Keynote interview | Romilly Madew AO, Chief

L–R: Romilly Madew AO and Adrian Dwyer

Keynote interview Romilly Madew AO

Key points:

• There is more of a political focus on infrastructure than ever before. • Maintaining credibility, independence and authority at Infrastructure Australia is a

‘continual tap dance’. • Infrastructure Australia needs to evolve how it assesses project business cases.

Interviewee:

► Romilly Madew AO, Chief Executive Officer,

Infrastructure Australia

Interviewer:

► Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia

Adrian Dwyer (AD): You came into the role at Infrastructure Australia (IA) when the Australian Infrastructure Audit was towards the point of development and publication. There’s now an opportunity for you to set the vision for what the future of Infrastructure Australia is. So, rather than just the future of infrastructure, what’s the future of Infrastructure Australia?

Romilly Madew (RM): Before I start, I think it’s important to recognise a couple of people in the room. Infrastructure Australia is 11 years old, and two of its former chairs are here – Sir Rod Eddington and Mark Birrell. Philip Davies is also here, the former CEO, and Mike Mrdak, the secretary who oversaw the creation of Infrastructure Australia. And if you think about Infrastructure Australia, it’s been on a journey. When it was created, there was no Infrastructure Australia or equivalent globally. So, these leaders created an organisation, and developed its governance and its work plan. But infrastructure is now in the hot seat and we, as an organisation, need to evolve.

There needs to be closer collaboration between the states and territories, especially in the way Infrastructure Australia works. The Audit just came out, and we had 150 contributors, but we’re now working on the Infrastructure Priority List. For this pipeline, Infrastructure Australia is working collaboratively with all of the states. In fact, one unintended consequence is that we’ve had a 40 per cent increase in the number of projects that are coming to us from jurisdictions for the pipeline because we’re working so collaboratively. We’ve kind of opened the floodgates. But I think that’s a good thing, because visibility of the pipeline is really important. We are also trying to be more pragmatic and practical in our engagement with the states and territories, and call out where there needs to be reform and further investment.

AD: One of the challenges with being more collaborative and working more with the states is that, as an adviser to government, you have to balance independence and influence. Accepting that it’s a spectrum between those two, how does Infrastructure Australia best find that balance between independence and influence?

RM: Currently, I’d say we’re more focused on independence. But if we’re going to build credibility, I think

we need to move into the middle range. We will not diminish the importance of the business cases and we will ensure that they’re robust, and we need to maintain our independence through that process. But with the scale of investment that is occurring, and that is likely to become the new norm, we also need to be really influential on behalf of the states in the sector. The Audit is a great example of where we have been independent, and where we haven’t shied away from the big issues, but it’s also an influential document.

It really is an interesting balance. My experience from the Green Building Council of Australia showed that we had to be independent when it came to Green Star ratings, but we also had to be influential in transforming the industry. So, I have experience in finding that balance, and I think it can best be described as a continual tap dance.

AD: So, if you’re trying to be more influential over government, that means being more attuned to what government wants. How do you avoid just being a ‘yes’ organisation?

RM: Well, it means not shying away from ‘I’m saying no’, but also being relevant. States will come to us with business cases, or they may even have feedback on the Audit, and recommendations for inclusion in the Australian Infrastructure Plan. We can say respectfully that we don’t agree, and this is why. Being clear on our evidence base is really important, and if we do say no, we do so respectfully, and we move on with a respectful engagement. We need to move beyond the argybargy between the Federal Government and the states that has occurred in the past, but it requires them to agree with our point of view and to move forward.

AD: I’m sure everybody read all 642 pages of the Audit as I did. One thing buried in there is some fairly pointed criticism of cost-benefit analysis (CBA) and how it’s used. Does that imply that CBA will now have a diminished degree of influence over Infrastructure Australia’s view of the world?

RM: Legislatively, we need to use CBA when it comes to business cases, but our commentary in the Audit was a sign that we are not afraid to also criticise ourselves. So, it’s not all on the sector to change, or on the states and territories. We, as an organisation, also need to evolve. We’re doing a number of things at the moment when it comes to the Assessment Framework, which is what business cases need to be developed in accordance with. It really does need to evolve. Infrastructure investment in Australia has evolved and changed in terms of improvements in transparency and accountability from the states, as well as the sophistication of business cases.

The feedback we get from the jurisdictions is that we need to look at intangible benefits. We need to consider social issues. We need to consider strategic merit. The New South Wales Treasurer could talk from a New South Wales lens, but he can’t talk from a Northern Territory lens, and their challenges are eyewateringly different. In remote, regional and rural Australia, their challenges are so different. And they don’t have the population density that we have in Brisbane, Sydney, Melbourne and Perth. So they would probably struggle to get a benefit-cost ratio above one if it was just pure CBA.

So, it’s appropriate that we consider looking at that, including a review that we’ve commissioned from EY into the experience of jurisdictions as our ‘customers’. We’re doing our two-yearly review of the Assessment Framework, and we’re also creating a Remote Areas Working Group as part of this. So, just as some states and territories need to improve their business cases, we are also looking at how we can evolve our assessment of their business cases.

AD: So, if CBA is marginalised to just one of a number of assessment tools for business cases, how do you retain the robustness that CBA provides? How can the taxpayer that you work on behalf of know that Infrastructure Australia is still giving the most pointed advice to governments?

RM: The next iteration of the assessment framework needs to ensure that that robustness is maintained, and that the benefits outweigh the costs. But in some instances, you have to consider that the benefits might not be economic. They might be a strategic or a social benefit. We need to ensure that we can quantify those benefits in a way that’s really transparent for the public.

AD: Economists can quantify it in a CBA; they can put a price on anything.

RM: I’m sure that there are great examples around the world where this has been done, and it has been done in Australia. We just need to work with the sector to find out how we can do that better. In some ways, we do it in the Assessment Framework already. We pick up the impacts of climate change, among other things. We just need to evolve the Assessment Framework.

AD: You’re now looking at the Australian Infrastructure Plan that comes out in 2021. What have you learnt in the last month, having published the Audit’s evidence base, and how’s that shaping your thinking on the Plan?

RM: The timing of the Audit couldn’t have been better. And the most interesting thing about the feedback we’ve received is how welcomed it was, even with respect to the issues we didn’t shy away from. So, we haven’t had lots of people telling us that parts of it were wrong. Our inclusion of social infrastructure has been welcomed, as well as the geographic lens that we took, not a jurisdictional lens. We looked at fast-growing cities, smaller cities, remote and rural, then small towns and regional, and then Northern Australia.

We’ve also received very positive feedback on the community-centred approach we took, which was around the

user outcomes of cost, access and quality. The Audit identified 180 challenges and opportunities. It’s the start of a process. It’s the start of a conversation. What’s important now is to listen to feedback from the sector and capture that in the Plan. The Plan will be the list going forward of recommendations to all governments about what needs to change.

One piece of feedback that we received was about the crowding and congestion report and modelling. When we put the Audit out, some of our Federal Ministers suggested that we didn’t pick up some projects that had been mentioned in the Budget. On that front, they’re right, we didn’t, because the modelling finished in September last year. But what this feedback highlights is that modelling is only as good as its inputs. And modelling has challenges at the moment – it doesn’t pick up changes in employment or densification. These are lessons for the Plan and future audits; we really need to look at modelling and its limitations.

AD: There are 180 challenges and opportunities in the Audit. That’s a big list. The problem with a list of 180 is that it’s everything and nothing. Are there some key ones? Are there three or five that stand out for you as the biggest challenges or opportunities over the next 10 or 15 years?

RM: One is about improving collaboration between state and territory, and at federal level, as well as better collaboration in the sector. This includes sharing experiences; for example, through post-completion reviews, which are only sometimes done and very rarely shared. Australia is in this huge infrastructure boom. We have to learn from each other and continue to improve for the next project.

Another one of the things we call out is for infrastructure to meet community needs, and infrastructure for all Australians. We’re just not focusing on the four largest cities. We are all better when infrastructure across Australia works efficiently.

And I think one of the special things about the Audit is that it calls out the importance of infrastructure as a joined-up whole. All forms of infrastructure need to work for the benefit and livability of our communities. It’s great to build a road or railway if it’s what’s needed, but what about the community at the end? And are we ensuring that the social infrastructure we’re putting in place is improving community outcomes in terms of economic productivity and quality of life?

Romilly Madew AO

AD: I’m going to come back to my first question about your vision for Infrastructure Australia. If you look three years down the line, what does Infrastructure Australia look like, and how is it different to now?

RM: The first thing is making our processes more pragmatic. I hope that the Assessment Framework is considered relevant, pragmatic and practical. I hope that it’s still robust and it doesn’t look like a tick-a-box exercise; that it’s a much more pragmatic process.

The second thing is that we are relevant and helping to bring about reforms and investments that have been talked about today. I hope that reform is happening around Australia, and that it’s done in a collaborative fashion, in partnership with the sector and the jurisdictions.

Adrian Dwyer – Chief Executive Officer, Infrastructure Partnerships Australia

Adrian Dwyer is the Chief Executive Officer of Infrastructure Partnerships Australia – the nation’s leading public and private sector infrastructure think tank. He was appointed to the role in March 2018. Mr Dwyer served as Infrastructure Partnerships Australia’s Head of Policy from 2011 until 2015, where he led major studies on road pricing reform and contracting and financing models, among others. From 2015 to 2018, Mr Dwyer served as Executive Director of Policy and Research at Infrastructure Australia – the Commonwealth Government’s statutory infrastructure body.

Romilly Madew AO – CEO, Infrastructure Australia

Romilly Madew AO commenced as Chief Executive of Infrastructure Australia in April 2019. Recently awarded an Order of Australia in acknowledgment of her contribution to Australia’s sustainable building movement, Ms Madew is recognised around the world as a leader and advocate for change in the property and construction sector. Prior to Infrastructure Australia, she led the Green Building Council of Australia for 13 years.

Ms Madew holds Board positions with Sydney Olympic Park Authority and Chief Executive Women, and has sat on numerous ministerial panels. Her achievements have previously been recognised with national and international awards, including the 2017 World Green Building Council Chairman’s Award and 2015 International Leadership Award from the US Green Building Council.

An Honorary Life Fellow of the Australian Sustainable Built Environment Council, Life Fellow of the Green Building Council of Australia and honorary fellow of the Planning Institute of Australia, Ms Madew has been named one of the ‘100 Women of Influence’ by the Australian Financial Review and Westpac, and is a National and New South Wales winner of the Telstra Business Women’s Award.

Westpac at forefront of sustainability thinking in infrastructure finance

The private sector has a key role in combating effects of climate change and other threats to the environment.

Westpac Executive Director David Scrivener believes that Australia’s infrastructure boom can do more than build assets for the community – it can also quicken the country’s transition to a net zero emissions economy and elevate our global sustainability credentials.

As Global Head of Energy, Infrastructure and Resources at Westpac Institutional Bank, Scrivener is passionate about the role of capital markets in driving sustainability outcomes in infrastructure, and encouraging greener projects that help the environment and community.

‘Australia has a once-in-ageneration opportunity to build infrastructure that will improve sustainability for decades to come,’ says Scrivener. ‘With innovative thinking in finance, we can help major projects better address climate change and other environmental threats.’

Scrivener’s colleague, Roddy Adams, says sustainability can go further in infrastructure. ‘The biggest impact banks can have in this area is encouraging behaviours that make sustainability integral to projects. That is, using capital to incentivise sustainability at the project-planning stage, measuring environmental outcomes and reflecting that in a project’s cost of capital.’

Adams, NSW Head of Energy, Infrastructure and Resources at Westpac, believes the onus is on the private sector to drive environmental outcomes. ‘Strong growth in renewableenergy assets is a result of a privatesector response to developing market solutions for sustainable infrastructure. The private sector found ways to reward projects that had better sustainability outcomes.’

Westpac’s sustainability leadership – and innovation in financing solutions for infrastructure projects – is timely given the current and growing pipeline.

More than $123 billion of work has commenced since 2015, and more than $200 billion has been committed to future projects, according to Infrastructure Australia. It estimates that $600 billion of infrastructure investment is needed over 15 years to keep up with population growth.1

Infrastructure is the most significant contributor to greenhouse gas emissions, but progress to reduce them is inconsistent, says Infrastructure Australia. Transport emissions have increased by almost nine per cent

since 2015, offsetting a three per cent decrease in energy-sector emissions.

Long-term social, economic and environmental independence will add to infrastructure challenges and opportunities. For example, 40 per cent of vehicles in Australia are likely to be electric by 2040, creating implications for energy infrastructure. 2

Westpac has a key role in this transformation. The bank lifted its exposure to financial climate change solutions to more than $10 billion at 31 March 2019 – a year ahead of schedule – mostly in transport and renewable energy projects. Its target is $25 billion by 2030.

‘We urgently need cost-effective, low-carbon solutions across the economy, particularly in transport and energy, that address the imminent threat of climate change, and banks with ambitious targets to finance these solutions,’ says Scrivener.

Market-leading sustainability credentials

Scrivener says Westpac is ideally positioned to help Australia’s infrastructure sector capitalise on its potential to become a global leader in green projects. ‘Sustainability is part of Westpac’s DNA. We were an early mover in sustainability, and that focus is embedded throughout the bank as we help our clients transition to a net zero emissions economy.’

Westpac is the leading financier of greenfield energy projects in Australia, providing funding in FY18 for 14 new wind and solar farms that will power more than 1.5 million homes.

It also facilitated and issued climate bonds and other green debt instruments in FY18, achieving strong progress of $1.3 billion towards its $3-billion target in 2020.

They include Westpac’s launch last year of the world’s first Green Tailored Deposit to be certified by the internationally recognised Climate Bonds Initiative. With a minimum transaction of $1 million, the Green Tailored Deposit is designed for medium- to long-term investors seeking investments that genuinely address climate change.

Sustainability-linked loans – designed to incentivise and reward a borrower for meeting predetermined sustainability targets – are another focus. Westpac in July 2019 provided funding to Queensland Airports for its Gold Coast Airport Redevelopment. The $100-million loan is tied to achieving its carbon reduction targets as accredited by the Airports Council International program, and is the first of its kind taken by an Australian airport.

These innovations add to Westpac’s infrastructure momentum. The bank supported more than $13 billion of transport projects in FY18, including the Melbourne Metro, Western Roads upgrade, High Capacity Metro Trains and Westgate Tunnel. ‘We expect this to grow substantially given the federal government’s commitment to $100 billion in infrastructure projects over the next 10 years, and similarly large plans in New South Wales, Victoria and other states,’ says Scrivener.

Westpac was also an early funder of the WestConnex motorway project in Sydney and remains a key lender.

Adams says Westpac’s sustainability focus was a reason he joined the bank in 2018, having held senior infrastructure positions over two decades. ‘If we want to build this country and leave assets that can serve our grandchildren, we must make our infrastructure more sustainable.’ ♦

To learn more about Westpac’s work in infrastructure, email David Scrivener at dscrivener@westpac.com.au.

1 Infrastructure Australia, ‘An Assessment of Australia’s Future Infrastructure Needs: the Australian Infrastructure Audit 2019,’ June 2019. p7

2 Ibid. p7

Partnering to develop next-gen on-demand services

Providing public transport customers with personalised on-demand solutions for their travels is fast becoming a reality in Australia.

Take up of on-demand services continues to grow, as customers seek more personal, adaptive and technology-driven transport options. It is estimated that one in five Australians have used on-demand rideshare services in the last three months (Roy Morgan, 2019).

Global mobility leader Transdev has recently announced a new partnership with Newcastle-based mobility tech start-up, Liftango, to develop on-demand transport solutions.

In Australasia, Transdev delivers more than 145 million customer journeys a year and is recognised globally as a leader in delivering on-demand transport from first-mile and last-mile connections, through to point-to-point services for the public transport market.

Transdev Australasia CEO Luke Agati says the partnership with Liftango reflects shared ambitions to improve connectivity and promote greater adoption of public transport services across Australia and New Zealand.

‘The partnership is an exciting opportunity to combine our shared strengths of innovation and mobility in order to provide a more personal and seamless experience for customers,’ he says.

‘The success of our business is built on strong local partnerships, and we are proud to be partnering with one of Australia’s most exciting local mobility start-ups in Liftango.’

Kevin Orr, CEO at Liftango, believes that the partnership will help Liftango take the next leap forward towards making public transport a convenient and flexible option.

‘Cities around the globe are combating congestion and commuter issues, as our populations and urban density continues to grow. Further exacerbating the problem is the increasing demand for recent ride-hail solutions. We are still yet to understand the full impact of these services both on congestion and the public transport network,’ says Orr.

‘However, the convenience these services offer is quickly becoming the norm for commuters.

‘Our partnership with Transdev is already creating new opportunities to integrate on-demand and shared mobility solutions into existing public transport networks, which will, in turn, help improve the commute, keep costs down, reduce our overall carbon footprint and start creating the transportation the cities of tomorrow will require.’

The new partnership follows Transdev’s launch of an Australian-first, the On Demand ferry in Sydney, on behalf of the NSW Government.

The On Demand ferry – a smaller, purpose-built harbour ferry that connects Barangaroo to the Bays precinct – lets customers book a ferry for a pick-up time that suits them best via a mobile app. It aims to provide a fast, regular, on-demand connection as an alternative transport option for commuters and tourists linking to existing public transport services and destinations, such as the Sydney Fish Market and harbourside parks.

This on-demand solution was delivered through a local partnership with technology provider Tranzer, who developed the mobile app to book the On Demand ferry.

Through its global expertise, Transdev has identified that accessibility is key to aiding the adoption of on-demand solutions. Giving customers the choice and control of how to book their service has been critical to uptake.

By partnering with a technology provider and leveraging its global expertise, Transdev is helping to make on-demand travel a reality for public transport and consumers. ♦