Speech: TTF Australian Transport Summit 2016
Good morning ladies and gentlemen, and thank you to the Transport and Tourism Forum and UITP for inviting me to take part in today's Australian Transport Summit.
This Summit has been bringing leaders in the passenger transport industry together for a number of years now, and it is a great honour to deliver the opening address at what promises to be a day of valuable discussion and insights into the key drivers of change in Australia's transport sector.
This morning, I hope to set the scene by sharing with you what Infrastructure Australia believes to be the key opportunities for reform in how we fund, build and operate Australia's public transport infrastructure in the coming years.
For those who are not familiar with what we do, Infrastructure Australia is an independent advisor to Australian governments and the community on the reforms and projects needed to meet the challenges of the future.
Over the past 18 months we have been busy delivering three landmark reports:
- The Australian Infrastructure Audit—a comprehensive review of the current state of Australia's infrastructure and our future needs across transport, water, energy and telecommunications. The Audit provides Infrastructure Australia and Australian governments with a critical evidence base for where investment and reform is required.
- The Australian Infrastructure Plan—Launched in Brisbane with the Prime Minister back in February, this is a reform based document, which provides a road map for governments, business and the community to address Australia's infrastructure challenges—and
- The Infrastructure Priority List—which sits alongside the Plan and provides a prioritised list of nationally-significant investments and guidance to decision makers on where they should direct funding.
The central theme in all three reports is that we need to take a long-term, strategic approach to infrastructure planning to accommodate our future population growth.
Australia's population will grow significantly over the next 15 years—far outstripping our peers in countries like the UK, Canada and the United States.
By 2031, more than 30 million people will call Australia home.
Most of them will live in our four largest cities—Sydney, Melbourne, Brisbane and Perth—which will increase in population by 50 per cent in the next 15 years.
This growth represents an enormous opportunity for Australia.
It provides a larger domestic market for businesses and increases the size of the labour force—all of which can be harnessed to boost our economic productivity and improve our living standards.
But it also puts additional pressure on urban infrastructure already subject to high levels of demand—meaning that without significant reforms and investments, capacity will not keep pace with demand and service levels will decline.
Growth in Asian middle class
Another important factor when it comes to meeting Australia's long-term infrastructure needs is our close proximity to the booming economies of south-east Asia and China.
By 2031, Asia will represent around two-thirds of the world's middleclass population, creating significant opportunity for Australian services, produce, resources and of course, tourism.
China's rising middle class, increasing connectivity and an aging demographic will see more people travelling and for longer periods of time.
In just two years, China will be the largest source of both inbound arrivals and inbound expenditure, overtaking New Zealand as our largest international market.
In terms of visitor numbers, China will contribute 43 per cent of total growth over the next 10 years and account for 60 per cent of tourism expenditure.
With our abundant natural resources and proximity to Asia, tourism is one of Australia's greatest strengths.
The most recent ABS figures show that tourism grew three times faster than the broader economy, both in terms of GDP and jobs.
Importantly, tourism provides a reliable source of growth for the Australian economy as it transitions out of the mining boom
This competitive advantage is something we must continue to build on, particularly as capacity constraints are already emerging in key areas of tourism infrastructure.
If we are to make the most of this opportunity, it vital that our tourism infrastructure is up to scratch.
That means better public transport linkages to airports, major convention and exhibition centres and key visitor precincts; more efficient and reliable public transport and less congestion on our key transport corridors.
In short, long-term infrastructure planning and investment must account for the value of tourism to Australia's economy.
Meeting Australia's infrastructure needs
If we take full advantage of Australia's population growth and the historic economic opportunities to our north, we could experience prosperity for generations to come.
But without efficient and reliable transport infrastructure in our cities and regions we simply won't live up to our potential.
To support our future growth, we need infrastructure that:
- Strengthens our global role as an exporter of resources, services and products;
- Enhances the liveability of our cities; and
- Enables us to grow sustainably.
To achieve this, we need to be more strategic about preparing for changes in infrastructure demand, and invest in the projects that deliver the best outcomes for the community.
That's why, in the Plan, we strongly advocate for Australian governments to invest in more high-capacity, high-frequency public transport services across all modes.
Our Infrastructure Priority List proposes world class mass transit metro systems in Sydney, Melbourne and Brisbane.
Metro systems similar to those you would have experienced in cities like Paris or London.
Also included on the List is the Western Sydney Airport at Badgerys Creek –
a project which has the potential to completely transform the region, unlock thousands of jobs and significantly grow the NSW economy.
But it isn't just about investing in these kinds of huge, transformational projects—it is also about reform.
The stakes for us as a country are incredibly high, and we need to be willing to make the difficult decisions about our infrastructure future.
With this in mind, this morning I want to talk about some of the key recommendations for transport reform in our 15-year Infrastructure Plan.
- Better use:I will begin by talking briefly about how we can make better use of existing infrastructure by embracing new technologies.
- Increased efficiency: our recommendation, as laid out in the Plan, to increase contestability in public transport service delivery through franchising.
- More money: And finally, the need to find new solutions to improve the public funding of infrastructure, including through market-based policy changes.
Bridj—Flexible passenger transport
A key recommendation in our Plan is that Governments should increase funding for investments in projects and technologies that make better use of existing infrastructure.
In practice, this means embracing technologies that drive greater efficiency across transport assets and networks.
Investing in technologies that allow operators to generate, collect and use data will be fundamental to driving real improvements in the efficiency of our public transport networks.
We don't have to look far to find examples of data being used to disrupt traditional patterns of infrastructure use and service delivery, and most importantly—deliver better outcomes for users.
An excellent example of this is Bridj, a flexible bus service operating in Boston, Washington D.C. and Kansas City.
Bridj operates a fleet of multi-passenger vehicles which have no fixed stops, but instead follow routes based on passenger input.
Passengers reserve a seat through the app hours or days in advance, while Bridj analyses origin and destination data and land-use patterns in real time to identify optimal pick-up and drop-off times and locations.
This enables Bridj services to be more responsive to users' needs than existing buses, which are restricted by timetables and set routes, while also being more affordable than taxis.
Bridj buses use real-time data so they are able to find routes that avoid the inevitable headaches that come with city traffic, meaning drivers can deliver faster travel times and manage passenger numbers to prevent overcrowding.
The service is particularly well-suited in cities where legacy transport systems are increasingly unable to meet new patterns of demand.
Data-driven systems like Bridj are able to provide high-quality, on-demand, point-to-point transport services that more directly and intuitively meet the needs of users.
Cost of urban congestion
Road network optimisation is another way in which we can make smarter use of existing infrastructure to address increasing congestion in our cities.
It almost goes without saying that as our population grows, Australia's urban road networks will come under increasing pressure.
If we don't increase capacity on our roads and better manage demand and traffic flows, the total cost of urban congestion could increase from $13.7 billion in 2011 to $53.3 billion in 2031.
On urban roads, Intelligent Transport Systems are already collecting, storing and analysing data on traffic counts, travel times, congestion, incidents and faults through sensors at intersections to enable better management of traffic flows.
For example, on a section of the Monash Freeway in Melbourne, the installation of electronic signs to improve traffic flow and additional CCTV cameras has helped increase capacity in each lane by close to 20 per cent.
Network Optimisation Portfolio
In our 15-year Infrastructure Plan, Infrastructure Australia proposes these kinds of targeted investments as part of a broader program described as Network Optimisation Portfolio.
This refers to the opportunities for low cost/high value investments we are recommending in every capital city to address capacity constraints.
Identified as a high priority initiative on our Infrastructure Priority List, the Network Optimisation Portfolio essentially targets the key pinch points on urban road networks with comparatively high public transport and freight use.
A key part of this is using data and technology to improve network operations by, for example, optimising traffic flow through intersection treatments, traffic light sequencing, clearways and incident management.
The focus would be on improving urban motorways, major urban arterials, and access to central business districts, and would complement existing works being undertaken to address capacity constraints.
A key strength of the Network Optimisation Portfolio is that it prioritises low cost investments which nonetheless have a significant impact on user outcomes.
This approach, where prioritising customer experience leads to broader efficiency gains, is also something that we believe can be achieved through greater private sector involvement in infrastructure service delivery.
Contestability in public transport service delivery
An important recommendation in our Plan is that Governments should adopt a default position of exposing public transport services to contestable supply through franchising.
Greater private sector engagement in the infrastructure sector is in everyone's best interest, as it brings with it commercial rigor and a powerful incentive for efficient delivery.
Franchising creates a contestable market, where the government holds the private sector to account via a contract on specific outputs, performance standards and conditions.
There are typically significant financial penalties if contracted standards are not met, including the potential to miss out on future contract extensions or cancellation of existing arrangements.
Together, this combination of contracted requirements, financial rewards and sanctions creates a powerful incentive to improve performance and efficiency.
If we are to bring the community along with us on franchising, the focus of reform must be on improving customers' experience.
The good news is that private operation of public transport through time limited, exclusive franchises—where providers compete to deliver services—is a proven model both in Australia and overseas in raising service quality and value for money for customers.
Experience has shown that franchising public transport can cut operating costs by between 20 and 30 per cent and as much as 50 per cent in some circumstances, mostly due to the incentives for franchised operators to deliver services more efficiently.
In Melbourne, the current Metro Trains franchising contract links financial rewards to both the reliability and punctuality of trains and trams.
Since Metro took over the franchise in 2009 customer satisfaction has increased from 74 per cent in 2010 to 85 per cent in 2015.
With the community, we need to celebrate these success stories and create a case for reform that highlights how selecting the best operator to provide a specific service can lead to greater innovation and better service delivery.
Fortunately, the scope for improvements to customer experience in Australia is broad—for example, the introduction of quiet carriages, catering facilities, station amenities, Wi-Fi, in-seat power connections, improved ticketing and customer information.
Of course, even with the lure of Wi-Fi and more reliable timetables, generating community support for this kind of proposal will have its challenges.
This is why our Plan recommends that governments should demonstrate the benefits by piloting franchising arrangements in some parts of the network or particular public transport modes to demonstrate the gains available from private provision of public transport.
We should be celebrating the successes of not only the Melbourne metro experience but also the franchising of ferry services in Sydney. How can we expect the public to support reform if we're not prepared to highlight its successes?
Addressing the funding shortfall
Beyond embracing greater private sector involvement in service delivery to drive efficiencies and better user outcomes, we also need to find new ways to address the current infrastructure funding shortfall.
There are ultimately two ways that public infrastructure can be paid for: either by taxpayers with an allocation of government spending, or directly by the user through for example, electricity bills or road tolls.
Australia's states and territories can no longer rely on taxpayer funds alone to meet infrastructure needs, particularly in the face of increasing budget pressures to fund welfare and health services.
As argued in the Plan, diversifying the pool of funding available for public infrastructure investment must be a major priority.
Beyond the substantial capital investments associated with new infrastructure, we need to find sustainable funding streams to include the costs of operation, maintenance, renewal and disposal.
One of the major opportunities to do this, as identified in the Plan, is changing our approach to how we pay for roads.
Currently the taxpayer is directly involved in funding road infrastructure across its planning, delivery and operation.
This approach is problematic as it means road funding is at the mercy of the annual budget cycles of governments, and exposed to a variable policy landscape.
It is also problematic as this system is fundamentally unfair as taxpayers subsidise allroad users, while those who use the network less are in effect paying a subsidy to support those who use it most.
Moving to a more sustainable model of charging for road use will be complex—and will undoubtedly have a significant impact on the transport sector.
That's why we have recommended that the Australian Government should initiate a public inquiry, to be led by a body like Infrastructure Australia, to assess the existing funding framework for roads and develop a pathway to road user charging reform.
Where to from here?
Having outlined what we see as the key opportunities for reform in Australia's transport sector, I want to make one final comment about prioritising the user when it comes to planning for our future infrastructure needs.
We're facing an environment of unprecedented change. Australia is changing, the world is changing, and we need to plan for it, if we are to take advantage of those changes.
There are genuine opportunities for all Australian governments and the private sector to work together to achieve better outcomes for our growing communities, but user outcomes must always come first.
As leaders in the transport sector, if there is anything to take from my presentation this morning, let it be this:
The sustainable needs of consumers and users should drive all decision-making on infrastructure—whether it be in determining the infrastructure we need, the outcomes it should deliver or the best ways to plan and pay for it.
If we keep this in mind and seize on some of the opportunities for reform I've outlined here today, we will be well placed to meet the challenges of tomorrow.