Embracing Australia’s infrastructure challenges An interview with the Minister Anthony Albanese

Embracing Australia’s infrastructure challenges

By Jeanette Leigh An interview with Anthony Albanese

On taking offi ce in 2007, the Australian Government under Prime Minister Rudd outlined plans for an unprecedented infrastructure program to prepare the Australian economy for growth over the next 40 years.

The government moved quickly to establish Infrastructure Australia’s Advisory Council, consisting of commonwealth, state and private sector representation. Infrastructure Australia produced its fi rst national infrastructure audit in December 2008. After a priority list was established May 2009, the government committed to a record national investment of $36 billion in roads, railways and ports.

Anthony Albanese, the Minister for Infrastructure, is very pleased with progress to date. He says that the current government has spent more on rail in 12 months than the previous government spent in 12 years.

“We have established everything that we committed to in the Nation Building Program and more because we got the structure right in the fi rst place.

“Infrastructure Australia applied a rigorous methodology to assess and prioritise projects. Prior to this, the development of infrastructure and investment was not approached in a coordinated and exacting manner,” says Mr Albanese.

Government priorities are to deal with clogged and outdated railways, roads and ports that pose a very real threat to growth and productivity. Road traffi c congestion alone cost the economy approximately $9.4 billion in 2005, and according to the federal government’s ‘State of Australian Cities 2010’ report, this fi gure is projected to rise to $20.4 billion by 2020. Port congestion is so chronic that in some places more than 50 ships can be waiting to dock. At one stage in November 2009 there was a vessel queue of 76 ships waiting to enter the coking coal export terminal at Dalrymple Bay in Far North Queensland. In some places, coal production is reduced because the infrastructure is unable to keep pace – a costly outcome. “At the Australian Transport Council last year we agreed to have single national regulators for rail safety, heavy vehicles and maritime sectors. That will lead to signifi cant productivity benefi ts over the medium and long term,” says Minister Albanese.

Embracing Australia’s infrastructure challenges

Bailout packages adopted during the GFC by major countries belonging to the G8 thwarted the potential collapse of many infrastructure projects globally. Mr Albanese says that having the infrastructure program “topped up” by some of the measures in the economic stimulus plan added more value. “Funding for projects such as the black spot program for roads, the rail level crossing program that installed safety measures such as boom gates, and the designated program for additional rest stops for truck drivers were added to the Nation Building Program,” says Mr Albanese. Minister Albanese concedes that, “There is always more that you can do but you must consider the impact this government has had on turning underinvestment in infrastructure around in a matter of just three years to the point where we are delivering signifi cantly on investment and reform.” The $43 billion scheme that Prime Minister Kevin Rudd refers to as Australia’s biggest ever infrastructure venture, will connect approximately 90 per cent of homes from remote outback settlements to coastal cities. Cable will be laid across a staggering 7.7 million square kilometres. If we are to compete in a global market then this project is arguably a pivotal one in the infrastructure program.

The NBN is close to Minister Albanese’s heart and he is keen for Australia to never again be embarrassed by our lack of speed.

“When we came to offi ce, Australia was ranked 27 out of 30 OECD countries in terms of average download speed. Highspeed broadband is critical for our future economic growth. Now more than ever we need to be smarter in the way we deal with infrastructure and the way we position ourselves so we can take advantage of growth opportunities in the Asia Pacifi c region.

“Distance is a big challenge. We are a big country with a relatively small population. One of the great benefi ts of broadband and the use of information technology is ease of communication. It allows us to conduct business across vast territories without getting on a plane.”

The project is still in its early stages. NBN Co has been established to deliver the broadband initiative, and Mike Quigley, former president and operations chief of French telecoms equipment giant Alcatel, has been appointed as CEO.

Test sites are being prepared to gain understanding of the varying environments that installers will need to operate across. In February, Mr Quigley told Senate Estimates that the project was on track and that the national broadband network will be brought to some homes on the mainland in the second half of this year.

Location testing will determine issues such as cost differences in varying design alternatives, for example the question of deploying fi bre optics under or overground.

Mr Albanese emphasises that the pace of change is quicker than we think, which is why national broadband is so important.

“The program will be critical in terms of the next few years because it connects with everything the government is doing. It has the potential to impact throughout the economy and is vital for education, e-health and transport,” says Mr Albanese.

Delivering these large expensive projects has been made more viable for the Australian Government through Public Private Partnerships (PPP). A 2007 IPA report, titled Performance of PPPs and Traditional Procurement in Australia, confi rmed that PPPs are the best method of delivering large-scale infrastructure projects because they demonstrate greater cost and time effi ciency over traditional procurement methods.

Infrastructure Australia applied a rigorous methodology to assess and prioritise projects. Prior to this, the development of infrastructure and investment was not approached in a coordinated and exacting manner,” says Minister Albanese.m

Embracing Australia’s infrastructure challenges

Some investors have learnt hard lessons about being overly ambitious regarding the patronage of new roads. However that does not mean that PPPs are wrong. You have to get the fi gures right and make sure that the analysis is not overinfl ated...

In 2008, the Rudd Government created uniform national PPP guidelines to remove any barriers to private sector involvement. These were set down by the Council of Australian Governments upon recommendation from the Infrastructure Australia advisory council.

“Alongside direct investment, these measures help facilitate the move towards a seamless national economy that promotes productivity, reduces costs for business and supports future economic growth,” says Mr Albanese.

There is debate about whether PPPs are the best funding model. Enormous contracts must be fi nancially viable for the companies vying for them and there have been some failures, the underperforming Lane Cove Tunnel being a case in point. The predicted patronage for the $1.6 billion roadway was overestimated. This was a salutary lesson that cost its owner and operator, Connector Motorways dearly, and it was placed into receivership earlier this year.

Minister Albanese says that there is no one size fi ts all solution. Business is risky and that is unavoidable.

“Some investors have learnt hard lessons about being overly ambitious regarding the patronage of new roads. However that does not mean that PPPs are wrong. You have to get the fi gures right and make sure that the analysis is not overinfl ated.

“There are plenty of examples of successful PPPs such as the M7 Westlink in Sydney and the Peninsula Link project in Victoria. For Peninsula Link a revised model was adopted where the private sector investor component is largely taken from superannuation funds. This is a positive development.

An IPA report confi rms that PPPs are the best way of delivering large-scale projects. (Image: Transurban)

Embracing Australia’s infrastructure challenges

High speed broadband is critical for Australia’s future economic growth.

“At the same time if the private sector risk isn’t balanced then it will not attract investment. Transference of risk is a part of the model. If the government holds onto all the risk it begs the question, why would you proceed down the PPP track?” says Mr Albanese.

Improved living standards are also high on the federal government’s agenda. Demographic predictors say that 60 per cent of people will inhabit the urban sprawl by 2030. As such, a key component of the government’s $42 billion Nation Building – Economic Stimulus Plan focuses on community infrastructure investment, to give the functionality of cities a makeover.

Many challenges lie in providing health, education and community facilities that meet the needs of a population that is predicted to increase by more than 60 per cent by 2050.

As such, the Federal Government is taking a much more handson approach to urbanisation, not leaving urban planning and the integration of transport, housing and employment growth solely up to state governments.

So far, more than a billion dollars worth of infrastructure programs are being implemented at local government level. Out of the 3,300 approved projects across 565 councils, 2,800 have been completed. Community centres, town halls, parks and playgrounds, and pool and sports facilities across Australia are receiving signifi cant overhauls. The largest grant, $36 million, was allocated to build the Gold Coast AFL Stadium, owned by the council.

Other projects include streetscaping of suburban main streets, and increased disability access. In some projects sustainability initiatives such as solar panels and water recycling plants are being installed.

“One of the great things about the local government program is that it formed a large part of the Economic Stimulus Plan, so the work could be done quickly and have an immediate impact on communities and jobs across the country,” says Mr Albanese.

There has also been record investment in school infrastructure as part of the Building Education Revolution, with $16.2 billion being spent on the upgrade of schools across the nation. This includes the Primary Schools for the 21st Century program with 7,961 primary schools receiving funding, and 537 science laboratories and language learning centres currently being built or refurbished under the Science and Language Centres for 21st Century Secondary Schools program.

Work has been rolled out at lightning speed, with the government expecting the upgrades to take place within a couple of years for more than 24,000 projects. “If there was a theme describing the government approach to infrastructure, large or small, it would be creating jobs today while supporting the infrastructure that we need tomorrow. Short-term investment helps to build productivity and economic growth for the future.

Embracing Australia’s infrastructure challenges

“And the exciting thing is that the billion dollar cost of our project has created more than $2.5 billion in economic activity around Australia at a time when it was sorely needed.

“Organisations such as Infrastructure Partnerships Australia play a vital role in ensuring that infrastructure policy is high on the political and social agenda. I have chosen IPA to launch a number of major speeches because it is the peak organisation that is broadly representative of the entire sector,” says Mr Albanese.

Along with government focus on the challenges facing Australia’s infrastructure, there also must be community focus. How we choose to live can have a considerable effect on the advancement of infrastructure. For example, while the average number of people in Australian households is decreasing, the average house size is increasing. As we face a signifi cant population rise within the next 40 years, this will not be sustainable.

The government faces a range of community infrastructure issues, including the promotion of diverse, healthy communities, and addressing environmental concerns. Government and communities together must implement a range of initiatives to tackle these challenges, says Mr Albanese.

Organisations such as Infrastructure Partnerships Australia play a vital role in ensuring that infrastructure policy is high on the political and social agenda.

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Embracing Australia’s infrastructure challenges

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“These kinds of issues are complex and require community engagement. This is a major challenge for the government. Through the House of Representatives Infrastructure Committee we have set up an inquiry … on smart infrastructure, and this will form part of the debate as to how we use our existing infrastructure more effi ciently and get more out of what we have,” says Mr Albanese.

Mr Albanese has a strong sense of optimism for the future carbon constrained economy. “Electric cars are moving fast, as are changes in energy generation. Information technology will be integrated with most areas of endeavour, such as transport systems, creating greater effi ciencies. We are already using it to ‘green light’ public transport such as buses.

“There is no doubt that we have to have more signifi cant investment in public transport to ensure the sustainability of our cities. And having people work from home keeps people out of cars, reduces greenhouse gas emissions and enhances quality of life.”

In 2008, the Major Cities Unit was established within the Department of Infrastructure to work with Infrastructure Australia’s Advisory Council, so from the Prime Minister down, there is engagement in the cities debate on issues such as urban congestion, which is having a massive impact on residents in places such as western Sydney where there are desperate public transport needs.

Mr Albanese empathises with the challenges of those people who spend more time commuting in their cars than at home with their kids, saying, “This is why it is so important to have Commonwealth engagement in urban transport, water provision and infrastructure and to work in partnership with state and local government to make sure we deliver improved living standards and quality of life.”

There is no doubt that we have to have more signifi cant investment in public transport to ensure the sustainability of our cities. And having people work from home keeps people out of cars, reduces greenhouse gas emissions and enhances quality of life.