Finally, a reaction to our inaction

"This report is quite deliberately expressed in stronger terms than previous reports . . . Whilst governments have invested a significant amount on infrastructure, they have made little progress in responding to a number of issues raised in previous reports, e.g. the need for improved planning, and the need for reforms in the areas of pricing, demand management and funding.

"In that context, Infrastructure Australia urges governments to embrace the need for reform, to lead necessary change, and to commit to action on a range of fronts.

"Ultimately, most of these problems and challenges have developed and intensified because of shortcomings in leadership. Governments, business leaders and opinion leaders have avoided a range of difficult debates and choices. That cannot persist."

Infrastructure Australia, Communicating the Imperative for Action

SIR Rod Eddington and his board at Infrastructure Australia have had enough. After sitting politely on the sidelines, watching good ideas get derailed by partisan fights, they are not going to take it any more. They want action and they are willing to make waves to get it.

Their fourth report to the Council of Australian Governments released yesterday, Communicating the Imperative for Action, does not beat around the bush. Australia, it says, has invested too little in infrastructure for many years, and has seen productivity growth slump as a result. We have too many governments and government bodies with fingers in the pie, getting in each other's way instead of collaborating, often for partisan reasons.

We are not making the best use of the infrastructure we have, not evaluating infrastructure choices properly to ensure we spend our money where it will give the best results and, perhaps most importantly, not confronting the impasse on how on earth we are going to fund all the infrastructure we need.

They're not just angry with governments: they're angry with us. Australians, the report argues, do not understand the real choices we face on infrastructure. If we want better roads, rail, water and electricity, we will have to pay for it and adjust our values to accept that burden in some form whether by increased taxes, charges, tolls, asset sales or whatever.

The report puts the problem squarely. "As a country and a community", it says, "we:

Are reluctant to increase government debt (although our national debt levels are among the lowest of any developed country).

Baulk at raising taxes to pay for better infrastructure and services.

Are uncomfortable with the 'user pays' concept (as seen in opposition to the use of tolls to fund some roads or increases in utility charges to pay for necessary capital investment and maintenance).

Are against recycling capital, i.e. selling poorly performing infrastructure assets that could be better managed by the private sector and using the proceeds of those sales to fund other infrastructure.

"Yet we are concerned about congestion, we are concerned about the health and security of our water supplies, we are concerned about the prospect of electricity 'brownouts' and we recognise the need to modernise our telecommunications.

"There is a profound disconnect here."

The report declares this a crucial issue for "our prosperity and future" and promises that "communicating the need for a more mature debate about our infrastructure and how we pay for it will be a core part of Infrastructure Australia's agenda."

The Rudd government set up IA in 2008 to advise it on priorities for infrastructure investment. This report does that, naming as its three top priorities the reconfiguring of urban freeways to give priority to public transport, plans to remodel High Street through Northcote and Thornbury to speed up tram travel, and the Brumby government's plan to build an underground rail link from Footscray through the city to Caulfield as the start of a Melbourne metro network.

But the focus of this report is not individual projects, but systemic issues. It wants us to confront the big question: how we do we want to pay for the infrastructure we need? It wants governments to act instead of endlessly putting off decisions, or commissioning yet another report to substitute for action.

(Michael Kilgariff of the Australian Logistics Council was savage yesterday on the latest example: news that the Productivity Commission will be asked to report on road user charges on top of the pile of reports already delivered by the Henry tax review, the board of COAG's road reform plan and many others. "What could the commission possibly look at that hasn't already been examined?," he asked.)

Sir Rod too is fed up.

He said reforms by government were "frustrating slow" when action was imperative. "Productivity has slowed as a direct result of infrastructure shortfalls time lost in travel, delays at ports, lost production due to water restrictions." Australia, the report points out, is below the OECD average in infrastructure investment, productivity growth and the ratio of capital stock to GDP.

His four biggest concerns are systemic. Governments are not tackling reform with the urgency it needs. They (and us) are not facing up to the need to make tough choices to finance the First World infrastructure we want. They are not selling the case for those reforms and tough choices. And they are not using pricing to make the most of the infrastructure we already have.

Infrastructure Australia (whose board includes Mark Birrell of Infrastructure Partnerships Australia) recently set up a working group to identify new ways of financing infrastructure projects, such as attracting investment from superannuation funds selling old infrastructure assets to pay for building new ones finding a way to tax the infrastructure-driven rise in land values and tackling the problem of demand risk, which has sent so many recent PPPs underwater.

And if all that fails, there's the toll option. The report proposes that the east coast national highway, at least from Melbourne to the Sunshine Coast, be turned into a toll road, like highways in the United States with the funds earmarked for new infrastructure projects.