11 June 2015
I congratulate the Australian Financial Review for organising a National Infrastructure Summit that unites government, industry and the wider community in a fulsome discussion of what we need from our infrastructure. I look forward to the Summit dialogue making an important contribution to the debate on our nation's infrastructure.
Everyone in this room would know that Australia's ability to deliver the infrastructure we need—and aspire to—is being severely tested. We have growing population levels, increasing congestion, budget deficits, and long-term environmental concerns. Continued levels of economic growth are also increasing the demand for infrastructure services.
But, rather than engaging with these issues, the public discussion on infrastructure is too often dominated by debates about single projects—not about strategy or long term policy.
As a nation, we must focus on the long game…
Discussions about Australia's infrastructure goals what we are trying to achieve, what problems we seek to solve, and where we rank against comparable nations—is what counts.
And, I'm sorry to say, the available international comparisons suggest that, despite recent increases in government spending and increased private sector participation, there is a real gap in the overall quality of Australia's infrastructure.
For example, in the recent World Competitiveness Yearbook results, Australia's infrastructure ranking slipped to 18th internationally. This reflects a six year slide that started in 2009 when Australia was ranked number five.
Earlier research by the World Economic Forum assessed the quality of our infrastructure at 20th out of 144 countries. They ranked us 16th in logistics, a lowly 43rd for quality of roads, and 81st in mobile phone subscriptions per head of population.
While Australia has some unique characteristics, including a large landmass relative to population, countries like Canada have similar characteristics yet rate more highly for infrastructure.
Our performance is not good enough, especially as Australia is a country that—by most other measures—is doing well.
We have an impressive natural and built environment, a highly educated population and a diverse business and employment base.
We are now the world's 12th largest economy, with our median wealth amongst the highest in the world.
So we deserve to rank higher with our infrastructure. We should be aiming as a nation to be in the top 10 globally.
If we are going to protect our future quality of life, Australia will certainly need to lift its game.
That's why the new mandate of Infrastructure Australia is so important.
Infrastructure Australia's role is to provide independent expert advice to all governments on infrastructure policy and planning.
We will publicly advocate for reforms on key issues including means of financing, delivering and operating infrastructure and how to better plan and utilise infrastructure networks.
In mid-2014, with bi-partisan support, the Federal Parliament agreed to amend the Infrastructure Australia Act to create an independent board, with the right to appoint our own CEO. That Board was formed in September 2014, with members being drawn from business and academia across the private and public sectors.
Since the formation of our new Board, IA has released two important pieces of work. Firstly, on 8 May we released the Northern Australia Audit—an important contribution to the upcoming Northern Australia White Paper. This report focused on the key opportunities to support Northern Australia's projected growth over the next 15 years.
Secondly, we have produced the Australian Infrastructure Audit, which the Prime Minister publically launched here in Sydney last month. The Audit is the nation's much needed, comprehensive independent review of Australia's infrastructure and our future needs across transport, water, energy and telecommunications.
The Audit was not intended to merely assess the number and role of our infrastructure assets. It takes a more strategic approach to assessing our nation's needs:
1. It examines the drivers of future infrastructure demand, particularly population and economic growth.
2. It takes a consistent approach to all of Australia, recognising that data gaps and modelling tools vary across the States and Territories.
3. And - it draws on the expertise of the jurisdictions, recognising that they are well placed to advise on their own state or territory's infrastructure challenges.
By forming a comprehensive and nation-wide picture of our existing infrastructure across transport, water, energy and telecommunications, and making informed projections about our future, we have the opportunity to consider where we want to be as a nation.
Seeing our future will allow us to shape it.
Our Audit base year was set at 2011 (the year of the last census) because it offers the most comprehensive and recent data sets, and we have projected from this date to 20 years into the future—to 2031.
We expect that Australia in 2031 will be vastly different from what we recognise today.
And the Australia we have seen provides a call to action to governments and the community to consider how we should prepare for it.
Australia's population is projected to grow from 22.3 million in 2011 to 30.5 million in 2031 an increase of 8.2 million or 36.5 per cent.
Over 90% of capital city population growth is projected to occur in the four largest capitals—Sydney, Melbourne, Brisbane and Perth. In total, these four cities are expected to grow by 46 per cent, or 5.9 million people.
To put that in perspective, Australia's population growth has been high by developed world standards. We ranked fourth out of 40 OECD countries for population growth over the decade to 2012, and were the fastest of those with a population over 10 million.
The geographic regions directly adjacent to our largest capital cities are also expected to grow appreciably. For example, in total, the Hunter, Illawarra, Gold Coast, Sunshine Coast, and Geelong regions are expected to grow from 2 million in 2011 to more than 2.5 million in 2031. These four extended metropolitan areas will account for over two thirds of Australia's population in 2031.
The smaller capital cities—Adelaide, Canberra, Hobart and Darwin are projected to grow in total by little more than 0.5 million people. Given this, it is worth considering what steps could be taken to foster greater long-term growth in those cities, which may moderate the consequential infrastructure challenges in the larger cities.
All of these national population increases and ongoing prosperity, will be the drivers of an increasing need for road space, public transport capacity, freight capacity and improved gateways for trade. For instance, the Audit found that by 2030/31:
Our growing population will have a profound effect on Australia's productivity and liveability. If we get our infrastructure right the growth in demand will turbo charge our economy and capture the many benefits of modernisation. But, if we fail, it will cause increasing congestion that harms both our competitiveness and living standards.
So, the Australian Infrastructure Audit that we have just released has shown us that there are ten key challenges that we as a country will need to deal with in the near future.
These key reform challenges are:
Huge increases in the size of our population, will be a critical factor in the increasing demand for infrastructure. Transport in particular will face considerable capacity constraints. Without significant reforms and investments, capacity will not keep pace with demand and service levels would then decline.
Australian productivity growth has been slower than most developed countries for over a decade, with the poor provision and performance of infrastructure contributing to the slowdown in productivity improvements. Sound investment in well-planned economic infrastructure will measurably improve our productivity capacity.
3 . Connectivity
Australia's key infrastructure assets and corridors are already experiencing delays and capacity constraints. If we decrease journey times and improve the reliability for people and goods travelling across the transport network, it will in turn increase productivity levels and individual quality of life. The same applies for improving our telecommunications infrastructure.
4 . Funding
At a time of increasing infrastructure demand, there is also a funding shortfall that needs to be addressed. Despite increased spending on infrastructure nationally over the past five years, fiscal pressures mean that governments—Federal, state, local—will struggle to maintain current levels of infrastructure expenditure in the medium to longer term.
Reforms are essential to increase the total pool of funds made available for infrastructure, especially by facilitating extra private investment.
5 . Competitive Markets
Although there has been good progress in energy and telecommunications sector reforms, the transport and water sectors are lagging behind. Ineffective and inconsistent regulation has had adverse outcomes for infrastructure users and the Australian community.
These include high costs in parts of the electricity sector, poor pricing decisions leading to potential problems in the future in the water sector, and low levels of cost-recovery in the transport sector. National infrastructure markets must operate to improve investment decisions and give consumers choice.
6 . Governance
Governance, planning and decision-making processes across Australia's infrastructure sectors often lack transparency and integration.
Without a long-term and nation-wide vision for the infrastructure required to support Australia's productivity into the future, as well as effective decision- making processes for how it will be funded and delivered, there will be a lack of public and investor confidence in the capacity of governments to deliver a pipeline of nationally significant projects.
If these processes are not reformed, increased investments in infrastructure will be inefficient and lead to poor project selection or delivery.
7 . Sustainability and Resilience
We will need to cut environmental impacts and improve resilience, using new technology to run our existing infrastructure better.
Enhancing the resilience of assets will become more important for infrastructure providers as extreme weather events threaten certain assets.
As the Audit reminds us, between 2000 and 2012, insured losses from natural disasters cost an average of over $1.2 billion per year. The damage to public infrastructure from the 2011 Queensland floods alone was estimated at $5–6 billion.
8 . Regional
Regional Australia often suffers from poorer infrastructure than in urban areas, with implications for social equity due to a lack of access to services and employment opportunities. Funding infrastructure to maintain suitable infrastructure service levels in regional areas requires national leadership and strong commitments by governments.
Equally important is to note that regional centres are some of this country's main generators of economic activity and employment.
As the Audit of the top 20 infrastructure ‘hot spots’ showed, regions like the Pilbara are critical to all our futures.
9 . Indigenous
Poor levels of essential service provision to Indigenous communities are undermining efforts to improve health, education and job outcomes. Providing remote Indigenous communities with infrastructure services at a level consistent with other communities of a similar size and location is essential to the broader aims of Closing the Gap.
10 . Best Practice
Best practice principles for infrastructure procurement, delivery and operation have been inconsistently implemented across governments. Action can be taken by governments to make major project procurement more efficient, including reducing the administrative burden and streamlining assessment processes.
All of these challenges and reforms will be addressed in the 15-year Australian Infrastructure Plan, a strategic framework that responds to the issues identified in the Audit.
An important part of the Plan will also be a reinvigorated Infrastructure Priority List—with a rigorous prioritisation process that results in a highly credible pipeline of nationally significant infrastructure projects.
Infrastructure Australia will be engaging with all of our federal, state and territory counterparts in coming months, as well as business, peak bodies and the wider community to inform the creation of the Plan—using the Audit as the evidence base for the issues that have been identified.
We are also seeking public submissions on how to solve the challenges raised in the Audit, and would welcome your feedback.The 15 year Plan will be submitted to Government late this year.
It's fair to say that if we fail to engage with our key challenges, the result for Australia is likely to be a slow ‘drift’ in our infrastructure decision making—and in our global rankings.
We could wake up in the future realising that Australia had the opportunity to chart a different course and failed to do so.
But, if we get our infrastructure right—as I believe we can—we will reap the many social and economic benefits of our population growth, and protect and enhance Australia's quality of life.
Again, Infrastructure Australia welcomes your comments on the Audit report. IA would like to know your project and reform priorities
This will be an important strategic discussion; and it will be central to our nation's future success.