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The Hon Tim Pallas MP | Treasurer of Victoria
The Hon Tim Pallas MP
The Hon Tim Pallas MP
Treasurer of Victoria
In May, when I handed down the 2016–17 Victorian State Budget, I presented an economic plan for the year and, indeed, for the remainder of this term of government.
It was a plan focused on three key pillars: • bolstering our financial position • delivering infrastructure that drives productivity and growth • investing in the Victorian people to ensure that our communities are safe, and our living standards remain the envy of the world.
The Economist might have crowned Melbourne the world’s most livable city for the sixth year running, but the challenge for our government is to ensure that we keep investing and growing with an eye on the future.
When the Andrews Labor Government was elected, we were clear about what Victoria needed – a pipeline of economic activity that creates jobs and grows the Victorian economy.
Since then, the economy has generated more than 150,000 jobs; economic growth is running at three per cent; and work continues at a great pace on a strong infrastructure pipeline. In fact, Victoria’s employment growth leads the nation.
This optimistic outlook is a vindication of our policies over the last two years, and is the logical result of an economy that continues to exceed growth forecasts.
Victoria’s economic fundamentals are strong indeed. Victoria’s real gross state product (GSP) grew 2.5 per cent last year after two years of anaemic growth.
Not only that, but GSP is forecast to grow three per cent in both 2015–16 and 2016–17.
The strength of the Victorian economy is also reflected in the June quarter national accounts, which show Victoria’s annual state final demand growth to be the highest of all the states. Victorian state final demand has now increased for seven consecutive quarters.
Key points:
• Transport is at the centre of Victoria’s infrastructure – funded principally through the $10 billion lease of the
Port of Melbourne. • The risk allocation and value for money from Public Private Partnerships (PPPs) sees private finance being expanded. • Victoria is committed to recycling taxpayer’s funds to fund new infrastructure, from surplus government businesses and assets that do not need to be public.
The Hon Tim Pallas MP
5.0
4.0
3.0
Per cent 2.0
1.0
0
-1.0
-2.0
Vic Aus 1990–91 to 1993–94
Source: Department of Treasury and Finance
Vic Aus 1994–95 to 1998–99
Vic Aus 1999–00 to 2007–08
Vic Aus 2008–09 to 2014–14 Productivity Population
Participation
The ANZ’s Stateometer report for June showed that Victoria’s economy is the only one in Australia to have grown above trend, which is consistent with figures showing that the total value of building approvals reached a record $31 billion in 2015–16, with an annual growth of 15 per cent in July.
This positive showing comes off the back of last month’s Westpac–Melbourne Institute Consumer Sentiment Index, which shows that Victorians are the most optimistic in Australia and display the highest consumer confidence.
Economic performance has been helped along by strong population growth, which is driving demand and bolstering the economy.
At 1.7 per cent in 2014–15, and now running at around 1.9 per cent, Victoria’s population growth is the strongest in the nation – more than 1900 additional people are choosing to call Victoria home each week.
While population growth is a welcome driver of economic expansion, we need to caution against it becoming the sole accelerant.
As you can see from the above graph, population growth is playing a disproportionate role in lifting Victorian living standards.
We want to see productivity growth making a greater contribution to the wealth of every Victorian.
That’s one of the key reasons the Budget contains a big boost in infrastructure spending.
Total estimated investments over the forward estimates include: • $6.8 billion in road infrastructure, including $5.5 billion for the Western Distributor road tunnel under the Maribyrnong River • $2.9 billion for rail infrastructure • nearly $1 billion for health infrastructure, including new buildings, vital health equipment and projects to increase the capacity of hospitals • nearly $900 million for new and upgraded school facilities across the state under the school capital programme.
This investment comes on top of $10.9 billion for the Melbourne Metro Tunnel project and $5–6 billion for the Level Crossing Removal Project over the next decade.
Transport makes up the largest component of our capital investment, a recognition of the role that it will play in boosting productivity.
The Melbourne Metro Tunnel packages are out to market, and regulatory and environmental approvals are in progress. Early works will begin next year.
The $324 million package includes the excavation of huge open shafts to enable the underground construction of the two new city stations.
This work will precede the beginning of major works, which will be delivered as a Public Private Partnership (PPP) and are scheduled to commence 12 months later, in 2018.
The Tunnel and Stations PPP will bore, build and fit out the nine-kilometre tunnel and the five new underground stations at Arden, Parkville, CBD North, CBD South and Domain.
Shortlisted bidders for the PPP will be asked to submit a formal proposal by early next year, with a contract expected to be awarded by the end of 2017.
The project has attracted a strong field of international and local contractors, and I am expecting highly competitive responses – perhaps from some of you here today.
Given the size of the Metro Tunnel project, there will be a mix of private finance and state capital
The Hon Tim Pallas MP
contributions. We are open to alternative financing and capital market solutions that provide sustainable, low-cost finance.
Elsewhere on the rail network, our Level Crossing Removal Project is well underway.
As part of the project to remove nine dangerous and congested level crossings on the Cranbourne–Pakenham line, more than 11 Melbourne Cricket Grounds worth of community open space will be created for new parks, playgrounds, sporting facilities, car parking and a range of other uses that will be determined by locals.
The elevated design built over the existing rail line means that passengers and drivers will be spared years of disruption during construction – the majority of the work can be completed with trains and roads operating normally.
The package of works will also rebuild stations at Carnegie, Murrumbeena, Hughesdale, Clayton and Noble Park, and will rollout power and signalling upgrades along the line.
Construction has recently begun, and over the twoyear construction period, 2,000 jobs will be created.
Closely linked to the removal of level crossings on the Cranbourne–Pakenham line will be the purchase of a fleet of new high-capacity metropolitan trains. The 455 carriages will make up 65 new trains, and will be ready for operation on day one of the Metro Tunnel. These trains make up the largest-ever order of trains in Victoria’s history, and will be supplied to the state as a PPP.
Another key state investment that will be delivered as a PPP is the Western Distributor. Three consortia have been chosen to tender for the design and construction of the project, which will slash congestion and take thousands of trucks off inner-west streets. The consortia are John Holland and CPB Contractors; Lendlease Engineering and Bouygues Construction; and an international consortium of Salini Impregilo, Fluor Australia and Lane Worldwide Infrastructure.
They will prepare fully costed designs for the Western Distributor, which includes the widening of the West Gate Freeway, a tunnel under Yarraville, a second river crossing, and connections to the port, CityLink and the city. The Western Distributor will
The Hon Tim Pallas MP
provide a vital second river crossing as an alternative to the West Gate Bridge, slash travel times from Geelong by an estimated 20 minutes, and create 5,600 jobs. It is forecast to take 22,000 vehicles per day off the West Gate Bridge, including up to 6,000 trucks, as well as improve links to Port of Melbourne, Webb Dock and the inner north.
This year’s Budget provides a government contribution of $1.46 billion to the project over the forward estimates, which will also be funded through a combination of government funding outside of the forward estimates, tolls on the new road connections and an extension to the CityLink concession.
We use PPPs in Victoria for four key reasons: • because they maximise whole-of-life efficiencies in the delivery of government projects • to harness the innovations of private enterprise • to take advantage of the commercial opportunities they present • because they transfer risk.
I want to improve the way the Victorian Government engages with the market. On all types of procurement, we should be aiming to reduce the costs and time taken to tender.
In the next few months, I will release an updated PPP policy. My department has been consulting a range of market players to land on a standard base contract. We will also develop standard Expression of Interest (EOI) and Request for Proposal (RFP) tender templates to achieve a consistent approach across projects.
My department has held more than 25 presubmission meetings this year alone, but there continues to be strong interest in market-led proposals.
I want the guidelines to set clear expectations that we welcome innovative proposals; however, there must be a good reason to justify exclusive negotiations. Proposals need to be aligned to our priorities.
We recognise that sustainable long-term PPP contracts need to be able to respond to the changing landscape – to respond to different types of programmes and projects that we’re seeking to deliver.
That’s why we are undertaking a business case that explores packaging up arterial road upgrades, as well as maintaining existing outer-suburban roads into an availability payment PPP (OSARs PPP) to introduce whole-of-life considerations into road asset management in Victoria.
We think that there is potential to deliver arterial road upgrades as PPPs – to translate the benefits enjoyed by projects like Peninsula Link and EastLink to smaller-scale road projects throughout Melbourne.
We recognise that arterial roads are just as important as major freeway connections to efficiently move people and goods around our rapidly growing city. Not only will we get the benefits of construction risk transfer, but we will also get performance and long-term maintenance benefits.
This year’s Budget contained $10 million in planning money for a number of projects in the outer metropolitan area that have the potential to be delivered as PPPs.
The Business Case is currently considering three packages: • a Western Package • a South Eastern Package • the potential of a Northern Package.
One of the biggest risks to any government road programme is poor-quality construction or a design that results in higher-than-anticipated maintenance and refurbishment costs down the track.
A private party is well placed to manage this risk through long-term arrangements with qualified and well-resourced subcontractors that can drive innovative design, build and maintenance solutions.
The OSARs PPP will be a path-finding project for arterial road infrastructure construction and maintenance, and will be the first of its kind in Australia.
Although government-funded PPPs do not expand the funding available to government, they allow us to use the funding available to purchase outcomes as well as physical assets. Through this process, we’re allocating to the private sector those risks that can be managed at a lower cost than government can achieve.
But it is important that we recognise that government has a responsibility to build and maintain project management skills in our own ranks. The greater the ability of the public sector, the more effective we can be when we collaborate with private companies.
One of our election commitments was to establish the Office of Projects Victoria (OPV) to centralise our skills and provide oversight of key projects. Of course, these kinds of bodies are only ever as good as the people who work in them.
The OPV has been established, and will be Chaired by Ken Mathers. Ken and I go back a long way. We worked together to deliver EastLink and Peninsula Link – projects delivered ahead of time and under budget. He was also on the board of Regional Rail Link.
The Hon Tim Pallas MP
The West Gate Bridge, Victoria
As you know, Ken has unparalleled experience in, and knowledge of, major infrastructure projects, and he was recently honoured by Australia’s infrastructure sector for more than 50 years of public service through a Chairman’s Prize at Infrastructure Partnerships Australia’s National Infrastructure Awards. He will be joined by the Victorian Chief Engineer and a small, highly qualified team.
The OPV will build capability and skills in project development and delivery. It will provide advice on cost, scope and technical matters for asset investment decisions and project delivery arrangements. Importantly, the OPV will monitor and oversee all major projects.
Despite challenges globally, Victoria is defying the broader trend, and is well on its way to once again becoming the engine room of the Australian economy. Just a fortnight ago, Standard & Poor’s reaffirmed our AAA credit rating, thanks to Victoria’s ‘very strong financial management and economy’.
Victorian business confidence has been in positive territory for the last 15 months, and consumer confidence is the highest in the nation. We are also the construction powerhouse of the nation, with recent figures showing building approvals up 15.3 per cent over the year. And our employment growth and economic growth lead the nation.
We have a strong infrastructure programme and, importantly, we have the means to deliver it.
We will fund our agenda through traditional means, like operating surpluses and asset recycling, and, where feasible, we will use innovative mechanisms like market-led proposals and PPPs. Where there is no pressing need to retain public ownership, we are highly receptive to unlocking capital in state-owned assets as part of the funding mix for new infrastructure.
Almost two years into our term of government, one thing is certain – we are not sitting idle; we are getting it done.
The Hon Tim Pallas MP, Treasurer of Victoria
Tim Pallas was elected to the Victorian Parliament in 2006, and is the state member for Werribee. Following the election of the Andrews Labor Government in November 2014, he was appointed Treasurer. His first budget in May 2015 was the biggest education budget in Victoria’s history. Mr Pallas served in the Bracks and Brumby governments as Minister for Roads and Ports, and later added Major Projects to his responsibilities.
As Minister for Roads, he oversaw the M1 Upgrade, and the construction of the Deer Park Bypass and Geelong Ring Road, completed the upgrade of the Calder Freeway to improve links to Bendigo, and was responsible for commencing the Peninsula Link project on the Mornington Peninsula.
In the Major Projects portfolio, he was responsible for big-ticket items like the development of AAMI Stadium and the Melbourne Convention and Exhibition Centre, as well as the Melbourne Recital Centre and Melbourne Theatre Company’s Southbank Theatre.
BARANGAROO URBAN RENEWAL WILL TAKE SYDNEY TO A NEW LEVEL
Award-winning designs for residential, business and community hub.
Sydney’s $6-billion Barangaroo transformation is emerging as one of the world’s great urban renewal projects and a showcase for Australian infrastructure.
The groundbreaking project, on the north-west tip of Sydney’s CBD, is setting global benchmarks in infrastructure planning, design, construction and governance.
Barangaroo is redefining how government, community and the private sector can work together to shape infrastructure projects and create an outstanding legacy – one that goes beyond physical buildings and understands how intuitive infrastructure elevates a city’s sustainability, culture, community and identity.
‘Great urban renewal taps into the passions and aspirations of a city’s people, refines and reinterprets them, and gives them space to thrive,’ says Barangaroo Delivery Authority CEO Craig van der Laan.
‘Done well, urban renewal can change how a city is perceived, and how the city’s people perceive themselves.’
This will be true of Barangaroo. The 22-hectare project is reimagining the Sydney CBD’s western edge through public spaces, harbourside parkland, cultural areas, educational and recreational facilities, as well as state-of-the-art residential, retail and commercial buildings.
By integrating with new rail, pedestrian and ferry infrastructure, Barangaroo will deliver unprecedented connectivity in an urban renewal project, and will become a major centre of economic activity that attracts knowledge workers from across Sydney and the world.
When the final piece falls into place in 2024 with completion of a new metro rail connection, Barangaroo will support more than 23,000 permanent jobs, attract up to 33,000 visitors daily, house 3500 residents and contribute an estimated $2 billion annually to the New South Wales economy. Barangaroo, quite simply, will take Sydney to another level.
‘Barangaroo is a benchmark project of the New South Wales Government,’ says van der Laan.
‘It is showcasing the New South Wales Government’s capacity to deliver infrastructure that adds extraordinary value – not just in economic terms, but also in terms of community, cultural and social benefit.’
Delivering a series of firsts
Barangaroo will boost Australia’s standing as a financial hub in the Asia-Pacific region, encourage new investment into New South Wales and help attract offshore companies and talent to Sydney.
Barangaroo South, one of the precinct’s three areas, is a vital extension of Sydney’s CBD. Developed through a partnership between the New South Wales Government and Lendlease Corporation, Barangaroo South will be a flagship address for leading Australian and international companies.
The first two of Barangaroo South’s three high-rise commercial towers have opened with anchor tenants including Westpac, KPMG, Gilbert + Tobin and Lendlease itself, with HSBC, PricewaterhouseCoopers and Marsh & McLennan to follow in the third tower, due to be completed in late 2016.
‘Barangaroo shows that New South Wales is open for business,’ says van der Laan.
‘This landmark location has already attracted leading global financial and professional service firms, and reinforces Sydney as the preferred destination for major organisations in the Asia-Pacific.’
Barangaroo South will include the landmark Crown six-star luxury hotel resort and VIP gaming facility, harbourside apartments, restaurants, bars, cafés and retailers – facilities that will strengthen Sydney’s standing as the gateway to Australia and one of the world’s great tourist cities.
Barangaroo is also delivering environmental firsts. The precinct aims to be climate positive – a first for an urban renewal project of its size. This will include being carbon neutral in operation, where all greenhouse gas emissions from energy consumption, water use, waste generation, and other on-site emissions sources are offset to zero.
A commitment to open public spaces enhances Barangaroo’s social credentials. More than 50 per cent of Barangaroo is dedicated public space, including the 2.2-kilometre foreshore Wulugul Walk and the international award-winning Barangaroo Reserve.
The six-hectare harbour headland reserve, Sydney’s newest foreshore park, opened to acclaim in August 2015. Barangaroo Reserve transformed one of Sydney’s oldest industrial sites, and
Craig van der Laan, CEO, Barangaroo Delivery Authority
opened an area of the harbour foreshore that had been closed to the public for more than 100 years.
Barangaroo Reserve includes a dramatic cultural space called the Cutaway, which is one of Australia’s largest internal spaces and has already hosted a range of important cultural and community events, as well as commercial functions.
‘The reconstruction of a harbour headland and the creation of Barangaroo Reserve was a bold statement of exceptional urban design, and raised the bar on standards of innovation and design in Australian landscape engineering,’ says van der Laan.
The work on Barangaroo Reserve has been recognised domestically and internationally. Barangaroo Reserve and its lead designer, PWP Landscape Architecture, were awarded the prestigous World Architecture News (WAN) Waterfront 2015 Award.
In April 2015, Infrastructure Partnerships Australia (IPA) named Barangaroo Reserve as Australia’s Project of the Year in its National Infrastructure Awards, and the reserve won the Architizer A+ Award Jury Winner in the Landscape and Planning Public Park category.
Vibrant, active, connected and accessible
The final stage will involve the development of Central Barangaroo, a 5.2-hectare site linking Barangaroo South with Barangaroo Reserve, intended to drive Barangaroo’s cultural and community aspirations with a vibrant and active, mixed-use precinct. A public tender for the right to develop Central Barangaroo is understood to be in the final stages.
Central Barangaroo will also include a dedicated metro station, linking the precinct to the city’s proposed new world-class rail system.
‘Central Barangaroo will be the beating heart of Barangaroo, with the metro station to make the global business hub at Barangaroo South and the western waterfront of the CBD accessible to everyone,’ says van der Laan.
The Barangaroo Ferry Hub is due to be completed in early 2017. Two new wharves will service passengers travelling from the inner harbour and Sydney’s west to Barangaroo, and connect to the Sydney CBD via Wynyard Walk, a new pedestrian link between Barangaroo and Wynyard Station.
As Sydney’s newest pedestrian tunnel, Wynyard Walk will help Barangaroo move up to an estimated 56,000 workers and visitors each day. It was opened in September 2016.
Vision, planning and governance at the heart of the project’s success
Mr van der Laan says that strong foresight and governance through the Barangaroo Delivery Authority on behalf of the New South Wales Government is helping to deliver a challenging project.
‘A visionary and ambitious urban transformation such as Barangaroo is always going to be complex, with many stakeholders having different and sometimes competing views. A key part of our role is to balance all those considerations and deliver an extraordinary outcome for the precinct as a whole.’
He believes that Barangaroo will continue to exceed expectations. ‘Barangaroo is a once-in-a-generation opportunity to create a truly extraordinary place and drive urban renewal in one of the world’s finest cities. Our commitment is to continue to deliver on the promise of this amazing place.’
To learn more about Barangaroo, visit www.barangaroo.com
ENABLING SAFETY AND SECURITY FOR AUSTRALIA’S CRITICAL INFRASTRUCTURE
Australia’s roads, postal services and power grids are no longer safe from cybersecurity threats. As our nation’s critical infrastructure becomes increasingly connected and digitised, the risks posed by cybercrime and hacking attempts grow. By collaborating with other industry players and building vigilance among their people, infrastructure providers can continue to deliver robust and reliable services – and earn consumers’ trust in their brands at the same time.
Australia’s financial services infrastructure is as critical to the national interest as any transportation or utility network. ANZ and other financial services providers have been tackling cybersecurity issues ever since the first internet banking systems came online decades ago. The steps that financial services providers take to protect sensitive customer data and critical functionality are similar to many other infrastructure providers’ defences in relation to cybersecurity. The scale, sophistication and potential severity of the threats are often the same, no matter which particular organisation is being targeted.
Understanding the risk
‘In an offline world, traditional approaches such as creating “air gaps” between critical infrastructure and any internet-connected system made sense,’ says Craig Shortus, Head of Utilities and Infrastructure at ANZ. ‘However, with the rapid adoption of internet-of-things technologies, remote monitoring platforms and cloud computing, most of Australia’s infrastructure is now connected in some way or another.’
For infrastructure providers, robust cybersecurity requires comprehensive awareness of all physical and informational assets, as well as who has access to them. Regular scans and monitoring reveal how data may inadvertently flow out of the organisation via social media posts, cloud hosting or employees’ mobile devices.
‘Knowledge of emerging technologies can also help operators understand the potential threats they may face from malicious actors,’ advises Steve Glynn, Chief Information Security Officer at ANZ. ‘These actors tend to be true early adopters who employ or target these technologies before most organisations are aware of their potential.’ Of particular importance is an understanding of what motivates different malicious actors, and how this influences where they might strike. Hacktivists, for example, are likely to target control systems or sensitive data in a bid to cause an outage or embarrassing breach to an organisation. Cybercriminals, on the other hand, usually adopt a much more low-key approach, aiming to siphon funds through phishing, social engineering and other types of online fraud.
Source: ANZ Institutional
Preparing for all contingencies
With this awareness, infrastructure providers can begin to identify where their systems may be vulnerable, and can take the necessary steps to secure them. ANZ performs frequent threat modelling exercises based on its understanding of different malicious actors’ motivations, combined
with intelligence about external and internal cybersecurity risks.
‘Sometimes, even the best-laid plans cannot prevent a cyber attack from occurring,’ cautions Craig Templeton, Head of Security Enablement at ANZ, ‘which is why infrastructure providers should run frequent exercises and drills that cover any contingency.’
At ANZ, teams drill their responses to a range of scenarios, testing not only their technical skills, but also their ability to escalate, communicate and mitigate the situation’s impact on other parts of the business. ‘These drills often bring in practitioners from other teams as well, such as business continuity or communications,’ says Templeton. ‘Our goal is to test our overall response to the broader reputational and operational impact of an attack, not just how we address threats from a technology standpoint.’
Source: ANZ Institutional Building trust with customers and industry
In today’s environment, all infrastructure bodies are connected, and they often face similar threats. The future may see infrastructure providers – including banks – sharing intelligence, responses and even technologies with one another. This could enable the ecosystem to grow stronger as a whole.
‘This collaborative approach does come with risks, but they’re well worth taking to ensure organisations maintain continuous protection in a complex cybersecurity landscape,’ says Glynn.
‘Sharing intelligence helps to forge an industry culture of reciprocity: if you successfully alert another organisation to a threat ahead of time, they’re more likely to return the favour and potentially save you from a crippling attack. And if one infrastructure provider suffers a breach or an outage, consumers often start to question whether other providers might also be vulnerable, potentially creating a crisis of confidence in the industry as a whole.’
Infrastructure providers should also work with their employees and customers to build a culture of cybersecurity awareness. Education is as important, if not more so, than technology when it comes to neutralising cyber threats. ANZ, for example, works with major organisations around Australia to ensure that cybersecurity messages to consumers are simple and consistent. As a result, consumers are much more likely to remember and practice good cyber-safety habits in their daily routines, benefiting a whole range of infrastructure providers, from banks to telcos and even supermarket chains.
‘Collaboration is the key to the cybersecurity of our national critical infrastructure,’ says Templeton. ‘When tackling threats or building up defences, infrastructure providers can draw on one another’s experience and intelligence – particularly those of the financial services industry, whose members have a diverse breadth of knowledge in this area.’
Doing so will help infrastructure providers not only gain greater trust – and brand loyalty – from their own customers, but it will also safeguard the services that Australians depend upon every day.
