50/50 with the states and territories, so both levels of government carry an equal share of both the benefits and the risks.

Again, we are not cutting any funding from the pipeline, what we are doing is ending the perverse incentives that saw the Federal Coalition throw money at projects that states did not want to build – and then they simply never happened.

This is not about saving money – it is about shared accountability and maximising our investments. For example, the Commonwealth is currently investing more than $10 billion in the Bruce Highway, an amount that is only worth around $12 billion on an 80/20 split, but would have been worth $20 billion had it been split equally.

When it comes to future investments, we will seek to unlock that extra money.

And in negotiating with our delivery partners, we will seek to encourage local employment and procurement, as well as increase the participation of women and First Nations communities and other marginalised groups in the delivery of these projects.

We seek to share the benefits of infrastructure investment, not just the costs and risks of cost blowouts.

Conclusion

As I said at the start – at its best, infrastructure is life changing and nation shaping.

It connects communities with opportunity and individuals with each other.

It creates jobs, it gets exports to market, it keeps us safe and it allows Australians to reach their full potential.

It creates prosperity and it unleashes productivity.

When built properly, it can quite literally inspire us.

Standing in the station box at Sydney Metro at Western Sydney Airport, or on the runway it is hard not to be inspired by the work of this amazing industry.

Whether it’s workers building trains in my hometown of Ballarat or over in Perth, knowing that over the coming years they will transport millions of people efficiently and safely through our cities, they do a vital job.

But most of all, I have been inspired standing with a work crew on the Tanami outside Yuendemu.

A lifeline through the most remote communities in Australia. It’s a long way from underground trains or level crossing removals, but it delivers essential services and it changes lives.

That is what infrastructure investment can do – it’s what it should do.

Australians at home don’t trust the promises of politicians who come to town, declare they will build a project and erect a sign spruiking the work well before work is ever due to begin – if it ever begins at all.

To be quite honest, over recent years Australians have been right not to trust them.

Many of the projects currently in the IIP will never be built and can never be built.

By ending those lies, the Albanese Government can invest in the projects that only the Commonwealth can – those which shape our cities, our regions and our nation.

We can build the roads, lay the tracks and dig the tunnels that will build a better future for all Australians.

Working together with our colleagues in the states and territories, that is exactly what our government will do.