Nation playing catch-up in infrastructure challenges

Kevin Rudd talked a lot about nation-building and gave us pink batts. Julia Gillard over-egged the “revolution” in schools. Tony Abbott declared himself the “infrastructure prime minister” but ran out of runway in the partyroom. Internet pioneer Malcolm Turnbull ended up with too much fibre in his broadband diet and not enough reliable electricity in his grid. Now Scott Morrison promises to bust congestion wherever it lurks — on roads, airports, even in the public service. Australia is playing catch-up on infrastructure and it is holding us back economically and socially. A new audit by Infrastructure Australia, the independent adviser to government, shows our infrastructure is not meeting needs. Just look at road congestion, crowding on urban public transport, rising power bills, outages and declining service standards. Our competitiveness, living standards and long-term prosperity are under threat.

Since IA’s first audit in 2015, a lot more investment has occurred, while governments have initiated reforms to improve infrastructure performance. More than $123 billion worth of work has started, with a committed forward pipeline of more than $200bn. The real action has been in the states, particularly NSW and Victoria, where population has been growing fastest, especially rampant in Sydney and Melbourne. Yet the capital outlay has been inadequate and we are going to have to keep running hard for years to come. We are still below the OECD average for infrastructure investment. Due to changing and growing demand and a maintenance backlog, IA says, “a new wave” of reform and investment is necessary if we are to maintain, let alone enhance, our quality of life and economic efficiency.

Over the next 15 years, population is expected to grow 24 per cent to 31.4 million. Almost 80 per cent of growth will be in our four largest cities, putting more pressure on roads and public transport. The audit found those cities are failing to keep pace with population growth, especially on the urban fringe; the quality of services for people in remote communities does not meet the standards Australians expect; in developing regions and northern Australia, infrastructure can “catalyse” quality of life and productivity by improving connectivity and efficiency.

The Morrison government’s $100bn infrastructure program over a decade is necessary, but far from sufficient to improve the capacity of the nation’s supply side. The provision of roads, rail lines, bridges, dams, even roundabouts, touches acute voter sensitivities. Small-scale projects can be the difference between winning and losing office, as the May 18 election proved. In the recent past, pork-barrelling ruled the roost, especially in the bush, as capital works funds were manipulated to win over voters at election time or the votes of rural-based independents to secure legislative passage in the parliament. Some of the projects approved — micro local works and mega schemes such as Snowy 2.0 — were either second-best options or may never have proceeded if they were based on even a crude cost-benefit analysis or business case. Did someone say NBN? At the very least, we need to ensure a lift in project quality and more due diligence in the way infrastructure is financed.

The audit shows we must do better in sequencing projects because the competition for trade skills, slowness in development approvals and poor availability of materials drives up prices, leads to delays, costs taxpayers more and eats up industry profits. State governments are increasingly looking to foreign companies to tender for projects. It’s produced a mixed bag of outcomes, with cost overruns, long delays and litigation. We need to build our capacity to deliver projects consistently over the long term, rather than be prone to the boom-bust, hot-cold cycles industry is accustomed to.

One area for close attention is trades training. The Prime Minister argues a trade is as good as university. The April budget had a skills package with the aim of boosting the number of apprentices. A new study by the Grattan Institute shows that men who go to university with low ATARs would earn more during their career if they switched to TAFE or a vocational college, provided they studied engineering, construction or business. The Council of Australian Governments is committed to standardising qualifications, a road map for reform and more planning meetings. It’s better than nothing.

Governments are outlaying 2 per cent of GDP on infrastructure. Even with rising debt burdens in some states, such as Queensland, there’s never been a better time to borrow. Debt makes sense as long as taxpayers get a decent return — on capital, better amenities, more jobs and increased capacity. For instance, the federal-state partnership to develop Badgerys Creek airport, a project delayed for decades, is a game changer in western Sydney. It is a key piece of national infrastructure but must be managed carefully, with an integrated approach to land use and infrastructure planning.

With the economy in low gear, officials and economists are urging governments to bring forward infrastructure spending to stimulate activity. That will help, but only if quality, common sense and fiscal prudence are not compromised. Too often our thinking has been short-term and public money squandered in panic in response to periodic downturns. The value of IA’s audit is to inform the way we think about infrastructure, so we are more strategic, guided by data and responsive to national priorities.