Government response to Infrastructure Australia offers no grounds for optimism

How wonderful, you might think, that the Australian government is in furious agreement with its independent infrastructure advisory body on how to tackle the country’s present and looming infrastructure challenges.

Of Infrastructure Australia’s 78 recommendations in its Infrastructure Plan, the federal government opposes only three outright. But, in reality, the government has ducked some hard choices by either supporting “in principle” or supporting with caveats. This means it can’t be criticised for being hostile to a good idea, but at the same time it doesn’t actually have to do anything.

Ducking hard choices means avoiding change that could make a real improvement to the effectiveness of Australia’s infrastructure.

A transparent and rigorous process is perhaps the most critical element underpinning an effective infrastructure investment program.

Infrastructure Australia believes this, and so does the Australian government. That’s why the Infrastructure Plan recommends publication of full project business cases, including supporting data and analysis, and preparation and publication of robust post-completion reviews once a project has been delivered.

How disappointing, then, that the government is silent on the first recommendation and passes the buck on the second.

A need to scrutinise investment decisions

Failing to publish business cases and their supporting analysis and assumptions means the public, experts and the media are unable to scrutinise government decisions. This is no coincidence: politicians misuse public money for electoral gain.

Over the past ten years, governments have spent more per person in New South Wales and Queensland, where federal elections are largely won and lost, than in less electorally sensitive states. They have also spent disproportionately outside the capital cities – even though most GDP, GDP growth and population growth is generated in the big cities.

This behaviour is still going on. In the 2016 federal election campaign, all major parties committed most of their transport spending promises to proposals that Infrastructure Australia had yet to assess.

Only 15% of the Coalition’s spending promises were on projects with a favourable assessment from Infrastructure Australia. For Labor, it was a mere 3%. For the Greens, 0%.

So, even though the major parties have all made serious promises about how important it is to listen to the independent advisory body, their behaviour shows they do not do this.

Taking responsibility for taxpayer dollars

The government’s evasive response on post-completion reviews passes the buck.

Despite supporting the recommendation to make project funding contingent upon post-completion reviews, the government says this should be the responsibility of the asset owner – usually a state government. At the same time, the federal government insists it is:

… no longer an ATM, simply handing over grants to state and territory governments for infrastructure with little involvement in how the money is spent.

Given the billions of dollars it spends, the federal government should take responsibility for auditing the effectiveness of the funds it provides. It should also demonstrate leadership by coordinating the publication of post-completion reviews from the asset owners.

A welcome step up in reporting practice

In welcome and remarkable contrast, the government has committed to transparent disclosure of infrastructure “community service obligations”.

This appears to mean the government will publish the underlying rationale and community impact of infrastructure investments it would not undertake if commercial considerations applied.

If the government is serious about supporting this recommendation, it will be a major step up in reporting practice.

It means if the government decides to fund a highway or railway line that doesn’t stack up economically, it will identify the social purpose – for example, connecting a rural community to a regional centre – and fund it explicitly as a community service obligation. It will be intriguing to see how this is implemented, and just how long this list could be.

Community service obligations are the real reason for much investment in rural and regional areas, since many infrastructure projects in the bush just don’t make sense economically. But governments usually pretend they are building in the regions to create jobs and economic opportunity.

Making hard choices with finite funds

Building in the bush on the pretext of creating jobs is exactly what politicians of all stripes frequently propose.

Not only does the government plan to increase investment in the larger capital cities, but also in the smaller capital cities, the outskirts of cities and, in principle, both the fast-growing and economically important regional centres and the smaller or slower-growing regional centres. In other words, the government plans to spend more everywhere.

This may well be what the government actually does. However, there is a world of difference between investment in the effective functioning of the economic powerhouses that are the big four capital cities, and spending in depressed regional areas in the hope that this might prop them up.

In fact, the government goes so far as to support the notion that governments should try to get people to move to smaller centres. But governments have been trying for years to get economic water to flow uphill, and we are poorer for it.

Trying to stop people from moving to where they want to live and work, or using the infrastructure pipeline as a tool for redistribution, is inefficient, opaque and runs counter to Infrastructure Australia’s role to identify and promote nationally significant infrastructure.

Rural and regional Australians will applaud the commitment to keep spending in their areas. And why wouldn’t they?

When there is very little transparency about the costs and benefits that underpin decisions to invest, there is a great payoff to lobbying for your particular area. The winners are happy, while it’s hard for everyone else to see that the cost of this trade-off is more congestion in fast-growing cities.

For as long as the Australian government avoids the responsibility of rigorous, transparent processes, there is no reason to expect any real discipline in how it spends this year’s A$6 billion or next year’s A$9 billion on transport infrastructure.

The government’s response to the Australian Infrastructure Plan provides no real grounds for optimism. Expect more regional boondoggles until we can tie the government to the mast of disciplined investment.