Garry Bowditch, Executive Director of the University of Sydney’s Better Infrastructure Initiative, makes the case for reforming our approach to infrastructure investment…
All too often I attend infrastructure forums where policymakers and industry leaders call for the urgent need to fix the infrastructure deficit, by building more assets and deliver more projects. This point of view is understandable when communities in both regional Australia and major cities like Adelaide continue to face escalating congestion with their roads, higher prices for use of infrastructure and increased uncertainty in terms of access and service quality across schools, hospitals, energy and transport. Clearly these problems are persisting and when it comes to spending money on the problem Australia has not been idle to the task.
In fact, many may be surprised to know that Australia has just completed a decade of infrastructure investment that is enormous in magnitude and historical in proportion. Australia has spent in the last decade over half trillion dollars on infrastructure, which is double the size of the previous decade. But increased congestion, emissions and high costs persist, accompanied with declining service standards like uncertainty of access, reliability of outcomes has emerged as the new norm.
It appears Australia has a problem translating big spending on asset building into meaningful benefits that lift competitiveness and improve the lives of its people.
Part of the diagnosis is that too much emphasis is on rushing the engineering blue prints for ‘shovel ready projects’ without proper consideration to setting objectives to measure future success. Compounding the situation further is an absence of problem identification the project is seeking to fix.
Governments must choose their infrastructure well, if it is to live up to the rhetoric of boosting productivity and living standards. The trouble is choosing projects is not easy, in fact it’s very difficult.
Australia’s experience suggests that the best way to deal with this is for Federal and state governments to finish the reform agenda started in the 1980s, and then do some more.
Many sectors in infrastructure have been reformed through corporatisation and privatisation. The big successes like airports and telecommunications has transformed these sectors for the better. We have seen excellent investment in facilities and customer service. Brisbane airport currently looks more like Dubai with its massive new runway excavations is a case in point, and other airports are de-congesting and de-bottlenecking to ensure good customer experiences.
But other sectors like roads and public transport remain largely untouched by reform. As a result an undisciplined investment process has seen taxpayer dollars failing to fix poor service levels, and tardiness with introducing capital saving new technologies. In contrast, telecommunications has had a far more stable investment pathway and has been quick to introduce new technology. Customers have been the winner as they have benefited from markets and competition.
The community and customers want services, not assets. All governments need to adapt by enabling markets to deliver these services where possible. It is better that infrastructure is provided through businesses to customers, not politicians lobbying voters which can be a recipe for opportunism and waste of taxpayers’ money.
When markets are not possible, then governments must seek to procure service outcomes. This will invite a broader participation in the market, not just those that want to build assets. It should seek to give greater emphasis to using existing infrastructure better, stimulate innovation and reward risk taking.
These issues are the focus of the University of Sydney’s Better Infrastructure Initiative report, Re-establishing Australia’s Global Infrastructure Leadership, (available here), which was released in February.
Garry Bowditch gave a presentation on “Fixing Australia’s Infrastructure Problem” at the South Australian Centre for Economic Studies’ Economic Briefing Luncheon in Adelaide yesterday.