Australia’s infrastructure emergency

Australia has one of the fastest growing populations in the developed world and, from an infrastructure perspective, is bursting at the seams. The government is about to make things worse.

One of Australia’s many political ironies is that the national effort to Stop The Boats has disguised an immigration boom.

Immigration has increased five-fold since the Howard government came to office and with a big increase in births over the past ten years, in part also due to Howard government policies, Australia’s total population growth has doubled and is now about three times that of most other developed countries.

The Abbott government’s ambitious paid parental leave project will ensure that the baby boom goes on and the pressure for immigration from India and China – apart from New Zealand the two leading sources of migrants – will only increase as well.

Last year Australia’s population grew 1.8 per cent, or 407,000, compared with 0.7 per cent for the United States, 0.5 per cent for Europe and China, and minus 0.1 per cent for Japan.

The extra 400,000 or so people a year is the reason Australia has not had a recession for 23 years and it’s why GDP growth is now around 2.5 per cent. On a per capita basis, Australia’s economic growth is among the weakest in the world, and per capita consumption growth is zero.

In other words, population growth is the only reason it looks like the economy is growing.

One obvious consequence of Australia’s population boom, apart from disguising a fundamentally weak economy, is rising house prices because not enough houses are being built as a result of restrictive planning laws and high construction costs.

Not enough infrastructure is being built either, to the point where a national emergency is approaching.

There is far too much focus on politically motivated big ticket infrastructure projects that soak up the available funding, and not enough on what you might call business as usual infrastructure.

Infrastructure Australia was set up in 2008 to organise and prioritise infrastructure spending but six years later the CEO, Michael Deegan has written a deeply frustrated submission to a Senate inquiry, declaring: “there is an air of unreality about our infrastructure planning.”

The inquiry, by the way, is into the “Infrastructure Australia Amendment Bill 2013”, which basically seems designed to scrap IA and start again. Deegan says the bill will make IA less independent; the Minister for Infrastructure and Regional Development, Warren Truss says it will make it more independent but it doesn’t look that way.

Says Deegan: “several provisions in the Bill considerably broaden the power of a Minister to give specific directions to Infrastructure Australia in areas that are at the core of the organisation's responsibilities, so independence is not in fact conferred.”

Rarely have we seen a more critical submission on a bill from a public servant, so Michael Deegan has obviously given up on his job and that of his chairman Sir Rod Eddington. Through more than 20 drafts of the bill, IA was not consulted on it at all.

Deegan’s broad complaint is that infrastructure planning in Australia is still not independent of politics.

That used to be true of monetary policy too, but not any more. It has been generally agreed that setting interest rates is too important a task to be left to politicians, so the Reserve Bank is now entirely independent.

With Australia’s population growing the way it is, infrastructure has become as important to the economy as monetary policy – if not more so.

IA should be given the sort of independence that the RBA has.

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