JOHN MENADUE. Infrastructure, rent-seekers and lobbyists.

Feb 5, 2018

As our mining boom has receded, Australia has seen unprecedented sums flow to transport infrastructure projects -mostly in our two biggest cities. But we have a real mess on our hands.

While we might acknowledge the economic principles in play, we are doing far too little to hold to account deep and continual failures in practice.

Such laziness hurts both the taxpayer and transport user, but it also dissuades those respectable investors who would otherwise seek sensible projects making fair and predictable returns in an attractive investment jurisdiction like Australia.

Such investors are out there, but increasingly they are viewing Australia’s transport sector as a market for cowboys, insiders and rent-seekers only. Crony capitalism is having a field day

One of the bodies that should in theory be empowered to speak and publish clearly on these matters is Infrastructure Australia – the independent statutory adviser to Prime Minister and Premiers on infrastructure matters, established by Prime Minister Rudd in 2008.

It is worth considering some recent mega  multi-billion dollar infrastructure debacles to consider how this body amongst many other government transport and infrastructure agencies is performing badly performing.

  • In Sydney, quite dubious major transport projects now come at a likely price tag of over $85 billion – a bigger spend than all of the European Union’s transport PPPs in the past five years [i]. In November 2017, the controversial c.$12 billion next phase of Sydney Metro was waved through as a Priority Status project by Infrastructure Australia in a wafer thin (6-page) assessment, despite IA admitting no capital costs had been tendered so as to establish and publish independent cost-benefit analysis[ii].  The State let almost $3 billion of project contracts a week later.
  • In 2016 the New South Wales government was caught putting an anticompetitive clause in the sale of Sydney and Wollongong’s ports: in effect preventing the coal-exporting Port of Newcastle – the economic trading lifeline of the Hunter and northern New South Wales – from establishing its own international shipping container operations and thereby diversifying its coal-dependent economy[iii]. Infrastructure Australia made no comment on this matter.
  • In Melbourne, the new State government rapidly accepted an unsolicited offer from the nation’s largest toll road operator to build something looking suspiciously like the western end of the same East-West motorway project that it had cancelled on coming to office.[iv] The project was not contested in the market and no other counterfactual solutions were published.  It costs nearly $7 billion[v] and is purported to net the toll operator an additional $15 billion in revenue thanks to State government sweeteners[vi].  No independent statutory assessment of this project has been published.
  • There has been a decade of bureaucratic inaction on roads. The answers lie in a mixture of genuine competition reform and congestion charging, but these things are not pursued. The roads portfolio is driving Australia deeper into debt and deficit: we spend far more on roads each year than we collect from the bowser and vehicle registration fees.  Australia has accumulated $32 billion dollars of new debt for road spending in the last 5 years alone[vii], but you wouldn’t know this from the Federal Minister responsible, who goes on the radio to quote the very opposite fiscal picture, while telling the public that any real road reform would be ‘a ten to fifteen year journey[viii].  How convenient – that is what his predecessors were saying a decade ago.  There has been no acknowledgement of this major road ‘deficit’ by Infrastructure Australia.

Recently, Fairfax reported that Infrastructure Australia has become a revolving door for transport sector lobbyists: a senior Infrastructure Australia public servant is leaving to become the new head of Infrastructure Partnerships Australia (IPA) – a body described in the Fairfax and News Limited media and by some politicians as a lobby group for the infrastructure sector.   For its part, IPA argues it is a non-partisan policy think-tank and member network[ix].

George Rennie explained in a recent Pearls post[x] that such behaviour sails through Australia’s comparatively weak lobbying code of conduct on the technicality of who does and does not constitute a lobbyist.  Rennie makes the point that in the US amongst other places, transgressing much more rigorous lobbying codes can attract a jail sentence.

Poachers and gamekeepers – apparently an outdated notion

The same recent Fairfax report contained an astounding additional detail – one also raised in another recent Pearls post[xi]: the board of the IPA lobby group/think-thank also includes the Secretary of the Commonwealth Department of Infrastructure as well as Deputy Secretaries of the biggest-spending State treasuries and planning departments[xii].

The deputy chair of IPA is also chairman of Infrastructure Victoria -the independent statutory adviser to the Victorian government on infrastructure matters, whose website proudly advertises that its board is ‘independent’ and free of ‘ministerial direction or control’.  Really!

IPA is a body which as reported by Fairfax runs on a budget of over $4 million a year, mostly from member subscriptions, but which publishes no member lists.  Judging by its board, some at least of its members are at the very top of Australian and international infrastructure financiers, legal and technical firms.  The inaugural deputy chair and subsequent chair of Infrastructure Australia was indeed the founding chairman of this lobby group/self-styled think-tank.  That said, it is important to note that this individual had rightly stepped down from IPA before being appointed by government to a leadership role at Infrastructure Australia[xiii].

I  ask that the leaders of our public service consider how on earth agency heads are sitting on the IPA board.

They might care to reflect on what failures have occurred, imperceptibly perhaps, over time, to so degrade the public sector advisory capacity and sense of probity and good practice that public servants sitting on the boards of the peak lobby groups/self-styled think tanks of the industries that they oversee can be deemed acceptable.

With such reflection complete, all of these arrangements should be undone. Post haste.

“A return to regular order”

In November 2017 I offered some thoughts on much-overdue parliamentary reform and democratic renewal[xiv].

I mentioned – as others have – the benefits of expanded Senate Committee scrutiny as well as a more powerful remit for the parliamentary budget office and parliamentary library.  These are some of the means for combatting the power of rent-seekers and lobbyists who extract concessions from government regardless of the public interest and invariably in ways unknown to the public.

In modern Australia, it is hard to imagine an area more ripe for such reform than transport infrastructure.  The amounts of money in play are too large to ignore; their opportunity costs to education, health, welfare and defence are vast.

In the short term, in New South Wales in particular, the only way to get to the bottom of the complex mess of secretive, puzzling and stratospherically-expensive transport deals is via  a Royal Commission or Judicial Inquiry.  The need for such action is becoming more urgent.

More generally, governments do much of their best policy formation in opposition. It  falls to parties now in opposition – and I include here the so-called ‘minor parties’, with hopeful eyes on a more collaborative future political system – to place fresh emphasis on transparent and predictable processes for infrastructure: strategy, planning and project selection.  All the tools needed lie at our elbow in our existing processes.  We don’t need to invent new ones.

We certainly don’t need senior public servants feeling they need to get closer to the solutions by sitting on industry lobby groups and/or think tanks.

To quote the now-famous line from US Senator John McCain when voting down the disastrous Trump repeal of the US public healthcare system: “I want to see a return to regular Senate order!”




[iv] See Sir Rod Eddington’s original (2008) recommendations for western side route options:











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