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Transport infrastructure projects must be carefully costed and beneficial

By John Caldon - posted Friday, 15 December 2000

The Prime Minister has made it clear that his Government intends to use at least part of the projected budget surplus to engage in ‘nation building’, particularly upgrading road infrastructure in the regions and constructing ring roads in outer metropolitan areas.

The Government has correctly recognised the important role roads play in the broader economy. Without decent roads products cannot get from farms and factories to markets and the community cannot easily travel for work or pleasure. Upgrading local roads in our regions will dramatically improve quality of life in areas where the current network is sub-standard.

But roads exist within a broader transport network. It is meaningless to talk of nation building without a national strategy for transport development – road, rail, air and sea. This type of coordination will allow true nation building. Important projects will become apparent when transport needs are compared with available services and when inappropriate and often perverse incentives (such as the road vs rail impasse) are corrected. Until such a strategy exists and is implemented by all Australian governments investments will remain ad hoc.


The general infrastructure strategy needs to be sustainable in the long term, not just thought about when there is an unexpected budget surplus. Every home owner knows that it is more efficient to do general maintenance on your house little by little. A new coat of paint every couple of years is better than waiting for the timbers to rot.

However, even without a strategy a Government using the budget surplus to fund infrastructure projects is much better than squandering the surplus on additional recurrent expenditure.

Just like a family’s wealth, public money is limited. There are only so many projects which can be funded from the budget surplus. An investment in infrastructure is an investment in the future only where that infrastructure reduces business costs and increases quality of life for the community. Public funds will then be used to facilitate new private investment which will lead to jobs growth and magnify the benefits.

Infrastructure should not be seen as an end in itself. The jobs created during planning and construction, while important, pale into insignificance compared with the long term growth generated by appropriately targeted investments. However the image of the brand new, gleaming road which remains under-used is one to be avoided.

When the Prime Minister says he will invest in the regions which regions does he mean? How will his Government ensure that the community is truly obtaining the best value for money? It is incumbent on them to ensure that funds are allocated according to a clear policy and with clear processes.

The community should demand no less than fully transparent guidelines for the investment of their funds. A cost-benefit analysis should be performed for each and every investment. This should consider not only financial outcomes, but also social and environmental issues. Will upgrading a particular road allow a new factory to be built with more efficient access to markets? How many jobs will be created? When? These questions need to be asked and the analysis should be open to public scrutiny. Then the claims of pork barreling which all politicians are so keen to make can be avoided.


Even more importantly ensuring value for money from public funding means that private sector funds and expertise should be leveraged wherever possible. The UK’s National Audit Office (the equivalent of the Auditor General) found that when the UK Government delivered road projects in partnership with the private sector, an average 13 per cent saving was achieved compared with direct public funding.

The Prime Minister has signalled his intention to fund outer metropolitan ring roads such as the Western Sydney Orbital and Melbourne’s Scoresby Freeway. Partnerships with private companies also allow accelerated funding, removing the need to "drip feed" construction of roads like Scoresby. This ensures that the full benefits for business and the community are captured from day one.

If savings of 15 per cent, or more likely based on Australian experience, up to 20 per cent, can be achieved by the partnership approach then doesn’t the Government owe it to us to at least consider it? Politicians like Blair in the UK and Bracks in Victoria have already shown that this can be done while protecting the public interest and making contracts transparent and open to scrutiny.

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This article was first published in the Australian Financial Review on November 28, 2000.

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About the Author

John Caldon is President of the Australian Council for Infrastructure Development.

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