The Australian Financial Reveiw

By Rod Pearse
CEO, Boral Limited
Chairman, BCA Sustainable Growth Task Force

The renewal of Australia’s infrastructure and reform of infrastructure markets are two of the key challenges the federal government must address. It is encouraging that it has embarked on a leadership role, announcing the creation of Infrastructure Australia and a clear priority-setting agenda. And it took an important step towards infrastructure funding through the budget, in which it announced the Building Australia Fund.

These are welcome and essential developments, but there is also a need to address other issues if we are to bring the political will, new structures and capital together to meet infrastructure needs.

A lack of proper planning, poor co-ordination within and between governments, complex and conflicting regulatory environments and an inadequate, inconsistent and inefficient approach to financing infrastructure investment have been the main problems.

There are solutions.  We need to get the policy settings right and to match the leadership at the federal level with co-operation from the states through Infrastructure Australia and the Council of Australian Governments (COAG).

Poor infrastructure planning and provision are avoidable handbrakes on economic growth. A national audit, longer-term planning, transparent and principled setting of priorities and efficient funding and investment will ensure we have the infrastructure we need to sustain growth and to improve our standards of living.

Removing impediments to investment in important infrastructure areas will benefit the economy by about $16 billion a year.  Ensuring effective investment requires a major overhaul of the regulatory and financing mechanisms to ensure efficient funding – public or private.

As the Business Council of Australia has argued, the debate around infrastructure is whether we have the right policy and pricing frameworks, and the extent of the impediments to investment.

In the energy sector, for example, governments still control or cap the retail price paid by residential consumers.  In water, there is little contestability in the management and supply of urban water and there are constraints on the effective trading of rural water. We rely more on traffic jams than on market-based pricing to help address our urban traffic congestion.

We need to create effective national markets.  We need market-based infrastructure pricing.  There should be forward-looking public investment approaches that are integrated across governments.  We must encourage active competition and also private ownership in all non-network segments, and regulation should not discourage private-sector investment that is seeking to meet expected demand.

Infrastructure Australia and the COAG must agree an accelerated action to achieve national infrastructure markets, market-based pricing, and strategic and coordinated investment by the public and private sectors. 

A truly national perspective is needed to achieve outcomes that will benefit all Australians.