Speech: Australian Logistics Council Forum 2016—Future Logistics Infrastructure

cover slide: The 15-year Australian Infrastructure Plan

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Good morning ladies and gentlemen, it's my pleasure to be here with you today.

I would like to acknowledge the Chairman of the Australian Logistics Council, Don Telford and CEO Michael Kilgariff and thank them and the Board for the opportunity to address you today, and participate in this important forum.

Logistics infrastructure is central to everything we do in this country and impacts the enviable quality of life we all enjoy.

This is a very timely opportunity for Infrastructure Australia following the release of our 15 year Australian Infrastructure Plan two weeks ago.

slide showing cover images of Australian Infrastructure Plan Reports

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The Plan was developed following consultation on the Australian Infrastructure Audit report with stakeholders including the Australian Logistics Council.

We have recommended fundamental changes, 78 of them, to the way we plan, fund, deliver and use our infrastructure to maintain our quality of life, the liveability of our cities and our nation's productivity.

Alongside the Plan is the reinvigorated Infrastructure Priority List which identifies 93 projects and initiatives of national significance.

The Priority List is ultimately a platform for better infrastructure decisions—it provides rigorous, independent advice to governments and the public on the infrastructure investments Australia needs.

The List reflects a consensus of submissions provided from State and Territory governments, peak bodies and the community, filtered through the independent and objective lens of IA's Board.

Key investments recommended in the List include:

  • New metro rail systems in Sydney, Melbourne and Brisbane;
  • Road and rail initiatives to tackle urban congestion in Perth;
  • Public transport improvements in Adelaide and Canberra;
  • Urban renewal in Hobart; and
  • Metropolitan water supply upgrades to support Darwin's growing population.

Alongside these projects are initiatives for the future, like protection of the corridors for High Speed Rail and new ring roads around Melbourne and Sydney.

When constructing the Plan, a key area of focus was to boost the efficiency of our national freight and supply chains and I will talk you through some of that today.

slide showing cover image of Australian Infrastructure Plan Priorities and reforms for our nation's future report

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In developing the Plan, (as I mentioned) we used the Australian Infrastructure Audit as our primary evidence base. The Audit found that:

  • Rigorous project selection is fundamental to boosting economic activity and supporting productivity growth. Investment in poorly conceived projects can undermine a country's economic prospects.
  • The failure to preserve corridors can lead to significantly higher construction costs.
  • Improvements in long-term planning, project appraisal and project selection are necessary if Australians' infrastructure expectations are to be realised.
  • Australia needs integrated infrastructure and land-use planning, across all levels of government.
  • Sound infrastructure planning requires an ongoing commitment to engage communities throughout the decision-making process. This improves the likelihood of meeting community needs and expectations, and reduces objections to development.

All of this is why we need a set of principles to guide the process of infrastructure decision making and we therefore propose to develop National Governance Principles which I'll talk more about shortly.

slide showing size of the national freight task to 2031 in diagram

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The efficient movement of freight into, out of and across Australia is critical to the nation's ongoing productivity, growth and competitiveness. In 2011–12, the total freight task was 591 billion tonne kilometres and included the movement of bulk commodities and containerised trade. The Audit projected substantial growth in the national freight task over coming decades.

While the private sector is largely responsible for moving freight, governments provide and maintain much of the supporting infrastructure, such as rail lines and roads. The connectivity of this infrastructure is vital for efficient freight movements and the productivity of the wider economy.

Our international gateways and supporting infrastructure face a number of challenges. Freight networks and supply chains are subject to a number of constraints such as missing links, pinch points, operational restrictions and first and last mile access challenges.

Without action, the extent of these challenges is likely to worsen. The Audit found that containerised trade will increase by 165% and non-containerised by 138%.

The total domestic land freight task is projected to grow by 80 per cent between 2011 and 2031. This growth will result in yet further stress on Australia's freight infrastructure.

Governments should undertake a program of investments and planning initiatives to address the challenges facing Australia's freight networks. The Infrastructure Priority List includes a range of investments that have the potential to materially improve the efficiency of freight movements across Australia.

slide showing Australi's growing cost of congestion in diagram

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Alongside a growing freight task is the growing cost of congestion.

The cost of congestion in our capital cities, estimated at $13.7 billion in 2011, is expected to increase to around $53.3 billion in 2031, or around 290 per cent, in the absence of additional capacity and/or demand management.

Accommodating this growth will require a focus on policy reform to enable the wider use of higher productivity heavy vehicles (such as B-triples), and selected investment (such as increasing bridge load limits and targeted safety improvements, aimed at improving the performance of national highway infrastructure).

slide showing map of Australia

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Addressing these challenges will require multiple investments that are focused on enhancing productivity.

Network optimisation as well as continued investment in new capacity.

The Network Optimisation Portfolio is an initiative that could involve a portfolio of works focused on addressing congestion on urban road networks with comparatively high public transport and freight use. These works could use data and technology to improve network operations by, for example, optimising traffic flow through intersection treatments, traffic light sequencing, clearways and incident management.

We need to build robust and resilient roads.

The initiative would build on existing work being undertaken in this field. It would focus on urban motorways, major urban arterials, and access to central business districts.

slide showing map of Australia and recommendation 3.4

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To tackle all of this—we need a National Freight and Supply Chain Strategy that takes an ‘end to end’ supply chain approach.

That's why our Plan recommends delivery of this Strategy, and includes it as a priority initiative on the IPL.

We need to define nationally significant freight corridors and precincts, identify the gaps, and outline a reform and investment pipeline to address these challenges.

As important as our roads are our ports:

  • The Audit found that Australia's demand for container and bulk terminal infrastructure is projected to grow faster than our GDP—with traffic through some ports projected to significantly exceed current capacity by 2031.

What we propose is an approach which starts with our strategic fit with global supply chains, has an integrated national perspective and strategic inputs from all users, including mining, resources and agriculture. 

slide showing driving better supply chain efficeincy in graph form

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A major area of reform and one that presents significant opportunity is road funding reform and road user charging.

The current approach to charging for road use and investing in road infrastructure is unfair, unsustainable and inefficient.

Indeed the model for which we fund roads is broken.

Since 1992, heavy vehicle operators have paid for road use through PayGo, a model that uses fixed annual registration and fuel-based charges to recover the cost of infrastructure investment to support heavy vehicles.

While the PayGo model has delivered a range of efficiency benefits, it is clear the approach has systemic flaws which require remedy. PayGo has ensured costs associated with heavy vehicle infrastructure provision are broadly recovered from the trucking industry, but the linkages to actual use and charging are relatively limited—in part because the balance between fixed and usage charges is distortive.

But perhaps the most acute flaw in the model is that it hasn't been met by supply side reform.

That is, charging has changed, but investment has not.

It is clear that charging reform is required, but it is also clear that we need to change the investment framework for road infrastructure.

That's why the Plan recommends a corporatised approach to road investment, under a Regulated Asset Base model and, crucially, underpinned by genuinely independent economic regulation.

Under the structure put forward in the Plan, the logistics industry would have certainty that the charges they pay would fund the infrastructure they need.

This will no doubt come as no surprise to many in the room.

The ALC and many of its members have been calling for charging reform for many years and have been strong advocates for a national approach to freight.

slide showing summary of Recommendation 5.3; Full implementation of a heavy vehicle road charging structure in the next 5 years; full implementation of a light vehicle road charging structure in the next 10 years.

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Road reform should not stop with heavy vehicles. Reform must recognise that light vehicles must pay their way, and that high value freight is often the victim of light vehicle congestion. That's why we recommend that heavy vehicle charging be implemented within five years and be swiftly extended to all vehicle classes within ten years. Of course, for both heavy and light vehicles, reform would necessarily see the removal of all existing taxes and charges—including Fuel Excise and PayGo.

This timeframe is ambitious and the reforms are substantial.

That's why we have recommended they be preceded by a public inquiry, to be led by a body like the Productivity Commission or Infrastructure Australia, into the existing funding framework for roads and development of a reform pathway. 

slide showing summmary of Recommendation 9.7: Best practice planning and decision making; replace short-term thinking with a culture of long-term planning and transparent, evidenced-based decision making.

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We should also modernise the processes and institutions that underpin Australia's infrastructure investment decisions by providing a tool for governments to assess their current governance arrangements against best practice.

The development and implementation of National Governance Principles would improve the quality and transparency of infrastructure decision making.

Principles should include:

  • Development of long-term, integrated infrastructure plans, integrated with land use planning;
  • Publication of full project business cases, including supporting data and analysis;
  • Completion of in-depth community engagement; and
  • Commitment to the preparation and publication of robust post-completion reviews once a project has been delivered and throughout the lifecycle.

slide showing summary of Recommendation 10.1: National approach to infrastrucutre performance measurement.

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Just as we ensure we're investing sensibly—we must also ensure the measurement of the performance and efficiency of Australia's infrastructure projects, networks and systems.

The development of a national Infrastructure Performance Measurement Framework should consider what features are most useful and practical to measure.

A national approach will promote better data collection and data consistency. It will allow, over time, for reliable comparisons between jurisdictions and, as far as possible, between Australia and our international peers.

slide showing Map of Inland Rail from Melbourne to Brisbane intiative.

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One major initiative to address both regional supply chain issues and metropolitan network constraints is Inland Rail. That's why we've included it on the IPL as a key priority to further develop over the coming years.The Melbourne to Brisbane corridor is one of the most important and busiest freight routes in Australia, supporting key population, production and employment precincts along the east coast.

The Inland Rail proposal aims to improve the efficiency of freight moving between Melbourne and Brisbane. At present, freight rail travelling through the corridor passes through the Sydney metropolitan rail network, often causing significant delays.

A proposed inland alignment would bypass the Sydney metropolitan area, substantially cut the overall journey time to less than 24 hours and increase the reliability of services between Melbourne and Brisbane.

The Inland Rail initiative needs to be considered in conjunction with other investments in the corridor, including the Newell Highway, to ensure they are complementary.

The projected growth in demand along the corridor, both for end-to-end freight and intermediate journeys, means that rail and road investments are not mutually exclusive—though the timing of required investments may be impacted.

Delivery of Inland Rail will require decisions in the near term to preserve the corridor and ensure the full route is available when required.

Infrastructure Australia is currently assessing a proposal on inland Rail.

slide showing cover images of Australian Infrastructure Plan Reports

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With the release of the Plan and IPL: we are presenting a whole package that works together: the reforms we need to make, the investments we need to deliver and the mechanisms to deliver both, in the form of incentives linked to funding.

The Plan provides the vision and roadmap 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. This strategic document must be turned into a well-led and carefully articulated action agenda.