Time to End Haphazard Approach to the Basics

The Australian Financial Review


By Rod Pearse OAM 

Chairman, BCA Sustainable Growth Task Force

If good infrastructure is the groundwork for economic growth, Australia’s recent economic growth has been built on shaky foundations. Large parts of Australia’s infrastructure have been near breaking point for some years.

The Business Council of Australia and others have charted these problems and the ways to fix them. As a nation, we have until now lacked the will to firmly impose the solutions.

The solutions are there to achieve. We must start with our governments coming together to develop a shared understanding of what kind of growth we actually want as a nation in the years ahead. From this shared understanding we can then create the necessary infrastructure solutions. These solutions include improved regulatory and pricing policies, better planning so that investments achieve defined objectives, transparent measurement of progress and targeting investment to where the real infrastructure gaps are. Right now we are a long way from these outcomes.

We have seen some some progress in infrastructure planning and delivery in the past few years. For instance, all states have committed to expand the supply of water to our drought-affected cities. Investment in infrastructure has been rising. And Canberra has directed some of its stimulus package into infrastructure – about 14 per cent of its total stimulus spending.

But too often action has been taken only when a crisis has hit – bottlenecks in our ports, massive overcrowding on our public transport or cities at risk of an inadequate supply of water. That’s barely a sustainable course even now. It will certainly not be acceptable in the coming decades, as Australia’s population increases to an estimated 35 million in 2049. It will become a recipe for economic chaos.

The infrastructure game is changing, however. State governments are making substantial infrastructure investments in an effort to catch up. The federal government has created an important new institution, Infrastructure Australia, to advise the federal government. It has also started to fund major infrastructure. And federal and state governments now clearly agree that major infrastructure projects are of national importance and essential to improving Australia’s productivity.

So Australia right now has a unique opportunity to confront its infrastructure challenges. This brings us back to where we started – developing a shared understanding of what amounts to Australia’s long-term growth ambition.

Australian governments have the capability to set out this growth ambition and to agree the infrastructure we’ll need to support it. In partnership, federal and state governments can plan for Australia’s economic and population growth in a sustainable manner – setting the standards for how we plan and grow our cities and regions and providing the facilities to support business and industry as well as communities.

There is widespread agreement on many of the necessary microeconomic infrastructure reforms, from smart metering of electricity to road congestion pricing. If there’s a reluctance to implement new initiatives, it is in part because Australians have not been clearly shown why they are needed and how they would work.

Armed with a long-term growth aspiration and identification of the infrastructure needed to support it, Australian governments can clearly show the way to sustainable economic growth, improvement in the amenity and convenience of our cities and regions and higher productivity and living standards.

And armed with this growth ambition, shared and understood by all our governments, we can tackle the five major areas of policy action.

Firstly, COAG must take the lead in this infrastructure challenge. It is an imperfect institution but it is the forum where governments have already agreed on the need to tackle our major microeconomic and business regulation reforms. Secondly, we need improved regulatory and pricing policies to drive better use of our existing infrastructure and send better investment signals to the market. Third, we must improve our infrastructure and project planning so that money spent on infrastructure achieves clearly defined objectives. Fourth, we need transparent and publicly available measurement and reporting on progress in infrastructure delivery and how it is meeting our growth requirements. This includes two-yearly audits by the Productivity Commission. And finally, we must construct our approach to infrastructure investment so that it is directed at the specific gaps in our freight, road, water, electricity and communications sectors.

Australia can pursue purposeful growth confidently. The solutions are there for us to achieve. The groundwork for growth should be laid now.