Speech: ASPAC CEO conference
Good morning ladies and gentlemen, and many thanks to Megan and the rest of the team at Consult Australia for inviting me here today.
It's an honour to open the second day of the ASPAC CEO conference—there is an impressive line-up of speakers for today covering the political environment, funding, governance and many other interesting topics.
I'd like to spend my time talking about the recent work of Infrastructure Australia, but also the important and ongoing role that I see the consulting industry playing in the infrastructure sector.
I have worked off and on and for a long time as a consultant both here and overseas and I feel strongly that the consulting sector is a key stakeholder in influencing and evolving the way that our infrastructure is planned, funded, delivered, maintained and operated…
So, first to IA. Last week I celebrated my one year anniversary as CEO of IA. It has been a particularly intensive period. We've delivered, among other things:
- A Northern Australia Audit;
- A nationally focused, Australian Infrastructure Audit;
- A new Assessment Framework for analysing the projects and initiatives that are sent to us by proponents;
- The 15 year Australian Infrastructure Plan, and
- A refreshed Infrastructure Priority List.
I'll be focusing today on our most recent releases - the Australian Infrastructure Audit, the 15 year Australian Infrastructure Plan and the refreshed Infrastructure Priority List, that is backed by our new Assessment Framework.
The Audit identified the challenges that our infrastructure faces out to 2031 and for the first time provided an evidence base for a long term plan.
And, the 15 year Plan and the List provide a holistic approach to solving those challenges—using both policy reform and evidence based investment together.
The Australian Infrastructure Plan
When we released our Australian Infrastructure Audit in 2015 we projected that by 2031, Australia's population would grow to more than 30 million people. Most will live in our four largest cities—Sydney, Melbourne, Brisbane and Perth.
And this rate of growth has been increasing in recent times. In February of this year, Australia's population hit 24 million people—approximately 17 years earlier than was predicted by the ABS in 1999.
Australia's population growth now exceeds that of our peers, outstripping countries like the UK, Canada and the US.
Growth like this provides a larger domestic market for businesses, increases the size of the labour force, and facilitates an injection of new ideas.
And we are well positioned to take advantage of the growth of Asia. By 2031, Asia will represent around two-thirds of the world's middle class population. Our proximity, and the quality of our exports and skills, will provide us with even more opportunities to continue our national success story.
So, by most growth measures, Australia is doing well. While we still face economic risks—like slow global growth—there is little doubt that our nation is well positioned for the future.
However, the Audit identified that if we fail to act comprehensively to harness this growth, Australia could face a future of congestion and constraint.
The road congestion alone is projected to cost the Australian economy $53 billion by 2031.
This congestion has real world consequences for ordinary people…
Increasing bottlenecks and delays will mean it takes longer for Australians to get to work or home, our goods will take longer to reach ports and markets, and the many services we rely on from infrastructure will decline.
This has a real world impact on our enviable quality of life and the liveability of our cities.
Our 15 year Australian Infrastructure Plan responds to the issues identified in the Audit and recommends fundamental changes to the way we plan, fund, deliver and use our infrastructure.
It also provides broader solutions than just building new roads and rail infrastructure.
We have focused our 78 reform recommendations in the Plan under four major themes:
- Productive cities, productive regions
- Efficient markets
- Sustainable and equitable infrastructure, and
- Better decisions, better delivery.
Some of these could be easily implemented tomorrow—like mandating post-completion reviews on all projects, or releasing more government data to the private sector.
Others are more complex and necessarily longer term—like the creation of a National Freight and Supply Chain Strategy.
We need to define nationally significant freight corridors and precincts, identify the gaps, and outline a reform and investment pipeline to address these challenges.
Similarly complex will be road funding reform.
The current approach to charging for road use and investing in road infrastructure is unfair, unsustainable and inefficient.
However, moving to a more sustainable model of charging for road use will be complex—particularly bringing the community on the journey to understand what needs to change, what the problem is we need to solve, and most importantly why.
That's why we have recommended that the Australian Government should initiate a public inquiry, to be led by a body like Infrastructure Australia, into the existing funding framework for roads and development of a road user charging reform pathway.
The public inquiry should consider:
- Flaws in the existing charging framework—including fairness, financial sustainability and economic efficiency;
- The optimal approach for road user charging and transport infrastructure funding in Australia;
- The social implications of charging reform, including transitional and distributional impacts of replacing current taxation with direct user charges; and
- A detailed reform pathway for transition to a full user pays model for roads
Similarly complex will be reform in how we manage our cities.
Cities are the key drivers of national productivity and economic growth and are critical to our long term success as a country.
In our capitals, we need to grow up, not out while maintaining and enhancing our world-class liveability standards.
Our cities must move to high frequency mass transit networks with turn-up-and-go services that save people time and money.
However, currently, many of the planning and delivery functions for our cities are characterised by complex and overlapping processes, and lack clear lines of accountability.
Therefore, we have recommended that state, territory and local governments should aim to deliver effective whole-of-city governance to meet the needs of growing and changing metropolises.
At the state and territory level, we need to have more high quality medium to long-term metropolitan planning for Australia's cities.
And with population growth such as we are projecting, there will be a clear need in the future to focus on high-quality high-density in and around our major city CBD's.
Smaller cities and regions need to also play their part and should capitalise on growth for themselves but to also relieve pressure on the larger cities.
Better connected regions will also facilitate growth and provide people with more opportunities to live and work in our regions.
So, how do we ensure that we choose a future of liveable, efficient cities, productive regions, cheaper infrastructure services and sustainable infrastructure?
The role of the States and Territories
All State and Territory governments will need to create long-term infrastructure plans, for the next 15 years and beyond.
By doing this governments can better plan for changes in demand for infrastructure, identify emerging challenges and establish a pipeline of well-conceived infrastructure reforms and investments.
To be effective, this planning should be integrated across different infrastructure sectors including transport, energy, water, telecommunications and social infrastructure—particularly Health and Education.
And it needs to be integrated with broader land use and economic development plans.
This is missing today.
In addition to this, governments need to commit to conducting feasibility studies on proposed projects and developing full business cases, before they commit the capital to building them.
The certainty created by long-term planning and the resulting pipeline of investment, increases the quality and reduces the cost of infrastructure. A well-developed long term plan will limit the influence of short-term thinking by providing decision makers with a robust evidence base from which to identify future infrastructure priorities.
Infrastructure Reform Incentives
We fully recognise that this is a complex agenda for change, particularly in a country where there are three levels of government and eight separate states and territories.
The Australian Government could play a more active role in our cities by using its funding levers to drive broader infrastructure reform.
Delivering reform can be complex for states and territories, while many of the fiscal benefits through personal and business taxes flow to the Australian Government. This means the states wear much of the immediate political pain, while the Commonwealth enjoys the bulk of the long-term upside.
Rather than simply 'gifting' funds for projects, Canberra should use its funding powers to drive broader infrastructure reforms.
Infrastructure Australia has proposed Infrastructure Reform Incentives which would see the Australian Government provide additional investment in state and territory infrastructure—over and above existing and projected allocations—in return for delivery of agreed infrastructure reforms consistent with those outlined in the Plan.
Finally, governments at all levels will need to be making specific, well-thought-through investments to ensure that we can support our economic growth.
That's why alongside the Plan, we released a refreshed Infrastructure Priority List. Taking the evidence collected for the Australian Infrastructure Audit and the Northern Australia Audit, Infrastructure Australia has undertaken an assessment of our infrastructure gaps and requirements.
We worked closely with our state and territory colleagues to define the projects and initiatives that ultimately made the list, but also in improving the explanation of the problem and the proposals broader strategic merit.
Through this approach we have developed a priority list of 93 nationally significant investment opportunities that all levels of government can choose from.
We are keen to see high quality business cases from states, territories and other proponents now to progress these initiatives and get them delivered.
And it is important to note that I said high-quality business cases… business cases that accurately reflect the benefits, costs, and other economic measures, as well as city shaping impacts.
But, it is also important that in addition to the economic measures such as the BCR that the strategic value of the project is considered as well.
It's a truism to say that the debate about projects or initiatives too often boils down to the Benefit Cost Ratio.
Benefit cost analysis is an extremely valuable tool, and the fact that decision makers routinely demand a BCR is welcome.
But the degree of focus on a BCR alone, means many now expect a single number to be the answer to everything about the merit of a project.
As many of you would know, it is not the only measure, that comes out of a benefit cost analysis—we also need to consider other economic measures such as net present value, and internal rate of return.
And apart from economic measures, Benefit Cost Analysis does not, and cannot, reasonably be expected to capture crucially important factors such as deliverability, strategic merit, policy impact and many other features.
It is critically important to understand behind the numbers provided by a BCR. By interrogating the individual costs and benefits, by challenging their veracity and resilience, by subjecting them to pressure tests and extreme circumstantial changes we can better understand the fundamentals of a project and ultimately give decision makers better information.
That's why we have updated our Assessment Framework—the approach we take to evaluating proponents Business Cases—to place a greater focus on;
- Definition of the problem;
- A broader understanding of the social and environmental impacts of an investment, in addition to the economic impacts; and
- Finally, consideration of features such as strategic fit, deliverability and adherence to best practice.
By analysing a problem strategically and considering a solution broadly, we are able to provide governments with rigorous, high quality advice on infrastructure investments—as outlined in our Priority List.
I see an important role for the consulting industry going forward in helping to drive up the quality of business cases that you are working on for proponents.
Many proponents think that if they can get the BCR up above 1, then they can get onto the next stage for funding.
But as I have outlined, it's also important to ensure that there is good definition of the problem, a big picture view of the social and environmental impacts, and deeper consideration of strategic fit, and deliverability.
You have a key role to play in providing this advice.
From the Infrastructure Australia perspective, we want to encourage a deeper strategic analysis of a project—and a closer working relationship with proponents and the consultants they use to ensure that their business cases are as high quality as possible.
My request to you is to go beyond what can on occasion be asked for by your clients, and consider the broader land use, system, social, environmental as well as the economic outcomes and opportunities.
We will be pursuing more work in this space in the near future to engage with the consulting industry early to explain our processes and expectations so that you are better able to service your clients in business cases going forward.
This can only be beneficial for consultants, clients and the community generally.
The publication of the reinvigorated list is certainly a great step forward in providing greater certainty to the whole supply chain, including consultants in what the problems are that we seek to solve, and should we hope support you in planning your businesses.
Opportunities for the consulting sector
This leads me to what I would like to conclude today:
How the consulting industry can best support and contribute to infrastructure in Australia.
I have talked a little about the impact of improvements in business cases.
But, I think that there is a role for the consulting industry to provide ongoing leadership in the infrastructure sector, and drive continuous performance improvement more broadly.
I would like to encourage more connection with your international networks for us to tap in to the innovation and different perspectives they bring.
And I would also like to see more leadership to help drive performance more broadly
I mentioned earlier that the recommendations in the Plan are guided by four major themes:
- Productive cities, productive regions
- Efficient markets
- Sustainable and equitable infrastructure, and
- Better decisions, better delivery.
Those themes will be used to structure Infrastructure Australia's ongoing policy and research program.
We already have policy work underway on corridor protection and value capture… and we have more on the way to support the reform agenda going forward.
The Plan provides the vision to address our infrastructure gaps and ensure Australians have access to infrastructure that supports innovation and secures prosperity. It is a document designed to help solve the problems of today and set us up to meet the challenges of tomorrow.
But the Plan will only be as good as the commitments and leadership that follow. And that responsibility for leading reform falls to us all-to governments, industry, peak bodies and the wider community.
This strategic document must be turned into a well-led and carefully articulated action agenda, across
We have a choice.
A choice between a future of congestion and constraint… with increasing bottlenecks and costly delays.
Or, a future of vibrant and liveable cities, productive regions, affordable infrastructure services and resilient infrastructure.
The consulting industry can bring its leadership to ensure we make the right choices.