Ministers for the Department of Infrastructure, Regional Development and Cities The Hon Michael McCormack MP Deputy Prime MinisterMinister for Infrastructure, Transport and Regional Development Senator the Hon Bridget McKenzie Minister for Regional ServicesMinister for SportMinister for Local Government and Decentralisation The Hon Alan Tudge MP Minister for Cities, Urban Infrastructure and Population The Hon Sussan Ley MP Assistant Minister for Regional Development and Territories The Hon Andrew Gee MP Assistant Minister to the Deputy Prime Minister The Hon Andrew Broad MP Former Assistant Minister to the Deputy Prime Minister The Hon Scott Buchholz MP Assistant Minister for Roads and Transport The Hon Barnaby Joyce MPFormer Deputy Prime MinisterFormer Minister for Infrastructure and Transport The Hon Dr John McVeigh MPFormer Minister for Regional Development, Territories and Local Government The Hon Keith Pitt MPFormer Assistant Minister to the Deputy Prime Minister The Hon Damian Drum MPFormer Assistant Minister to the Deputy Prime Minister Senator the Hon Fiona Nash Former Minister for Regional DevelopmentFormer Minister for Local Government and Territories The Hon Darren Chester MP Former Minister for Infrastructure and TransportFormer A/g Minister for Regional DevelopmentFormer A/g Minister for Local Government and Territories The Hon Warren Truss MP Former Deputy Prime Minister Former Minister for Infrastructure and Regional Development The Hon Paul Fletcher MP Former Minister for Urban Infrastructure and Cities The Hon Jamie Briggs MP Former Assistant Minister for Infrastructure and Regional Development

Keynote address at the Committee for Economic Development Luncheon ‘Australia's infrastructure potential’



21 May 2015

RACV Club, Melbourne

It is great to be here. It is always great to be in Melbourne, maybe not so much this year as a Carlton supporter but it is terrific to be here today talking to CEDA.

CEDA is a very well-known institution for economic thought and policy development, and it continues to play a large part in our country.

Today I'm talking about Australia's Infrastructure potential following Diane's contribution.

Through a combination of geography, topography, hard work and creativity, Australia stands on the edge of the greatest economic boom the world has ever seen. Our produce and natural resources are in demand the world over.

Our proximity to Asia and our connections to the English speaking world make us the ideal place to do business whether you're coming from the East or West.

And the recent Free Trade Agreements that Andrew Robb has signed on behalf of the Australian Government have turbo charged the opportunities for Australian businesses to access a combined market of 1.5 billion customers. But we need to make sure that Australia is ready to take full advantage of these opportunities.

You would have seen in last week's budget an ambitious plan to create more jobs and grow the economy—with small business and families front and centre.

The 1.5% company tax cut and the immediate tax deduction for every asset small business acquire valued up to $20,000 will help small business invest, grow more, and employ more.

We are also giving parents more choice and opportunity to work by making child care simpler, more affordable, more flexible, and more accessible. We need more women in the workforce.

These are responsible measures to get more people into work and strengthen our economy.

Importantly, we are implementing these measures while also reducing the budget deficit.

We inherited a government that was borrowing around $133 million a day just pay the daily bills.

We've got it down to $96 million a day.

We inherited $123 billion of budget deficits over the next four years. We have got it down to $82 billion.

We have a long way to go quite obviously.

But we have put the budget back on a credible path back to surplus. Some of these decisions have been tough.

But they are the right decisions for our future.

And of course, infrastructure is a key pillar of our plan to strengthen the economy.

Australia's infrastructure challenge

We cannot grow the economy without the right infrastructure to support it.

I am optimistic about our potential to deliver the right infrastructure for the future.

But we are facing an enormous challenge.

We know that infrastructure is the key to Australia's competitiveness.

Yet historically our investment has not kept pace with demand.

Total freight volumes have nearly tripled over the past three decades1 and car passenger movements have increased by over 30% since 1990.2

Yet Australia's quality of overall infrastructure has dropped sharply.3

The Global Competitiveness Index currently ranks Australia's overall quality of infrastructure 35th in the world—a fall of ten spots since 2008.

This is resulting in a growing congestion problem that is costing our economy around $15 billion dollars a year—projected to increase to $20.4 billion by 2020.4

This pressure on infrastructure will only increase as the population grows to around 30 million by 2031.5

It is obvious from these states why the supply of infrastructure is consistently rated amongst the top problematic factors for doing business in Australia.

It is challenging enough just to address Australia's infrastructure backlog let alone meet Australia's future infrastructure needs.

We are opening up new trade opportunities with China, Japan and Korea—and we have heard encouraging steps this week towards an outcome with the Trans Pacific Partnership.

But it is clear that we will not able to make the most of new trade opportunities with congestion on our roads and bottlenecks at our ports.

We desperately need to improve our infrastructure so we can deliver our goods across the country and to the rest of the world more efficiently—otherwise congestion will continue to act as a handbrake on our economy.

The 2014–15 Budget delivered the biggest infrastructure investment of any government in Australian history—a $50 billion investment.

This investment meant we could get the big projects off the drawing board—like WestConnex in New South Wales and the Perth Freight Link in Western Australia.

And it meant that we could finally start upgrading the infrastructure in Australia's fastest growing area—Western Sydney.

We absolutely recognise, though, that Government funding alone will not be enough to deliver the infrastructure we need for the future.

That is why we established the Asset Recycling initiative, a $5 billion fund that State Governments could access when they recycled the proceeds of existing asset sales into new infrastructure.

We expect this initiative to generate close to $40 billion of additional infrastructure investment.

We have already signed agreements with the Australian Capital Territory and New South Wales, providing over $2 billion towards new infrastructure like the second harbour rail crossing and Parramatta Light Rail project.

We also understand that project planning and analysis is just as important as the investment.

We have delivered on our election commitment to make Infrastructure Australia an independent statutory authority, governed by an independent Board who choses its own CEO.

Delivering independence to Infrastructure Australia is a crucial element of the Government's plan to improve project planning and delivery of infrastructure.

Since the reforms passed the Parliament last year, Infrastructure Australia has undertaken an audit of nationally significant infrastructure.

Tomorrow, the Prime Minister will release this audit.

The audit will feed into the 15-year plan on infrastructure priorities, which Infrastructure Australia expects to finalise in the second half of 2015.

The audit shows a growing gap between the demand for infrastructure and the funds that are available.

It again highlights why we have to reform the system and why there needs to be a greater involvement by the private sector for alternate sources of funding.

Governments will always play a major role in funding infrastructure but it is vital that all levels of government work with the private sector to drive even more investment.

Partnering with the private sector is our opportunity to make up for the lack of investment in the past and deliver the infrastructure we need for the future.

International companies are looking to invest in Australian infrastructure.

In fact, during a recent trip to Canada and the United States, I received a very clear message that there is a strong appetite to invest here.

I want to make sure we provide them with the opportunities wherever possible so they can partner with us to deliver the infrastructure for Australia's future.

To encourage more private sector investment, we must have a strong pipeline of projects.

The work Infrastructure Australia is undertaking will provide a greater understanding and opportunity of where to invest.

The private sector can also take comfort in the fact that this work is being undertaken at arm's length from government and thus away from political interference.

We also need to ensure that tendering processes are not cost prohibitive.

The cost of bidding is consistently raised with me and this issue featured strongly in the findings of the Productivity Commission report in public infrastructure which was released last year.

We are working with the states and territories to streamline procurement policies to minimise the administrative burden on governments and the private sector.

We are willing to consider the use of flexible tendering arrangements, including consideration of semi-financed bids on a case by case basis.

We know that the private sector has a strong interest in investing in existing assets, which is why we are offering state and territory government incentives to stimulate their balance sheets through the Asset Recycling initiative.

But we also need to discuss new ways to encourage the private sector to invest further in infrastructure projects in Australia, particularly in new assets.

We continue to talk with the superannuation industry and investment manages about future opportunities.

The Australian Government will continue to look at innovative ways to deliver, fund and build the infrastructure that our country needs.

But alternative financing and asset recycling will ultimately continue to be a decision for the state and territory governments.

If a State Government rejects alternative financing—whether it be tolling or asset recycling—that state then becomes wholly reliant on a finite amount of government resources to deliver new infrastructure. And that finite money is competing against other interests such as health and education.

It has become clear that the level of activity in each state is reflective of their willingness to embrace alternative financing.

New South Wales is clearly a standout.

Around $20 billion worth of new investments are planned in New South Wales by selling electricity assets.

New investments include a second harbour rail crossing, Parramatta Light Rail project, a Regional Growth Roads Programme, Smart Motorways Programme, and Pinch Points and Clearways Programme.

WestConnex Stage 2 is being delivered eighteen months ahead of schedule because both the Australian Government and State Government were willing to consider alternative financing arrangements—in this case a $2 billion concessional loan.

The first time the federal government has used such a vehicle.

And of course construction has started on NorthConnex—the first major infrastructure project in New South Wales to be delivered under the new unsolicited bids process.

On the other side of the country, Western Australia is embracing new forms of investments.

They are establishing a heavy vehicle freight charge to support the Perth Freight Link.

The freight charge will be collected through a GPS-based system—a first in Australia.

WA is also looking to sell the Fremantle Port—possibly unlocking $1.5 billion for new infrastructure. We congratulate the WA Government on this move.

The Australian Government wants to see more quality infrastructure being built in Queensland.

There was one consistent message we heard from investors in Canada a couple of weeks ago: that was the dismay with the Queensland Government's decision to reverse the Asset Recycling Initiative.

We are already investing almost $7 billion to upgrade the Bruce Highway and have committed $929 million for the Gateway Motorway North in Brisbane.

But we will not be able to fund all the infrastructure Queensland needs, especially in south east Queensland, through government funding alone.

The Queensland Government has been talking about new public transport projects but we haven't seen a plan and they haven't explained how they will be funded.

We will continue to encourage the Queensland Government to embrace the Asset Recycling Initiative and work with us to deliver the infrastructure Queensland needs for the future.

In South Australia we are eager to invest in more projects, especially along the North South Corridor.

This week the South Australian Government released the North South Corridor Planning Study.

We welcome the release of this report, which was suggested and funded by the Australian Government.

Given this is the first time we have seen the final report, I have now sent this to Infrastructure Australia to seek their advice on what sections of the corridor should be prioritised for funding.

The Australian Government is fully committed to delivering the North South Corridor and we look forward to working with the South Australian Government to do so but we will need advice from the South Australian Government about how they intend to fund it.

It is vital, though, that tolling options—especially for heavy vehicles—are considered as a source of funding, and we will keep discussing these options with the South Australian Government.

In Victoria, the Australian Government continues to talk to the Victorian Government about the major infrastructure projects of national significance.

We fully support moves to sell the Melbourne Port and re-invest the proceeds of the sale into new infrastructure.

But we are completely dismayed by the Victorian Government's decision to not proceed with the East West Link.

The unprecedented decision to tear up a contract and pay over half a billion dollars to a consortium not to build anything was a massive set back to Victoria and its reputation.

This project was ready to create 7,000 construction jobs and deliver significant and much needed travel time savings for commuters.

The decision has left Victoria without a major shovel ready project.

In his 2008 East West Link Needs Assessment Report, Sir Rod Eddington warned that “Doing nothing is not an option.”

But this is what is happening now, as a result of the Victorian Governments' decision to tear up the East West Link contract.

We remain absolutely committed to the East West Link and we have set aside $3 billion for the first Victorian Government willing to build this project.

But Victoria cannot afford for this stalemate continue.

Melbourne cannot afford to wait four more years for the next major infrastructure project to start construction.

That is why we welcomed the announcement from Transurban regarding the Western Distributor.

We are more than willing to work with Transurban and the Victorian Government to further progress this proposal.

This morning, I met with Transurban and I am encouraged by the work that has been done so far.

I am stunned however by the fact that the Victorian Government refuses to allow Transurban to provide us with any detail of the project.

They want $1.5 billion from us but they don't want the project detail to be provided to us.

We understand that we will not see any detailed proposal from Victoria until the end of the year.

We are doing everything we can to work with the Victorian Government on infrastructure but we need them to cooperate.

Despite the fact that the Federal Government did not know anything about Transurban's proposal before it was announced to the media, within 24 hours of receiving the Premier's letter the PM had responded asking for more detail and laying out the conditions of our support -

  • The community benefits must be the same as the previous proposal for the western section of East-West link;
  • There must be a state contribution;
  • It must be assessed by Infrastructure Australia; and
  • We do not support increasing tolls on roads that have no association with the project, however we want Transurban and the Victorian Government to explain to us how this project will benefit the entire network.

If Daniel Andrews was serious about wanting to find a shovel ready project for the Federal Government to invest in and if he was serious about creating jobs, he would come to the Federal Government now with a proposal and his chequebook and say “How can we make this happen?”

Instead he stands on the sidelines demanding cash while refusing to provide the detail or the money that is necessary to make any Commonwealth investment happen.

The Labor Government wants us to simply fund a ‘good idea’.

This is just unacceptable and today I call on the Victorian Government to release to us the full details as quickly as possible so it can be assessed and we can work towards an agreement.

There will be federal money for this project if it is the right project.

Despite the recent uncertainty following the Victorian Government's decision to tear up the East West Link contract, Australia does remain a good place to invest.

As mentioned before, Governments will always play a major role in financing infrastructure.

But there is a very strong interest and willingness from the private sector here and abroad to invest in Australian infrastructure.

There is a huge opportunity to deliver a new wave of infrastructure across the country—infrastructure that will unclog our cities, deliver safer roads and let us make the most of new trade opportunities.

But relying on government funding alone is a false dream.

And holding on to old assets based on policy from a bygone era only ties up scarce government capital.

We can deliver more value out of the taxpayers' money by moving tied up funds out of existing assets into new assets.

We need to be smarter about the way we fund infrastructure and we need to be more ambitious about what we can achieve.

We must encourage alternative financing and embrace what the private sector has to offer if we are to achieve all that is before us.

Thanks so much for listening.

1 BITRE “Freightline” publication, May 2014. It states on page one: “In 2011–12, the domestic freight task totalled almost 600 billion tonne kilometres1 that is equivalent to about 26 000 tonne kilometres of freight moved for every person in Australia.” Page 2: “Total freight volumes have quadrupled over the past four decades, predominantly due to significant growth in road freight and, more recently, strong growth in mining-related rail freight volumes.” On page 8 it states “Growth in Australia's freight task is projected to continue over the next two decades with total domestic freight projected to grow 80 per cent, between 2010 and 2030”

2 BITRE Yearbook 2014, p. 59

3 Global Competitiveness Index Report 2008–09 and 2014–15. Australia's ranking has dropped from 25th in 2008–09 to 35th in 2014–15

4 Trends, Infrastructure and Transport to 2030, February 2014, Department of Infrastructure and Regional Development, p. 10 & Department of Transport and Infrastructure, State of Australian Cities, 2013

5 Australian Infrastructure Audit Report, p6