Rob Dossor, Economics
The Commonwealth faces competing demands for the funding of national infrastructure, most involving large amounts of money, and requiring difficult decisions around which to prioritise.
Many of these decisions are highly controversial and there have been calls for renewed changes to the process.
The Commonwealth funds a significant amount of
national infrastructure covering roads, rail, ports and airports. Development
of this infrastructure is recognised as being critical to Australia’s economic
growth and competitiveness across many sectors, ranging from increasing the
number of shipping containers moved through ports, to reducing the travel time
for motorists on urban roads.
Infrastructure projects generally involve large
sums of money. In the 2016–17
Budget, for example, the
Government will spend over $5 billion on infrastructure projects through
the Investment Road and Rail Programme.
There are few formal requirements around how funding
decisions are made by the Commonwealth.
To return to the earlier example, the Infrastructure
Road and Rail Investment Programme is legislated under the National Land Transport Act 2014 (the Act). The Act gives
the Minister wide discretion about the investment projects that may be funded.
- construction of a road or railway in a state or
some external territories
- maintenance of a road or railway that is part of
the National Land Transport Network
- construction of an inter-modal transfer facility
in a state or some external territories and
acquisition or application of technology that
will or may contribute to the efficiency, security or safety of transport
operations in any state or some external territories.
The Minister may ‘have regard’ to some broadly
described considerations in deciding whether it is appropriate to approve a
project. These include any assessments of the economic, environmental or social
costs, or benefits of the project. There is no requirement, however, that a
project will produce benefits that exceed the cost.
Infrastructure Australia (IA) was established in July
2008. One of IA’s
functions is to evaluate nationally significant infrastructure proposals
(as well as other infrastructure as determined by the minister). It is not a
requirement, however, that IA evaluates all nationally significant
infrastructure proposals before the Government provides funding for
Calls for reform
A number of projects have attracted criticism on
the basis that a comprehensive assessment was not conducted or made available
to the public. For example, in its audit of the approval and administration of
the federal funding for the Victorian East West Link project, the Australian
National Audit Office found:
...neither stage of the East West Link project
had proceeded fully through the processes that have been established to assess
the merits of nationally significant infrastructure investments prior to the
decisions by the Government to approve $3 billion in Commonwealth funding
and to pay $1.5 billion of that funding in 2013–14.
The Grattan Institute and
Commission (PC) have called for better governance arrangements and
institutional oversight in infrastructure decision making. The Reserve
Bank of Australia outlines the importance of rigorous and transparent
project selection and planning processes. IA
states that ‘instances of publicly committing to a project before a detailed
analysis has been completed and published can undercut confidence in government
decision making...’, and recommends:
Government [needs] to establish a more rigorous
evidence base for infrastructure investment decisions. Key steps include:
increasing the quality and consistency of long-term infrastructure planning;
deepening stakeholder engagement; allocating increased funding for project
development work, such as business cases; improving the transparency of
decision-making and ensuring the consistent delivery of post-completion
According to the PC, best
- that decisions are taken in the public interest
the incorporation of effective processes,
procedures and policy guidelines for planning and selecting public
infrastructure projects, including rigorous and transparent use of cost-benefit
analysis and evaluations, public consultations and public reporting of the
- the establishment of mechanisms for the
transparent review or audit of the decision-making process by an independent
party proposals for reform
Before the 2013 election, the Coalition proposed that IA
assess infrastructure expenditure exceeding $100 million before funding decisions
were made. However, it did not implement this proposal and did not expressly
take it to the 2016 election.
Before the 2016 election, Labor committed to ensuring
that IA would ‘independently [assess] all major infrastructure projects on the
basis of the benefits they provide to the economy, the way they fit in with
existing infrastructure, their commercial viability and their capacity to
enhance national productivity.’ Labor also committed to ensuring that road
projects incorporated smart infrastructure and considered the alternative
option of using technology to improve the existing roads, and that IA would administer a $10 billion
infrastructure financing facility.
Productivity Commission Public infrastructure, Inquiry report, Canberra, May 2014.
Infrastructure Australia, Australian infrastructure plan, February 2016.
R Dossor, Infrastructure Australia Amendment (Cost Benefit Analysis and Other Measures) Bill 2014, Bills digest, 28, 2014–15, Parliamentary Library, Canberra, 2014.
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