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It’s time to get serious about Australia’s Cities By Mark Birrell, Chairman, IPA
It’s time to get serious about Australia’s cities
Mark Birrell
Australia’s cities are at a crossroads. In May, a Mercer survey mentioned both Sydney and Melbourne among the world’s most desirable places to live. Yet it is apparent that without real reform toward targeted, sustained and well-planned investments in the next generation of infrastructure, the desirability of Australia’s major cities will be compromised.
Our cities are under extraordinary pressure because of often inconsistent planning and an historic absence of integrated infrastructure delivery, twinned with unprecedented growth pressures. Treasury’s recent Intergenerational Report signals that Australia will need to house more than 36 million people in just 40 years’ time. Modelling by Infrastructure Partnerships Australia suggests that 72 per cent of national population growth by 2050 will occur in Australia’s capital cities. Meanwhile, Monash University’s Centre for Population and Urban Research fi nds that Australia is more likely to be looking at a population exceeding 42 million people, based on recent growth trends. Whichever fi gure proves to be most accurate, it is generally accepted that Australia is facing a record increase in its population. There is also a broad consensus that Australia’s capital cities will house the lion’s share of this growth. More people will inevitably mean more commuters, more freight and a greater demand on public services. If we are going to ensure a high quality of life for Australians and avoid endless urban sprawl or social disconnection, it will also mean enhanced planning that fully considers density, transport infrastructure and the delivery of social assets and community infrastructure – like schools, hospitals and cultural spaces – in a single, uniting, strategic infrastructure plan for each city.
It’s time to get serious about Australia’s cities
Capital cities such as Perth are predicted to undergo signifi cant population growth. (Photo: Larry Pitt Photography)
Australia Population, 1850-2050
Source: IBISWorld (2008)
Rail projects around the country are looking to increase freight and transport capacity.
These challenges come on top of an existing infrastructure shortfall estimated at more than $700 billion. Treasury Secretary Ken Henry recently told a Lowy Institute conference that “if we doubled the annual investment typically undertaken in economic and social infrastructure, it would still take over eight years to close these suggested infrastructure gaps”. Already, Australia faces mounting recurrent urban congestion costs of more than $10 billion a year. Demand across Australia’s road and freight networks will double over the next decade, and freight demand will treble to 1,540 billion tonne kilometres by 2050. These pressures mean we need to plan seriously now for the kinds of cities we want in the short, medium and longer term. It is time to consider new ways to make our cities more productive, effi cient, liveable, connected and sustainable. Fortunately, Australia’s policymakers are awake to many of these challenges. Last year, Prime Minister Kevin Rudd and the nation’s premiers agreed to a new approach predicated on worldclass experience and global best practice in planning for the future of our urban domain. A cooperative COAG-led process that drives best practice planning will equip Australia to resolve many of its common national urban challenges. These moves are particularly welcome because they elevate the strategic planning of Australia’s major cities to a key focus of Australia’s fi rst ministers. Currently, the quality of existing long-term infrastructure planning across the states is highly variable. National principles refl ecting global and national best practice could help all of Australia’s states to start to get it right on infrastructure. Linking national infrastructure funding to nationally agreed reform presents a positive option which was successful in the context of the National Competition Policies in the 1990s.
It’s time to get serious about Australia’s cities
Of course Canberra must limit itself to high-level planning principles. States will always have the primary responsibility for state infrastructure and planning decisions – but common principles are a sensible step forward. A nationally agreed set of principles that begin to integrally link land use, urban density and environmental outcomes to the development of supporting transport, utilities and social infrastructure will be very important to address growth pressures. But recognition of the scale of the problem will only get us part of the way there. This focus from governments of all levels must be matched by a willingness to drive hard decisions and undertake sustained investment. The 2009/10 federal budget made landmark investments in urban rail projects. Done well, this rail renaissance will deliver important and transformational effects on the functionality of Australia’s cities. South East Queensland is enjoying new investment in rail infrastructure. Soon, the Gold Coast will be home to a new light rail network, linking Helensvale in the north with Broadbeach through Surfers Paradise. The project – supported by local, state and federal governments – will eventually reach as far south as Coolangatta Airport. Plans for a major expansion of Brisbane’s metropolitan rail system are underway, with detailed feasibility planning well advanced for the important Cross River Rail project, a new northsouth rail line for the inner city, including a tunnel under the Brisbane River and new underground inner city stations. Melbourne too is planning for its Metro rail tunnel project, which would massively increase capacity and offer the capacity to evolve the operation of that city’s urban rail network, while Perth is soon to enjoy the fruits of a nationally funded project to sink the rail line and connect the Northbridge precinct to the CBD. With state balance sheets heavily impacted by the global fi nancial crisis, there is a signifi cant role for the Commonwealth in helping to deliver the next generation in public transport projects. Put simply, the scale of many of the most important projects is now beyond the budget of any state – much in the same way that the many costs of urban congestion also extend across state boundaries. But while the 2009-10 budget set aside nearly half its entire infrastructure allocation of $8.4 billion for urban rail projects, this year’s budget was strikingly modest by comparison. In a federal election year, industry and governments alike hope for more detail about how the Commonwealth will partner with the states for better cities, what investment will be available for Infrastructure Australia’s national priority projects, and how Australia can adapt its infrastructure market to better harness the knowledge and capital of the private sector. After all, our productivity and liveability are at stake.
Mark Birrell, a lawyer and company director, is the Chairman of Infrastructure Partnerships Australia and the national leader of Minter Ellison’s infrastructure practice.
CAPELLA CAPITAL –PARTNERING TO DELIVER QUALITY INFRASTRUCTURE PROJECTS
The past decade has seen a significant increase in the number of infrastructure projects being delivered through Public Private Partnerships (PPPs) and Australia has been at the forefront of this curve. Australian Infrastructure Review’s editorial team sat down with John Bowyer, CEO of Capella Capital, a partnership with Lend Lease and one of Australia’s most experienced PPP origination businesses, to understand the value of this delivery model and Capella Capital’s unique offering to this sector.
Why do you think PPPs are an increasingly popular delivery model for Australian public projects?
PPPs have delivered more reliable infrastructure assets, both in terms of construction and service delivery, providing Governments with better value for money than projects delivered by traditional procurement methods. Governments also like the more rigorous procurement process and the certainty of cashflow that PPPs deliver.
PPPs have been successfully delivered in almost all states and territories in Australia and we are now seeing one of the largest pipelines since PPP programmes began. The delivery model can be adapted to suit the differing needs of Governments in various asset classes from social infrastructure such as schools and hospitals to roads, rail, rolling stock and water.
What is Capella Capital’s focus?
Capella Capital provides a fully integrated solution – from project inception and financial and legal structuring, through to debt and equity arrangement, project development and into long term ownership and asset management. We also provide high quality strategic and financial advice to select clients.
Our initial focus will primarily be on the PPP infrastructure sector but we will also look to promote our strong track record in other infrastructure areas such as transport, water and renewables. The team has recently closed the $323 million South Australian New Schools PPP Project as part of the Pinnacle Education Consortium.
We are pleased with our initial successes and we look forward to more in the coming year or so.
What are the benefits of the Lend Lease relationship?
Lend Lease’s support of Capella Capital, a cornerstone of which is the provision of equity to our projects, allows us to sponsor and arrange PPP projects across Australasia. Lend Lease is a highly respected global property solutions provider with a strong reputation as an equity investor, fund manager and asset manager – they are in this business for the long term.
For Lend Lease, Capella Capital is an important strategic step in broadening its existing global PPP infrastructure platform and funds management capability.
In your experience, what is the most important factor contributing to the success of PPPs?
The Capella Capital team has partnered with most governments, market leading construction contractors, facilities managers and debt and equity providers in Australia over the last 10 years that the team has been together. Strong relationships are the foundation of our business and the PPP model. It is through the strength of these partnerships that successful projects are able to be delivered.
The best evidence of our success is the support Capella Capital has received from all sectors of the market as it continues to establish its business. In particular, the support from governments and our key consortium partners has been greatly appreciated, and we are committed to delivering many successful projects with our partners over the coming years.
