When you are handed a to-do list which is 78 items long, you are going to be busy.
Thus when Infrastructure Australia (IA) laid down the 78 recommendations for infrastructure reform in its Australian Infrastructure Plan in 2016, state and federal governments were going to have a lot on their plate. This is especially the case for the federal government, which supported fully or in principal 70 of the 78 recommendations.
Two years on, Infrastructure Australia has published its progress report on the plan. This has shone light on areas where we are falling behind.
To be sure, progress has been made. Partly as a result of stronger collaboration between state and federal jurisdictions, the standard of business cases for major projects has improved. The creation of dedicated infrastructure agencies across several states has helped improve collaboration with IA and thus has strengthened analysis of the pipeline of future projects.
Metropolitan governance has improved, with greater focus on metropolitan-scale planning delivery through initiatives such as the Greater Sydney Commission. Several states have moved to better integrate transport and land-use planning. Some strategic transport corridors are being protected.
NSW last year moved to protect four corridors in Western Sydney, including the Outer Sydney Orbital, Western Sydney Freight Land and the North-South passenger rail line through the future Western Sydney Airport. Last April, Queensland announced it would protect the Townsville East Access Corridor.
Nonetheless, there are areas where IA says progress is lacking.
Start with road market reform. In its 2016 plan, IA recommended that the Australian Government hold an inquiry to look at the potential benefits of road user charging. Whilst the government signalled its support for this in its November 2016 response to the plan, nothing has happened.
IA says this is disappointing.
“Road market reform has the potential to deliver significant improvements in network performance, while also establishing a secure, fairer, and sustainable source of funding for our roads,” IA said in its report.
“Currently, user funding for the construction and maintenance of our roads is sourced from a mix of fuel excise and vehicle registration charges. However, Australian taxpayers incur a significant ongoing cost burden to maintain and develop our road system, regardless of whether they own or drive a car.
“The weak link between usage and charging in our current system means that motorists do not receive price signals to minimise their impact on other users and the broader network. As a result, critical road networks are chronically congested for portions of the day but have excess capacity across most of the 24-hour cycle.”
On a separate but related note, the report says Australia’s roads are facing a shortfall in funding as the amount of money raised through fuel excise duties is eroded amid greater vehicle efficiency. Over the past decade, federal government revenue from fuel excise has dropped from $12.2 billion to less than $11 billion despite the number of vehicle kilometres travelled rising from less than 220 billion to more than 250 billion.
Another area where progress is lacking is energy market reform. On this score, serious issues have been laid bare amid ongoing uncertainty over carbon policy and bickering over the role of coal as opposed to renewables. Uncertainty over arrangements to reduce carbon emissions has fuelled doubt among investors in backing new projects. Likewise, critical issues in regard to the impact of emerging energy sources which are intermittent upon the stability of the National Energy Market remain unresolved. There has also been little progress in managing the effect of gas exports on domestic gas supplies.
The federal government is trying to address some of this through its National Energy Guarantee, through which it is seeking to establish guarantees on energy reliability and on carbon emissions reductions.
Progress has also stalled in urban water reform. Australia’s urban water sector provides essential water, sewerage, flood mitigation and stormwater services to more than 20 million people and 9 million connected properties in our cities and towns. The quality, reliability, and cost of water infrastructure impacts both community well-being and economic prosperity.
Whilst stopping short of recommending privatisation, the 2016 report called for an urban water sector which was well regulated, open to private sector participation and which provides incentives for innovation.
Nonetheless, IA says overall urban water reform efforts have stalled. Progress toward full cost recovery and independent price regulation has slowed and in some instances has reversed.
Addressing this is crucial, IA says. Without reform, it says average household water bills could more than double in real terms between now and 2040.
Notwithstanding the aforementioned improvements in funding and governance, meanwhile, better practices are still necessary in some aspects of project selection – though improvements have been made in this area with greater focus being afforded to projects which are on IA’s priority list and governments generally adopting a more methodical project selection process.
A tendency for governments and opposition parties to announce early stage projects remains a concern, IA said, as this tends to see options foreclosed on alternative and possibly better value options.
Likewise, significant numbers of transport, regional and water projects are still not subject to post-completion reviews. This, IA says, means governments are missing out on opportunities to learn from past experiences.
Finally, IA says a national population policy is needed. This should articulate a spatial vision for the growth of Australia and identify the role the Australian Government would play in supporting states and territories in managing and capitalising on population growth. While the five-yearly Intergenerational Report provides a national view of demographic trends, IA says a spatial forecast is still required especially to support long-term infrastructure investment. Without this, potentially incorrect projections of population growth could impact on the costs, benefits and optimal timing of major projects.
The Australian Government has not supported the idea of a population policy, arguing that this is unnecessary because much population information is provided by the Intergenerational Report.
Australia has made some progress on infrastructure reform.
To cater for an estimated population of 41.5 million by 2061, however, we must pick up the pace of reform in several areas.