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Federal budget 2014: infrastructure experts react

The Abbott government has committed an additional A$11.6 billion for an “infrastructure growth package” that is heavy on roads, but aimed at fast-tracking what it considers critical infrastructure. The…

Roads are the way to go for the 2014 federal budget. tim rich and lesley katon/Flickr, CC BY-ND

The Abbott government has committed an additional A$11.6 billion for an “infrastructure growth package” that is heavy on roads, but aimed at fast-tracking what it considers critical infrastructure.

The asset recycling initiative will cost A$5 billion over five years in order to encourage the states to sell assets and redirect the funds into infrastructure.

An additional A$3.7 billion will be directed towards road projects, including A$2.9 billion for Sydney’s WestConnex, Melbourne’s East-West Link, Adelaide’s North South Corridor, NT road upgrades, the Toowoomba Second Range Crossing, and the Perth Freight Link. This funding will also extend to national highway upgrades, black spots, and the Roads to Recovery program.

An additional A$2.9 billion will go to support the Badgerys Creek airport in Western Sydney, part of a larger ten-year A$3.5 billion Western Sydney Infrastructure Plan being delivered with the New South Wales government.

Together, the investment is expected to lead to additional infrastructure investment of A$125 billion, and add around 1 percentage point to GDP.

To find the money for the additional spending, the government will reintroduce the bi-annual indexation of the fuel excise, starting in August this year. Funds for asset recycling will also come from the sale of Medibank Private and the potential sale of the Royal Australian Mint, Defence Housing Australia, Australian Hearing, and the registry services business of ASIC.

In order to improve project selection and delivery, the government plans to introduce new governance arrangements for Infrastructure Australia (IA), in order to give it greater independence and transparency.

IA will be required to undertake audits of Australia’s infrastructure asset base every five years and develop a 15-year infrastructure plan. It will also be tasked with evaluating proposals for “nationally significant” economic infrastructure, as well as proposals in the health and education sectors. It will be asked to evaluate projects seeking $100 million or more of government funding, and publish its findings.

Rolling expert responses follow.


Phillip O'Neill, Professorial Research Fellow, Urban Research Centre at University of Western Sydney

Australian cities were starved of infrastructure provision in the early and mid-2000s when the Howard-Costello Coalition government gave priority to the pay down of Australia’s public sector debt and the establishment of the Future Fund to cover the government’s pension liabilities.

The planned ramp-up of infrastructure spending by a newly elected Rudd Labor government in 2007 was undermined by the global financial crisis. This left a newly established Infrastructure Australia with the task of assessing infrastructure projects that it had no capacity to fund.

Not surprisingly, then, Australian cities are starved of efficient, technologically advanced infrastructure. Moreover, there is limited understanding at both state and federal levels about how best to combine private and public sector inputs to address the infrastructure deficit.

Rather than address the complex issues of infrastructure provision with innovative solutions, this budget seems to adopt a simple formula: lean heavily on existing revenue streams in order to lever funds into road building, the easiest of all infrastructure assets to provide.

Then, in the background, the budget provides incentives for state governments to divest brownfields infrastructure assets, motivated not by economic value objectives but by the lure of financial gains for struggling balance sheets.

It is heartening that federal politicians continue to acknowledge the need for raised infrastructure expenditure. It is disappointing, though, that the Coalition government has not shown any intention to explore new options for funding and delivering the infrastructure services needed in an advanced 21st century economy.

Australian financial institutions are seen worldwide as successful innovators in infrastructure financing. So too, Australian infrastructure constructors and operators are world leaders. Yet our governments, state and federal, seem incapable of harnessing this expertise to develop a new suite of world-leading, sustainable, productive infrastructure. Australian firms are leading infrastructure designers and providers offshore. Unfortunately we currently lack the political will and imagination to mobilise these at home.

Michiel Bliemer, Professor in Transport and Logistics Network Modelling at University of Sydney

The infrastructure measures in the Budget 2014 are not unexpectedly focused on road infrastructure. Although rail was mentioned by the Treasurer, it is hard to find anything regarding investments in public transport.

As is well-known, more road infrastructure may locally alleviate congestion, but it also means more cars on our roads and into our cities where congestion problems will only get worse.

Public transport alternatives take cars off our roads, which means less congestion for car drivers and improved mobility for non-car drivers and leads to a more sustainable transport system for the future. It is therefore disappointing to see only substantial investments in road infrastructure. The asset recycling initiative offers perhaps a short term boost in infrastructure investments, but does not seem an appropriate model for sustainable infrastructure funding.

The indexation of the fuel excise tax and the hypothecation of the additional revenues for funding infrastructure projects, however, is a good idea given that revenues have been steadily decreasing over the years due to increases in the fuel efficiency of cars. An even better idea would be to introduce a user pays system that charges a higher price per kilometre during peak hours.

Chris Standen, PhD candidate in Transport Policy & Planning at University of Sydney

Asset recycling makes economic sense, but only if the privatised asset does not become a monopoly, and the proceeds are invested in new infrastructure, on which the economic or social return outweighs the forgone future revenue from the recycled assets.

Urban motorways give a negative return on investment, despite glossy business cases contrived by proponents to show the opposite. They encourage sprawl and create dependence on a costly and inefficient mode of transport. As a result, transport costs in car-dependent Australian cities are now twice as much as in cities with good public transport.

Urban motorways do not fix congestion because they simply attract more traffic. Sydney’s M5 and M2, for example.

In the case of WestConnex, Abbott and Baird are squandering A$12billion on a motorway that will allow people to drive from Penrith to the city in 92 minutes, even though the same journey can be completed in 49 minutes today in the comfort of a train. They will be charging motorists thousands in tolls every year for the privilege, on top of all their other costs.

Graham Currie, Chair, Public Transport, Director of Research (Transport Engineering) at Monash University

What we have is a car budget really which won’t do very much for the problems we have in cities which are facing congestion problems. I’m not sure more roads is going to help that issue so it’s a bit biased and one sided in my opinion.

What they do is they say that public transport is a state issue. But they invest in roads so it just creates a biased investment program and priorities. We end up having more and more investments in roads because the states are struggling with budgets for public transport. It just encourages more and more road travel when particularly our central areas are struggling to deal with that because we don’t have enough capacity.

We need a national interest to stop dealing with that issue and to move, particularly in inner areas, towards real investments, which is something all big cities are doing worldwide but unfortunately this [BUDGET] is just going to encourage more of that thinking.

Jemma Green, Senior Research Fellow at Curtin University

The budget is devoid of any spending on mass transit infrastructure - and instead proposes to spend large amounts of money on roads, some of which are actually not needed. Whilst roads obviously need to be maintained and built, at the expense of the kind of infrastructure that allows cities to operate efficiently and grow is a material omission. Congestion is costing cities billions of dollars each year.

A far more pressing issue in Perth right now is the need for funding for the light-rail - Metro Area Express (Peter Newman wrote about this for The Conversation last year). This was a WA State (Liberal) Government promise for delivery 2018, which, following WA’s credit downgrading from AAA to AA- in 2013, prompted this to be delayed to 2022. Meanwhile all the other infrastructure programmes remain prioritised (stadia, Elizabeth Quay, and the road programmes).

Research at Curtin has shown how up to 60% of the light rail can be funded using a value capture method. This is a system of putting aside windfall taxation revenues (stamp duty, caital gains taxes, rates) received as a result of building the rail - land values go up because of it. This innovative funding approach is yet to be tried in Australia (has been in other parts of the world), and in a budget constrained climate, could allow Australia to really get the infrastructure it needs.

The proposal to build a Perth Freight Link appears to lack detailed business case assessments and is a bizarre attempt at putting in expensive infrastructure that will create more issues than it solves. It will increase the capacity of the Fremantle Port when the surrounding residential areas cannot withstand further heavy traffic imposts.

A far better idea to deal with the growth projections is to relocate the Fremantle Port to James Point in Kwinana. This will allow for the realisation of both the Fremantle City in terms of jobs and residences and at the same time the growth in activity in the port. The Perth Freight link is trying to solve the problem of port access when what is really needed is a new port in Kwinana. Then the emphasis could be moving containers at least in part via rail with the Kwinana to Kewdale Link as well as a Roe Highway Stage 8 extension following the existing rail line. This approach would also have far fewer environmental impacts than the Perth Freight Link, and be located closer to Latitude 31 - a new industrial precinct.​

The Future of Infrastructure opens on 19th August in Melbourne.

Join the conversation

23 Comments sorted by

    1. Barry White

      Retired

      In reply to Andrew Kewley

      Where is the railway expenditure ? Hockey mentioned it but none of the commentators have found it, or they haven't bothered to look.
      That is why rail has such a low priority, even the commentators have not heard of railways.

      It is far more important than motorways that we electrify and expand our rail facilities.

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    2. Michiel Bliemer

      Chair in Transport and Logistics Network Modelling at University of Sydney

      In reply to Barry White

      I believe I explicitly mention that the treasurer mentioned rail, but that none can be found in the budget measures. Disappointing indeed.

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    3. Michiel Bliemer

      Chair in Transport and Logistics Network Modelling at University of Sydney

      In reply to Andrew Kewley

      Being Dutch and only having moved from Amsterdam to Sydney 2 years ago, I would like to see a larger emphasis in Australian cities on bicycles as well. However, note that the budget presented is a federal budget, while bicycle infrastructure is typically left to local governments.

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    4. Barry White

      Retired

      In reply to Michiel Bliemer

      Yes sorry, you did mention that it was not mentioned.
      Actually I was bleating that the TV commentators who are raving on about broken promises because it pushes their personal image are not mentioning the most important infrastructure that we will need to distribute food.
      Perhaps they think we are too fat !

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    5. Andrew Kewley
      Andrew Kewley is a Friend of The Conversation.

      Student

      In reply to Michiel Bliemer

      With regards to cycling infrastructure, I think there needs to be some real leadership in both the federal and state governments to make change. Many of the appropriate locations for new cycling infrastructure are along major arterial roads, so it is actually more of a state government thing.
      Starting with adopting international best practices in engineering (Austroads guidelines are of poor quality), developing methods under which such infrastructure can be implemented when it crosses multiple jurisdictions (usually multiple councils and state government), laws which address the federal-local fiscal inbalance and ending with states deciding on dedicated funds for cycling infrastructure, just like roads.

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    6. Chris Standen

      PhD candidate in Transport Policy & Planning at University of Sydney

      In reply to Andrew Kewley

      Andrew, agree the state government does have a responsibility. In NSW, RMS is responsible for state roads and all traffic signals, and it has ultimate say over what councils do with local roads. (The only places councils can build infrastructure without RMS approval is in non road-related areas, e.g. parks.)

      Unfortunately, despite having been brought under Transport for NSW, RMS remains subservient to the motoring lobby, and sees its main responsibility as to maximise the volume of motor vehicle…

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  1. peter mackenzie

    Transport Researcher

    This is an abridged, edited version of a comment I made on an infrastructure item on TC today.

    I just heard Minister Hockey announce funding for the 2nd Toowoomba Range road crossing. That's a case study I looked at really closely.

    It will cost around $2b by the time it is completed. Note that it is all for freight, it's not being built for cars (though I don't think they will be barred from using it - but I could be wrong on that point).

    What independent studies have been made to assess…

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    1. peter mackenzie

      Transport Researcher

      In reply to Andrew Kewley

      Good question Andrew.

      My former bureaux deputy-head tells me that simply there are more votes in roads. I believe that there is a lot of community demand for roads, supported strongly by the motoring organisations and from the trucking lobby and the road building lobby. With Labor, there is the added pressure from the TWU, and with Coalition, pressure from the trucking lobby itself rather than unions.

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  2. Matthew Beck

    Senior Lecturer in Infrastructure at University of Sydney

    Any spending on infrastructure should be welcomed if the contributes significantly to productivity and economic growth. However, recent experience with toll roads across the eastern seaboard has been patchy at best. Sydney’s Cross City Tunnel, Brisbane’s Clem7 and Melbourne’s Eastlink are a few examples where actual demand for the infrastructure investment has fallen significantly short of forecasts on which decisions were based. In many of these instances the ultimate price has been paid by either…

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    1. peter mackenzie

      Transport Researcher

      In reply to Matthew Beck

      Well put Matthew. Re your mention of 'interesting' seeing how well this government handles infrastructure projects - I say more 'worrying' than interesting by their performance already.

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  3. Matthew Beck

    Senior Lecturer in Infrastructure at University of Sydney

    An additional point of interest; increased expenditure on roads with no spending announced on alternative transport infrastructure in conjunction with an increased "road use" charge via the raising of the fuel levy.

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    1. Alice Kelly
      Alice Kelly is a Friend of The Conversation.

      sole parent

      In reply to Matthew Beck

      Yes, I find Tony Abbots statements made at least twice over the last few days, about "the new roads for the 21st century" he is creating completely bizarre. No mention of the transport for the 21st century.
      Truth is, his approach is a 20th century one, until he factors in 21st century transport and actual need, it will likely be that much of this road infrastructure could be another wasted opportunity.
      They don't factor climate change into all aspects of the economy, like transport and infrastructure, and in hindsight this government will be seen as an echo of 20th century mistakes.

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  4. John Goldberg

    Retired Academic University of Sydney

    In evidence to the Productivity Commission at its recent hearings (14 April 2014) I showed that there is a disturbing trend evident in the misuse of cost benefit analysis to promote rail and road infrastructure.What this means is that large amounts of money have been and are likely to be misallocated. As an example of a rail project the enlargement of a the main Northern railway line by introducing a third track for freight has no economic validity. A benefit to cost ratio of 3.0 was claimed but…

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    1. peter mackenzie

      Transport Researcher

      In reply to John Goldberg

      Hi John

      I completely agree with your overall point about rubbery bcrs and misallocation+ over-pricing and poor governance of projects. A number of studies, notably one by MckInsey Interbational have shown it to be true worldwide, soaking up/wasting hundreds of billions of $.

      In addition, for a number of big ticket projects in Australia, the pork barelling requires avoidance/over-riding of scrutiny by Infrastructure Australia.

      The only place WestConnex takes us, is in the opposite direction…

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    2. John Goldberg

      Retired Academic University of Sydney

      In reply to peter mackenzie

      I agree with you that the Melbourne to Brisbane line needs to be built and I believe some funding has been allocated. Unfortunately the case for the Third Track has ignored the great environmental cost particularly the noise levels at night from freight trains . A survey carried out last year showed that 76% of a total sample of 412 residents suffered serious sleep disturbance. The NSW Department of Health is on the record as expressing serious concern over this matter.Long term health effects from continual sleep arousal will be a costly externality
      . Thank you for the McKinsey reference.

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    3. Barry White

      Retired

      In reply to John Goldberg

      Did the Financial Review take into account the freeing up of track time in commuter peak times ?
      The peak time trains are very crowded but more passenger services could run if freight trains are not using the same track.
      Even now, many freight trains are held back near Newcastle until the peak ends. That puts additional delay on freight delivery.
      Interestingly in the US freight is moving from road to rail because it is cheaper.
      In any case as fuel gets more expensive there will be no choice.

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    4. John Goldberg

      Retired Academic University of Sydney

      In reply to Barry White

      The Third Track will only increase rail capacity by 9.6%. The increase in freight demand however will be 70% per annum up to 2030 without any additional capacity available. The rail network consequences have not been properly thought out. The project was really ad hoc as evidenced by the poor quality EIS.

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    5. Barry White

      Retired

      In reply to John Goldberg

      Interesting John, However your longer time projection looks like a business as usual scene. That itself is very much under a cloud as it depends on growth.
      The alternative view is an era of zero growth beginning around 2017 when tight oil starts its decline. However if interest rates increase the Wall St financiers are likely to pull the finance out of the tight oil business. The fast decline rates would soon expose the decline in conventional oil.
      We really are between a rock and a hard place.

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    6. peter mackenzie

      Transport Researcher

      In reply to John Goldberg

      Hi John

      Thanks for your reply to me and your further comments.

      re the Inland Rail Melbourne-Brisbane. That line has the potential to reconfigure the rail freight network, even moreso with the East-West conection at Parkes. It is so importanrt it should be fastracked, especially the Toowoomba range section, not just $300m thrown at it. Compare that to spending on the Human and Pacific Highways, with $80 for duplication of the Sheahan Bridge at Gundagai alone.

      I guess the greatest noise on…

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