Labor’s plan for $15 billion ‘reconstruction fund’ to promote post-pandemic manufacturing economy

Posted on April 4, 2021 by particularkev

Michelle Grattan, University of CanberraA Labor government would set up a $15 billion National Reconstruction Fund to promote manufacturing in Australia’s post pandemic economy.

The fund, to be announced on Tuesday as Labor begins its national conference, would partner with private investors and superannuation funds, which have access to large reserves of capital.

It would be aimed at helping build new industries and boosting existing ones. The $15 billion would be provided through a combination of loans, equity, co-investment and guarantees.

In a statement on the plan, Anthony Albanese and shadow minister for national reconstruction. Richard Marles, say the pandemic has highlighted the serious deficiencies Australia has in its manufacturing capabilities and its ability to be globally competitive in innovation and technology.

“If there is anything that COVID has taught us, it is the need for Australia to be a place which makes things – to have our own industrial and manufacturing capabilities, our own sovereign capabilities,” they say.

“From commercialising our historic capacity in science and innovation to boosting the development of medical devices and pharmaceuticals, through to reviving our capability to make cars, trains and ships, today’s announcement will support the businesses in these industries to secure the capital and investment to grow and prosper,” Albanese and Marles say.

The fund would concentrate on a range of strategic industries. These would include resources value adding; food and beverage processing; transport; medical science; renewables and low emission technologies; defence capability, and enabling capabilities across engineering, data science and software development.

Objectives of the fund would be to:

reduce the risk of investment in innovation
help firms grow by support for new investment especially in regional areas
strengthen self-sufficiency and industrial diversity in Australia by assisting businesses build national sovereignty and decrease the risks in their supply chains
support regional developoment by enhancing private sector investment in industries of the future.

Labor would model the fund on entities such as the successful Clean Energy Finance Corporation, which was set up by the Labor government. It has invested billions to promote the transition to renewable energy, energy efficiency and low emissions technologies.

Labor’s proposed fund would have an independent board.

Assistance it provided would need to return rates above the government borrowing rate.

The $15 billion capital provided would be off-budget.

Labor points out that according to the OECD Australia ranks last in manufacturing self-sufficiency among industrialised countries. It produces just over two thirds of what it uses.

The pandemic as well as the deepening Australia-China tensions have increased debate over the past year about the need for greater self-sufficiency especially in certain key areas, such as medical supplies. The pandemic led to supply chain problems which are still being experienced for some products.

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

$34bn and counting – beware cost overruns in an era of megaprojects

Posted on November 9, 2020 by particularkev

Greg Moran, Grattan Institute

A Grattan Institute report released today finds Australian governments spent A$34 billion, or 21%, more on transport projects completed since 2001 than they first told taxpayers they would. And as we enter the era of megaprojects in Australia, costs continue to blow out.

Transport projects worth A$5 billion or more in today’s money were almost unheard of ten years ago. Today, as the chart below shows, megaprojects make up the bulk of the work under way across the country.

These megaprojects include WestConnex in Sydney, West Gate Tunnel in Melbourne and Cross River Rail in Brisbane. And this is to say nothing of some enormous projects being planned, such as Melbourne’s Suburban Rail Loop.

We are also hearing calls to add to this bulging pipeline. In June, the transport and infrastructure ministers of all states and territories said they were “clearing the way for an infrastructure-led recovery” from the COVID-19 recession.

Cost overrun risks rise with project size

The Grattan report, The rise of megaprojects: counting the costs, sounds a warning about the risks of this approach. The report uses the Deloitte Access Economics Investment Monitor to look at the final cost of all public road and rail projects worth A$20 million or more and completed since 2001. As the chart below shows, we found bigger projects overran their initial cost estimates more often and by more.

Almost half of the projects with an initial price tag of more than A$1 billion in today’s money had a cost overrun. These projects overran their initial costs by 30% on average. The extra amount spent on some megaprojects was the size of a megaproject itself.

Cost announcements before governments were prepared to commit formally to a project were particularly risky. Only one-third of projects had costs announced prematurely, but these accounted for more than three-quarters of the A$34 billion overrun.

When early costings of infrastructure turn out to be too low, it distorts investment planning in three ways:

underestimating the costs of transport infrastructure can lead to over-investing in it relative to other spending priorities
if governments misunderstand the uncertainty in a project’s cost at the time they commit to it, their decision to invest in that project was made on an incorrect basis
because unrealistic cost estimates are more prevalent for larger projects, governments are more likely to over-invest in larger projects.

There’s also a fourth and no less important problem: when unrealistically low cost estimates are announced, the public is misled.

Despite the experience of the past 20 years, the costs of big projects continue to be underestimated. The chart below shows A$24 billion more than first expected will be spent on just six mega megaprojects (that is, projects with an initial cost estimate of A$5 billion or more) now under construction. Overruns on other megaprojects have been reported too.

What needs to be done?

With megaproject costs continuing to blow out, governments should take immediate steps to manage better the portfolio of work under way — particularly if they are looking to add to it in the name of economic stimulus.

Each state’s auditor-general should conduct a stocktake of current projects. This would give the public and the government a clear picture of the situation.

Ministers should begin reporting to parliament on a continuous disclosure basis. Any material changes in expected costs, benefits or completion dates of very large projects should be disclosed.

Steps should be taken to put decisions on the incoming batch of projects on a sounder basis, too. When announcing a cost, ministers and government agencies should disclose how advanced the estimate is. If the proposal is at an early stage, they should quote a range of estimates.

Governments should also require their infrastructure advisory bodies to at least assess — if not approve — large proposals before funding is committed.

Looking further ahead, action is needed to stop the pattern of spending billions more than expected on megaprojects. State departments of transport and infrastructure should devote more resources to identifying modest-sized transport infrastructure proposals.

And governments need to start learning from the past. Detailed project data, particularly on expected and actual costs, should be centrally collated in each state.

Post-completion reviews should be mandatory on all large projects. These reviews should be published.

If there is no change in the way infrastructure is conceived and delivered in Australia, then the era of the megaproject will indeed mean megaproblems.

Greg Moran, Senior Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Will the population freeze allow our big cities to catch up on infrastructure?

Posted on October 30, 2020 by particularkev

Glen Searle, University of Sydney and Crystal Legacy, University of Melbourne

The 2020 federal budget forecasts Australia’s population growth will slow to almost zero over several years because of COVID-19 and related restrictions. This leads to the question: will this period allow the big cities to catch up on infrastructure shortfalls that developed before the pandemic?

One of us recently conducted research on how infrastructure shortages – such as rail lines, open space and affordable housing – linked to Sydney’s pre-pandemic rapid growth arose in the context of government support for a lot more population. The findings gives us some insights into whether an infrastructure catch-up might happen.

The impacts of fiscal imbalance

The research centred on the consequences for infrastructure provision in Sydney of the vertical fiscal imbalance in Australia. The Commonwealth collects more than 80% of tax revenue while the states rely on the Commonwealth for 45% of their revenue.

The federal government, especially the Treasury, favours population growth. That’s because it generates extra tax revenue, reduces the risk of recession and spreads the welfare costs of an ageing society across a wider base.

The state government is also positive about growth, though less so than the Commonwealth. As a public marker of successful government, growth provides political legitimacy. However, it also requires the state, under the Australian Constitution, to provide most of the infrastructure needed to support that growth.

On the other hand, the Commonwealth garners most of the extra tax revenue from growth. Extra state revenue from a growing population is absorbed into the unavoidable recurrent costs of health, education and so on to service the increased needs. As a result, the state government is unable to fund enough new public infrastructure.

Commonwealth infrastructure funding to the state is only a small fraction of the total required. The federal budget says New South Wales will receive A$2.7 billion from the Commonwealth for infrastructure over the next decade. The state government’s forecast infrastructure spending is more than A$100 billion over the next four years.

As a result, the state needs to call on private sector funding as much as possible. This means infrastructure that can’t be fully paid for by users, such as rail lines, open space and affordable housing, is under-provided. And, as is the case in Victoria, existing assets such as public housing are sold to the private sector.

An over-reliance on growth?

This context suggests the pandemic-induced flatlining of population growth won’t necessarily allow the infrastructure shortfall to be overcome. Cities are unlikely to catch up unless the Commonwealth greatly increases its funding of state infrastructure.

State budgets rely heavily on growth-sensitive revenue such as property transfer taxes and the GST. And these are set to fall. NSW GST revenue, for example, is forecast to be A$3.5 billion lower this financial year than anticipated before the pandemic.

For states to fund infrastructure beyond user-pay projects like motorways, they have to take on debt to offset reduced taxation revenue. But this will be constrained by their desire to preserve their credit ratings as a marker of good governance.

The federal government is less constrained. The combined influences of ultra-low interest rates and the Reserve Bank’s availability to buy government bonds mean much higher Commonwealth debt is now fiscally tolerable.

The question then becomes: can the Commonwealth’s ability to shoulder increased debt be used to provide the states with more infrastructure funding? The Commonwealth’s huge budgeted outlays to offset the economic impacts of the pandemic are obviously a major constraint on this happening.

Nevertheless, infrastructure projects are generally seen as an important vehicle for responding to the effects of the pandemic. And state government projects count just as much as Commonwealth projects for economic recovery.

However, the federal budget provides little cause for optimism here. The big cities received relatively little infrastructure funding, and certainly very little to overcome current shortfalls.

For instance, the main Sydney project funded was the St Marys-Western Sydney Airport rail line. However no business case for the line has been released, and it is likely to be a decades-long white elephant with little passenger traffic.

A case for more federal funding

The case for more Commonwealth funding of state infrastructure goes beyond helping a post-pandemic recovery. The big cities need funding for public goods such as public housing and mass transport.

But developing infrastructure of this kind offers limited opportunities for user-pays financing, especially where current shortfalls are significant. These public-good projects range from relatively small projects such as dedicated cycleways to big-ticket items like Sydney’s Metro West and Brisbane’s Cross River Rail, as well as low-job but high-need items like land purchases for new public open space.

The role government played in responding to the pandemic reminded us just how important leadership, accountability and public-sector-led co-ordination are in times of crisis.

Climate change is another crisis that requires such a response, particularly when it comes to infrastructure investment and delivery. Infrastructure that reduces our dependency on carbon involves investment in high-quality public transport, active transport (walking and cycling) and public open spaces.

In some areas the private sector is well placed to deliver greener outcomes. But in areas such as transport, open space and housing, government investment must play a central role. The transformation that the challenges of the 21st century demand of us needs bold leadership from our elected officials.

As our research has concluded, a deep analysis of the costs and benefits of big city population growth for state government finances should provide the basis for a new federal-state financial accord that addresses the imbalance of such costs and benefits between the two levels of government.

Glen Searle, Honorary Associate Professor in Planning, University of Queensland, University of Sydney and Crystal Legacy, Senior Lecturer in Urban Planning, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

High-viz, narrow vision: the budget overlooks the hardest hit in favour of the hardest hats

Posted on October 8, 2020 by particularkev

Danielle Wood, Grattan Institute; Kate Griffiths, Grattan Institute, and Tom Crowley, Grattan Institute

The Morrison government seems to think economic stimulus is all about high-viz vests and hard hats. It’s a narrow and dated view of the world of work.

Tuesday night’s budget included several broad measures to support business and jobs, such as its tax write-off for business investments and wage subsidy for employing young people.

These look like sensible measures, albeit ones that bet heavily on business to lead the recovery.

But when it comes to targeted policies for job creation, the 2020 budget is a sea of hard hats.

The three sectors with the most targeted support are all bloke-heavy: construction (more than A$10 billion so far through the crisis), energy (A$4 billion), and manufacturing (A$3 billion). There is also an extra A$10 billion for transport projects, another boost to construction jobs in the building phase.

The problem? That doesn’t fit the story of this crisis. Unlike past recessions, the worst fallout in the COVID-19 recession has been in services sectors.

Hospitality, the arts and administrative services have all been hit hard. These sectors are dominated by women, which is one reason women’s employment has taken a bigger hit this year.

Yet these sectors received next to nothing in the budget. They are also less likely to benefit from economy-wide supports such as instant asset write-offs because they are the least capital-intensive sectors.

Size reflects the industry share of Gross Value Added for 2019. Industry-specific stimulus excludes stimulus available to all industries, such as JobKeeper.
ABS, Grattan analysis of Government announcements to October 2020

There are many ways the federal government could have helped these sectors.

Overseas governments, and some state and local governments, have funded vouchers and discounts to encourage people back to restaurants, cafes and regional tourist destinations.

Grants or direct support to help the arts sector revive could provide a desperately needed boost to our creative recovery.

The government could have created many more jobs by directly investing in government services. Services create more jobs than infrastructure per dollar spent, and they have especially high economic multipliers right now.

Notes: Excludes expenses for ‘other economic affairs’ (which contains JobKeeper) and ‘other purposes’ (largely GST payments to the states). Total expenses growth is also calculated excluding ‘other purposes’. Source: Budget 2020-21.
Source: Budget 2020-21

The budget initiatives in education, aged care and mental health are welcome, but very small in the scheme of new spending.

Major investments in aged care and education would be a jobs boon and could have provided a more rounded vision for the recovery.

A missed opportunity for women

This week, just before the budget, the federal Minister for Women, Marise Payne, issued a statement saying:

This government recognises that women have been significantly impacted by the COVID-19 pandemic and it is critical that we focus on rebuilding their economic security as a priority.

Yet the government has left the biggest opportunity on the table. Making child care more affordable is the most effective way to reduce the gender gap in working life and retirement – directly supporting jobs and the economic recovery.

The Grattan Institute has recommended a A$5-billion-a-year package that would make child care significantly cheaper and improve the workforce participation incentives for primary carers (still mainly women).

Instead, women seem to have been relegated in this budget to an afterthought in the form of a A$240 million “support package”, which offers no meaningful economic support.

The Conversation’s Business & Economy editor Peter Martin explains the 2020 budget in three minutes.

Poorly targeted stimulus

All of these omissions are even more glaring given the spending on other areas and groups with far less need for support.

Sizeable measures are targeted towards energy, agriculture and defence. Yet all of these sectors have increased their total work hours since March.

Another A$3 billion is slated for manufacturing. While that sector has shed jobs during the crisis, it should bounce back more quickly than “social consumption” businesses such as hospitality, retail and personal services.

Construction spending is needed, because a future crunch in the sector is expected as housing construction slows.

But the focus on major transport infrastructure for job creation does not make so much sense. These projects are less jobs-intensive.

Also, states such as Victoria already have a big pipeline of large projects, so have little capacity to deliver more.

The A$3 billion for shovel-ready projects focusing on road safety and local roads are better targeted to create jobs. But it has missed the opportunity to deliver a major social housing spend, providing something desperately needed that would also help mitigate the downturn in housing construction.

To achieve its stated objective of getting unemployment well below 6% as quickly as possible, the government should be focusing on stimulating sectors where activity has fallen the most – especially services sectors.

But this budget overlooks the hard hit in favour of the hard hat. The government should check this blind spot quickly. A broad-based recovery depends on it.

Danielle Wood, Chief executive officer, Grattan Institute; Kate Griffiths, Fellow, Grattan Institute, and Tom Crowley, Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Scott Morrison names six priority areas in $1.5 billion plan to boost manufacturing

Posted on October 1, 2020 by particularkev

Michelle Grattan, University of Canberra

The federal government is selecting six priority areas for support in a $1.5 billion manufacturing plan Scott Morrison will outline in a pre-budget address.

They are resources technology and critical minerals processing, food and beverage, medical products, recycling and clean energy, defence, and space.

The plan will also focus on building “supply chain resilience” after the COVID pandemic exposed the risks of not having enough capability to quickly produce large amounts of vital items such as personal protective equipment.

The funding will be provided over the budget’s forward estimates period.

In a Thursday speech to the National Press Club, released ahead of delivery, Scott Morrison says this budget “will be one of the most important since the end of the second world war”.

“This budget will be necessarily different in scale to those we have seen for generations. It will respond responsibly to the challenge of our time.

“The budget will confirm the strong plan we have to recover from the COVID-19 recession and to build our economy for the future.”

Morrison says Australia needs “to keep making things”. Manufacturing employs about 860,000 and before COVID generated more than $100 billion in value annually for the economy and more than $50 billion in exports.

“Our government is determined to set a ten-year time horizon where all parties – industry, workforce (including unions), governments at all levels, capital (including superannuation funds) and our scientific and research community – are pulling in the one direction,” Morrison says.

He says the government’s “practical strategy” has three elements: creating a business environment where manufacturers can be more competitive, aligning resources to build scale in areas of competitive strength, and securing sovereign capability in areas of national interest.

The policy involves considerable government intervention – picking winners in terms of sectors, and collaborating with them in planning.

A $1.3 billion “modern manufacturing initiative”, focused on the priority areas, will invest in projects to help manufacturers “scale up” and create jobs.

The government and industry will partner to develop industry-led roadmaps to identify growth opportunities, barriers to scale and what is needed along the value chain in each area.

These maps, to be prepared by April, will be guides for investment and actions by both government and industry.

They will set goals and performance indicators – in jobs, research and development, investment – for the following two, five and ten years.

The manufacturing plan is one of a series of policy initiatives the government is announcing in the run up to the budget.

Others have included deregulation of credit policy to stimulate lending, changes to insolvency provisions to cushion struggling businesses, measures to promote digitalisation, and policies on energy.

Morrison in his speech again strongly talks up the importance of gas for the economic recovery generally and the manufacturing sector in particular.

“If you’re not for gas, you’re not for jobs in our manufacturing and heavy industries,” he declares. “For many manufacturers, it is half the problem.”

The National Covid-19 Co-ordination Commission had advised that gas was 20-40% of many industries’ cost structures.

“Combined with higher electricity costs, the NCCC said that has moved many firms into a ‘doom loop’ where they are living ‘turnaround to turnaround’, making existential decisions at each point of the next major maintenance decision, rather than decisions to invest in technology and much-needed productivity improvements to remain competitive. This needs to change,” Morrisons says.

“That is why, as part of our gas-fired recovery plan, we have committed to resetting our east coast gas markets, unlocking gas supplies, establishing a new gas hub and improving our gas grid distribution systems.”

His speech comes as Santos’s $3.6 billion controversial Narrabri coal seam gas project has this week been given “phased approval” by the NSW Independent Planning Commission, with its development subject to it meeting a range of conditions.

Morrison says the government’s “modern manufacturing initiative” will provide a new investment vehicle to help overcome the barriers to scale. It will leverage co-investment with states and territories, industry and research institutions across three activities

collaboration: investments of an average of $80 million each to foster long-term, large-scale production or R&D facilities involving consortia of businesses and other organisations, including physical clusters (such as at the Western Sydney Aerotropolis)
translation: investments of about $4 million for industry-led projects translating research and commercialising new products
integration: investments of about $4 million connecting local firms with export markets.

The national sovereignty part of the manufacturing plan has more than $107 million earmarked for “supply chain resilience”.

“We cannot ignore the obvious. The efficiency benefits of hyper-globalisation and highly fragmented supply chains can evaporate quickly in the event of a major global shock like the COVID-19 pandemic.

“It is only sensible that Australia consider more options to guard against supply chain vulnerability for critical necessities and to secure us against future shocks,” Morrison says.

Currently, a government review is being done of Australia’s supply chain vulnerabilities in the wake of the pandemic.

The resilience initiative “will support Australian manufacturers investing in capabilities to address areas of identified acute vulnerability domestically, and to ensure they are in a position to contribute to the supply chains of trusted partners and like-minded countries.

“Sovereign Manufacturing Capability Plans will be developed in key areas and a range of policy options will be considered including procurement and long-term contracting arrangements, as well as actions to promote better information sharing and collaboration between government and industry.”

But Morrison stresses this does not herald a return to protectionist policies.

He says Australia is complementing its actions to boost domestic sovereign capability through greater collaboration with like-minded countries.

The manufacturing policy also includes $52.8 million for the existing manufacturing modernisation fund which gives grants to support transformational technologies and processes.

In a Wednesday pre-budget speech Anthony Albanese renewed his calls for trains to be built locally.

“State governments will invest billions of dollars in new public transport projects over the next two decades, requiring hundreds of new rail carriages.

“We should build them here. We have the facilities in Maryborough, Ballarat, Bendigo, Newcastle and Perth. We also have the skills,” he said.

“What we need is a government prepared to back in Australian-made trains and Australian-based jobs.

“This is just one example of how the government should use its purchasing power to create good, secure jobs while strengthening our sovereign industrial and research capabilities.”

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Morrison government to invest $211 million in fuel security to protect against risk and price pressures

Posted on September 15, 2020 by particularkev

Michelle Grattan, University of Canberra

The Morrison government is acting to protect Australia’s fuel security as the international outlook becomes more uncertain and prices will be under increasing pressure.

Under the plan, operating through market and regulatory measures, the government will invest $211 million in new domestic diesel storage facilities, changes to create a minimum onshore stockholding, and support for local refineries.

Announcing the program with Energy Minister Angus Taylor, Scott Morrison said the changes “will ensure Australian families and businesses can access the fuel they need, when they need it, for the lowest possible price”.

Australia’s fuel supplies are always potentially vulnerable to international instability, something that the pandemic – with its disruption to supply chains – has just reinforced. Local refineries are also under economic pressures, with potential consequences for prices.

The measures are:

a $200 million investment in a competitive grants program to build an extra 780 megalitres of onshore diesel storage with industry
creation of a minimum stockholding obligation for key transport fuels, and
working with refiners on a market design process for a refining production payment.

The government is seeking to have the $200 million grants for new storage matched by state governments or industry. Its focus will be on projects in strategic regional locations, connected to refineries and with connections to existing fuel infrastructure.

Morrison said fuel security was essential for Australia’s national security and the country was fortunate there hadn’t been a significant supply shock in more than 40 years. Fuel security underpinned the entire economy, and the industry itself supported thousands of workers, he said. “This plan is also about helping keep them in work.”

Taylor acknowledged the pressure refineries are under.

The government says modelling indicates a domestic refining capability is worth some $4.9 billion over a decade to Australian consumers is terms of price suppression.

The construction of diesel storage will support up to 950 jobs, with 75 new ongoing jobs, many in the regions, the government says.

“A minimum stockholding obligation will act as a safety net for petrol and jet fuel stocks and increased diesel stockholdings by 40%,” Morrison and Taylor said in their statement.

They stressed the government’s commitment to onshore refining capacity. The industry’s viability is under threat.

The planned production payment scheme is to protect from an estimated 1 cent per litre rise that, according to modelling, would hit fuel if all refineries onshore were to close. Refineries receiving the support will have to commit to stay operating locally.

Under the minimum stockholding requirements, petrol and jet fuel stocks would be kept no lower than current commercial levels, which are about 24 consumption days.

Diesel stocks would increase by 40%, to be at 28 consumption cover days. This would add about 10 days to Australia’s International Energy Agency compliance total.

In July Australia had 84 IEA days including stocks on water. Implementing a minimum stock holding obligation would bring Australia into line with most IEA members which regulate their fuel industries to meet their security needs. Under the IEA treaty member countries are required to have 90 days of stocks.

(IEA days and consumption cover days are different.)

Refineries will be exempt from the obligations to hold additional stocks.

The production payments will ensure a minimum value of 1.15 cents per litre to refineries. A competitive process will determine the location of new storage facilities.

The government says it recognises “the future refining sector in Australia will not look like the past. However, this framework will ensure the market is viable for both our future needs and can support Australia during a severe fuel disruption.”

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Morrison commits another $1.5 billion for infrastructure

Posted on June 15, 2020 by particularkev

Michelle Grattan, University of Canberra

Scott Morrison will announce a further $1.5 billion for an immediate start on small infrastructure projects in the government’s latest initiative to spur economic activity.

Of this, $1 billion will be provided to priority “shovel-ready” projects, with $500 million targeted specifically to road safety works.

The projects are nominated by the states and territories.

Addressing a Committee for Economic Development of Australia function on Monday Morrison will say this means the government will have brought forward or provided extra funding worth $9.3 billion in infrastructure investment in the past eight months.

“As we come out of the COVID crisis, infrastructure can give us the edge that many countries don’t have,” he will say.

Announcing a priority list of 15 major projects being fast tracked for approval under a federal-state bilateral model, he will say these projects and the 66,000 direct and indirect jobs they will support “will be brought to market earlier by targeting a 50% reduction in Commonwealth assessment and approval times for major projects, from an average of 3.5 years to 21 months”.

Anthony Albanese, also speaking to CEDA, will stress the need for “productivity renewal”.

“Our post-coronavirus actions must confront the weaknesses in our pre-coronavirus world,” he will say. “And here, productivity stands out”.

A Labor government would have a productivity renewal project to “lift business investment, lift investment in people and lift investment in critical infrastructure.

“Our goal will be to drive growth through productivity and to drive fairness through growth.”

Meanwhile a poll by the Australian National University has found the most popular COVID-specific measure to help fix Australia’s economic problems would be to spend more on trying to find a vaccine and treatment.

The poll, done in May of more than 3200 people, asked about four Covid-related policies: increasing spending on the search for a vaccine and treatment, opening up pubs, clubs and cafes, extending JobKeeper and JobSeeker payments beyond the current six months, and opening Australia’s borders to tourists and international students. (On Friday the national cabinet agreed to work “to return international students on a small, phased scale through a series of controlled pilots”.)

Asked how much they thought the various measures would help fix Australia’s economic problems, greater spending to pursue a vaccine received 75.6% support, followed by easing restrictions on pubs and the like (71.7%).

Some 57.6% said extending JobKeeper and JobSeeker would help, and nearly half believed unlocking the border would assist.

More money to find a vaccine had strongest support among older people, while extending the payments had the greatest backing among young people. Coalition voters were least likely to back extending JobKeeper and JobSeeker.

Asked about several economic policies that would help to fix Australia’s problems, 82.1% agreed more spending on domestic programs like healthcare, education and housing would do so, 76.7% nominated infrastructure, 59.1% said cutting taxes, and 55.9% backed putting more money into the hands of poor people.

The study concluded that “the strongest predictor of support for these policies … was anxiety and worry regarding COVID-19. Those who were anxious and worried were far less likely to support liberalisation measures (on borders and hospitality) but far more likely to support spending measures (on vaccines and the labour market).

This highlighted a tension.
“To maintain support for some of the physical distancing measures required to maintain low rates of infection, there needs to be some concern regarding COVID-19 and fear of infection if the virus once again gets out of hand.

“However, in order to implement some policies that will help support economic growth into the future, this concern and perceived risk may need to be reduced”.

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Why is there so much furore over China’s Belt and Road Initiative?

Posted on May 31, 2020 by particularkev

Michael Clarke, Australian National University

There were certainly questions asked when Victoria first signed a memorandum of understanding to join China’s Belt and Road Initiative (BRI) in 2018, but it wasn’t until the past week that the criticism reached a fever pitch.

The depth of the animosity over the deal shows the extent to which the BRI has become a faultline in the China-US competition.

And Australia, economically interdependent with China but a committed ally of the US, finds itself caught in the middle.

What is the BRI and what does China want?

There is a diverse array of projects encompassed under the BRI umbrella, focused on six main “economic corridors”.

These corridors link China to Central Asia, the Middle East and Europe by land (the “Silk Road Economic Belt”), and to Southeast Asia, the Indian subcontinent, the Pacific and east Africa by sea (the “Maritime Silk Road”).

To date, China has pledged an estimated US$1 trillion in investments in “hard” and “soft” infrastructure (from ports and high-speed rail to telecommunications and cyberspace) and signed memorandums of understanding with 138 countries.

However, there is much debate about what is actually driving the project.

Some see it as a purely geopolitical gambit to break what Beijing perceives as American “encirclement” after the Obama administration’s “pivot to Asia”.

Others see it as President Xi Jinping and the Chinese Communist Party’s desire to shake the Chinese economy out of its recent slowdown and resolve some of its structural maladies.

From an economic standpoint, the initiative serves multiple purposes. It allows China to redress economic imbalances between its coastal and interior provinces, find outlets for excess production capacity and internationalise the Chinese currency.

Finally, some have dismissed the Belt and Road Initiative as a “soft power” vanity project to burnish China’s international image.

Indeed, the Chinese leadership views BRI as a way of both legitimising China’s model of government and economic development to the rest of the world, and positioning China as the leader of an alternative new world order from the one authored by the US after 1945.

In reality, BRI is about all of these things.

Xi Jinping and Vladimir Putin at the Belt and Road Forum in Beijing in 2017.
ROMAN PILIPEY / POOL

What are the benefits and pitfalls of BRI?

In thinking about BRI’s global and regional reception, we need to recognise there is demand for what Beijing is offering.

Its commitment of US$1 trillion is a drop in the bucket of the estimated US$26 trillion needed by Asia’s economies for infrastructure investment, but it still surpasses anything put up by other major regional players.

The “blue-dot network” announced by the US, Australia and Japan in November as a response to the BRI, for instance, was trumpeted as promoting infrastructure investment that is “open and inclusive, transparent, economically viable”.

But the initiative is not an infrastructure funding mechanism itself. Rather, it merely certifies projects that “demonstrate and uphold global infrastructure principles”.

While this might be an admirable goal, there is a problem, as former Asian Development Bank executive director Peter McCawley points out:

A road is a road, whether it is built with US or Chinese money. At present, it seems that the Chinese are prepared to fund the construction of infrastructure in Asia, while the US is not.

Concerns about the nature of Chinese investments under BRI are valid. Many BRI projects are financed through Chinese public financial institutions such as the Export-Import Bank of China that enjoy low borrowing costs and interest rates.

This enables them to lend on favourable terms to Chinese companies, who can then significantly undercut foreign companies for infrastructure bids.

Another concern is that Beijing is engaging in “debt trap diplomacy” by extending excessive credit to countries that will struggle to pay it back.

The aim is then to extract political and economic concessions or physical assets, such as ports or land deals, from those countries.

Several studies have suggested the “debt trap” narrative has been exaggerated. But while a Lowy Institute report last year noted that China has not “deliberately” engaged in debt-trap diplomacy, it added

the sheer scale of China’s lending and its lack of strong institutional mechanisms to protect the debt sustainability of borrowing countries poses clear risks.

Victoria’s BRI agreement: storm in a teacup?

Beyond the economics, the Belt and Road Initiative carries clear political risks for Australia.

Australia’s attempt to balance its alliance with the US and economic interdependence with China has become even more difficult, as both have become “rude and nasty” in pursuit of their interests under Donald Trump and Xi Jinping.

Some analysts claim Victoria’s BRI agreement means Chinese firms will be

building chunks of national infrastructure, perhaps with tie-ups to Chinese state banks and other entities.

But the reality may be more prosaic. The memorandum of understanding and subsequent “framework agreement” speak of mutual commitments to “promote practical cooperation” of Chinese firms in Victorian infrastructure and Victorian firms in “China and third-party markets”.

They are also not legally binding and may be terminated by mutual agreement.

Meanwhile, Premier Daniel Andrews said this week Victoria would not agree to telecommunications projects under the BRI, a key security concern.

BRI and the great power competition

The furore over Victoria’s agreement is due to the fact there is no Australian consensus on BRI or the broader issue of our relationship with Beijing. Debate on these issues is necessary if Australia is to chart a course between two great powers gearing up for confrontation.

Unfortunately, the debate on China has become toxic.

Those who recognise the risks of engaging with China, but still advocate for closer relations, are often lambasted as “craven” or worse. Those sounding the alarm bells about Beijing’s malign intentions are accused of sowing a “China panic”.

To say this is unhelpful is an understatement.

Some talk of a new Cold War between the US and China.

Yet, as the Cold War historian Odd Arne Westad, has noted, today’s China-US competition is not a replay of the past. The conflict between the two biggest powers will not lead to bipolarity, but rather

will make it easier for others to catch up, since there are no ideological compulsions, and economic advantage counts for so much more.

Tying ourselves ever more tightly to either protagonist is imprudent, as Westad says,

The more the US and China beat each other up, the more room for manoeuvre other powers will have.

Michael Clarke, Associate Professor, National Security College, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Is another huge and costly road project really Sydney’s best option right now?

Posted on May 19, 2020 by particularkev

Philip Laird, University of Wollongong

The New South Wales government has focused on delivering more motorways and rail links for Sydney, along with main roads in regional NSW, since the Coalition won office in 2011. The biggest of these, WestConnex, is still being built. Plans for yet another major motorway, the Western Harbour Tunnel and Beaches Link, are well advanced.

A hefty environmental impact statement (EIS), but incredibly no business case for a project costing about A$15 billion, was recently put on public exhibition. When submissions closed at the end of March, the vast majority of 1,455 submissions from public agencies, individuals and organisations were objections to the Western Harbour Tunnel project.

The NSW government has promoted the Western Harbour Tunnel since announcing it in 2014, but hasn’t convinced the many objectors.
YouTube/NSW government

The proposal follows three stages of WestConnex and the F6 Extension south of Sydney. Thousands of objections in the planning process did not stop the government going ahead with each stage.

This led to a state parliamentary inquiry in 2018. Its first finding was: “That the WestConnex project is, notwithstanding issues of implementation raised in this report, a vital and long-overdue addition to the road infrastructure of New South Wales.”

However, the committee also found “the NSW Government failed to adequately consider alternative options at the commencement of the WestConnex project” and that “the transparency arrangements pertaining to the WestConnex business case have been unsatisfactory”.

These two findings apply to the Western Harbour Tunnel process too.

In the run-up to the 2019 state election, the government promoted the project and placed on public exhibition an environmental impact statement for the A$2.6 billion F6 extension between Arncliffe and Kogarah.

The proposed Western Harbour Tunnel and Beaches Link.
Transport for NSW

The state opposition promised to scrap the Western Harbour Tunnel and F6 projects. Instead, it would give priority to rail and public transport upgrades.

Some have suggested time-of-day road congestion charges as a much better option than more motorways.

Local government objections

Four councils made detailed objections to the Western Harbour Tunnel proposal.

The City of Sydney, noting “it has been a long-time critic of WestConnex”, said:

This is primarily because this costly motorway project will fail in its primary objective of easing congestion. Urban motorways do not solve congestion; they induce demand for motor vehicle trips and any additional capacity created is quickly filled. This phenomenon applies equally to the Western Harbour Tunnel and Warringah Freeway Project, a component of the WestConnex expansion.

The City of Sydney recommended the government provide alternative public transport options.

The Inner West Council, whose suburb of Rozelle will be adversely impacted by the project, has also long opposed inner-urban motorways. It prefers “traffic-reduction solutions to addressing congestion, including public and active transport, travel demand management and transit-oriented development, with some modest/targeted road improvement”.

North Sydney Council noted significant concerns with the EIS, including “inadequate justification and need, loss of open space, construction and operational road network impacts, air quality and human health concerns, environmental, visual, social, amenity and heritage impacts, as well as numerous strategic projects having the potential to be compromised”.

Willoughby City Council noted the limited time given for considering a very large EIS, made worse by the COVID-19 pandemic. It questioned why a public transport alternative was not assessed. “Known alternative solutions with lower climate impacts need to be considered to be consistent with action on climate change and improved resilience.”

Ignoring the alternatives

In 2017, it was revealed the NSW government was instructing transport officials to ignore public transport alternatives to motorways such as the F6 extension and Western Harbour Tunnel. Wollongong-Sydney train travel times could be cut by half an hour for A$10 billion less, according to a Transport for NSW internal memo.

This is at a time when Sydney train ridership has been increasing faster than the distance driven by Sydney motorists. Rail showed 39% growth over ten years to 2018-19 and road just 12% in a time of rapid population growth.

Over many objections, the F6 extension is proceeding. Many aspects of the Western Harbour Tunnel need further attention. The NSW Ports Authority is concerned about the amount of highly contaminated sludge that will be dredged up from the harbour. The shadow minister for roads, John Graham, notes dredging will be close to residential areas.

Heritage NSW has noted the project will have direct impacts on six sites, including the approaches to Sydney Harbour Bridge.

The Action for Public Transport (NSW) group questions the influence of the Transurban company on transport planning at a time when NSW’s long-term integrated transport and land use plans aim for net zero emissions by 2050. Its submission says:

The funding for the project should be reallocated to more worthwhile projects such as filling in missing links in urban public transport systems, disentangling the passenger rail network from the rail freight network, and providing faster rail links to regional centres.

What are these other priorities?

NSW has a shortage of “fit for purpose” rail infrastructure to serve a growing population. This includes the Sydney Metro West (an EIS is on exhibition) and ensuring the new Western Sydney Airport has a rail service. More funding is also needed to upgrade the existing rail system and to cover a A$4.3 billion cost blowout on the Sydney City and Southwest Metro project.

The government has acknowledged a need for better rail services to the South Coast, Newcastle, Canberra and Orange. In 2018, it commissioned an independent report on fast rail options for NSW by British fast rail expert Andrew McNaughton. The completed report is yet to be released.

The question now is should the Western Highway Tunnel be abandoned or, at the very least, deferred until major rail projects have been completed.

Philip Laird, Honorary Principal Fellow, University of Wollongong

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The PM wants to fast-track mega-projects for pandemic recovery. Here’s why that’s a bad idea

Posted on May 11, 2020 by particularkev

Elizabeth Mossop, University of Technology Sydney

Our governments are committing taxpayers to further debt as part of a planned recovery from the economic impacts of the coronavirus pandemic. Infrastructure spending is great for economic stimulus, but it has to be the right kind of infrastructure.

These are some of our largest public investments, so we want this public money to work a lot harder to create multiple rather than just singular benefits. As well as quickly providing jobs and the economic benefits of solving the problems of transport or energy supply, stimulus projects need to deliver broad, long-term community value, reduce inequality and help counter climate change.

The focus of fast-tracked infrastructure spending in the pandemic recovery should be many smaller-scale projects that provide these broader benefits. Hence these projects will provide greater value than the transport mega-projects that had already been proposed for economic stimulus.

For example, the high-speed rail project Labor has proposed will help decarbonise travel, but it won’t provide enough jobs in the short or medium term. Major road projects will cut commuting time for some drivers, but won’t provide widespread benefits or longer-term employment. New roads also increase emissions and often damage neighbourhoods.

Good infrastructure delivers broad benefits

Infrastructure projects are such significant economic engines they can incorporate community improvement without compromising their other outcomes.

The ways in which projects get planned and implemented hold the key. For example, projects should involve local businesses, give hiring preference to long-term unemployed people and use sustainable materials.

Infrastructure planning can integrate multiple functions. For example, water-management infrastructure (for drainage or flooding) can be designed to include open space, tree cover, recreation and cycleways. Streets can be designed as beautiful public spaces that include pedestrians, cyclists and cars, as well as tree canopy and water storage.

Good infrastructure used for employment creation and economic recovery looks like Roosevelt’s New Deal of the 1930s. These programs created a legacy of high-quality public infrastructure across the United States.

A “Green New Deal” approach in Australia could focus on smaller-scale projects, including:

This greenway traverses Sydney’s Inner West municipality.

These types of projects are fast to get going and labour-intensive. They can be implemented in both cities and regional areas. These projects can also build longer-term employment capacity and help with the transition of workers out of fossil fuel industry jobs.

Bigger isn’t necessarily better

The largest infrastructure projects, like those being proposed, are the riskiest in terms of cost blowouts and often deliver limited social and environmental value. In many instances their claimed economic value is also doubtful, as their costs are modelled inaccurately and their benefits and use are often vastly exaggerated.

One cause of cost blowouts is that governments are often reluctant to commit to spending in the early stages of major projects. This means commitments are often made before projects are well enough understood. Early spending to explore alternatives, understand impacts and consult widely can often realise projects more quickly and with more predictable outcomes that better serve the public interest.

The Morrison government is promoting the myth of fast-tracking through the cutting of red tape and green tape. This is not the key to faster project delivery. We have a decent system of development regulation, which attempts to balance the business interests of developers against the public good. The current crisis has illustrated very clearly the importance of the public values of liveability, preserving natural resources and easy access to open space and local centres.

We must hold all our infrastructure projects to higher standards. Robust planning and environmental regulation are crucial to maximise the public benefit of projects. Effective community engagement ultimately leads to smoother implementation and better outcomes. Projects that work within planning regulations move more swiftly into implementation than projects that try to bypass them.

In this pandemic crisis we have seen governments move fast and effectively to change policy and implement large-scale programs to benefit the community. The economic rebuilding forced on us by the pandemic is an opportunity to show the same agility to rethink our approach to infrastructure as an engine to uplift our communities and improve life for all citizens.

Elizabeth Mossop, Dean of Design, Architecture and Building, University of Technology Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Tag Archives: infrastructure

Labor’s plan for $15 billion ‘reconstruction fund’ to promote post-pandemic manufacturing economy

$34bn and counting – beware cost overruns in an era of megaprojects

Cost overrun risks rise with project size

What needs to be done?

Will the population freeze allow our big cities to catch up on infrastructure?

The impacts of fiscal imbalance

An over-reliance on growth?

A case for more federal funding

High-viz, narrow vision: the budget overlooks the hardest hit in favour of the hardest hats

A missed opportunity for women

Poorly targeted stimulus

Scott Morrison names six priority areas in $1.5 billion plan to boost manufacturing

Morrison government to invest $211 million in fuel security to protect against risk and price pressures

Morrison commits another $1.5 billion for infrastructure

Why is there so much furore over China’s Belt and Road Initiative?

What is the BRI and what does China want?

What are the benefits and pitfalls of BRI?

Victoria’s BRI agreement: storm in a teacup?

BRI and the great power competition

Is another huge and costly road project really Sydney’s best option right now?

Local government objections

Ignoring the alternatives

What are these other priorities?

The PM wants to fast-track mega-projects for pandemic recovery. Here’s why that’s a bad idea

Good infrastructure delivers broad benefits

Bigger isn’t necessarily better

Sharing my thoughts with the world from a Particular Baptist perspective

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Cost overrun risks rise with project size

What needs to be done?

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The impacts of fiscal imbalance

An over-reliance on growth?

A case for more federal funding

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A missed opportunity for women

Poorly targeted stimulus

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What is the BRI and what does China want?

What are the benefits and pitfalls of BRI?

Victoria’s BRI agreement: storm in a teacup?

BRI and the great power competition

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Local government objections

Ignoring the alternatives

What are these other priorities?

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Good infrastructure delivers broad benefits

Bigger isn’t necessarily better

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