Fool’s paradise: ‘independent’ advisers promote lie that transport infrastructure can lead a Covid recovery

Jan 13, 2021

A recent report for Infrastructure Australia confirms what many suspect – some transport infrastructure projects should be shelved. Yet IA refuses to reassess any transport projects, including those it knows or should know are wrong.

Credit – Unsplash

Covid-19 has changed the world of transport irrevocably. There are substantial fears about remaining ‘Covid safe’ while travelling, especially on public transport, and central city areas are less attractive as places to work or live, to name just a few. As a result:

  • Public transport use is substantially down;
  • Traffic on major roads is substantially down, although it may return to pre-Covid levels;
  • Local transport methods such as cycling have substantially increased;
  • Home deliveries and so on have also increased.

With such major changes in the air, it should be obvious to all that transport infrastructure policy must change and adapt to the new world. Yet there is little sign of that occurring at any level of government. Quite the contrary. Governments are ploughing on with pet projects as if nothing has changed, claiming mega-projects are needed more than ever to ‘create jobs’ – despite major infrastructure being capital, not labour, intensive.

The supposed independent adviser on infrastructure, Infrastructure Australia, adds to this air of unreality by claiming that infrastructure is the key to economic recovery. Yet such claims are quite at odds with a report it recently published.

That report, by respected firm LEK, confirms the suspicions of many outside the infrastructure club. As noted above, demand for transport has declined and changed, and the changes are expected to continue after the pandemic.

While the report did not discuss policy implications of these and the substantial downward revisions in projections for population and economic growth, several stand out:

  1. Transport projects must be reassessed;
  2. New projects must allow flexibility and scalability;
  3. Urban road charging must be introduced to reduce the deleterious effects of road use e.g. road wear and tear, congestion, emissions.

I argued more than six months ago that the pandemic would fundamentally change Australia’s transport needs – the movement of people and goods. The Grattan Institute agreed.

Another reason to reassess transport projects is that Australia doesn’t do enough on areas that are key contributors to social cohesion and economic resilience, including health and education. Significant spending is required at precisely the time that Australia is facing a vastly tougher budgetary situation. It seems obvious that transport projects should drop down the list of government spending priorities.

While the health effects of the pandemic have not been as severe in Australia as elsewhere – or as severe as forecast – the effects of anti-Covid restrictions on the economy and lifestyles have been profound. Covid fear is also a powerful driver of behaviour and will have an enduring effect on transport patterns.

Reassessment of projects

Given the substantially lower forecasts of usage, all major project proposals – and projects that are under way – need to be reassessed. Lower usage translates to lower benefits, which renders uneconomic at least some projects. Many projects will be a larger drain on the public purse because user revenues will be lower.

These reassessments must be conducted in public to ensure public confidence and accountability.  If projects were to be robustly assessed, no doubt many would be redesigned, deferred or cancelled.

Unfortunately, Infrastructure Australia has not done this, nor has it seen fit to revise project assessments – including those it knows or should know are wrong.

The single revision to Infrastructure Australia’s game plan is that it will now assess only those projects whose direct outlays exceed $250 million – up from $100 million.  That meaningless gesture has gone largely unremarked.

Flexibility and scalability

The expected trend of more work and living taking place in suburbs and regions reinforces what should be the basic tenet for transport policy: infrastructure must be interoperable (usable by a variety of vehicles). The need is greatest in rail.

Yet governments have seen fit to ignore this in Australia’s two biggest cities.

Sydney Metro, for example, is designed to prevent interoperability by, for example, having tunnels that are too small for other Sydney trains, and a route that precludes further railways being constructed through the CBD-global arc. This will cause an economic and social disaster far greater than did the other breaks of rail gauge – in the 19th century.

In Melbourne, plans for the airport railway preclude sensible options for improved rail services to such regional cities as Geelong, Ballarat and Bendigo.  Regional rail options are far more attractive and likely to be vastly more affordable than the nonsensical proposed suburban ‘loop’, which is destined to be another white elephant.

There remains the abject failure of the Commonwealth – over successive administrations – to advance interoperability for national road and rail routes.

Instead, federal governments have resorted to handing out money to the pet projects of favoured state premiers, resorting to ‘nation-building’ cliches to excuse such hand-outs. In many cases such funding has driven cohesion in national transport backwards.

Urban road charging

In principle, road use charges (per km rate) aim to reduce the deleterious effects of road use – including congestion, local and greenhouse emissions, accidents, loss of amenity, and wear and tear on roads. Most of these effects occur in urban areas.

The imperatives for direct road charging have never been more important than in the Covid world.  The decline in public transport, and the growth in local freight deliveries, augurs badly for reducing transport’s contribution to greenhouse emissions.

For years Dr Mike Keating, Luke Fraser and I have pointed to an enormous excess of road spending over road-related revenues – the opposite to what should be.

Road use is heavily subsidised. The latest official figures show road spending in Australia – in 2018-19 – has outstripped revenues by more than $6 billion.  In today’s dollars, deficits over the previous decade totalled $34 billion. For those wondering why Australia has too many cars: look no further than this spending to the detriment of spending on public transport.

Recovery of the direct financial costs of road building – excluding major costs such as congestion, accident and pollution costs – fell from about 124% at the start of the millennium to just 79% in 2018-19.

As pointed out previously, the culprit is spending on roads. Road revenues – fuel excise, registration fees, stamp duty and so on – actually increased in real terms by 3% over the previous five years and 10% over the decade.

But road spending in real terms has soared. While spending in 2018-19 dropped by 2%, this is on the back of increases of 14% and 9% in the two previous years. Real spending increased by 14% over the previous five years and 20% over the decade – substantially faster than population growth.

Meanwhile, calls get louder for the immediate introduction of road user charging. But what most proponents of such charging don’t tell you is that they are asking motorists and truckers to pay about 25% more than they currently do for road use. Such an option is unacceptable to any Government or community.

The way forward, for the essential introduction of road user charging, is to slash road spending by stopping uneconomic and unwarranted mega projects.

Yet ‘independent’ infrastructure advisers religiously avoid an honest reappraisal of projects, and instead do their bit for our fool’s paradise by promoting the lie that transport infrastructure can lead a Covid recovery.

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