Billions for big projects must roll on: report

A $200bn ­investment pipeline in major projects over the next five years must be replicated on a rolling basis, a landmark report warns.

A new report says living standards are under threat from rising road-congestion costs, ­energy bills and growing pressure on utility networks. Picture: Mark Stewart

A $200 billion ­investment pipeline in major projects over the next five years must be replicated on a rolling basis for the next 15 years and beyond to prevent living standards from going backwards, a landmark infrastructure audit has warned.

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It shows that Scott Morrison’s $100bn infrastructure spending boom and ­record levels of state funding for key projects will not be enough to ease the pressures posed by a growing population.

The Infrastructure Australia report finds that living standards are under threat from spiralling road-congestion costs, rising ­energy bills, growing pressure on utility networks and a need for more investment in inner-city health and education services.

The 700-page report — the first since 2015 — comes as Infra­structure Department head Steven Kennedy prepares to take over as Treasury secretary.

The audit lashes governments for inadequate spending and policy inconsistency, which it argues have stalled private investment in key sectors including energy generation and transmission.

 

According to Infrastructure Australia — set up by Labor in 2008 to advise all levels of government on infrastructure needs — the annual cost of road congestion is projected to grow by $18.9bn to $38.8bn in just over a decade, without further investment.

It finds that energy prices have risen 50 per cent since the last audit, an increase it blames on an “absence of decisive federal leadership”, a “lack of certainty on ­energy or emissions policy” and a “lack of co-ordination across Australia’s governments on how best to manage changes” in the country’s energy mix.

“The result has been a worse deal for many users,” it found.

Infrastructure Australia chairman Julieanne Alroe warned that inaction on the agency’s reform blueprint would cost the economy tens of billions of dollars in extra congestion, higher prices and lost time each year.

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Ms Alroe said that, although government spending was at ­record levels, there was “much more to do” to ensure businesses could compete on the world stage.

“Rather than a short-term boom, the historic level of activity we are seeing in the sector must, and is likely, to continue for the next 15 years and potentially ­beyond,” Ms Alroe said.

“This must be the new normal if we are to meet the challenges and opportunities ahead.”

Australia’s population is forecast to increase to 31.4 million people over the next 15 years. Infrastructure Australia says that spending in Sydney, Melbourne, Brisbane and Perth is failing to keep pace with population growth — especially in the outer suburbs.

While 96 per cent of people living in the inner city are within walking distance of public transport, only 34 per cent of Australians living in the suburbs are able to walk to a transport connection. Those in regional and remote areas are worse off, with services falling “below what is ­acceptable” for a developed nation.

Ms Alroe said these remote communities were struggling with overcrowded social housing, limited access to drinking water, inadequate transport and poor telecommunications, which led to poorer health standards and a lower quality of life.

The report also ramped up calls for greater investment in ­infrastructure on the fringes of cities and outlined an ­urgent need for governments to address the growing skills gap, which poses a threat to the rollout of an elevated program of construction.

Reserve Bank governor Philip Lowe has pleaded for ­increased spending on public works to stimulate the stagnating economy and revive flagging productivity; and Australian Industry Group chief Innes Willox has pushed Scott Morrison to tackle the skills shortage, which he said was threatening the delivery of the unprecedented pipeline of infrastructure projects.

Deputy Prime Minister ­Michael McCormack has spruiked the more than 270 major projects under construction or development, but the level of spending on major projects is due to peak in 2022, before declining sharply.

Labor has been pressuring the government to drag forward the timeline for dozens of projects to help kickstart economic growth.

The Infrastructure Australia audit says dense cities such as Sydney, Brisbane and Melbourne will require funding for high-capacity public transport and a renewal of inner-city hospitals and schools.

Congestion is resulting in ­extended commuting times, across the nation. Workers on ­average spent 4½ hours a week commuting in 2017, according to the results of the Melbourne Institute’s latest annual household survey — an increase of 23 per cent compared with 2002.

Although $123bn of construction work has started since the inaugural 2015 audit, Infrastructure Australia’s executive director of policy and research, Peter Cola­cino, said the imminent five-year $200bn in spending by federal and state governments needed to be extended into the long term. “The idea that you’re ever finished building is just not right,” Mr Cola­cino said. “I wouldn’t say the picture is bleak — I would say we’re performing quite well. But the pressures are going to continue to grow.”

Dr Kennedy, who takes over from outgoing Treasury secretary Phil Gaetjens next month, ­recently questioned the viability of increasing the number of infrastructure projects planned over the next four years.

With so many large projects on the horizon, Australia faces the prospect of not having enough skilled workers to handle the major works, while city dwellers are at risk of construction fatigue.

Dr Lowe, who appeared before a parliament committee on Friday, called for a range of small-scale projects across regional Australia to be rolled out. Josh Frydenberg has asked Treasury to examine whether some projects in the decade-long infrastructure plan could be brought forward.

Just a third of the $30bn worth of new spending announced in this year’s federal budget was due to be spent over the next four years, and spending will not peak until 2024. However, the government is ­reluctant to threaten its projected surplus.

Over the forward estimates, the Morrison government is expected to spend $42.8bn on a number of federal and joint federal-state projects, including the Melbourne Airport Rail Link, the Western Sydney North-South Rail and the Queensland M1 upgrade.

Mr McCormack, who oversees the infrastructure ministry, said the audit failed to take into ­account $23bn worth of infrastructure spending announced in this year’s federal budget and noted the government was funding 19 items on the agency’s priority list.