Coalition eases infrastructure rules to push pork

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ScreenHunter_05 Apr. 15 22.08

By Leith van Onselen

The Abbott Government has reportedly struck a deal with the states to take greater account of “community benefits” arising from infrastructure projects, in a bid to make it easier to build big ticket infrastructure projects. From The Australian:

Assistant Infrastructure Minister Jamie Briggs has negotiated the changes with state treasurers and transport ministers in a bid to encourage more projects and to end rows over whether new ­motorways and urban railways met Canberra’s cost-benefit benchmarks.

The new guidelines could clear the way for more construction by taking broader factors into ­account — including community benefits — when states submit their plans to Infrastructure ­Australia.

The Australian was told the new approach would make it easier for Canberra and the states to approve major projects such as the WestConnex in Sydney, the East West Link in Melbourne and the final stage of making the Pacific Highway dual-carriageway from NSW to Queensland.

Mammoth projects that are particularly expensive, such as road and rail tunnels, could emerge as the big winners because of the community gains from removing congestion.

The new arrangements look to be designed to lower the benchmark required to pass traditional cost-benefit analysis, in the process allowing a swag of projects through – such as expensive road tunnels – that would otherwise not be justified on economic or financial grounds.

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There is the risk that allowing subjective “community benefits” to dictate infrastructure decisions, rather than objective criteria, could weaken the governance surrounding infrastructure provision, and in the process waste large sums of taxpayer dollars on poorly conceived or executed projects.

Such an outcome would also be at odds with the Productivity Commission’s latest report into the provision of public infrastructure, which presented a scathing assessment of the governance, selection and execution processes by Australia’s governments, and recommended that governments build a “credible and efficient governance and institutional framework for project selection”, that includes “properly conducted cost–benefit studies of large projects, and their disclosure to the public”.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.