19 minute read
Tim Pallas | Treasurer of Victoria
The Hon Tim Pallas, Treasurer of Victoria
Key points:
• in response to the mounting pressures of rapid population growth, the Victorian Government has embarked on a substantial infrastucture investment programme • industry and government need to work in tandem to address issues like resources and skills shortages, and effective procurement and delivery methods, and • there is a clear need to engage with the community early in the development of projects to ensure that they have support.
Welcome to the economic hub and economic focus of the nation, Victoria. There are many challenges that we must confront as we go forward, but they’re challenges of opportunity and aspiration.
Melbourne’s population has increased by 125,400 people, or about 2.7 per cent, in the year to June 2017. With the population growing at that sort of magnitude, Melbourne is effectively reducing the distance between the comparative populations of Melbourne and Sydney by about 25,000 people a year. We have enormous pressure on our infrastructure, and the challenges for Victoria are quite multifaceted.
Firstly, we need to recognise as a state that we can’t simply put out applications and specifications into the public domain, and expect that we’re going to get a fully cooked proposal capable of service delivery. The state has to see itself as a partner in this process, and we have to actively involve ourselves in the way that we shape and procure the infrastructure that the community needs. We can already see an extractive materials resources shortage starting to impact on price. When you consider that the raw components are about 30 per cent of infrastructure costs, this is something the Government is focused on.
The second thing we need to recognise is we can’t continue to believe that we can be the beneficiaries of providence. For example, when we first came to Government, there wasn’t a lot of work around and it was relatively easy to put away projects. What we’ve found as we’ve started to become a lot more active in the infrastructure delivery space is that skilled workers that exported themselves from Western Australia and Queensland, because of the downturn in the construction phase of the mining boom, have reverted back to New South Wales and Victoria. They’re now fully occupied.
We need to recognise that we have to grow the product at home. That’s why the state has put so much effort into developing the skills and the capability base domestically. From our perspective, when Victoria hits a population of 10.1 million, as was predicted in a 2016 report, the effort to build our skills, our resources capacity and the adept way in which we engage
the private sector to be able to deliver infrastructure, will be critically important. 10.1 million people by 2051 brings enormous challenges and nervousness to the community, especially when Melbourne will reach about eight million. I often bemoan the fact that the easy thing for state politicians to do with population is to go to warring stations, and to try to assert that they have a solution.
It is the Federal Government’s responsibility to manage population. The Australian Constitution guarantees free movement between the states for citizens wherever they are. We need to recognise that population is something that states manage, but that the Commonwealth has principal responsibility for the migration side.
Population growth is a challenge that Victoria is prepared to meet, and also has capacity to meet. Victoria has the fastestgrowing economy in the nation. It’s estimated that over the last four years, about $48 billion has been added to the Victorian economy. Nearly one in every seven dollars circulating in the Victorian economy today didn’t exist four years ago.
Recent Australian Bureau of Statistics (ABS) fi gures show that Victoria’s state fi nal demand is up 4.9 per cent, the highest growth rate of all the states. We’re also leading the states on wages growth, retail trade growth and real gross state product growth. The story of this Government has been one of consistent, progressive and cumulating growth that has demonstrated itself in very material ways.
The most material way is the creation of jobs. About 370,000 jobs have been created since this Government was elected. When we came to Government, we inherited unemployment of about 6.7 per cent. It is now at about 4.8 per cent. That is a very profound shift in the economic circumstances of the state.
Infrastructure has played a vital part in this. The State Government has about $13.7 billion in infrastructure in this
Level Crossing Removal Camp Road, Campbellfield. Source – North Western Program Alliance – John Holland and KBR year’s budget alone. To put that into context, $4.9 billion is the 10-year average investment of governments of all persuasions. That number now sits notionally at $10.1 billion going forward.
That number will rise because we’re giving the industry a much clearer picture of the pipeline of projects that the Government is intending to pursue. The clear intention of the Government is to have a credible and long-term strategy around infrastructure.
The message that we’re giving to industry is that we are not taking a peak-and-troughs approach to infrastructure. We’re building to a new normal and, perhaps dauntingly for a Treasurer, we’re not there yet. The challenge is to make sure that industry appreciates it and makes the necessary investment for us to get there, and that Government understands that it has a substantial role to play with regards to skill acquisition and procurement strategies. We also have to recognise that we have a substantial role to play in easing the administrative burden in the tender process. The intent and requirements we need must be clear to ensure that industry can meet compliant bid requirements.
While the state has put $13.7 billion of investment into infrastructure for the coming year, if you look at the whole-ofgovernment investment, about $78.9 billion of infrastructure projects are either underway or about to start. That shows that as a state, our capital projects are going from strength to strength.
In terms of major projects, we’ve got the $10.1 billion Melbourne Metro underway, the biggest rail project in Victoria’s history. Melbourne Metro will increase capacity on the city loop – making it possible to run more trains more often on rail lines across Melbourne. Melbourne Metro will double the capacity of the city loop by taking two dedicated lines that feed into the loop and running them under the loop.
The $6.7 billion West Gate Tunnel Project is a marketled proposal that will provide an alternative river crossing to the West Gate Bridge. This project is vitally important to the economic growth of the state. The state’s dependence on the West Gate Bridge is not sustainable. The West Gate Bridge was designed to carry 40,000 vehicles per day, but it is now carrying about 200,000 vehicles per day. The need to differentiate that traffi c fl ow to take trucks off inner western suburban streets and to provide greater capacity into and out of the biggest port in the nation, the Port of Melbourne, is critically important.
We have allocated $110 million in this year’s budget to fasttrack the completion of detailed planning and design for the $15.8 billion North East Link. If we are re-elected, we will have a mandate to get on and deliver this project. I don’t think any project has been the subject of more public disclosure, planning work, and community engagement before an election. The community and industry know exactly what they’re signing up for.
In an unprecedented move, we released the business case for the project to allow people to know the full value North East Link will provide. This means the community can scrutinise it,
West Gate Tunnel. Source AECOM
criticise it, and have a public discussion about the merit of the project. There shouldn’t be any fear in infrastructure circles about greater transparency around our infrastructure agenda. In many senses, it is a relief measure that the community demands and deserves. As a government, we need to be prepared to advocate for these projects in the public domain. Industry support is critical to this, as well.
The $2.2 billion High Capacity Metro Trains project was announced in November 2016. This project will deliver 65 new High Capacity Metro Trains (HCMTs) capable of carrying 20 per cent more passengers than any other train on the network.
The $1.7 billion Regional Rail Revival will provide the infrastructure needed for more frequent and reliable train services for regional Victorians.
The work that we’re doing with the Federal Government on the airport and regional rail plan, including the preferred Sunshine route, is also very important.
The Suburban Rail Loop is a big plan and a big vision for Victoria and Melbourne. We have committed $300 million for a business case for the 90-kilometre circle line through Melbourne’s suburbs. Work that has been completed to date suggests that it would be a line servicing about 400,000 passengers – the busiest suburban line in Melbourne – and it would cost about $50 billion.
The Premier has a nice way of describing this. He doesn’t pretend that this project will be done in one or two terms of government. This is a long-term infrastructure project. That should get industry quite excited because it speaks volumes about this Government’s commitment to the longevity of our infrastructure agenda.
What Premier Andrews says is, ‘Well, I won’t be the Premier that gets to cut the ribbon on the completed project, but I will be the Premier, if I get the opportunity at the next election, to get it started’. Looking beyond our own time and political mortality is critically important. This is about thinking beyond ourselves and our aspirations and looking to build for the future.
We said before the last election that we would lease the Port of Melbourne and we did. We got about twice the value that New South Wales got for Port Botany and Port Kembla for half the period of time under the lease. That shows it was a premium asset, and it went to the market at the right time and was properly managed.
We said that any proceeds from the lease would go directly to meeting the infrastructure needs of the community. Now, let’s look at the Level Crossing Removal Programme. Those of you who aren’t from Melbourne wouldn’t know the drag on our economy, on your sanity, that level crossings have – particularly in peak hour.
The Victorian Government is well on its way to achieving our aim of removing 50 of those level crossings in the first two terms of government. We said that in our first term about 20 would be completed. That number looks to be closer to 27 or 28 by the time our first term comes to an end.
All of those projects highlight that we are a government that does what it says it will do. Some people in this room have been critics of some of the choices we’ve made. I must also add that people in this room have also been robust advocates for other things we’ve done. People here call it as they see it. However, it is also vital to reconnect the electorate with politicians that honour the things that they say they will do. That’s what you get from this Government. What you see is what you get, and we don’t have any fear about declaring our agenda.
It would be strange if I didn’t talk about my friends in the Federal Government. If you watch the press conferences that the Prime Minister and Federal Treasurer give, they take credit for the economic growth of the nation. The contribution that
West Gate Tunnel. Source – AECOM
Victoria makes to the nation’s economic growth is happening without much support from the Commonwealth Government.
There is a reason we called Malcolm Turnbull the Prime Minister for Sydney. It struck a tone with Victorians around the same time that our infrastructure share was about seven per cent of the national average.
Over the long term, the Commonwealth is moving to arrest that to some extent, and we’re pleased to see what’s happening with the Melbourne Airport Rail Link, but there’s a long way to go.
However, in the fourth year of the current forward estimates period, the Federal Government expects that it’ll contribute about $250 million to infrastructure spend in Victoria. New South Wales hit a high of 48 per cent of the national infrastructure allocation. We’ve got a long way to go.
Victoria’s got a pretty robust agenda. When the Commonwealth lays claim to its great economic management, take out the Victorian figures because they had nothing to do with it. These figures then start looking poor by comparison.
Because we’re in Victoria, I should at least make an observation about Sydney. There was a recent article in The Daily Telegraph that fired a shot at the New South Wales Government. The article said the New South Wales Government has a can’t-do attitude and is apathetic when it comes to driving major Sydney events. Now, I don’t necessarily know much about the agenda New South Wales is chasing, but there was a great line there. The author said Victorian leaders were leaving the New South Wales Government for dead.
As much as we love the niggle between Sydney and Melbourne, the nation functions best when Sydney and Melbourne are performing well. My focus is now beyond the idea of a Melbourne–Sydney rivalry. We are looking to Victoria’s place on the world stage.
As a nation, we would be much better served by a much more dispassionate, non-political provision of resources out of the Commonwealth. This would allow all states to either flourish or flounder on the way that they administer their economies and the way they provide for their communities.
This Government has delivered the highest average surpluses in the state’s history. Victoria has posted another extension on its surplus, by about $270 million. Our economy is strong and our debt is low.
This means that we’ve got a great opportunity to partner with industry to drive our dollar as hard as we can. But we do also recognise that sometimes projects require creative thinking and the skills that the private sector brings. We welcome your participation and involvement in driving our agenda forward in a genuine and collaborative partnership.
The Hon Tim Pallas MP – Treasurer of Victoria
Mr Pallas was elected to the Victorian Parliament in 2006 and is the state member for Werribee. Following the election of the Andrews Government in November 2014, he was sworn in as Victoria’s 50th Treasurer. In October 2017, Mr Pallas was appointed the Minister for Resources.
His first budget in May 2015 delivered the biggest education budget and investment in public transport in the state’s history. His second budget in April 2016 included the single biggest school capital investment in Victoria’s history, as well as fully funding the construction of Melbourne’s new Metro Tunnel. His third budget in May 2017 included an unprecedented $1.9 billion investment to tackle family violence. Mr Pallas is most proud of his latest budget. The 2018 –2019 Victorian Budget delivered another strong surplus focused on continued jobs growth, and investment in projects and services vital to the state.
Australia is going through an infrastructure boom. The top nine planned infrastructure projects are expected to cost $140 billion, yet with such a big increase in both the number and size of projects, there are some accompanying challenges that go beyond traditional engineering and finance requirements. There can also be a change in thinking about where the focus should be in a project.
Scott Young, Executive Director, Real Estate and Infrastructure at Commonwealth Bank, says that the bank is taking a broader approach to infrastructure projects. ‘In addition to providing the much-needed funding, we are partnering with clients in our Innovation Labs to explore ways they can leverage emerging technology and evolve their business models for changes in urban density, sustainability and mobility,’ he says.
To build modern infrastructure projects effectively, it is necessary to take into account a wide matrix of factors: demographic and technological trends, financing models and stakeholder expectations. For Commonwealth Bank, it has also meant rethinking its operating model.
Tracy Gibson, Executive Director, Real Estate and Infrastructure at Commonwealth Bank, says that the bank is bringing together its infrastructure and real estate teams, with a focus on future cities. ‘We need to be collaborating to effectively support clients investing in the real estate and infrastructure sector, as their assets are becoming more integrated and interdependent,’ says Young.
Gibson says that one example of how infrastructure and real estate can go together is the Cross River Rail project in Queensland, which will be developing four new stations, including in-station retail and commercial opportunities, along with the Over Station Development at Albert Street station. That makes it, she says, both a property/real estate project and an infrastructure project.
Young points to the development of Western Sydney as another instance of collaboration. ‘Over time, development in and around Western Sydney Airport will include a range of real estate and
infrastructure facilities. A large number of stakeholders have been consulted or involved in the development planning stages to ensure that this area caters for the needs of the community better than an unplanned, piecemeal approach might.’
Infrastructure is, in the first instance, usually thought of as ‘hard infrastructure’, like roads and airports. But that definition is widening to include such areas as providing better access to health, education, water and clean energy.
Australia is widely acknowledged to be at a turning point in its infrastructure development. There is a growing need to upgrade legacy infrastructure and to invest in the types of infrastructure that will support future technologies. At the same time, there is a limited supply of contractors and some emerging skill shortages. It has increased pressure on planners and financiers.
The way in which physical and social systems are being understood is also changing and altering assumptions. One trend is circular economies: a focus on maximising the use of resources with the aim of reducing waste (in contrast to linear economies, which focus on making, using and disposing of products).
This can include technologies that enhance value. Emerging technologies like artificial intelligence, the Internet of Things and big data analytics are playing roles in improving existing infrastructure.
The sums involved in the sector are large, and the market is global. According to the consultancy McKinsey & Company, more than US$2.5 trillion a year is invested just in transportation, power, water, and telecommunications systems.
At the same time, infrastructure investment has declined as a share of gross domestic product in 11 of the G20 economies since 2008. McKinsey forecasts that US$3.3 trillion will be required until 2030.
In Australia, the federal government has committed more than $75 billion just to transport infrastructure for the next 10 years. The effectiveness of the future infrastructure development may prove crucial to national productivity.
Demographics will be an important factor. ‘In Australia, where the working age population is growing at a decent clip, 40 per cent of government taxes will be spent on health care by 2043, versus 25 per cent today,’ says Young. He adds that fuel-efficient cars and electric vehicles will render many traditional road funding mechanisms, including fuel excises, ineffective.
Gibson notes that population growth will be an influence, especially in Melbourne and Sydney. She expects activity in these infrastructure sectors to be intense. ‘There is a large volume of infrastructure projects and urban renewal that is going to come down the pipeline over the next 20 years.’ ♦
This article has been prepared in conjunction with the Commonwealth Bank of Australia, ABN 48 123 123 124 and is not Financial Advice or Independent Research. Any opinions or views of contributors are reasonably held or made, based on the information available at compilation, but no representation or warranty is made or provided as to the accuracy, reliability or completeness of any statement made.
A shared vision for the future
In 2007, the City of Sydney developed a long-term strategic plan for our city, endorsed by our communities.
It involved tens of thousands of residents and businesses, government and statutory authorities, visitors, and educational and cultural institutions.
The result was Sustainable Sydney 2030, which has been the cornerstone of everything we do.
Our consultation showed that 97 per cent of people wanted us to take action on climate change. They also wanted a city with a strong economy – one that supports the arts and connects its people to each other and the world.
Since 2004, we’ve completed more than 250 projects, including parks, playgrounds, childcare centres, pools, libraries, theatres, and community and cultural spaces.
We’ve planted 12,329 street trees, and provided more than 78,211 square metres of landscaping and 154 rain gardens.
We’re building a network of bike lanes, and are upgrading footpaths and city laneways. We were also a key driver in Sydney’s small bar revolution.
Our Eora Journey project, which celebrates our First Nation people, involves the creation of seven major public artworks and an economic development plan. We recently released plans for Bara, a major new artwork overlooking Sydney Harbour.
The City generates affordable housing through levies by selling its land at a discounted rate and by providing funding to community housing providers. These land sales have totalled more than $26.8 million and created more than 920 affordable housing dwellings.
We’ve established the Better Buildings Partnership, City Switch, 100 Resilient Cities and the C40 Climate Leadership Group.
We’ve reduced emissions in our own operations by 25 per cent and have been carbon neutral since 2007. Across our local government area, we’ve helped to drive emissions down by 20 per cent.
We’ve played a leading role in establishing Resilient Sydney, the first strategy for metropolitan Sydney to set out the directions we must take to strengthen our ability to survive, adapt and thrive in the face of increasing global uncertainty and local shocks.
The last decade has seen unprecedented growth and development in our city. In recent years, our residential population has grown by 38 per cent, adding almost 10,000 new residents each year.
It is now 10 years since Sustainable Sydney 2030 was first adopted, and we can see how our city has been transformed in that time; but it’s time we look beyond 2030 to what the future of our city could be out to 2050.
We will soon conduct another extensive consultation program in the development of a new Sustainable Sydney 2050 plan.
It’s important that community members share their ideas for the future of our city, to help to identify where we can work together on solutions.
Through good planning and a consultative approach, we can strengthen social cohesion in our fast-changing community, while also supporting social and affordable housing needs and planning for critical issues, such as traffic congestion, area livability, amenities, infrastructure and other challenges rising from our changing climate. ♦
Lord Mayor Clover Moore
