We know the key role that continued infrastructure investment plays in sustaining Australia’s level of economic growth. It underpins economic activity and helps to provide opportunities for growth and employment.
I believe infrastructure investment is one of the major challenges facing this nation. There has been some preliminary commentary about what the government might do with future hard-won budget surpluses. Tax cuts are one option that the Government will consider; investment in defence is another.
I believe a strong case can also be made for higher infrastructure investment in the future both as our economy grows, and to facilitate that growth. For example, it is worth noting that the Bureau of Transport Economics estimates that the total transport task in Australia will double over the next two decades.
I am an advocate for strategic investment in the future of our nation.
Government has traditionally provided and operated ‘public’ infrastructure in Australia. The Federal Government invests heavily in roads – some $800 million annually, directly, in addition to significant identified but untied grants to State and local government worth another $800 million per year.
We are investing $250 million in upgrading the interstate rail track, as well as investing in a range of specific rail projects such as the much anticipated Alice Springs to Darwin line.
But governments cannot carry the burden of infrastructure investment alone – and they should not reasonably be expected to. This means we have to get a whole lot smarter in how we go about investing in infrastructure. Today, more than ever, we need private sector involvement in order to meet the infrastructure needs of all Australians.
Private ownership of infrastructure (through privatisation and greenfields investment) has become increasingly possible in the past decade. With more private sector investment now possible, the role of government is changing, although it is no less substantial. Government will always be required to ensure there is efficient infrastructure development by providing network planning, safety and technical regulation and standards enforcement.
And as most of our road network has very low traffic volumes, a large proportion of the network will never be able to operate commercially. These roads are critical to our national and regional development and highlight the need for ongoing government funding.
But there have been changes even in these areas. In the past construction and maintenance work was largely done by government authorities. Today, private firms undertake a large proportion of government funded construction and maintenance work after winning competitive tenders.
Increasingly, private firms are also financing major road projects. Over the last decade, Build, Own, Operate and Transfer – or BOOT – contracts have been used in many infrastructure projects.
Most private road investments have occurred under BOOT arrangements and some have been very large by Australian standards. For example, Sydney’s M2 Tollway, built at a cost of $600 million, is a successful BOOT arrangement.
This is an edited extract from a speech delivered to the Australian Council for Infrastructure Development Annual Conference on 14 October 1999.
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