CEO Philip Davies Australian Infrastructure Audit briefing session
22 June 2015–20 July 2015
Ladies and Gentlemen, welcome, and thank you for joining us here today for an update on the work of Infrastructure Australia.
I would like to acknowledge the Traditional Owners of the land on which we meet and pay respects to elders both past and present.
For those of you I haven't met before, my name is Phil Davies, and I took up the role of CEO of Infrastructure Australia on 20 April this year.
Today, I will provide an update on the recent activities of Infrastructure Australia, including a briefing on the Australian Infrastructure Audit that we released on 22nd May.
This event is an important part of our engagement process where we are seeking feedback on the Audit as well as submissions which can inform the 15 year Australian Infrastructure Plan due for completion later this year.
There will be an opportunity to ask the panel questions at the end of this presentation.
Infrastructure Australia's role is to provide independent expert advice to all governments on infrastructure policy and planning.
We publicly advocate for reforms on key issues including means of financing, delivering and operating infrastructure and how to better plan and utilise infrastructure networks.
Some of you may know that 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 its own CEO.
That Board was formed in September 2014, with members being drawn from business, academia and across the public and private sectors.
Following the new legislation we have been focussed on the delivery of four important pieces of work.
The first of these was the Northern Australia Audit which we released on the 8th of May. The Northern Australia Audit focused on the key opportunities to support Northern Australia's projected growth over the next 15 years, and was a key input into the Northern Australia White Paper released on the 18th of June.
Some of the key findings from the Northern Australia Audit were:
- The Northern Australia economy is vital to the wider Australian economy contributing 11.7% or $178 billion of Australia's GDP in 2012/13.
- Northern Australian infrastructure faces unique challenges, with vast distances between centres and high rainfall during the wet season. This adds significant costs to infrastructure in the region requiring resilient asset scoping and intensive ongoing maintenance.
- Providing reliable and resilient roads supports our export industries as well as regional and remote communities.
The Audit found that we will also need to improve water security to support growing regional populations and ensuring the sustainable growth of the agricultural sector.
The other three major pieces of work Infrastructure Australia has been focussed on are the basis of a strategic approach for long term infrastructure decision making for our country:
Firstly, an Australian Infrastructure Audit—that examines the key drivers of our infrastructure demand and identifies the challenges we will face in the future—the evidence base.
Secondly, a 15-year Australian Infrastructure Plan—that will outline our proposed policy and governance solutions to the challenges raised in the Audit. These solutions will be based on our engagement with jurisdictional colleagues, peak bodies, experts and the community.
Finally, a reinvigorated Infrastructure Assessment Framework and Priority List—the Assessment will look at a broad range of strategic context in addition to the ‘Cost Benefit Analysis.’ This will include considering how initiatives or responses to challenges identified in the Audit, as well as projects, fit into a wider network, system, or corridor solution.
But the main focus for today is to brief you on the Australian Infrastructure Audit, which the Prime Minister publically launched in Sydney on the 22nd of May.
The Audit is the nation's first comprehensive independent review of Australia's infrastructure, and our future needs across transport, water, energy and telecommunications.
The Audit and its 81 findings will be used as the basis for an ongoing dialogue with key stakeholders including yourselves, and the broader community.
It's an opportunity to work together on the long term aspirations and plans to meet forecast population and economic growth as well as maintain Australia's quality of life.
The Audit is not intended to merely assess the number and state of our infrastructure assets. It takes a strategic approach to assessing our nation's long term infrastructure needs:
It examines the key drivers of future infrastructure demand, particularly population and economic growth.
It uses a consistent approach across all of Australia, acknowledging that data gaps and modelling tools vary across States and Territories.
It draws on the expertise of each jurisdiction recognising that they are best placed to advise on their own state or territory's infrastructure challenges and opportunities.
So, what did we find as part of the Audit?
Well, the good news is that strong growth is projected for Australia in both our population and our economy.
Our population is expected to grow from around 22 million in 2011 to over 30 million by 2031. We have already increased by more than one million people since 2011.
Our four largest cities—Sydney, Melbourne, Brisbane and Perth—are projected to grow from almost 13 million in 2011 to over 18 million in 2031.
To put that into an international context—this level of population growth is high. 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.
This growth in our population and economy will make us richer as a country. The challenge we face is managing our success so that infrastructure delivers the economic benefits and quality of life Australians expect.
One of those challenges relates to congestion—an issue that constrains economic growth and also affects quality of life.
One of the key findings from the Audit is that without action, congestion could cost Australia $53 billion annually by 2031.
Similarly, road travel times in Perth, Melbourne, Sydney, Adelaide, Brisbane and Canberra are expected to increase by at least 20 per cent in the most congested corridors by 2031. In some cases, travel times could more than double.
On average, demand for public transport in our capital cities is set to almost double over the next 20 years.
The national land freight task is projected to have grown 80 per cent by 2031, with a large component expected to be handled by road freight vehicles.
Demand for many key components of the freight network, including ports and freight railways, is expected to exceed current capacity by 2031. Improving the efficiency of end to end supply chains will be critical to handling the national freight task as Australia grows.
Turning to the other sectors now…
In the water sector, the regulatory framework is fragmented. Each state and territory is currently managing its own set of institutional arrangements for the governance, reporting and management of its water sector. This may not be in the best long-term interests of consumers.
As this figure shows, despite consuming less than 10 per cent of water in Australia, households account for 57 per cent of expenditure on water. Clearly, reforms are required to introduce more cost-reflective pricing in the water sector.
The Audit found that Australia's electricity generation capacity will generally be sufficient to meet demand over at least the next 5 to 10 years, with energy efficiency improvements causing a trend of declining demand for electricity in some parts of the country.
In the gas market, issues are arising around supply, reservation policies and environmental concerns. While global energy prices will determine much of the activity in this market, these issues may require a government regulatory response.
In telecommunications, it will be important to ensure ongoing competition in the delivery of the NBN to maximise the potential social and economic benefits of the government's investments.
The NBN can unlock major productivity benefits across metropolitan and regional areas, and could moderate demand for infrastructure across the transport, energy and water sectors.
Addressing these issues at the state and national level through new and renewed infrastructure projects is not the only issue we need to face.
The Audit highlights 10 policy reform challenges that most jurisdictions will need to engage with.
The first is population—As I said earlier, significant 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.
Secondly, we need to address productivity. Australian productivity growth has been slower than most developed countries over the last 15 years, with the poor provision and performance of infrastructure contributing to the slowdown in productivity growth.
Thirdly—improving the connectivity of Australia's key infrastructure assets and corridors will be vital. The Audit identifies the most congested road and rail corridors in Australia, finding that for many of these corridors demand is projected to significantly exceed current capacity by 2031.
The fourth challenge is ensuring we have competitive infrastructure markets. Although there has been good progress in energy and telecommunications 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 poor levels of cost-recovery in the transport sector.
Fifthly—we have a real issue with a funding shortfall, and all at a time of increasing infrastructure demand. Despite increased spending on infrastructure nationally over the past five years, fiscal pressures mean that governments will struggle to maintain current levels of infrastructure expenditure in the medium to longer term.
Our sixth reform challenge relates to Governance—the planning and decision-making processes across Australia's infrastructure sectors generally lack transparency, leadership and integration.
Without a long-term 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 continue to be a lack of public and investor confidence in the capacity of governments to determine a pipeline of nationally significant projects.
Sustainability and Resilience
The seventh challenge relates to finding ways to reduce our infrastructure environmental impacts and improving its 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.
Our eighth challenge relates to our regions—Our analysis in Audit showed that regions like the Pilbara and Gladstone are critical to all our futures. Today their infrastructure contributes $44 billion to the national economy. By 2031 this is projected to more than double to $110 billion.
However, 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.
Poor levels of essential service provision to remote communities also undermine efforts to improve health, education and employment outcomes.
Providing remote 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 in Indigenous Disadvantage.
Finally, we need to better implement best practice principles for infrastructure procurement, delivery and operation. Action needs to be taken by governments to make major project procurement more efficient, including reducing the administrative burden and streamlining assessment processes across governments.
All of these challenges and reforms will be addressed in the 15-year Australian Infrastructure Plan, a strategic response to the issues identified in the Audit.
The Plan will have three key products:
- Firstly, the Executive summary & Chapters—which will tell the story of the Plan and be structured around the 10 challenges we identified in the Audit and I just spoke about.
- Secondly, a list of policy and governance reforms that will enhance our productivity and improve our quality of life. This list will form the basis of Infrastructure Australia's forward research agenda.
- Finally, a reinvigorated Infrastructure Priority List—with a rigorous prioritisation process that results in a highly credible pipeline of nationally significant infrastructure projects. This list will feature a list of nationally significant initiatives which align with strategic challenges identified in the Audit and Jurisdiction infrastructure plans and strategies. The list will also include projects which have been assessed positively by Infrastructure Australia and its independent board.
We are strongly encouraging submissions that provide solutions on the key reform challenges I outlined earlier, or particular long term (10–15 years) initiatives or projects that are nationally significant.
Our website—at www.infrastructureaustralia.gov.au has a wealth of information available for those who are interested in the backing data that went into the Audit report, and you can also provide your submissions via the site.
Thank you for coming today and I look forward to our ongoing engagement and your submissions.
- Australian Infrastructure Audit—briefing session slides PDF: 768 KB