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 Broad MP 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

SKY News Agenda with David Speers



08 October 2015

Topics: Labor's Infrastructure announcement

David Speers: Well for some government reaction now to what Labor has announced, the newish Minister for Major Projects Paul Fletcher joins me in the studio. Thank you for your time this afternoon Minister.

Paul Fletcher: Thanks David.

David Speers: Now I know today you've basically dismissed Labor's ideas. I thought Malcolm Turnbull was keeping everything on the table. This one is ruled out?

Paul Fletcher: Well look, the first thing to note is that there's plenty of work going on under the Turnbull Government in relation to our infrastructure package, some $50 billion. Projects like the Bruce Highway and the Pacific Highway, Anthony Albanese mentioned both of those, they were mentioned by Labor today, they're being delivered. There'll be a four lane highway Sydney to Brisbane by 2020, $5.6 billion going into that. There's 6.7 billion going into upgrade the Bruce Highway, that highway…

David Speers: What about some of those others like Melbourne Metro, Cross River Rail in Brisbane, what's happening with them?

Paul Fletcher: Well let's some to one of the curiosities or the questions about what Labor has announced today, because yes it's important to seek to encourage private sector investment in infrastructure. Where ever we can find projects to do that that's a very good idea. Anthony Albanese talked about NorthConnex—that's a project in New South Wales which connects the M1 at Wahroonga to the M2 at Pennant Hills. About $3 billion of total expenditure, $810 million in total from the Commonwealth and the state governments together, the balance being paid by the Transurban consortium, and they will recover that out of tolls.

David Speers: So this is private sector involvement in infrastructure projects.

Paul Fletcher: There's very extensive private sector involvement in this project and other projects. WestConnex, which is another project where the Commonwealth is working together with the New South Wales Government, stage one and stage two once completed will then be returned to private ownership, very significant realisation- retrieval of capital which can then be reinvested in other projects.

David Speers: But could you leverage more private sector involvement, and beyond just toll roads which do seem to be the most likely option that private sector invest in?

Paul Fletcher: And it's highly desirable to maximise the amount of private sector involvement in infrastructure. The challenge with public transport is that the fare revenue on a railway system typically doesn't even cover the operating expenses, so it does not generate a financial return to the investor.

David Speers: So even on an airport link like Sydney or Brisbane where you charge more than a regular train ride?

Paul Fletcher: You do charge more, but certainly if you look at the airport link in Sydney, that has been unfortunately a troubled project. As a general proposition it is very challenging to generate a financial return on a public transport project. And so therefore for Labor to be talking about this $10 billion, which by the way is borrowed money, to be saying that this is a solution because there's a shortage of capital wanting to invest in projects with a return- there isn't a shortage of capital for- wanting to invest in projects with a return, there's a shortage of projects with a return.

David Speers: And that's the key point here. Are you saying there's only a small number of projects that really stack up for the private sector?

Paul Fletcher: In general there are some infrastructure projects which generate a return, and it's a very good idea to get the private sector involved. We are very keen to do that, we are doing it…

David Speers: That Badgerys Creek rail link, would that stack up for the commercial sector?

Paul Fletcher: Well I think it's too early to say. And that comes to another point, it's very important that we have a proper assessment of projects, that we have a business case, that we have a cost-benefit analysis, and that we make a rational decision about which projects to fund. State governments have…

David Speers: And that's the job for Infrastructure Australia.

Paul Fletcher: That is the job for Infrastructure Australia. State governments have a finite amount of money available; the Commonwealth Government has a finite amount of money available. Now it's very unclear from what Labor has announced today, will Infrastructure Australia continue to be the body which makes- which does the independent analysis and says to the Commonwealth Government yes this should be supported or not, or is the list of projects which was included in what Labor put out today—included in Bill Shorten's speech—is Labor now committed to those projects? And if they are, then in some cases they're committing to projects before a business case has been done, before it's gone through…

David Speers: But do you take Anthony Albanese's point that a lot of these have been already ticked off as priority projects for…

Paul Fletcher: Well no, no. In fact I think that really bears further analysis. He talked about Melbourne Metro. See this is a proposed rail project in Melbourne. Now on my information the business case has not been provided and won't be provided until early next year. So the Commonwealth Government, the Turnbull Government, is certainly saying to state governments if you have projects that you believe are deserving of Federal Government support, it's projects of national significance, they need to go through an Infrastructure Australia process, and please give us a business case. Now it's unclear from what Labor is saying whether, in terms of the projects they've listed, they're now saying they are committed to by Labor regardless of Infrastructure Australia analysis.

David Speers: Let me ask you what the Government's going to do, you want to deliver more public transport, you want more federal government involvement in public transport, is that right?

Paul Fletcher: What Malcolm Turnbull as prime minister has said is that we will assess projects on their merits. So, that means looking at the benefit cost ratio. In other words for every $1 of taxpayer money that goes in, does it produce a benefit of $1.50 or $2 or $3 or as is sometimes the case does it only produce a benefit of about 30 cents or 70 cents.

David Speers: But if it passes that test, you do want to put federal money into public transport.

Paul Fletcher: What we want to do is rationally allocate Commonwealth money in accordance with a process where we identify the projects of highest value, projects that are of national significance, bear in mind there is plenty of work for state governments to do here, state governments have traditionally taken the lead on public transport projects…

David Speers: So, I just want to be clear about this though, is there a role for greater federal involvement in public transport projects?

Paul Fletcher: Potentially there is…

David Speers: But how do you do that?

Paul Fletcher: But—and let me tie that back to the principle which Prime Minister Turnbull has articulated, that we don't have a bias in favour of road or rail, what we're interested in is which projects make most sense and we're also, of course, constrained by the Commonwealth Budget, in other words, the constraint on mode has been relaxed but there's very much a constraint on the amount of money available. Now, Labor's proposals to go out…

David Speers: You'd be borrowing money too for whatever you do…

Paul Fletcher: Labor's proposal is to go out and…

David Speers: …you'd be borrowing money as well.

Paul Fletcher:…borrow additional $10 billion…

David Speers: It's all—we're in deficit so you'd be borrowing it too.

Paul Fletcher: But we are in the process of—as Treasurer Morrison has stated, we are in the process of seeking to get our Budget back into surplus over time so it is very important that as we look at what we do in this space, we are conscious of the fiscal constraints and can I make the point that $50 billion plan that we have has an enormous amount going on. Pacific Highway, Bruce Highway…

David Speers: Sure, but just back on public transport, it sounds from what you're saying like we're not going to—you're not going to be able to leverage private sector money for any public transport either. If it doesn't stack up, it doesn't stack up.

Paul Fletcher: What I'm—the point I'm making is that the premise that there is some new way to get private sector investment into projects that don't generate a financial return is not a valid premise. It doesn't make sense to maximise opportunities to get private sector investment in infrastructure, of course it does, we're already doing that. Let me give you an example of some of the financial innovation that is occurring now, there is a $2 billion concessional loan from the Commonwealth Government to the New South Wales Government for WestConnex. Now, that is important to allow the Stage 2 to be brought forward as quickly as possible and in turn, for the combined two stages, to then be sold to realise capital to reinvest. So, that's very important.

David Speers: But it does sound, that's partly what Labor's talking about, concessional loans…

Paul Fletcher: The point I'm making is there's nothing particularly new here. This is being dressed up by Labor as some bold breakthrough in infrastructure. Look, we welcome creative thinking but they don't have an answer to the fundamental problem, how are you going to get private sector investment into projects that don't generate a financial return and nor do I have an answer to the fact that we are doing this stuff, we are delivering this stuff—the projects that Albanese is talking about, many of them, we already have well underway. Can I make this point as well, when we saw the chaos from the previous Labor Government with Pink Batts, with school halls, with their mismanagement of the NBN, a huge infrastructure project which they failed to take to a cross-benefit analysis with Infrastructure Australia. Does anybody really believe that Labor is capable of delivering on a plan in this space?

David Speers: Paul Fletcher, we will have to leave it there. Thanks for joining us this afternoon.