1
June 2023
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Rodney
Bogaards
Economic Policy
On 1 May 2023, the Minister for
Infrastructure, Transport, Regional Development and Local Government, Catherine
King, announced
a review of the Government’s 10-year, $120 billion infrastructure pipeline.
The 90-day review will be undertaken by former federal and state bureaucrats
Mike Mrdak, Reece Waldock and Clare Gardiner-Barnes.
Under the measure ‘Building a
better future through considered infrastructure investment’, Budget
measures: budget paper no. 2: 2023–24 states (p. 173):
The Government will undertake an independent strategic review
of the Infrastructure Investment Program (IIP) to ensure the $120.0 billion
pipeline over 10 years is fit for purpose and the Government’s investment is
focused on projects which improve long-term productivity, supply chains and
economic growth in our cities and regions.
This ‘pipeline’ is the Australian Government’s
Infrastructure Investment Program (IIP). The IIP funds mainly road and rail
infrastructure – but also other infrastructure, such as City Deals, Olympic
Games venues and dams – through payments to the states and territories to
support their infrastructure services. The funding is intended to assist
economic and social development in both cities and the regions. The Australian
Government has a $120 billion 10-year funding allocation for the IIP.
A summary of projects funded under the IIP, and other
infrastructure-related payments to the states, can be found in Table 2.8
‘Payments to support state infrastructure services’ in Federal
financial relations: budget paper no. 3: 2023–24 (pp. 59–60). A state-by-state
breakdown for the budget year (2023–24) is provided in the data annex (Table 1)
at the end of this article.
Purpose of the review
In a media
release on Budget night (9 May 2023), Minister King stated:
A 90-day independent review of the Infrastructure Investment
Program will ensure that we are investing in projects that are truly nationally
significant …
Under the Liberals and Nationals, the number of
infrastructure projects in the pipeline blew out from 150, to almost 800.
Projects were left without adequate funding, resources or genuine commitment …
This review will allow all levels of government time to
consider the projects that are actual priorities, and assess their cost and
deliverability in the current climate. The process will help to lay firm
foundations to build a more sustainable, credible pipeline of investment.
Updated IIP project schedules will be finalised following
the review, with the Australian Government working with states and territories
to determine priorities.
In an interview
with ABC Radio National on 1 May 2023, Minister King outlined what the
Australian Government wanted from the review in relation to each infrastructure
project in the pipeline:
…can it be delivered, are states and territories stumping up
the money and their share of the money to do so, when can it be delivered and
if it can’t be delivered, then realistically we’ve got to be upfront with
people and say, ‘Look, we can’t deliver this project …’
Minister King also indicated that following the review,
all large projects that remain in the pipeline will be subjected to a ‘proper
cost–benefit analysis’:
…one of the things we’ve asked the reviewers to look at is
whether there is a cost benefit analysis for these projects … there may be …
smaller projects … where that sort of level of cost benefit analysis won’t be
warranted … but certainly it is my preference that when we proceed with these
[larger] infrastructure investments that there is a proper cost benefit
analysis done with each of those.
In a similar vein, Budget paper no. 2 also indicates that
the Australian Government will spend $200 million over 2 years from
2023–24 for the Major Projects Business Case Fund, to support the planning of
land transport infrastructure projects (p. 172). According to Budget paper no.
3, this ‘funding will support a range of scenarios relating to business case
development, including supporting joint state, territory and Australian
Government planning processes’ (p. 62).
Implications for the IIP funding
envelope and specific projects
In an interview
with Perth radio station 6PR on 1 May 2023, Minister King committed to
maintaining the 10-year funding envelope at $120 billion – but re-profiling the
existing funding by abolishing poor projects and replacing them with new, more
productive projects:
I’m absolutely committed to keeping the pipeline at $120
billion over the next ten years … this is not about finding savings. What this
is about trying to do is make sure that every project that is sitting within
that pipeline is able to be delivered, has a funding partner to deliver it with
us, is actually costed properly so we know how much that is going to cost but
also create headroom within that infrastructure pipeline for new projects.
This sentiment was reinforced by Treasurer Jim Chalmers in
a radio
interview after the Budget:
…what we’ve said to the states and territories, including the
Victorians, is the $120 billion pipeline over 10 years for infrastructure is
safe and we need to work out the best way to spend from that pipeline. And
that’s why my colleague Catherine King and others in the Cabinet are working
with the Victorian Government and other state governments to make sure we’re
getting maximum value for money for that.
Minister King indicated when announcing
the review that the Australian Government remained ‘committed to delivering
our election commitments and following through on projects already under
construction’. Nonetheless, responding to the announcement, the Shadow
Minister for Infrastructure, Transport and Regional Development, Bridget
McKenzie, expressed concern about potential cuts to road and rail
infrastructure projects:
Minister King has made it clear she plans to hollow out or
‘streamline’ the list of infrastructure projects and is gearing up to implement
a partisan purge of planned road and rail upgrades funded by the former
Coalition Government.
It is still not entirely clear which projects are included
and which projects are exempt from the review process, despite the terms
of reference and the documents
provided in response to a request from Senator Canavan being tabled at
Senate Estimates on 22 May 2023. However, it appears that 3 nationally
significant rail projects, one of which was initiated by the former Coalition
Government, will not be scrutinised as part of the review:
Some infrastructure stakeholders supported the need for
the infrastructure pipeline review, but others raised risks with the approach
and urged further consultation:
Commentary in leading Australian newspapers was generally
positive about the direction of the review – if it improves the quality
of infrastructure spending:
-
The Australian
said in an editorial that the review ‘will be worthwhile if it helps
concentrate infrastructure spending towards productive investment with the
capacity to build economic growth’ and that ‘given revenue shortfalls and high
deficits, no side of politics should under-estimate the value of thorough
cost-benefit analyses of proposed projects’.
-
The Australian
Financial Review’s national affairs columnist said ‘it makes good
policy sense to do a quick 90-day audit of Australia’s clogged infrastructure
pipeline … But although a review should clarify choices and raise the standard
for continued funding, it doesn’t guarantee all the infrastructure projects
likely to be ticked off will be the best choices for taxpayers’.
-
The Courier
Mail said in an editorial that ‘There’s nothing wrong with reviewing
the direction you are going, trimming unnecessary projects and making sure
priorities don’t need to be adjusted’, but that ‘Road and rail projects
promised by one party should not be scrapped for the sake of it, particularly
while shoring up pet projects’.
The review will be a useful litmus test of the extent to
which the Government will expand the productive capacity of the economy by
improving the quality of the infrastructure pipeline, and ensuring it is
focused on projects that will generate appropriate returns on investment for
taxpayers.
Data annex
Table 1 Payments to the states
for infrastructure services budgeted in 2023–24 ($m, nominal)
|
NSW
|
Vic
|
Qld
|
WA
|
SA
|
Tas
|
ACT
|
NT
|
Total
|
|
Infrastructure Investment Program (IIP)
|
|
|
|
|
|
|
|
|
|
|
Road
investment component
|
1,816.0
|
1,285.9
|
2,050.3
|
1,365.6
|
1,004.8
|
369.3
|
81.5
|
266.9
|
8,240.3
|
|
Rail investment component
|
1,144.1
|
1,214.3
|
345.7
|
1,011.0
|
20.7
|
22.1
|
52.5
|
1.9
|
3,812.3
|
|
Roads
of Strategic Importance
|
87.1
|
60.7
|
203.9
|
176.2
|
39.8
|
114.2
|
|
136.1
|
817.9
|
|
Roads to Recovery
|
132.7
|
100.5
|
101.9
|
69.0
|
44.4
|
16.2
|
5.7
|
13.5
|
483.9
|
|
Major
Projects Business Case Fund
|
20.0
|
50.5
|
71.5
|
15.1
|
|
|
|
|
157.1
|
|
Black spot projects
|
35.9
|
31.1
|
24.3
|
13.4
|
8.5
|
3.1
|
1.7
|
2.1
|
120.1
|
|
Bridges
Renewal Program
|
20.8
|
4.5
|
16.0
|
18.5
|
16.6
|
13.6
|
5.0
|
|
95.0
|
|
Heavy Vehicle Safety and Productivity
program
|
7.9
|
15.2
|
14.0
|
17.5
|
1.8
|
25.7
|
0.1
|
7.9
|
90.0
|
|
Northern
Australia Roads
|
|
|
28.2
|
18.2
|
|
|
|
22.7
|
69.2
|
|
Improving cattle supply chains
|
|
|
|
0.5
|
|
|
|
|
0.5
|
|
Subtotal
– IIP
|
3,264.5
|
2,762.7
|
2,855.8
|
2,705.0
|
1,136.6
|
564.2
|
146.5
|
451.1
|
13,886.3
|
|
Other payments
|
|
|
|
|
|
|
|
|
|
|
National
Water Grid Fund
|
73.3
|
52.5
|
84.4
|
8.3
|
10.5
|
59.8
|
0.0
|
102.3
|
424.2
|
|
Local Roads and Community Infrastructure
|
97.5
|
71.2
|
71.2
|
51.1
|
31.4
|
11.4
|
5.6
|
10.2
|
349.6
|
|
Western
Sydney Infrastructure Plan
|
302.9
|
|
|
|
|
|
|
|
302.9
|
|
South East Queensland City Deal
|
|
|
163.9
|
|
|
|
|
|
163.9
|
|
Pilbara
Ports Common User Upgrades
|
|
|
0.0
|
69.3
|
|
|
|
|
69.3
|
|
Geelong City Deal
|
|
65.0
|
0.0
|
|
|
|
|
|
65.0
|
|
Townsville
City Deal
|
|
|
58.0
|
|
|
|
|
|
58.0
|
|
Adelaide City Deal
|
|
|
|
|
39.0
|
|
|
|
39.0
|
|
Brisbane
2032 Olympic and Paralympic Games
|
|
|
36.0
|
|
|
|
|
|
36.0
|
|
Hunter region – supporting clean energy
|
25.0
|
|
|
|
|
|
|
|
25.0
|
|
Launceston
City Deal
|
|
|
|
|
|
20.5
|
|
|
20.5
|
|
Hobart and Launceston-place based co-investments
|
|
|
|
|
|
20.0
|
|
|
20.0
|
|
Albury
Wodonga Regional Projects
|
8.0
|
7.0
|
0.0
|
0.0
|
|
|
|
|
15.0
|
|
Cairns Regional Development
|
|
|
15.0
|
0.0
|
|
|
|
|
15.0
|
|
Perth
City Deal
|
|
|
0.0
|
11.0
|
|
|
|
|
11.0
|
|
Port of Bundaberg – multi-use conveyor
|
|
|
7.7
|
|
|
|
|
|
7.7
|
|
Drought
Communities Programme – Extension
|
2.1
|
0.3
|
0.3
|
2.2
|
0.8
|
|
|
|
5.7
|
|
Barkly Regional Deal
|
|
|
|
|
|
|
|
5.6
|
5.6
|
|
Western
Sydney City Deal
|
5.4
|
|
|
|
|
|
|
|
5.4
|
|
Subtotal – other payments
|
514.2
|
196.0
|
436.5
|
141.9
|
81.7
|
111.7
|
5.6
|
118.1
|
1,638.8
|
|
Total for infrastructure services
|
3,778.7
|
2,958.7
|
3,292.3
|
2,846.9
|
1,218.3
|
675.9
|
152.1
|
569.2
|
15,525.1
|
Source: Australian Government, Federal
Financial Relations: Budget Paper No. 3: 2023–24, 59–71.
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