Gridlock

Improving Australia’s infrastructure should be a key priority for our nation, according to Dr Nora Scheinkestel FAICD, director of Stockland, Telstra Corporation and chair of Macquarie Atlas Roads.

This view is shared by a majority of Australian directors who consistently rank infrastructure as the most important long-term issue for government. Ninety per cent of the Australian Institute of Company Directors (AICD) members consider the current level of national infrastructure investment to be too low, according to AICD’s most recent Director Sentiment Index.

“We need to take a broad view of infrastructure. Making Australia an efficiently connected, networked country – physically and technologically – will deliver enormous benefits,” says Scheinkestel.

“It will facilitate mobility and agility, delivering economic improvements by way of productivity but, in addition, well-thought-through infrastructure initiatives will also bring social, environmental and even intellectual benefits.”

Barriers to productivity

As the Australian Infrastructure Audit (2015) highlights, without action on infrastructure, increasing congestion and bottlenecks will test Australia’s productivity and quality of life.

Infrastructure Australia forecasts that by 2031:

  • Road travel times in capital cities are expected to increase by at least 20 per cent, more than doubling transit times on more congested routes.
  • Demand for public transport in cities is expected to double.
  • The national freight network will have exceeded capacity.
  • Regional roads, town water and rail infrastructure will have deteriorated to service standards that the Australian community will be unlikely to accept.

Infrastructure Australia chairman, the Hon Mark Birrell FAICD, says Australia needs to plan and invest better in economic infrastructure.

“We’re lucky to live in a nation that has got positive economic growth and positive population growth, which many other countries can’t claim. But we’re also a nation which has been constrained by the inefficiency of some existing infrastructure assets or the absence of new projects that would make it easier to sell services and products into international markets,” he says.

According to Birrell, one of the key issues is the need to increase overall funding of well-selected projects and simultaneously increase maintenance funding of existing assets.

The Grattan Institute’s transport program director Marion Terrill agrees that governments should not overlook the benefits available from smarter use of the infrastructure we already have. However, “plenty in the industry are quite concerned at how poor the commitment to maintenance is,” she says.

“Certainly by international standards our spending on maintenance is low. Australia spent 15 per cent of transport infrastructure funds on maintenance in 2013 compared to 25 per cent a decade ago,” says Terrill.

She highlights that the lack of data, and also government transparency in infrastructure spending, are two big roadblocks.

“More often than not, governments are making really substantial investment decisions on transport infrastructure without any line of sight to the public as to what’s motivating those decisions – what’s the business case for the investment? [Grattan] has found that a lot of the time the business case in investment either doesn’t exist or is quite weak,” she says.

“The data is also not very good. Looking specifically at transport infrastructure, there is very poor data available on the conditions of roads, so it’s not comparable across different states.

Investment decisions are being made with very limited and inconsistent data, which leads to quite poor decision making and quite poor spending on infrastructure.

— Marion Terrill

The way forward

In the recently released policy paper, Governance of a Nation: A Blueprint for Growth, the AICD encourages Australian governments to develop consistent and strong governance standards for nationally significant infrastructure projects, increase the transparency of forecasts of the costs and benefits of infrastructure investments, and develop nationally consistent measures of infrastructure performance to aid benchmarking and review.

The AICD urges strong COAG engagement with the findings and recommendations of Infrastructure Australia’s Australian Infrastructure Plan, released in February 2016.

“There’s an emerging consensus on how we can improve the delivery of major projects in our cities and regions but also how we can reform the way infrastructure is financed and operated,” says Infrastructure Australia’s Birrell.

“We need to prioritise federal and state funding into projects that improve connectivity and boost our opportunities for trade. Let’s collectively focus on ways to steer the growth we’re having in a positive direction by getting transformative infrastructure projects underway and always putting the needs of customers, consumers and users first.”

Dr Scheinkestel adds: “While some projects may be more local, many will be national and so require co-ordinated collaborative effort at the government level and far-sighted investment by the various stakeholders.”

AICD’s Blueprint emphasises that greater coordination between governments is needed to deliver a strong pipeline of productive infrastructure that aligns with the nation’s longer-term capacity and growth needs.

Furthermore, Australia’s infrastructure needs cannot be funded by public investment alone. Expanding private sector engagement in infrastructure delivery and operation is critical if we are to avoid the forecast shortfall in capacity and service levels.

“There’s good signs of business and governments getting their act together on improving infrastructure, but the immense demands that will be placed on our nation are an indication that there’s a need for even greater partnerships as well as federal and state co-operation,” says Birrell.