Action Urged on Crucial Infrastructure

23 March 2006

The Australian

By Rod Pearse
BCA Sustainable Growth Task Force
CEO & Managing Director
Boral Limited

Growth depends on decisions being translated into tangible results, writes Rod Pearse

The reform debate about infrastructure has travelled a long way over the past 12 months.

A year ago, the Business Council of Australia outlined in The Australian its Infrastructure Action Plan – a major report which focuses on the quality and quantity of infrastructure, including our road, rail, energy and water systems, which are crucial to the economy.

In each area, independent research commissioned by the council found shortfalls, bottlenecks and inefficiencies which threatened to slow down economic growth considerably.

These are not abstract policy issues.

Traffic congestion, chronic water shortages and energy blackouts are examples of poor infrastructure outcomes which not only detract from the quality of life but create major uncertainty as well as costs for business and the economy.

In all areas, it was found that the cause of the problem was not a lack of available funds for infrastructure spending.

Instead, as the council has consistently advocated, the scarce resource is proper planning and co-ordination among and within governments.

The council's report helped to trigger an important debate around a key question: how might Australia better manage its infrastructure so that it supports, not limits, future growth?

Australia's political leaders have now acted on these concerns. At the meeting of the Council of Australia Governments (COAG) in February, federal, state and territory governments agreed to elevate the issue to one of national importance.

A critical first step in this new commitment to infrastructure reform has been COAG agreeing to achieve major reforms in energy and transport by 2007.

For example, COAG has agreed to achieving a national electricity grid, harmonise road regulations and develop strategies to address road congestion.

But while decisions can be made, processes established and milestones met, they will count for little if there is no tangible improvement in critical infrastructure.

To make sure decisions translate into tangible results, the council has recommended that COAG report on key indicators such as reliability levels for electricity supply, the levels of road congestion in each capital city, road and rail travel times between major destinations, and the extent of water trading.

Making sure there is a truly national electricity market that encourages more investment in new energy infrastructure will improve the security and reliability of the electricity supply.

Establishing a consistent set of national road regulations – such as setting uniform load limits for trucks – will improve travel times and reduce administrative costs.

Introducing improved buying and selling arrangements for water trading will result in a more sustainable allocation of water.

We all recognise that improvements will not come overnight. But tracking progress and providing information on outcomes is important in assessing whether the policy approach is right or needs adjustment.

The council's research shows that implementing a major infrastructure reform program over five years will deliver an extra 2 per cent to GDP a year.

Conversely, the research also shows that each year's delay in implementing COAG's decisions on infrastructure reform will cost about $10 billion in lost growth.

COAG deserves credit for putting infrastructure front and centre on the national policy agenda. However, the council hopes the COAG reform plan triggers more concerted action around the issue of rural and urban water – a vital infrastructure area where reform remains mired in a series of federal and state impasses.

Business, which is reliant on 70 per cent of Australia's infrastructure to function, has a strong interest in monitoring COAG's progress.

This is why the council will support progress with infrastructure reform over the next two years, while continuing to urge action if results fall short of returning infrastructure to a sustainable footing.

Rod Pearse is head of the Business Council of Australia infrastructure taskforce and is the managing director of Boral.



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