Political dysfunction is taking its toll on our infrastructure

Two road header tunnelling machines are now digging at Epping, building the underground tunnel link between the North West Rail Link tunnels and the Epping to Chatswood railway tunnels.6969

One side-effect of the Sydney property boom could be a boom in tunnelling. We can only hope.

It’s hard to be precise, but the “crazy” price of land on the earth’s surface, at least in Sydney, appears to have finally gone above the falling cost of digging tunnels underneath it, thanks to improvements in tunnelling technology as well as the land price boom.

Australia’s lack of urban subway networks is arguably the nation’s biggest, most problematic, infrastructure failing.

Most of the transport challenges in Melbourne and Sydney have to do with compensating for the absence of adequate underground public transport, apart from a single loop in each city.

As the Governor of New York, Andrew Cuomo, said: “What made Manhattan Manhattan was the underground infrastructure, that engineering marvel.”

The same goes for London and Paris, not to mention Shanghai, Beijing, Budapest, Stockholm, and Minsk. In fact it’s hard to think of a city of any size without a subway, except in Australia.

The reason, in history, is the sense that Australia’s wide-open spaces and cheap land meant there was no need to dig under the surface for transport. When other cities were tunnelling subways throughout the 20th century, driven by the high cost of land, Sydney and Melbourne were sticking to the surface.

In Melbourne they even — absurdly — put the railways (trams) in the middle of the roads, presumably thinking there would never be very many cars. Now both the cars and the trams spend much of there time stationary. Sydney’s roads are clogged by buses.

The result of Australian public transport being mostly on the surface is that our major cities are now grinding to a halt.

Infrastructure Australia has sounded the alarm in its latest Infrastructure Audit, saying that car travel times are set to increase by at least 20 per cent, and as much 100 per cent as the populations of Melbourne and Sydney are set to double over the next 50 years.

“Demand for public transport in the capital cities (measured by passenger kilometres travelled) is set to rise by 55 per cent in Sydney, 121 per cent in Melbourne and an average of 89 per cent across all capital cities.

“Unless peak period passenger loads are managed and capacity is increased, commuters in all capital cities will see more services experiencing ‘crush loadings’, where peak demand exceeds capacity.”

There are now two underground railway projects underway or announced: the North West Rail link in Sydney, which has four huge tunnel boring machines currently digging a 15km tunnel from Bella Vista to Epping, and Melbourne’s $10 billion (roughly) Metro Rail Project, recently announced by Premier Daniel Andrews.

Both projects should be the start of a big program of building underground railways using the new generation of mega-tunnel boring machines (although the plan in Melbourne is to save money by digging up Swanston Street and shutting all the shops for years, rather than tunnelling that bit, but that’s a whole other can of worms), but the agonising process of getting these two projects through Australia’s febrile political systems is hardly encouraging.

Sydney’s NW Rail Link was first announced in 1998. Since then it has been cancelled, re-announced, changed, blocked and announced again, as changes of government and conflicts between state and federal governments of different parties kicked the football up and down the field.

Melbourne’s new underground project was first announced 10 years ago and suffered similar politics to the Sydney one. Even now, as a Labor government announcement, it remains unfunded and bitterly opposed by the Coalition.

In fact it’s clear that political dysfunction, not cost, is now the sole blockage to Australia getting the infrastructure it needs, and specifically the underground railways and roads needed to reduce the congestion on the surface.

Alan Robertson, owner of Brisbane-based engineering firm Ausrocks, and an acknowledged expert on tunnelling, says the cost of excavation is now about a tenth of the total cost of a tunnel in Australia.

A tunnel boring machine that installs the lining behind it about $100,000 per metre of tunnel, according to Robertson. The cost of a fully installed tunnel, however, is now about $1 million per metre, he says.

The difference? Planning approvals and red tape, including necessary fire and safety regulations.

Even so, he says it’s now cheaper, at $1 million per metre, to build a new railway or road underground in Sydney than it is to buy the land and do it on the surface.

And in fact for many of the rail and road links needed to cut congestion in both Sydney and Melbourne, land was not set aside, so using it for transport would be impossible anyway.

Funding the projects should not be a problem either — the only reason it is seen as a blockage, such that all discussion on the subject centres on “users pays” models, is also because of political dysfunction.

Two months ago Morgan Stanley’s Australian economist, Daniel Blake, published a report in which he said Australia could borrow $80 billion for infrastructure without jeopardising its AAA credit rating.

He called the report “The Missing Fiscal Link”, and concluded that without a big fiscal stimulus focused on infrastructure to support failing monetary policy, Australia’s economic growth would not rise to the levels predicted by the government, and the level needed to get unemployment down.

Said Blake: “Fortunately, debt markets are wide open for both federal and state governments. Yields on commonwealth government securities (CGS) are the lowest on record, and we expect sustained global demand for AAA-rated assets. As a result, while funding through the ‘Asset Recycling Initiative’ has been impaired by politics, we see opportunity through CGS debt.”

Blake called for operating expenditure to be separated from capital expenditure in the federal budget, along the lines of proposals in the UK.

“This would create the political space for debt to be used to accelerate an infrastructure cycle (rather than for current expenditure), while the asset recycling initiative should be maintained — helping release equity from prior investments and set benchmarks for future spending.

“We believe the government should also consider the merits of infrastructure bonds alongside the reviews of taxation and the financial system, with the potential for tax-incentives to be provided for long-duration investment. Both of these plans are ambitious but, in our view, are politically realistic.”

Obviously Daniel Blake has been listening to music while he sits in traffic, and hasn’t had Question Time from Parliament on the radio. If he did, then hysterical, nasty debates about trivia would possibly change his mind about what is politically realistic in Australia.

Debt has become a political dirty word, for good reason: it has been used to fund recurrent expenditure and that has to stop.

Funding capital works, though, is a different matter entirely.

A century ago, when virtually all of the railway infrastructure that we still use was being built, there were minimal demands on state and federal budgets from health and welfare spending. Most taxation receipts were spent on infrastructure, such as railways, roads, electricity and communications — all of them owned and funded by governments.

Now fiscal budgets are mostly absorbed by welfare transfers and health spending, and there is none left for infrastructure. Therefore the cost of it must be taxed separately: there is simply no room to fund health and welfare, plus infrastructure, while keeping at taxation at a globally competitive level.

There are two ways of charging separately for infrastructure: user pays and community pays, via public debt. Governments prefer the former, with private companies inserted to run the projects and collect the money, because it doesn’t involve the dread D word and is politically at arm’s length.

Politicians can present private toll roads as just another business from which we buy services, and not a form of taxation at all (even though they are, really). Railways are more difficult because they generally don’t run at a profit, although that is changing with the new generation of driverless trains.

But it’s not just the direct users who benefit from roads and railways — the whole community does, by clearing congestion elsewhere and increasing national productivity.

It would be far more equitable and efficient if the projects were funded by public debt, especially with government interest rates at historic lows, with the debt partly serviced by tolls and partly by taxes on all road users.

I suppose it would be asking too much for such an idea to be bipartisan, on the grounds that we’re heading for a national emergency.

Oh sorry, I forgot. The national emergency was debt, wasn’t it?