Infrastructure Australia boss, Mark Birrell, has urged the Senate to stop bickering and allow through the Abbott Government’s “asset recycling” program, arguing that it is essential to clear the project backlog in Australia. From The AFR:
He said the plan, unveiled in the May budget, was a crucial next wave of reform that would mirror competition payments to the states in the mid-1990s.
“Asset recycling is a key part of the future because it’s a fresh way of funding infrastructure that would otherwise not be built,” Mr Birrell told The Australian Financial Review.
“Both industry and user bodies would be hoping this source of funds is available to build new infrastructure and now is the time to do it.
“Legislated certainty will means this program of incentives definitely lasts. State treasurers need to know where the money will come from”…
Infrastructure Partnerships Australia chief executive Brendan Lyon said some amendments to the asset recycling bill, such as Senate veto over individual projects, were unworkable.
“This policy is designed to accelerate, not frustrate, state asset sales,” Mr Lyon said.
I accept the criticism that mandating that all incentive payments by the Commonwealth to the states require a legislative instrument is overly cumbersome and would reduce funding certainty. However, it is wrong to conclude that the Senate’s concerns about asset recycling are not justified and that the program should proceed unhindered.
The Productivity Commission’s new report on the provision of public infrastructure, released last week, contains many examples of where “inadequate project selection… have led to costly outcomes for users and taxpayers”, and explicitly raised concern that asset recycling “could act to encourage privatisation in circumstances that are not fully justified and encourage the selection of new projects that do not have demonstrable net benefits”.
Without adequate safeguards in place, the asset recycling program is likely to encourage a large number of questionable privatisations that leave taxpayers worse-off. Moreover, there is an increased likelihood that the new infrastructure projects will be chosen without rigorous scrutiny, further heightening risks to taxpayers.
Viewed in this light, the Senate’s requirement that any infrastructure project worth more than $100 million be assessed by Infrastructure Australia with a published cost-benefit analysis is eminently sensible, and one wonders why Messrs and Birrell and Lyon have not supported the Senate’s stance.
Allowing the asset recycling program to proceed without safeguards will result in more of the same – too much infrastructure pork barreling instead of well-targeted and productive investment – and lead to more taxpayer funds being wasted on projects with dubious merits.
