Infrastructure Reform: Time for Action

Failure to act on recent agreements aimed at improved infrastructure planning and development will cost Australia $10 billion a year in lost economic growth, according to a Business Council report released today.

The report, which examines the outcomes of the February Council of Australian Governments (COAG) meeting, reveals COAG made significant progress in agreeing to revamp infrastructure policies.

The report highlights that the comprehensive program of agreed action by federal, state and territory governments needs to be undertaken by the end of 2007 before the benefits of better infrastructure planning and development in key areas such as rail, road, energy and water can flow through to the economy.

BCA research shows that implementing a comprehensive infrastructure reform program will deliver an extra 2% to GDP per year after five years.

However the cost of delays in implementing the COAG program is of the order of $10 billion per annum in today’s dollars.

The Chairman of the BCA’s Sustainable Growth Taskforce, Mr Rod Pearse said COAG should be congratulated for taking on the challenges of reform in the energy and transport sectors.

However, progress in water reform – the other major infrastructure area highlighted by the BCA as needing structural reform – still lags and, as the report notes, requires a concerted commitment by federal, state and territory governments.

Mr Pearse said the Benchmarking the Progress of Infrastructure Reform: Challenges, Milestones and Outcomes report – released a year after the BCA released its Infrastructure Action Plan – acknowledged the infrastructure debate had come a long way over the past 12 months.

“The most significant outcome from COAG has been the elevation of infrastructure to a position of major, national policy importance.

“As the BCA argued in its report last year, bottlenecks and shortfalls in Australia’s major infrastructure classes have been the result of a lack of strategic, national focus and co-ordination within and between governments.

“Broad agreements by COAG to establish a special COAG Reform Council, introduce improved pricing regimes for energy and transport, and address road congestion are a significant start to tackling these problems.

“However, the essential next step is to see these agreements translated into action over the next two years, otherwise – as the report highlights – the cost to Australia’s economy through lost growth from ongoing infrastructure bottlenecks will be in the order of $10 billion a year.”

Mr Pearse said the Benchmarking the Progress of Infrastructure Reform report outlines a series of performance benchmarks which COAG could adopt to assess whether its reforms have resulted in better infrastructure outcomes. The report also outlines timelines needed to turn COAG agreements on infrastructure reform into action by the end of 2007.

Performance indicators (see page 29 of the report) include:

  • Reliability levels for electricity supply
  • Levels of electricity transmission line congestion
  • Level of road congestion in each capital city
  • Road and rail travel times between major destinations
  • Extent of permanent water trading
  • Average dam levels in each capital city

Key Milestones (see page 28 of report) include:

End of 2006

  • Clear proposals to achieve a national electricity grid
  • Clear proposals to address urban road congestion
  • Significant progress on harmonising road and rail regulation

Early to mid-2007

  • COAG decisions on electricity, rail/road pricing and road congestion
  • Clear proposals to address urban water issues

End of 2007

  • Smart meter rollout
  • COAG commences national infrastructure audits

Mr Pearse said the BCA would closely monitor progress and outcomes, based on the performance indicators and milestones outlined in the report, and issue a further progress report at the end of this year.

“While business, which utilises 70 per cent of the nation’s infrastructure, has a key interest in better infrastructure outcomes, the broad community has a powerful interest in making sure Australia’s infrastructure underpins growth, rather than constrains it,” he said.

“Business will continue to work closely and constructively with governments to make sure these important reforms are achieved.”

Benchmarking the Progress of Infrastructure Reform: Challenges, Milestones and Outcomes