Our future infrastructure landscape
It is a pleasure to join you here in Melbourne at the Australian Financial Review National Infrastructure Summit.
I am born and bred of this great city. I grew up in Pakenham, 55 kilometres out from where we are today. When I was a boy, it was a country town of just a few thousand people; the local hospital where I was born was then called the Pakenham Bush Nursing Hospital.
No one would call Pakenham “the bush” anymore. As Melburnians know, there are suburbs all the way to Pakenham and beyond. The town itself is 50,000 people with another 20,000 on its way.
I mention this story because it illustrates the incredible growth of this city over the last few decades; growth which has been largely replicated in our other big cities. This has made our cities more cosmopolitan, vibrant, and wealthier, but it has also created enormous challenges, particularly the challenge of congestion.
In the last decade or so, our large cities of Melbourne, Sydney and Brisbane have seen congestion markedly increase.
For example, 10 years ago, a 30km freeway journey in Melbourne's morning peak took an average of 39 minutes. Today, it takes an hour. Peak hour is extending; freeways are now frequently at a stand-still; many trains are at crush capacity; and station carparks are full.
Congestion was a key theme in the recent election, particularly for those in middle and outer suburbs. It impacts people's lives in a real way on a daily basis.
But congestion is also an economic burden. When roads are congested, it costs more to transport goods, for service providers to get to their destination, and for employees to get to work.
Large cities will always have some congestion, but analysis from the Bureau of Infrastructure, Transport and Regional Economics shows that the avoidable costs of congestion for Australia's capital cities has risen significantly over time from a cost of $5.7 billion per year in 1990, $9.3 billion in 2000 and $25 billion in 2017–18. It suggests that without any policy change, it will grow to $40 billion per year by 2030.
The Governor of the Reserve Bank of Australia also emphasised this point in his most recent speech, pointing out that our infrastructure investment is one of the key factors supporting the economy:
The investment [in infrastructure] is important. It is not only supporting demand in the economy at a time when this is needed, but it is also adding to the supply capacity of the economy and directly improving people's lives, including through a reduction in transport congestion.
It is these social and economic costs of congestion, and the importance of infrastructure to the economy generally, that have been at the forefront of our minds in establishing our national urban infrastructure agenda (which I will come to in a minute).
This infrastructure agenda is one element of a multi-faceted plan to better manage our future population growth—which has the aim of supporting economic growth and maintaining the liveability of our cities and regions.
That plan was outlined just a couple of months before the election and comprises three broad components:
- Easing the population pressures on our big capitals and supporting the growth of smaller cities and regions,
- A massive boost in infrastructure, and
- A better planning mechanism with the states.
In my remaining time today, I want to take you briefly through these components of our population plan and how they fit together, with a focus on our infrastructure agenda and how we are thinking about the implementation challenges post election.
Easing population pressure
The first element of our Population Plan is to ease the population pressure on our big cities and better support the growth of our regions and smaller capitals.
Australia's population story is one of strong growth.
Australia, along with New Zealand and Israel, has some of the highest population growth rates in the developed world, with Australia averaging about 1.6 percent per annum.
This growth would be challenging enough for planning and infrastructure to keep up, but it hides the fact that 75 percent of all that growth in recent years has been to three areas: Melbourne, Sydney and South East Queensland.
Those cities have had exceptionally fast growth. Melbourne grew by a rapid 2.7 per cent in 2016–17, with Sydney and SEQ not far behind. Only two other cities in the English speaking world added more people than Melbourne during that year: Atlanta and Houston.
Around sixty per cent of all our population growth has been driven by migration, but it is even higher in Melbourne and Sydney.
Outside of our largest urban areas there are many smaller cities and territories that are growing more modestly but want to grow faster, and in some cases cannot find people for the work available.
South Australia, for example, wants to grow faster and bridge the gap between its current population growth of 0.7 per cent per year and the national average of 1.6 per cent.
In the regions today, there are an estimated 60,000 vacant positions—18 per cent more than two years ago. I have mayors and businesses screaming for more people in those areas.
In response to this, we are implementing a much more nuanced approach to Australia's migration policy, in close consultation with the states and local government. We have also announced a fast rail plan which will work in concert with these new migration settings to help decentralise our population.
Step 1 is reducing the permanent migration cap from 190,000 to 160,000 people per annum. Then, within this 160,000 cap, we have allocated 23,000 places specifically for areas outside the large capital cities.
On top of this, we have provided new incentives for international students to seek opportunities in smaller cities or the regions. International students are the largest component of the temporary migrant intake, but like with permanent migrants, 80 percent go to Melbourne, Sydney and Brisbane. Our new incentives will change this distribution, without jeopardizing one of our largest export industries.
We are also expanding the use of Designated Area Migration Agreements. These are tailored migration agreements for specific geographical areas. Six are presently being implemented or negotiated.
Working in concert with these new migration settings is our fast rail plan.
Our fast rail plan has the same objective as the new migration settings that I have outlined. That is, to take the pressure off the big capitals and support the growth of the regions.
Over the next two decades, our ambition is to have several of Melbourne's, Sydney's and Brisbane's satellite cities connected to fast rail. This would then enable people to live in a place like Shepparton or Wodonga (with the cheaper housing and lifestyle that accompanies regional centres) while being able to easily commute daily to the larger employment markets.
We are starting with Melbourne to Geelong and have allocated $2 billion to get this going and create a 30 minute commute. We are then funding a number of business cases on other routes to determine future priorities.
Our large capitals will continue to grow strongly but the combination of these migration settings, fast rail to satellite cities and further investment in regional centres will see a slightly more even distribution of population growth.
Boosting infrastructure expenditure
The second part of our Population Plan is a massive increase in infrastructure expenditure, particularly in urban areas where the population is growing rapidly.
In the 2019/20 budget, we announced a record investment of $100 billion over ten years that benefits every state and territory.
In the three years before we came to office, the federal infrastructure expenditure averaged $6 billion per annum; it is now averaging over $10 billion across the forward estimates.
The bulk of the funding is on the large city-shaping road and rail projects along with key national roads of strategic importance (which the Deputy Prime Minister has referred to).
In the Budget, for example, we made additional commitments to M1 Motorway in Queensland, the Pacific Motorway in New South Wales, the Western Highway in Victoria, and the North South Corridor in South Australia, among others.
Further rail investments were made in fast rail (as I have mentioned) as well as an additional $700 million to improve services through to Waurn Ponds in suburban Geelong.
However, in the last two budgets, we have also focussed more on suburban roads, in recognition that it is often the local road, intersection, or lack of bridge that causes as much of a congestion headache as the pace of the freeway.
We have allocated $3 billion out of our $4 billion Urban Congestion Fund, to more than 160 projects across our major cities. These projects are aimed at reducing congestion, helping reduce vehicle operating costs and delivering a more reliable road network for commuters and freight.
Part of this $4 billion Urban Congestion Fund is $500 million allocated for commuter car parks. Over the next few years, this funding will add capacity to 47 commuter carparks in Melbourne, Sydney and Brisbane, removing up to 25,000 cars from our roads every day. In many cases, we have targeted entire rail corridors to add parking capacity all the way up the line.
We want to get cracking on all of these projects as quickly as possible. In nearly all cases, this involves working cooperatively with state governments and local councils who will undertake the construction, even if the federal government has fully funded the project.
I have been having meetings with my state counterparts and local mayors to get these projects locked into construction schedules and delivered as quickly as possible.
The public want the levels of government to work together to get projects delivered and that is exactly what we want to do, regardless of the political colour of the government or Council.
We have done this effectively across the nation, but as our investment increases, naturally our engagement will also. Our aim is to develop strong partnerships as we continue to roll out projects.
Further, how we design the new roads and commuter car parks is often as important as the funding itself. We want to continue to engage with the private sector who bring expertise in the planning and design as well as good public consultation which Councils and State Governments are generally good at.
Our national infrastructure program is already having an impact on the economy and will continue to do so.
Ernst and Young, in analysis commissioned by the Federal Infrastructure Department, estimates that our investment in 90 federally funded major projects are, each year, adding $3 billion to national productivity, saving 225 million passenger hours, and 55 million freight and business hours.
In further new analysis, they state that the economic gains of these projects are long lasting. By 2036, the economy will be $8.3 billion permanently larger as a result of these projects in our pipeline. In addition, this pipeline of projects, once complete, will have generated more than 9600 permanent jobs (on top of the tens of thousands of jobs generated during project delivery nationwide).
This demonstrates the significant, lasting impact of good infrastructure investment that remains long after the opening.
People are also starting to see the changes on the ground from state and federal investments in our cities and will see even more changes in the near future.
In Brisbane, for example, the $1 billion Gateway North Project was opened by Premier Palaszczuk and myself just a few months ago, allowing 83,000 road users to travel more seamlessly between Nudgee and Deagon, and reduce congestion on the connection to the Bruce Highway.
As well, next year, two upgraded sections of the M1 Pacific Motorway will be opening, at the Gateway Motorway Merge and between Mudgeeraba and Varsity Lakes, reducing congestion along the heavily trafficked route between Brisbane and the Gold Coast.
In Sydney, the city will be transformed within two or three years as some of the massive projects from the huge NSW infrastructure program will be completed, while others are just getting started. For example, the $3 billion North Connex will open next year, along with the next stage of the $16.8 billion WestConnex project (the New M5). The state-funded light rail to Randwick will be open at the end of the year. This is on top of the Northwest Metro that opened last month and had 130,000 passengers on its first day of opening, taking massive pressure off the road network, including major arteries like the M2 Motorway.
In Perth, we are partnering with the state government to deliver the transformational METRONET project, which will construct approximately 70 kilometres of new heavy passenger rail and up to 18 new rail stations. This represents the single largest investment in public transport in Perth's history and will make a huge difference in the lives of Perth's residents.
Of the big cities, my main concern over the medium term is Melbourne. The Victorian Government has initiated many large-scale projects that will help transform the city, but most are still five, ten or more years away from completion. Metro Rail which is critical to enable more train capacity on the entire network, for example, won't be finished until 2025; Melbourne Airport Rail, which we kicked off with our $5 billion commitment, will commence construction in 2022; North East Link, another great project of which we have allocated $1.75 billion will open in 2027; and of course, the Suburban Rail Link will take decades.
Of course, the East West Link would have been finished this year (creating a ring-road for Melbourne) had it not been cancelled. It still needs to be built and we are willing to fund the entire government requirement.
This is not to say that nothing has been completed. Many projects have, including the widening of the Tullamarine and the Monash (both supported by the federal government) and an impressive level-crossing removal program. However, the multi-billion dollar large scale projects are all some time away, while many of Sydney's are approaching completion.
We are in this situation in Melbourne in part because the population growth well outstripped expectations. In 2004, for example, it was projected that Melbourne would grow by 500,000 by 2017; it in fact grew by 1.2 million.
Given the time schedules involved in the larger scale projects, it means it is even more essential to get fast traction on the smaller ones. It will also mean continued monitoring of population growth into the city through our new population planning framework which I will now discuss.
Better planning with the states
The final major element of our plan to better manage our future population growth is a better planning framework with the states and territories.
Last December, the Prime Minister led a discussion with states and territory leaders who have now all agreed to develop a National Population and Planning Framework. The Framework will provide greater transparency and coordination around population growth and management, consider jurisdiction's input into migration settings, improve population data sharing, and focus on skills requirements at a regional level.
We are continuing to develop this Framework with the states and territories and welcome input on it from the broader community.
Our Population plans will also be supported in the future by a new Centre for Population. This will be established from 1 July this year and be based in Treasury, where the Population portfolio is led from.
The Centre will help all levels of government and the community better understand how the populations of our states, cities and regions are changing and the challenges that change presents.
We will also continue to deliver on our City Deals, which have become an important mechanism for developing 10–20 year plans across three levels of government for a specific geographical area. We already have seven deals signed and are in the implementation phase of them.
Just before the election campaign we announced our intention to negotiate a South East Queensland deal, while during the campaign we announced two for Melbourne: a South East Melbourne deal and a North West Melbourne deal. All three will be large and complex, but have the potential to better support the growth and liveability of these fast growing regions.
We know that having the right infrastructure in place to support the right number of people and skills, aligned with effective governance and collaboration by all levels of government, is essential to continuing to build the success of Australia's cities as great places to live and work.
We will be looking to identify, and where appropriate, leverage the important connections between our population plan, our approach to cities and the funding we provide to support new infrastructure in future City Deals.
To conclude my remarks today, I want to reaffirm our top priority, which is to progress the significant commitments we have made on population, infrastructure and cities policy.
Our direction is clear, and we will work closely with state and local governments to achieve our shared objectives of improving the lives of all Australians, taking pressure off our major cities while supporting growth in our regions, and getting people home sooner and safer.