John Austen. Grattan Institute on transport projects: a better mousetrap?

In ‘Road to riches: better transport investment’ the respected Grattan Institute joined commentators, independent authorities and lobby groups in advancing ideas on transport ‘investment’. Like others it proposed publication of assessments for public spending; a better mousetrap to ensnare politically motivated proposals.

The report proposed a three stage process for government transport ‘investment’:

  1. Spending only after publication, by tabling in parliament, of a benefit-cost assessment;
  2. Spending on all proposals that pass such an assessment;
  3. Independence of spending from Grants Commission processes.

There is merit in the ideas. There also are pitfalls.

  1. Spending only after publication

This has already been proposed by various organisations.

Sensible transport spending choices can be made for many reasons, including ‘political’ ones. At times the electorate might want decisions for reasons other than ‘economic’ criteria set out in assessment manuals. Still, in a democracy it is important for the electorate to know what is done in its name and why.

The case for parliamentary tabling of assessments is compelling for the Commonwealth after the High Court’s decision in Williams (No. 2). It is less important and more questionable for the states.

  1. Spending on all project proposals that pass such an assessment

According to assessment manuals an ‘economic’ transport project need not increase GDP, because benefits are often dominated by travel time savings. Investing in all ‘economic’ transport projects would bankrupt Australia.

Instead of just reducing travel time, transport should increase the ability of communities, particularly those with ingrained disadvantage, to participate in activities enjoyed by the more privileged. Such an accessibility agenda has better prospects for economic growth, fairness and community support than the current travel time paradigm that dominates transport ‘investment’ thinking.

  1. Independence of spending from Grants Commission processes

The concern is that a state’s gain from Commonwealth transport gifts can be offset by reduced Commonwealth general grants.

The concern arises when the Commonwealth spends outside the national transport network, hence the issue is network definition. That the current network does not match its description is well known, easily fixed and a national disgrace.

The ‘problem’ would disappear if the network reflected the Commonwealth’s proper role. In fact, the problem would become a strength; providing Commonwealth and state governments with an incentive to focus on their respective responsibilities.

Fundamentals

Behind these specifics are fundamental questions. I become concerned when transport commentary blames politicians but ignores problems that contribute to ‘political’ decisions like:

  • Some published work being embarrassingly wrong;
  • Poor attitudes and discontinuity in transport policy;
  • The wide gap between transport and broader public policy.

Harsh? Consider a few recent public examples relevant to major investments:

  • The Productivity Commission claimed the national access regime is not intended to apply to roads. The relevant legislation gave roads as one of the two examples of infrastructure covered by the regime;
  • Infrastructure Australia overlooked it’s (offices) own 2013 suggestion that all urban transport projects be tested ‘as if’ there was road pricing;
  • In consecutive years Bureau of Infrastructure Transport and Regional Economics revisions to road data have been nothing less than radical;
  • The High Speed Rail study purported to demonstrate a ludicrous proposition, that demand in the NSW southern highlands would be of the same magnitude as for Newcastle or the Central Coast;
  • Sydney metro apparently forgot the (extraordinary) independent and expert review by Mr Ron Christie AM which warned about the ‘breaks of gauge’ it appears to making.

Other examples exist, such as reluctance to talk about true national objectives like defence or railway standardisation.

Given this it would be foolhardy to fund all transport proposals with a published positive economic assessment or that pass other tests administered by bureaucracies.

That more than just published assessments are needed is the reason for the infrastructure audit recently conducted by Infrastructure Australia. The real problem today lies in identification rather than assessment of investments.

Stability in political and commercial systems is essential for good investments. In Australia the bedrock for such stability is the Constitution.

A root cause of problems in Australian governments’ transport investment is a drift away from Constitutional concepts of federalism and separation of powers and instability in the Commonwealth’s ‘role’. That the drift continued under numerous governments suggests it is not the sole fault of politicians. The drift should have stopped with the decision in Williams (No. 2) but continues, unremarked.

The real need is to improve governance of transport by:

  • Constitutionally faithful roles of: the Commonwealth in transport; the executive and Parliament within the Commonwealth. Professor Saunder’s principles warrant consideration;
  • Publishing (proposed) infrastructure contracts, including those which restrain competition to established or new infrastructure;
  • Applying Government Trading Enterprise reforms and the National Competition Policy to roads;
  • Greater conformance with precepts such as: alignment of responsibility with power; independence of decision making from beneficiaries; public sector as protector of the public interest;
  • Scrutiny of the practices of advisory institutions and departments.

A discussion on these will not be universally welcomed. However, the Grattan Institute would be helping the community and those in the transport sector by pursuing these deeper questions rather than, like so many others, just refining a mousetrap.

 

John Austen is a happily retired former official. He was Director of Economic Policy for Infrastructure Australia from its inception in 2008 to his retirement in 2014. Further background is at: thejadebeagle.com.

References

Bureau of Infrastructure, Transport and Regional Economics, Infrastructure Statistics Yearbooks 2014, 2015.

Department of Infrastructure Transport and Regional Development, High Speed Rail Study, Phase 2 Report, 2013.

Independent Public Inquiry into a Long Term Transport Plan for Sydney (Chair Ron Christie AM) Final Report, May 2010.

Infrastructure Australia, Urban Transport Strategy, 2013.

Productivity Commission; National Access Regime Final Report, 2013.

Productivity Commission; Financial performance of government trading enterprises (various).

Saunders, Cheryl and Crommelin, Michael, Reforming Australian Federal Democracy, University of Melbourne Law School Legal Studies Research paper 711, 2015.

Terrill, Marion, Roads to riches: Better transport investment, Grattan Institute, April 2016.

 

 

 

 

 

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