Morrison commits another $1.5 billion for infrastructure


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”.The Conversation

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?



Guanghui Gu / Costfoto/Sipa USA

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.




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China’s worldwide investment project is a push for more economic and political power


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.




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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.




Read more:
Why we should worry about Victoria’s China memorandum of understanding


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.The Conversation

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?


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.”




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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.




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How the NSW election promises on transport add up


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.




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We can halve train travel times between our cities by moving to faster rail


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.




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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.The Conversation

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


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.




Read more:
Look beyond a silver bullet train for stimulus


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.




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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.




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Spectacular cost blowouts show need to keep governments honest on transport


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.




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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.The Conversation

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.

If more of us work from home after coronavirus we’ll need to rethink city planning



Halfpoint/Shutterstock

John L Hopkins, Swinburne University of Technology

We have seen an unprecedented rise in the number of people working from home as directed by governments and employers around the world to help stop the spread of COVID-19.

If, as some expect, people are likely to work from home more often after the pandemic, what will this mean for infrastructure planning? Will cities still need all the multibillion-dollar road, public transport, telecommunications and energy projects, including some already in the pipeline?




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Flexible working, the neglected congestion-busting solution for our cities


World’s largest work-from-home experiment

Remote working was steadily on the rise well before COVID-19. But the pandemic suddenly escalated the trend into the “world’s largest work-from-home experiment”. Many people who have had to embrace remote working during the pandemic might not want to return to the office every day once restrictions are lifted.

They might have found some work tasks are actually easier to do at home. Or they (and their employers) might have discovered things that weren’t thought possible to do from home are possible. They might then question why they had to go into the workplace so often in the first place.

But what impact will this have on our cities? After all, many aspects of our cities were designed with commuting, not working from home, in mind.




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Stress test for NBN and energy networks

From a telecommunications perspective, the huge increase in people working from home challenges the ways in which our existing networks were designed.

Data from Aussie Broadband show evening peak broadband use has increased 25% during the shutdown. Additional daytime increases are expected due to home schooling with term 2 starting.

Research by the then federal Department of Communications in 2018 estimated the average Australian household would need a maximum download speed of 49Mbps during peak-use times by 2026. If more people work from home after COVID-19, the size and times of peak use might need to be recalculated.

Another factor not modelled by the government research was the potential impact of an increase in uploads. This is a typical requirement for people working from home, as they now send large files via their suburban home networks, rather than their office networks in the city.




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Recent research by Octopus Energy in the UK has found domestic energy use patterns have also changed since COVID-19. With more people working from home, domestic energy use in the middle of the day is noticeably higher. Some 30% of customers use an average of 1.5kWh more electricity between 9am and 5pm.

Conversely, data from the US show electricity use in city centres and industrial areas has declined over the same period.

Less commuting means less congestion

Closer to home, new data from HERE Technologies illustrate just how much traffic congestion has eased.

Thursday afternoons from 5-5.15pm are normally the worst time of the week for traffic congestion in Melbourne. Last week the city’s roads recorded the sort of free-flowing traffic usually seen at 9.30am on a Sunday. Just 1.8% of Melbourne’s major roads were congested, a fraction of the usual 19.8% at that time.

All of Australia’s major cities are experiencing similar reductions. Transurban has reported traffic is down 43% on the Melbourne airport toll road, 29% on its Sydney roads and 27% in Queensland.

Passengers are also staying away from public transport in droves. For example, South Australian government statistics for Adelaide show passenger numbers have slumped by 69% for buses, by 74% for trains and by 77% for trams, compared with this time last year.




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What does this mean for infrastructure planning?

With these trends in mind, future investment in roads, public transport, energy and telecommunications will need to consider the likelihood of more people working from home.

Prior to COVID-19, Melbourne research found 64% of city workers regularly worked from home, but usually only one day a week, even though 50% of their work could be done anywhere. While the changes we are now seeing are a result of extreme circumstances, it is not inconceivable that, on average, everybody could continue to work from home one extra day per week after the pandemic. Even this would have significant implications for long-term urban planning.

The most recent Australian Census data show 9.2 million people typically commute to work each day. If people worked from home an average of one extra day per week, this would take 1.8 million commuters off the roads and public transport each day.

Many road and public transport projects will be based on forecasts of continuing increases in commuter numbers. If, instead, people work from home more often, this could call into question the need for those projects.

Areas outside city centres would also require more attention, as working from home creates a need for more evenly distributed networks of services for the likes of energy and telecommunications. Interestingly, such a trend could support long-term decentralisation plans, like those outlined in Melbourne’s Metropolitan Planning Strategy. And if such change encourages more people to live away from the big cities, it also could help to make housing more affordable.




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Fancy an e-change? How people are escaping city congestion and living costs by working remotely


The Conversation


John L Hopkins, Innovation Fellow, Swinburne University of Technology

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

Look beyond a silver bullet train for stimulus


Marion Terrill, Grattan Institute and Tom Crowley, Grattan Institute

Amidst a global pandemic, some people are starting to dream big about infrastructure projects to help get Australia moving again. The decades-old dream of an Australian fast train is back in the headlines. But, as alluring as it sounds, the federal opposition’s idea for a bullet train from Melbourne to Brisbane is not a good use of a generation’s worth of infrastructure spending.

After the coronavirus crisis, there may be good reasons to fast-track infrastructure to create jobs and stimulate the economy. But it remains as important as ever that funding go only to worthy projects. A bullet train does not fit the bill.




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No silver bullet

Federal Labor claims the train would be an “economic game-changer” for the regions in its path. But a study into the train, commissioned by Labor itself in government in 2010, found no evidence for this.

Any regional development was too uncertain, the authors concluded, to be considered in their cost-benefit analysis. In fact, they found the project could damage towns along the route:

The history of the impact of transport improvement in Australian towns is that they concentrate activity in the larger centres and create commuter towns lacking in higher level services. Without concerted efforts to the contrary, this is also a likely outcome of the introduction of HSR [high-speed rail].




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Regional cities beware – fast rail might lead to disadvantaged dormitories, not booming economies


Of course, as advocates will be quick to point out, the study did conclude total benefits would outweigh costs by a considerable margin: $2.30 in benefit for every $1 of cost. But this rosy calculation was based on a series of assumptions that are either outdated or inappropriate. As our upcoming report on fast rail will explain in more detail, it’s unlikely the train’s benefits would exceed its costs if a rigorous independent assessment were carried out today.

The benefits are also narrowly concentrated. The biggest winners would be business travellers between Melbourne, Sydney and Brisbane. Wider benefits to society accounted for only 3% of the total, and the effect on economic growth was expected to be minimal.

That’s because the train would take a very long time to build. According to the study, the project would only be “shovel ready” 15 years after funding was committed. This makes it completely ineffective as a timely stimulus during a downturn.




Read more:
We can halve train travel times between our cities by moving to faster rail


Advocates also argue the train would reduce emissions by taking high-emitting planes out of the sky. But a net reduction won’t be achieved for many years – maybe decades – because constructing the line would create so many emissions.

If built, this train would be the most expensive infrastructure project in Australian history. The study estimated the price tag at A$114 billion – A$130 billion in today’s dollars. As our chart shows, this is enough to pay for an entire generation’s worth of infrastructure.

Projects are not presented as an alternative to the train but provide a point of reference for the scale of spending required for the high-speed rail project. Projects in yellow have active government funding commitments. Figures indicate total project funding costs, including private contributions. Figure for the fast train is in 2019 dollars.
Source: Based on most recent figures from Department of Infrastructure, Transport, Regional Development and Communications, Infrastructure Australia, NSW, Victorian and Queensland governments, Brisbane City Council, AECOM, ABS, Author provided

So what should be done?

It is true current low interest rates would make borrowing to pay for such a large project cheaper than ever before, and fast-tracking infrastructure may be justified to aid economic recovery. But that doesn’t give governments a blank cheque to spend on whatever they like. The crisis does not absolve government of its responsibility to scrutinise projects to decide whether they are worthwhile.

A good place to start is by identifying the problem you want to solve.

If regional development is the goal, other options are available to governments that are more likely to be effective than a bullet train. Infrastructure Victoria and Infrastructure NSW both identify better digital connectivity as a pressing need for regional and rural areas. The current strain on the national broadband network as many of us try to work from home is a good reminder of the link between connectivity and productivity.

If governments do want to focus on transport, “smaller picture” projects, though not as glamorous, tend to deliver more bang for buck, as previous Grattan work has argued.




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Projects that can be fast-tracked to start construction soon are also more likely to support economic recovery. Infrastructure Australia’s priority list suggests a range of transport projects and initiatives that are much further developed, including improving the Sydney-Canberra rail link. And the priority list includes projects that benefit all states and territories, not just the big three on the east coast.

The coronavirus crisis has upended many of our assumptions about “normal operating procedure” for governments. But it doesn’t mean we throw the old rule book out the window. Governments should only spend public money on projects that have clear and tangible benefits to society – not on grand “nation-building” projects that are big on style but low on substance.The Conversation

Marion Terrill, Transport and Cities Program Director, Grattan Institute and Tom Crowley, Associate, Grattan Institute

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

Government to inject economic stimulus by accelerating infrastructure spend


Michelle Grattan, University of Canberra

The government is responding to increasing concern about the faltering economy by accelerating A$3.8 billion of infrastructure investment into the next four years, including $1.8 billion for the current and next financial years.

Scott Morrison will outline the infrastructure move in a speech to the Business Council of Australia on Wednesday night, while insisting the government is not panicking about Australia’s economic conditions.

The government’s action follows increasing calls for some stimulus, with concern the tax cuts have not flowed through strongly enough to spending.

The just-released minutes of the last Reserve Bank meeting show the bank seriously considered another rate cut at its November meeting but held off, partly because it thought that might not have the desired effect. Reserve Bank governor Philip Lowe has previously urged more spending on infrastructure.

Morrison is making appearances in various states to publicise the government’s infrastructure plans.

The infrastructure bring-forward over the coming 18 months is $1.27 billion plus $510 million in extra funding. Over the forward estimates, the bring-forward is $2.72 billion plus $1.06 billion in additional funding.

The government’s latest action means since the election it will have injected an extra $9.5 billion into the economy for 2019-20 and 2020-21. This comprises $7.2 billion in tax relief, $1.8 billion in infrastructure bring-forwards and additional projects, and $550 million in drought assistance to communities.

In his BCA speech, draft extracts of which have been released, Morrison is expected to say that “a panicked reaction to contemporary challenges would amount to a serious misdiagnosis of our economic situation”.

“A responsible and sensible government does not run the country as if it is constantly at DEFCON1 the whole time, whether on the economy or any other issue. It deals with issues practically and soberly.”




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If you want to boost the economy, big infrastructure projects won’t cut it: new Treasury boss


He will say that notwithstanding the headwinds, including the drought which has cut farm production, the economy has continued to grow, and is forecast to “gradually pick up from here” with jobs growth remaining solid.

“Against this backdrop, it would be reckless to discard the disciplined policy framework that has steered us through many difficult periods, most recently and most significantly the end of the mining investment boom, which posed an even greater threat to our economy than the GFC.”

The projected return to surplus this financial year would be a “significant achievement”.

Lauding the government’s legislated tax relief, Morrison will say. “Our response to the economic challenges our nation faces has been a structural investment in Australian aspiration, backed by responsible economic management.”




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Why we’ve the weakest economy since the global financial crisis, with few clear ways out


Morrison’s infrastructure bring-forwards follow his post election approach to the states asking for projects that could be accelerated.

As a result of this process we have been able to bring forward $3.8 billion of investment into the next four years, including $1.8 billion to be spent this year and next year alone.

This will support the economy in two ways – by accelerating construction activity and supporting jobs in the near term and by reaping longer run productivity gains sooner.

Every state and territory will benefit, with significant transport projects to be accelerated in all jurisdictions – all within the context of our $100 billion ten-year infrastructure investment plan.

This bring forward of investment is in addition to the new infrastructure commitments we have made in drought-affected rural communities since the election.

In his address Morrison is also expected to announce the first stages of the government’s latest deregulation agenda, aimed at enabling business investment projects to begin faster.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

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

Three charts on: why congestion charging is fairer than you might think



Peak-time drivers to the CBDs of Sydney and Melbourne typically earn much more than the average worker.
Taras Vyshnya/Shutterstock

Marion Terrill, Grattan Institute and James Ha, Grattan Institute

Congestion charging should be introduced in Australia’s largest cities, as Grattan Institute’s latest report shows. Our analysis also finds that the people who commute to the Melbourne and Sydney CBDs by driving are two to three times as likely to earn six-figure salaries as other Australian workers.

One of the main concerns about charging drivers who use the busiest roads at the busiest times has been about fairness. But sensible congestion charges could be designed to avoid burdening financially vulnerable people who lack alternatives to using particular roads at busy times.

Congestion charging is gaining traction in cities around the world as a proven method to manage congestion. London, Singapore, Stockholm and Milan all have congestion charging schemes. New York City legislators have approved plans to introduce it in Manhattan.




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Traffic congestion reconsidered


It’s better than building new infrastructure

Sydney and Melbourne are big, global cities, but with growth and prosperity comes congestion. The solution from the federal, New South Wales and Victorian governments has been to throw money at huge infrastructure projects. Politicians like promising infrastructure because large benefits can be targeted at key voters, while the costs are spread across all taxpayers.

But this means many people are paying to alleviate some people’s congestion. And the relief from new infrastructure tends to be short-lived. In Australia’s fast-growing cities, extra public transport capacity at peak times gets chewed up quickly, while new freeways tend to fill with new traffic soon after opening.




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Do more roads really mean less congestion for commuters?


This doesn’t mean governments should stop investing in infrastructure. But it does raise the question of whether spending billions of taxpayer dollars is the best or fairest way to tackle congestion.

We usually think of congestion as a force that slows us down, without thinking about how we slow everyone else around us. Congestion charging fixes this by charging a modest fee to use the busiest roads. Drivers then have to decide whether it’s worth making their trip at that time on that road.

Drivers who need to travel at peak times are always able to do so – they just need to pay a fee. Heavy users will end up paying more for using an in-demand resource. The most flexible drivers will save money by travelling later, or elsewhere, or by another mode. And this means getting out of everybody else’s way.




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City-wide trial shows how road use charges can reduce traffic jams


Charging is also fairer than the licence-plate approach of Mexico City or Beijing, where cars are banned from driving on certain days depending on their licence plate numbers. These heavy-handed restrictions ignore the fact that people’s travel needs vary from day to day. Why ban a driver on the day of a job interview?

But what about all the drivers on low incomes?

It’s fair to ask whether congestion charging will burden the most vulnerable people in society. And the answer depends on the design of the scheme.

First, the people who we should really worry about are those who: are struggling financially; frequently or urgently need to travel on charged roads or to a charged area; and lack good alternatives to driving at that time on those roads.

A sensible congestion charge would target only the busiest roads and areas – think central business districts (CBDs), major freeways and key arterial routes – and only at times of high demand such as peak hour.

So if Sydney or Melbourne were to introduce a peak-period congestion charge around their CBDs, how many vulnerable people would be affected? Hardly any.

Our research shows the drivers who would pay the charge tend to be doing just fine. It’s mostly commuters and people driving as part of their job – think tradespeople and couriers. Those travelling for work could pass the cost on to their customers – every tradie driving to the CBD would face the same charge, so no one would gain or lose a competitive advantage.




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Don’t blame parcel delivery vans for clogging up city traffic, look to the tradies


Most CBD drivers are well-off

And the CBD commuters? They tend to earn much more than the typical Australian.

Grattan Institute analysis shows most people driving to the Sydney CBD for work each day earn six-figure salaries. Their median income is nearly A$2,500 a week – about A$1,000 a week more than the typical income for full-time workers in Sydney.

It’s a similar story in Melbourne. The median full-time worker driving to the CBD earns nearly A$2,000 a week – about A$650 more than the typical full-time worker in Melbourne.

And these CBD commuters are also generally well-served by public transport. The CBD is the most accessible location in Sydney and Melbourne, with multiple train lines and bus or tram routes running through it.

That’s why most people travel to the CBD by public transport. In Sydney, barely one in six full-time CBD workers actually commute by private vehicle. In Melbourne, it’s only a quarter. But these workers typically earn a lot more than the people on CBD-bound buses, trams and trains.


Grattan Institute, Author provided

Perhaps surprisingly, drivers to the CBD are more likely to come from inner, richer parts of the city – think Mosman and Double Bay, not Penrith or Parramatta. It’s the same in Melbourne: more people drive from Kew and Richmond than Broadmeadows or Dandenong. Even those driving in from lower-income areas typically earn more than most of their neighbours.

This means the number of genuinely disadvantaged people who would be burdened by a congestion charge is small. As for one-off trips to the CBD – maybe for a specialist appointment – these are by definition infrequent and can often be rescheduled to the middle of the day.

State governments should consider discounts for low-income people with impaired mobility. However, wide-ranging exemptions would badly undermine the effectiveness of the congestion charge – as happened in London.


Grattan Institute, Author provided

Congestion charging is a smarter way to improve Australia’s largest cities and fears that it would be unfair are overblown. It should be the centrepiece of a mixed strategy to tackle congestion. The NSW and Victorian governments should introduce cordon charging around the CBDs of their capitals within the next five years.




Read more:
Flexible working, the neglected congestion-busting solution for our cities


The Conversation


Marion Terrill, Transport and Cities Program Director, Grattan Institute and James Ha, Associate, Grattan Institute

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

Congestion-busting infrastructure plays catch-up on long-neglected needs


Phillip O’Neill, Western Sydney University

Infrastructure spending is one of the central themes of Treasurer Frydenberg’s budget speech. His headline announcement was the promise to increase the ten-year federal infrastructure spend from the A$75 billion announced last year to a target of $100 billion.

Major projects previously announced – like the Melbourne Airport rail link, Western Sydney’s north-south airport rail link and Queensland’s Bruce Highway upgrade – are affirmed. A fast rail connection from Melbourne to Geelong is added. Also added are nation-wide packages of roadworks targeted at reducing congestion and improving regional freight corridors.

So the announcements continue the infrastructure program detailed in the 2018-19 budget, as promoted regularly in the government’s expensive “Building Our Future” advertising campaign that gives prominence to the government’s ten-year “Infrastructure Pipeline”.




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Infographic: Budget 2019 at a glance


Lack of transparency is an issue

It needs saying that analysts have found it difficult to verify what last year’s $75 billion promise actually involved. The claim is the subject of a major investigative paper by the Australian Parliamentary Library, with its authors observing:

The Parliamentary Library has been unable to locate any public document which provides a transparent overview of [the federal government’s] total infrastructure commitments.

One suspects that scrutiny over coming weeks of the $100 billion infrastructure spending promises will be thwarted by a repetition of this lack of transparency.

Why are infrastructure needs so great?

The national population growth story is the key framework for assessing the Coalition’s infrastructure plan. Between 1901 and 1948, the nation grew steadily, but modestly, from a population of 3.8 million to 7.7 million. Then the population surged on the back of a post-war baby boom and an expansion of immigration. The population grew by between 2.0 and 2.5 million people each decade from the 1950s through to the 2000s.

But in the last decade, the nation has added nearly 6 million people, with the east coast cities overwhelmingly hosting the increase. Urban infrastructure planning and spending have lagged. Both quality of life and economic productivity have been affected adversely as a consequence.

The infrastructure spending in this budget responds to community concerns about these declines.

We now know we failed to properly plan for and fund the surge in urban growth that has carried congestion on its back. Instead, large federal government surpluses from the 1990s were steered into debt paybacks.

The Future Fund was also created to cover public service pension liabilities. That fund is now custodian of over $150 billion worth of assets.

Dissolving pension liabilities is wise economic management. Australia’s problem is that this resolution took place at the expense of national capital works spending. Around this time, the state-owned utilities that had taken responsibility for the roll-out of post-war infrastructure – with their regular, predictable annual capital works budgets and their vast in-house planning and delivery offices – were on their last legs.

The loss of committed funding and the erosion of the utilities stalled infrastructure delivery at a time in Australian history when it was most needed. The urban infrastructure projects for coping with the acceleration of urban growth are only now coming on stream.

New funding streams have had to be found, led by a new round of state-based asset sell-offs – in New South Wales especially – and new models of private sector delivery, ownership and operation. Pretty much all new urban infrastructure projects in Australia are now some sort of private public partnership.

But, as this budget confirms, private sector involvement in infrastructure spending and delivery needs to be leveraged on the back of public funding and protected from project risk by a raft of government measures. An important risk amelioration measure involves decision-making technologies.

Here, the growing expertise within the federal government’s Infrastructure Australia unit is increasingly important. Established by the Rudd Labor government a decade ago, IA struggled for legitimacy for many years. Now we can see Infrastructure Australia’s priority lists – based on its independent assessments – dominating government budget announcements. Indeed, the government’s ten-year Infrastructure Investment Pipeline is a very close reproduction of Infrastructure Australia’s national priority listing. Which is a good thing.

Why the focus on roads?

The problem, of course, is that rather than infrastructure steering urban growth, as would have been the case had the Howard Coalition government not dramatically lowered the level of national capital works spending, infrastructure spending now chases urban growth.

Not surprisingly, the Morrison government packages a bundle of roads spending as “urban congestion” measures, acknowledging that transport planning has been inadequate.




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The concentration on roads spending also acknowledges that the millennial growth surge in our cities has been geographically perverse. Greenfields residential projects are rarely aligned to public transport systems. And jobs growth has been a mix of CBD obsession and suburban scatter.

The result is congestion of antiquated CBD-centric public transport systems and suburban journey-to-work patterns that make retrofitting of public transport an impossible task.

No doubt there will be criticism of this budget’s apparent obsession with roads spending. The unfortunate reality is that large sections of our cities are stuck with the roads-based configuration that was instilled into their DNA from the get-go. Roads – not rail – are the thoroughfares that define transport options across our new suburban areas into the future.

Getting used to road spending and having constructive things to say about road use are a major challenge.The Conversation

Phillip O’Neill, Director, Centre for Western Sydney, Western Sydney University

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

Blocking Chinese gas takeover won’t damage Australia’s foreign investment pipeline



File 20181121 161621 4s3rkd.jpg?ixlib=rb 1.1
A single foreign company having sole ownership and control over Australia’s most significant gas transmission business, says Australia’s treasurer, is not in the national interest.
Shutterstock

Simon Segal, Macquarie University

The Morrison government’s decision to block Hong Kong’s largest infrastructure company from buying one of Australia’s key infrastructure companies seems to make a complicated relationship with China even more fraught.

Rejections of foreign takeover bids are extremely rare. This is just the sixth such decision in nearly two decades.

It might be argued the blocking of the A$13 billion bid for gas pipeline operator APA Group by Cheung Kong Infrastructure (CKI) Holdings reflects increasing politicisation of Australia’s process for reviewing foreign investment.

But this is not a political shot across the bows like China’s announced anti-dumping probe into imports of Australian barley. This takeover proposal was always doubtful. News of its knock-back potentially damaging relations with China, or foreign investment more generally, are greatly exaggerated.




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As tensions ratchet up between China and the US, Australia risks being caught in the crossfire


Always unlikely

APA Group owns 15,000 km of natural gas pipelines and supplies about half the gas used in Australia. It owns or has interests in gas storage facilities, gas-fired power stations, and wind and solar renewable energy generators.


APA Group’s infrastructure assets.
APA

Back in September, after APA accepted the takeover offer from a CKI-led consortium, the investment research company Morningstar judged it unlikely that Australia’s Foreign Investment Review Board would approve the bid.

The board is only an advisory body. The final decision rests with the federal treasurer. Josh Frydenberg signalled his intention to block the deal in early November, giving CKI a few weeks to change its proposal, either by selling assets or finding other investment partners, enough to change his mind.

That did not happen. Frydenberg’s final decision to block the bid was based, he said, on “a single foreign company group having sole ownership and control over Australia’s most significant gas transmission business”.

He emphasised the government remained committed to welcoming foreign investment: “foreign investment helps support jobs and rising living standards.”

It’s not all about CKI

CKI is not state-controlled. It is headed by the son of Hong Kong’s richest man, Li Ka-shing, and has a history of considerable success in investing in Australia.

Nonetheless speculation about the rejection damaging the Australia-China relationship has ensued. In the words of the South China Morning Post: “As the most China-dependent developed economy, Australia potentially has a lot to lose should relations with its biggest trading partner deteriorate further.”




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Australia and China push the ‘reset’ button on an important relationship


Let’s put this into perspective.

First, there is broad bipartisan agreement that foreign investment is crucial to Australia’s economic prosperity.

Second, as already mentioned, this is just the sixth major public foreign investment proposal blocked since 2000. (All but one, notably, have been by Liberal treasurers.)

Third, all six rejections have been case-specific. Each bid has been considered on its merits.

This case arguably has less to with CKI being Chinese linked than with the size and significance of APA, whose transmission system includes three-quarters of the pipes in NSW and Victoria.

In 2016 CKI’s A$11 billion bid for NSW electricity distributor Ausgrid was also blocked (by then-treasurer Scott Morrison) on national security grounds.

But in 2017 CKI won approval for its A$7.4 billion bid for West Australian-focused electricity and gas distribution giant DUET. And in 2014 CKI’s acquisition of gas distributor Envestra (now Australian Gas Networks) was also cleared.

Shifting emphasis

This is not to deny that politics played a part in Frydenberg’s decision.

The seven-person FIRB board was divided (the exact votes are not known). The Treasurer’s call could have gone either way.

Forces within the Liberal Party that opposed Malcolm Turnbull’s leadership have also been deeply hostile to APA’s sale to CKI. Among the most vociferous was NSW senator Jim Molan, who warned of “hidden dragons” in the deal.

For a minority government lagging in the polls and just months away from an election, such views have assumed inflated importance.

Nonetheless the APA decision was not a surprise. Greater scrutiny is now part and parcel of the Foreign Investment Review Board process. In particular, the emphasis has firmly shifted over the past few years to scrutinising national security and taxation areas.




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The Critical Infrastructure Centre within the Department of Home Affairs, which became fully operational this year, brings together capability from across the federal government to manage national security risks from foreign involvement in Australia’s critical infrastructure. It’s particularly focused on telecommunications, electricity, gas, water and ports.

David Irvine, who has chaired the Foreign Investment Review Board since April 2017, is a former head of the Australian Security Intelligence Organisation.

This shifting emphasis does not equate to a bias against foreign investment per se. There is no evidence investors, including Chinese, are being discouraged or significantly deterred from investing in Australia.

CKI itself demonstrates, by returning to Australia despite previous rejections, that foreign investors will not give up so long as the next deal stacks up. There is already speculation CKI has moved on, and now has its eyes on Spark Infrastructure, an ASX-listed owner of energy asset.The Conversation

Simon Segal, PhD research candidate, Business, Macquarie University

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