Treasurer Joe Hockey’s announcement of a A$5 billion Northern Australia Infrastructure Facility in last week’s budget has been met with cynicism in the media.
Bernard Keane writing on Crikey argued “the ‘infrastructure Prime Minister’s’ second budget containing no worthwhile new infrastructure investment outside a northern Australia boondoggle fund”.
A tad harsh?
The facility plays into a wider discussion around northern Australia, to be laid out in the forthcoming White Paper on Developing Northern Australia (along with an Agricultural Competitiveness White Paper). These may well establish a robust policy framework to guide infrastructure investment.
Northern Australia has 5.6% of Australia’s population (2011), comprises 45% of the land mass and generated 11.7% of GDP in 2013. Determining our share of national infrastructure investment is properly a political judgement.
But how infrastructure funding is invested, on what projects and via what governance and delivery mechanisms, is rightly open to policy, academic and public scrutiny.
Evaluating infrastructure
On May 8 Infrastructure Australia released its Northern Australia Audit, a comprehensive 300-page analysis of infrastructure challenges and opportunities across the north.
Curiously the audit was not mentioned in Hockey’s budget speech. However, it was referred to in a A$3.8 million infrastructure pipeline to look into roads, rail, water, electricity, ports, airports and communications projects.
We could see some much-needed and sensible investment in and consequent development of the north. This would take overall investment to be well designed, soundly governed and competently administered and implemented. It would also need projects to be well chosen on the basis of detailed evaluation of whole-of-life benefits, costs and risks.
Equally, there is a risk of unco-ordinated effort and ill-conceived public investment for short-term political reasons with dubious long-term public benefits – potentially exceeded by long-term costs.
There are sound public policy arguments that decisions about large infrastructure investments with a design life of more than 100 years like ports, bridges or rail lines should not be made just by politicians with an electoral horizon of less than three years. However, the attraction of such arguments tends to fade with a political party’s proximity to the government benches.
Where is the ‘soft’ infrastructure?
The budget announcement with its explicit mention of ports, pipelines, electricity and water appears to take a narrow view of infrastructure as “hard” engineering and capital works.
This would be a pity, given the breadth of the coalition’s pre-election 2030 Vision for Developing Northern Australia and the Green Paper. These documents envision vibrant tourism, education, health and defence industries sectors, complementing the north’s traditional frontier image of minerals, energy and agriculture.
A broader definition of infrastructure can include:
investments that underpin human capital (such as education, training and health services)
natural capital (maintenance budgets and staffing for national parks)
governance (land tenure, property rights, planning)
disaster resilience (communication technologies and services)
deep enduring links to neighbouring countries.
Both the pre-election Coalition 2030 vision platform and the Green Paper propose that northern Australia is about more than mines, pipelines and cattle. In my view the White Paper needs to expand in this direction.
From the limited detail in the budget papers, there is a risk that this infrastructure facility harks back to an earlier primary commodity-based notion of northern development.
A better agenda
From an environmental perspective, noting the strategic need to decarbonise the Australian economy and taking a broader view of infrastructure, I would like to see long-term national-interest investments. This could include:
multi-decadal commitments to Indigenous ranger programs for tourism, environmental management, biosecurity, community resilience, cultural resource management and disaster risk reduction
investment in the underlying governance framework via Indigenous organisations for savanna burning projects across all tenures for emissions reduction, habitat conservation and asset protection
accelerated development and deployment of renewable energy generation to position northern Australia as a world leader in remote, off-grid, mini-grid and tropical renewable energy (a massive and rapidly growing global market)
substantial reinvestment in protected areas such as national parks and Indigenous Protected Areas – the jewels in the crown of our natural assets – in capital works, staffing and maintenance budgets, to underpin smart tourism development and for responsible stewardship of priceless natural heritage.
A view to the future
Looking more broadly at the budget papers, it seems odd for a government that prides itself on prudent economic management to be proposing a concessional loan fund that the budget papers say will cost the budget “a negative fiscal balance impact” of A$794 million over three years. At the same time the government is proposing to abolish the profitable Clean Energy Finance Corporation and directing it to make commercial returns on investment.
The north is littered with examples of poorly conceived projects, projects with a toxic ongoing legacy left to taxpayers to clean up, and projects where planning and approval processes seem inadequate or at best opaque.
The facility and its fund could play a very useful role in breaking with tradition and buttressing the smart development of northern Australia. But it would need to:
use the evidence in the Infrastructure Australia audit
support investment in “soft” and “green” infrastructure
undertake transparent cost-benefit analysis on a whole-of-life and risk-assessed basis
appraise projects using an independent, expert body at arm’s length from government
structure incentives and assistance measures to properly reflect the distribution of public and private benefits over time.
Right now is too soon to tell.
The forthcoming White Paper, and more importantly the government response to it, will put this initiative in context and allow judgements about whether this fund is intended to subsidise non-commercial projects that hark to the 19th century, or position northern Australia wisely for the 21st century.