JOHN AUSTEN. Placating the Infrastructure Club

Infrastructure Australia’s 2020 priority list doesn’t recognise – let alone address fundamental problems.

Legislation tasks Infrastructure Australia with considering nationally significant infrastructure – national significance relates to improving ‘national productivity’.

Each year, Infrastructure Australia releases lists of proposals it considers ‘priorities’.

One list – ‘projects’ – comprises proposals whose assessed economic benefits exceed costs and are ready to proceed. Another list – ‘initiatives’ – covers good ideas deserving further development.

Transport dominates the lists – e.g. 20 of 23 ‘projects’ – as it relies on taxpayer funds. Some 10 of the 12 newly recommended ‘projects’ involve roads – 8 in Queensland.

From the outset, Infrastructure Australia sought to diversify the lists. The most recent attempt, the 2020 lists, include water security, coastal inundation, waste recycling etc. as ‘initiatives’. At present they lack projects and proponents.

Infrastructure Australia publishes only summary project evaluations. Lack of specifics make these difficult to understand – three general observations follow: road charging; infrastructure club influence; national direction.

Road charging

It is not clear how recommended ‘projects’ would stack-up if there was road charging. The suspicion is many wouldn’t fare well. An example of one which might not pass an ‘as if road charging’ test is the increase from 6 to 8 lanes on the M1 near the Gold Coast.

An ‘as if road charging’ test would mitigate inbuilt biases towards roads. The key evaluation tool used by Infrastructure Australia is benefit: cost (ratio). This relates to ‘economic welfare’ which for roads is dominated by ‘travel time savings’ e.g. 76% of the M1 project’s benefits. However, few time savings translate into productivity via producing income or reducing costs. Hence benefit: cost results of road projects overstate productivity gains – more so for untolled roads like the new ones on the list.

Infrastructure Australia continues to eschew its advice of years ago – transport projects should be assessed as if there was road charging. Such advice is needed to consider whether spending on big road projects lifts – rather than damages – productivity.

Instead, its published evaluations show proponent claims while lacking facts essential to interpretation e.g. business and leisure travel time savings, time savings per trip, time valuations, effects on wider network traffic, ramp-up periods. These ongoing failures look petulant.

 Club influence

Lack of assessment specifics, ex-facie absurd proposals and reliance on government proponents lead to suspicions of Infrastructure Australia having an interest in placating industry, infrastructure bureaucrats and State etc. politicians – aka the infrastructure club.

One example is Infrastructure Australia’s suggestion to reserve a high-speed rail corridor identified in the latest $20m ‘study’. That study appeared to entail almost fraudulent inventions by the Federal Infrastructure Department. The corridor is idiotic – going into downtown Sydney and Melbourne at prohibitive cost, but bypassing Newcastle, growth areas and putting Canberra on a dead-end supposedly to minimise (orders of magnitude lower) costs.

Another example is (another) Princes Highway bridge ‘project’ at Nowra, Gilmore electorate. Travellers in this area know of congestion, albeit minor compared with any city. The observable cause is not the bridges but roundabouts and traffic lights up to several km away. The assessment doesn’t mention this. The bridge project can only move – not fix – any congestion problem and, in any event, is not a national priority under the legislation.

A much more concerning case is the Sydney Metro extension, political flagship of the NSW Government. Readers may recall Infrastructure Australia’s extraordinary recommendation of the project in mid-2017 – without saying what the project does or cost (other than being over $12bn!) and noting options had not been properly considered – just a week before NSW let a $2.8bn tunnelling contract.

The endorsement continues to be repeated – unlike other under-construction projects, say WestConnex. Yet it overlooks the project’s $4.3billion-$5.3billion (34% to 46%) cost blowout, publicly reported three weeks prior to the list. This reduces the claimed benefit: cost ratio to well below 1.0 – i.e. no economic merit. Even ignoring its grave strategic problems, Metro does not meet the legislative definition of national significance. Worse, questions about significant criminality arise from the NSW Minister’s claimed ignorance of the blowout until after the State election – the overrun was identified many months before.

One project part – Sydenham-Bankstown – is subject of a NSW Parliamentary Inquiry considering the ‘adequacy of the business case’ – what Infrastructure Australia supposedly assessed. The Inquiry heard conflicting evidence – NSW claims were challenged – and is due to report by end March. Hence Infrastructure Australia’s views are highly significant to a political debate but are otherwise redundant, a fact reinforced by the project go ahead being announced well before, yet escaping mention in, the 2017 assessment.

The unique treatment of the project is ever more curious if not improper. This surely needs exploration by the Australian National Audit Office and is a first candidate for any Commonwealth integrity commission.

Infrastructure Australia’s almost total reliance on information from Governments, meek acceptance of ludicrous commercial-in-confidence claims, conduct of assessments behind closed doors, documents showing proponent claims rather than thorough analysis of benefits and costs and apparent disregard of issues that publicly cast long shadows over proposals – such as authoritative criticisms or monumental cost blowouts – speaks more of appeasing, rather than being independent from, project proponents.

 National direction

Despite words about ‘audits’ and attempts to broaden horizons beyond roads, Infrastructure Australia’s lists are almost entirely the result of trawls of State Premier’s Departments and, in turn, road agencies.

The States’ only interest in Infrastructure Australia is as a hurdle to be jumped to get Commonwealth funding. As against this is political risk – of Infrastructure Australia passing adverse reflection on pet projects. By action, if not word, States reject Infrastructure Australia’s claims to identify or assess priorities which are nationally significant and lift productivity.

As Dr Keating suggests, little if anything on the ‘project’ list could ever remotely increase national productivity – despite such lifting being a legislative requirement. Some ‘projects’, like Sydney Metro, lower productivity. Infrastructure Australia has drifted away from legislative intent.

Put simply: how good is a process that recommends just a few piecemeal road projects in Queensland as the new priorities to improve national productivity?

The answer to the conundrum of Infrastructure Australia’s reliance on the States and its associated drift has been clear since the organisation’s inception in 2007.

In 2014, the High Court pointed to the answer by saying national significance does not provide the Commonwealth with power e.g. to spend public monies. The reason: as all matters acted on by the national government – the Commonwealth – are nationally significant, determining power on the basis of national significance would allow the Commonwealth to define its own scope – inconsistent with Federation. Hence its scope is:‘narrower than “all those matters that are reasonably capable of being seen as of national benefit or concern”.’

 Hence, Infrastructure Australia’s legitimacy is limited to infrastructure significant to the Commonwealth, rather than (all) nationally significant infrastructure.

If Infrastructure Australia believes the Commonwealth should do more than the Constitution directly permits – via s.96 State grants or through referendums / transfers of power say on energy or water – it must articulate this role before starting an ‘audit’ or developing any list.

Enunciation must be far better than drivel like ‘foster cooperation among all levels of government’ – which the High Court said doesn’t meet Constitutional requirements:

‘Consultation between the Commonwealth and States coupled with silent, even expressed, acquiescence by the States does not supply otherwise absent constitutional power….’

Infrastructure Australia continues to squib that foundation issue. It disregards the substantial narrowing of legislative intent implied by High Court decisions. Instead of becoming tightly focussed on the Commonwealth it is foraging even further afield.

Infrastructure Australia also seems unaware of other serious problems in its legislation – mentioned in previous posts – such as inconsistency between its corporate form and proper ‘independence’.

Conclusion

The Commonwealth’s infrastructure role is the base for Infrastructure Australia’s tasks. These tasks include creating public confidence that its assessments are so thorough, independent and even-handed that they are the authoritative guides to projects the Commonwealth might support.

If the latest infrastructure lists are any guide, Infrastructure Australia’s failure to advise that current legislation is fatally flawed and the Commonwealth must set a different – appropriate and legally defensible – role will generate big problems.

These types of problems can be seen in other Commonwealth funding programs that also cite Constitutionally-irrelevant and ill-defined ‘national significance’ – like sports and regional infrastructure. Worryingly, these too are based on proponent trawls, albeit of local government areas and electorates. The notorious issues of these programs stem from advisers believing Commonwealth functionaries should be guided by Jack Sparrow’s compass – which justifies whatever the holder desires.

Ports, regional and infrastructure funding – who except the jealous could object? Certainly not the beneficiaries.

Yet the very point of public service – especially statutory organisations like Infrastructure Australia – is to protect the public from beneficiary interests.

It is clear infrastructure advice is taking the wrong direction.

John Austen is a happily retired former NSW and Commonwealth official living in Western Sydney

 

 

 

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John Austen is a happily retired former senior official of Infrastructure Australia living in Western Sydney. Details are at thejadebeagle.com.

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5 Responses to JOHN AUSTEN. Placating the Infrastructure Club

  1. Avatar James Kosta says:

    It seems the links in this piece are broken – could they please be fixed so we can chase down that further reading?
    Many thanks.

  2. Avatar Ray Laverack says:

    It seems all and sundry infrastructure projects are now submitted by State and Territory governments to Infrastructure Australia for Commonwealth funding regardless of their National significance, although they still may have considerable State significance.

    This highlights the fundamental lack of resources of State and Territory governments, although the latter is a special case, to fund major infrastructure projects on their own without Federal assistance. Since the States ceded their income tax powers to the Federal government, the larger States in particular have been disadvantaged in being denied income tax and more recently GST revenue generated in their States, which could fund infrastructure through direct funding and increased borrowings. The Federal government now calls the shots, which isn’t necessarily in the best interests of individual States.

    If the Sydney Harbour Bridge was submitted to a similar body as Infrastructure Australia for Federal funding in its day, then it would probably result in a negative cost/benefit ratio. No-one could have foreseen the growth in Sydney’s population and private motor vehicle ownership at the time. Fortuitously, the State government of the day and in spite of the cost, chose to accept John Bradfield’s visionary plan for the expansion of Sydney’s suburban rail network, as well as catering for a direct road link between both sides of the harbour. Otherwise, it may never have been built. Imagine what it would be like today without it.

    My problem with Infrastructure Australia today is that it no longer appears to function as a truly independent agency, like for example the Productivity Commission. My perception, whether rightly or wrongly, is that it tends to be more swayed by the preferred agenda of the government of the day, instead of undertaking a transparent objective analysis of projects. In some cases, they also seem to unquestionably accept the justification by State governments for some projects without sufficient scrutiny.

    A classic example of how sometimes they can get it wrong, is their recent decision to reject the Australian Rail Track Corporation’s (ARTC) submission for further funding to upgrade the standard gauge North East rail corridor from Melbourne to Albury to allow passenger trains to safely operate at higher speeds. Following the recent fatal derailment of the XPT passenger train between Sydney and Melbourne at Wallan, it may come back to bite them, in failing to acknowledge that the track is in poor condition and not up to the task of providing safe passage. It’s even more galling when you consider that this section of track forms part of the Inland Rail project from Melbourne to Brisbane, promoted by the Federal government, and which could certainly be considered to be a project of National significance. You would expect that this project alone would be constructed to the highest standards over its whole length.

  3. Avatar John Doyle says:

    Disturbing. It brings to mind the deliberate dumbing down of the civil service starting with putting staff on contract back in Paul Keating’s day. Now governments just tell the Service what result they want, and expect to get it rubber stamped.
    Infrastructure is a non profit endeavour. Privatising it just makes trouble and costs for the public.
    Taxation does NOT fund any federal spending. It is not a yardstick for any expenses. For as long as available resources can be purchased to undertake the work the cost can be met. Currently the available fiscal space is in the order of $1Trillion.

    In Australia we need infrastructure to help overcome the distances involved, but are cramped by reason of our small population. So the per capita expense will be very different from nations with high speed rail networks. They cannot be compared using economic arguments.
    It is vital we get back to having a fearless civil service.

  4. Avatar Ken Dyer says:

    An infrastructure project, building electricity transmission capabilities to support ongoing and new investments in renewable energy would be of benefit to the taxpayer.

    Instead we are still investing money in poisonous coal fired power stations, and are stuck with increasing emissions and electricity prices that are dropping because of renewable energy.

    However, I doubt whether the LNP Government would want to put this on the list of projects because it would inconvenience the coal industry.

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