Australian Infrastructure Plan has some way to go to give our cities what they need

Infrastructure Australia’s latest report, Australian Infrastructure Plan, is a substantial contribution to better infrastructure planning.

For our cities, it cogently argues for more compact settlement patterns and transport pricing reform. However, it has some substantial weaknesses.

Integrating land use and transport priorities

The report’s discussion about the need for more compact cities is impressive but falls into the same trap as the state governments it criticises for failing to adequately integrate land use development directions and transport priorities.

The Infrastructure Priority List is rather light on initiatives that will support development of Australia’s four largest cities as more compact cities, rather than just cities with a compact core.

For example, while many public transport projects are included, these are mainly rail projects focused on feeding central business districts. These are worthy projects that will improve services and promote agglomeration economies. However, they deal with only part of the overall public transport needs for development of more compact cities.

The report clearly recognises that higher-frequency public transport services will be needed more broadly across our cities. It includes some rail projects for growth areas and bus rapid transport in some locations. It does not focus sufficiently, however, on public transport, walking and cycling projects that will help the middle suburbs achieve their potential.

These are the areas where much more employment and residential development needs to take place if our cities are to become more compact. Supportive infrastructure, particularly public transport and active transport, is central to this goal.

Another illustration of the failure to adequately integrate land use and transport thinking is the discussion of servicing the outskirts of our cities.

A major reason these areas have infrastructure and service delivery problems is that their development densities are too low. Yet I found no reference to the need to increase densities in outer urban areas. This would help with issues such as the need to improve public transport services and associated cost-recovery rates.

Urban governance

There is useful discussion in the plan on governance matters but also a significant hole.

International conversations about cities currently emphasise the importance of someone being able to “speak for the city” and of cities having more financial autonomy. These matters are important for cities to have the resources to perform their roles more effectively and be more accountable for their performance.

The plan looks at the need to reform local government, as well as project planning and delivery arrangements, but does not consider the central governance question: “who speaks for our cities?”. This is a challenge that is fundamental to our cities' common difficulties of sustaining long-term land use transport plans.

The apparent answer is “state governments” at present, but the recent Sydney introduction of a Greater Sydney Commission is a very innovative step to strengthen partnerships between the state and local governments at city-wide level. This move is recognition that the right answer needs to be wider than simply the state government. New governance arrangements should have figured more prominently in the report.

One of London’s advantages is that it has someone ‘who speaks for the city’, the mayor, currently Boris Johnson. Reuters/Phil Noble

On funding, the report cites London on a number of occasions. There is no better city to use as a model, given that its population is about what Sydney and Melbourne can expect in 40 years – and that nobody does it better. London has already resolved the problem of “who speaks for the city”.

Under the mayor’s leadership, London is pursuing greater financial autonomy. The city is using measures such as value capture quite aggressively to increase its financial autonomy. The plan discusses value capture to an extent, but it needs a stronger focus on this as a great funding opportunity for more autonomous and accountable cities.

Externalities and pricing reform

From a public transport perspective, the weak treatment of externalities is the biggest problem in the plan.

There is much discussion of congestion and recognition of potential issues of social disadvantage, but not much systematic recognition of other externalities of cities, particularly transport externalities. The assumption seems to be, for example, that:

• agglomeration economies (or wider economic benefits more broadly) will be recognised somehow and dealt with at an appropriate time in some way;

• greenhouse gas emissions will be dealt with by whatever Australia decides to do to meet its international obligations;

• air pollution externalities will be met by vehicle emission standards; and

• accident and health externalities do not exist or are not important.

This provides scant comfort for the pricing reform the plan proposes. Road pricing reform is about more than recovering infrastructure costs and making motorists aware of congestion costs.

It is about improving the efficient allocation of scarce resources by making road users (and public transport users) more accountable for all the net external costs attributable to their travel choices. This includes (for example) the air pollution costs that remain after emission standards are applied, the accident costs not covered by insurance, rising health costs from a lack of exercise linked to motor vehicle dependence, and the costs of greenhouse gas emissions.

The report should have been much stronger on all the externalities involved in all modes of transport being internalised within reformed transport pricing arrangements.

The plan cites evidence that Australia’s urban public transport cost-recovery rates are low by comparison with similar cities elsewhere. If road pricing reform is implemented and includes a wide range of external costs, the case for increasing these cost-recovery rates is defensible, on two conditions:

1. measures are in place to support particular disadvantaged groups (which could be through government funding of targeted fare concessions); and

2. external benefits of public transport (for example, agglomeration economies) are recognised as warranting cost-recovery rates that are less than 100%.

Road funding model

The discussion about reforming the road funding model is hard to evaluate because the treatment of external costs of vehicle use is too vague.

If those costs were all internalised, as they should be for more efficient asset use, then it would be a mistake to hypothecate all the revenue in the road funding model to roads. The payments for air pollution damage, health and accident costs, for example, would need to be separated and be available for other uses that help lower such external costs.

More broadly, the process of determining road infrastructure priorities should not be ultimately devolved to the board of a road funding entity. It should be subject to an integrated process of planning land use and transport, to which that board contributes. Elected politicians ought to remain the ultimate decision-makers on major works.

Infrastructure planning vs integrated planning

The plan’s discussion about long-term infrastructure planning being “an opportunity to improve the value of community engagement” needs to provide more clarity about just what this means.

If long-term integrated land use transport planning had been undertaken more effectively in Australian cities, we would not need separate infrastructure agencies at federal and state levels.

Community consultation can be tricky at the best of times, so a comprehensive and consistent process is vital. AAP/Julian Smith

If the report is suggesting community consultation on strategic infrastructure planning that is separate to what should be happening around long-term land use transport plans, which are becoming increasingly broad in international best-practice cities, then we will have very confused communities.

The long-term process of planning integrated land use transport should be where strategic consultation takes place. Infrastructure would be one of the matters subject to consultation and infrastructure priorities one output from the planning process.

The fundamental discussion point needs to be what we want our cities to be like in 30 to 40 years' time. Transport and other infrastructure discussions and priorities should be placed in the context of creating those cities.

The market’s role in public transport

The plan argues for more competition in the delivery of public transport services.

The cost savings it cites are essentially from settings where a private operator replaces a public operator (the greater the savings, the more bloated the initial public operator). International experience is that subsequent rounds of market testing, once a private provider is in place, deliver few savings.

Furthermore, recent research by David Hensher, from the Institute of Transport and Logistics Studies at University of Sydney, suggests that if you have an efficient private operator operating under a negotiated performance-based contract, this will be as efficient as a tendered outcome. The report does not seem to be aware of these important nuances.

Improving the policy debate

Infrastructure Australia has done much to raise the quality of debate about infrastructure planning and delivery. Its Australian Infrastructure Plan continues this contribution.

However, so far as our cities are concerned, the effectiveness of the plan will be compromised unless Infrastructure Australia walks the walk in terms of land use transport integration. It needs to align its priorities much more comprehensively with its well-framed land use development directions, and take a broader perspective on pricing reform and associated funding and governance matters.

This is about better integration and delivery in the broadest sense.