Back in 2014, the Productivity Commission’s (PC) released a 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”.
And in October 2016, the Grattan Institute’s Marion Terrill released a report entitled Cost overruns in transport infrastructure, which documented the spectacular cost blowouts on Australian infrastructure projects over the past 15 years.
Grattan’s analysis covered all 836 transport infrastructure projects valued at A$20 million or more and planned or built since 2001, and revealed that over the past 15 years, Australian governments have spent $28 billion more on transport infrastructure than they told taxpayers they would spend. Australia also compared poorly internationally:
When cost overruns around the world are compared from the time of the formal funding commitment or contract, Australia generally ranks in, or slightly worse than, the mid range.
Today, PMI, a US-based organisation that certifies project management skills and tracks wastage in infrastructure spending, will release its annual survey on Australian infrastructure projects, which will reveal that Australia continues to have a poor track record on delivering infrastructure projects when compared against its global peers; although at least we showed improvement in 2016. From The AFR:
[The survey] will show an improvement in the number of projects completed successfully in 2016 for the first time in five years.
The money wasted has fallen to $US97 million ($126 million) for every $US1 billion invested, an improvement on the average of $US122 million per $US1 billion wasted in the previous year. But Australian organisations came in below the global average, wasting an average of $US108 million for every $US1 billion spent. The survey included 187 Australian respondents working on big projects…
In Australia the percentage of projects completed on time is 50 per cent compared to 51 per cent globally. About 55 per cent of projects were completed within budget compared to 57 per cent globally…
Well targeted infrastructure investment offers the nation the ‘double dividend’ of supporting growth and jobs as the mining and dwelling investment booms fade, whilst also expanding Australia’s longer-term productive base and improving living standards.
This is especially important given the government is wedded to running a mass immigration policy, which means that living standards of the incumbent population will be eroded over time via higher congestion, slower travel times, and lower productivity (amongst other things) unless there are commensurate investments in new infrastructure.
Unfortunately, government’s of all colours have failed to implement proper governance surrounding infrastructure provision, and have in many instances blown taxpayer dollars on poorly conceived or executed projects.
Ultimately, sound infrastructure policy is about evaluating each infrastructure proposal on its merits, regardless of mode (e.g. road or rail). Investment proposals should be ranked and decisions undertaken based on their net economic and social benefits, which necessarily requires the completion and public release of detailed cost-benefit analysis, so that infrastructure decisions can be scrutinised and decision-makers can be held accountable.
Continuing the current approach, and picking infrastructure winners based on pre-conceived biases or political motivations, is a recipe for waste and is likely to end up being productivity destroying for the economy at large.
