Infrastructure Australia delivers another stark warning

By Leith van Onselen

Back in July, outgoing Infrastructure Australia (IA) CEO, Philip Davies, warn that Australia’s infrastructure provision is failing badly in the face of strong immigration-fuelled population growth:

Mr ­Davies said if planning for major projects did not change at all levels of government, the major capitals would not cope with the population growth.

“An additional 11.8 million people will call Australia home in the next 30 years, with the bulk of this growth occurring in our largest cities — Sydney, Melbourne, Brisbane and Perth,” Mr Davies said.

“The reality is, if we don’t ­improve the way we plan and deliver our infrastructure, we won’t cope with this growth and our cities will be characterised by congestion and constraint.

…When asked if he could cite a project that had stacked up to the 11 principles outlined in the document to be published today, Mr Davies said to date there had been none that had adhered to the best-practice model.

Mr Davies’ warning was followed shortly after by similar warnings from Australian Chamber of Commerce and Industry CEO, James Pearson, as well as the Grattan Institute’s Transport Fellow, Hugh Batrouney.

Yesterday, IA’s acting CEO, Anna Chau, rubbished a new plan aimed at making dud projects even easier to justify. From The Canberra Times:

A six-month inquiry by Parliament’s standing committee on infrastructure this week recommended reducing the discount rate on infrastructure investment from 7 to 4 per cent, effectively adding millions of dollars in future value to projects that would otherwise be considered of marginal value.

The move would have a significant impact on the cost-benefit analysis of future projects – such as Sydney’s light rail or Melbourne’s airport link – opening the door to a wider array of approvals as infrastructure struggles to keep up with a population that will double by 2075.

Infrastructure Australia’s acting chief executive Anna Chau said reducing the discount rate to 4 per cent would be a form of “intergenerational theft”.

“We wouldn’t do this for kids in our schools, just as we wouldn’t lower the standards in our hospitals, so why should we do it for our major infrastructure projects?” she said.

“Lowering the discount rate… won’t make this process any more rigorous,” said Ms Chau.

“It’s like lowering the passing grade from 50 per cent to 25 per cent”.

A swathe of announcements are expected in the lead up to the next federal election due before May next year, raising the prospect expensive but worthy projects will be cast aside in favour of pork barrelling in key electorates.

“There is always a desire to lower the pass mark,” said Ms Chau…

Let’s be honest: politicians (both state and federal) already get plenty of dud projects funded with the discount rate at 7%. So lowering it to 4% probably won’t make that much difference. They’ll act unethically either way.

The bigger issue is that Australia cannot possibly build its way out of the projected mass immigration-fuelled population growth, which will add a Canberra’s-worth of people every year for decades:

With Sydney and Melbourne growing to more than 8 million people by 2060, and Brisbane and Perth growing to more than 5 million and 4 million people respectively:

The reasoning is simple: in already built-out cities, the cost of retrofitting new infrastructure to accommodate greater population densities is prohibitively expensive because of the need for land buy-backs, tunnelling, as well as disruptions to existing infrastructure.

Bernard Salt explicitly highlighted this point in an article earlier this month:

Demographer Bernard Salt says… we need to be world’s best practice at city planning and Western car-based city infrastructure delivery. And if we are not then our cities will collapse under their own weight”…

As Salt points out, subway construction is jaw-drop­pingly expensive. The new 11km Metro tunnel to “untangle” the ­existing City Loop rail link works out at $1m a metre, 10 times the cost of line construction above ground. “They are extraordinary numbers, and that’s why this is the big issue,” he says…

The Productivity Commission (PC) has also repeatedly warned on the massive and expensive infrastructure requirement if Australia is to keep pace with manic population growth.

The PC’s 2013 report warned that total private and public investment requirements over the next half century are estimated to be 5-times the cumulative investment made over the last half century:

ScreenHunter_15679 Oct. 25 14.39

The PC’s 2016 Migrant Intake into Australia report explicitly noted that the infrastructure required to accommodate a bigger population will necessarily be very expensive, with costs borne by the existing population:

Physical constraints in major cities make the costs of expanding infrastructure more expensive, so even if a user-pays model is adopted, a higher population is very likely to impose a higher cost of living for people already residing in these major cities.

…governments have not demonstrated a high degree of competence in infrastructure planning and investment. Funding will inevitably be borne by the Australian community either through user-pays fees or general taxation…

Whereas, the PC’s recent Shifting the Dial: 5 year productivity review explicitly noted that infrastructure costs will inevitably balloon due to our cities’ rapidly growing populations:

Growing populations will place pressure on already strained transport systems… Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land. Costs of new transport structures have risen accordingly, with new developments (for example WestConnex) requiring land reclamation, costly compensation arrangements, or otherwise more expensive alternatives (such as tunnels).

We also cannot forget Infrastructure Australia’s recent report, which found that both Melbourne’s and Sydney’s living standards will be crushed as their populations surge to 7.3 million and 7.4 million by 2046, regardless of how they grow, with worsening congestion and reduced access to jobs, hospitals, schools and green space:

Clearly, it is the federal government that carries the primary blame for Australia’s infrastructure woes arising from rapid population growth, as it has set our mass immigration ‘Big Australia’ policy.

The most obvious and least cost policy solution to mitigate Australia’s infrastructure woes is to significantly dial back Australia’s immigration program and forestall the need for costly new infrastructure projects in the first place.

Prevention is always better than trying to find a cure. And Australia cannot possibly build its way out of this mess.

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Comments

  1. Is it actually about building infrastructure for some practical outcome or just a way of guaranteeing returns on investments backed by the tax payer ?

    • Guys. Infrastructure is not required.
      This up coming correction we have to have is going to be larger than when Mt Vesuvius took out Pompeii
      And there is every indication the collapse of the big 4 will trigger it.
      Soon.

      • We’re like living in a termite infested place. Everything kind of looks OK on the surface, but there are weird creaks you hear in the dead of the night, and the entrance doors are stuck open. You’ve noticed that the toilet-paper holder suddenly fell off the wooden wall, when you pulled on it last time. You leaned against the wall one day and it left an imprint. Your big 4 house stumps seem a little fatter than you remember them, but you put off looking at them in detail because “The block” is just about to start on TV…

        Yep … Straya!

      • too right, exactly, good analogy
        I woulda said like a house of straw, before cous, Big Bad started huffing.
        Run little piggys run

  2. There are hidden consequences to mass immigration – construction deaths:

    died after a tub of concrete fell from a crane at a work site

    https://www.theage.com.au/national/victoria/worker-dead-after-crane-accident-identified-as-man-aged-in-his-40s-20180906-p50292.html

    What was under construction? A bloody apartment block.

    If we did not have so much immigration, we would not have so many construction deaths. Japan thinks it is a bad idea to build more and more apartment blocks, have more and more construction deaths, and have a smaller and smaller per capita GDP.

    • boomengineeringMEMBER

      It’s amazing how easy it is to fool the public eg, in the race to New Holland (Captain) ysk Cook came 50th but was touted as the winner for years. ( not counting the thousand voyages alongside and settlements as well, before ).
      If they can do that for 200 years the immigration lie could last a long time.

      • boomengineeringMEMBER

        Jacob,
        Many thanks for the reply and attachment, as far as not wanting Australia, they did in fact claim it again in 1642 by raising the flag. If a burglar who stole from you told everyone who questioned the items that you didn’t want them anyhow How credible does that sound.

      • Of course the dutch were stealing it in the first place so can’t really complain about the british stealing it off them can they? But lets be realistic. Every piece of habitable land has been stolen and restolen throughout history as various groups came into and out of power. Who holds it now, and who has the power to take it are always the only relevant points.

      • Recent discoveries in Atherton QLD, show chinese artifacts and greek coins recovered from a meter underground
        Some who are trying to preserve the general cpn cook story are saying someone brought back the finds from egypt
        But I’m not so sure.

      • boomengineeringMEMBER

        bjw
        correct and in a couple of hundred years history will have it that Vietnamese discovered Australia in 2000, not much there before then.
        WW
        That’s the problem any artifacts without document back up is deemed as conjecture . I believe the Portuguese were on the East Coast first but no documents to prove it. Also Aztec artifacts found in Dee Why could have been dropped there only a few years ago, who knows.

      • >Also Aztec artifacts found in Dee Why could have been dropped there only a few years ago, who knows.
        Aliens man! and alien technology – why do you think they had those Nazca drawings in Peru, eh? I’ll bet you that an appendage of one of those cheery little avatars points straight to Dee, via Alpha Centauri. Think about it! 😀

      • boomengineeringMEMBER

        WW,
        To elaborate, I think you are correct
        North East Australia = Chinese with Greek coins (probably first)
        Mid East Australia = Spanish, then Dutch in Botany Bay, (possible Aztec’s before)
        South East Australia = Portuguese, then Dutch.
        Great if we could find some documentation.
        IMHO only

      • Boomer
        IN the museum at Cairo, there is a carvel built long ship, from some tomb, that would have made the Vikings envious and Alan Bond and Ben Lexcen wondering how they arrived at the hull shape.
        It is beyond doubt that the gyppos had power saws for wood and stone and some say they had vessels capable of sailing outside the mediterranean, in a real ocean.
        some say they had mechanism for determining both latitude and longitude in the northern hemisphere at least.
        some say there is a gyppo vessel under the sand at the bottom of south stradbroke island.
        some lead recently recovered from 6m down on fraser island is said to have come from mines in crete/italy and is a fishing net weight from that vessel.

      • boomengineeringMEMBER

        WW,
        Thanks, that Stradbroke vessel is common knowledge to be Spanish but Gyppo puts another possible slant on it.

      • boomengineeringMEMBER

        jel, too true even before my dog mans licence was told my whole long life never to be under a load.

  3. Melbourne’s population growth is to be accommodated within its ‘permanent’ urban growth boundaries. The escalation of land costs as land bankers play Game of Mates will make currrent prices look cheap.

    We need land tax, to oblige holders to put their land to use, funding the removal of taxes that cause actual injury like Stamp Duty and Payroll Tax.

    • The under construction underground rail in MEL is funded entirely from Consolidated Revenue. No contribution from CDB holders who stand to make many billions in land price uplift from increased amenity and easier worker commutes. MURLA was 1/3 funded by a CDB rates levy that captured a mere fraction of the benefits enjoyed. Sound public policy.

  4. Some of the comments at the bottom of the Anna Chau article made more sense than the article itself.

    Its really about whether you want infrastructure that delivers long term strategic goals as opposed to something that “turns a profit” in the short term. We’ve had way too much of the latter, the object being to flog it off to the private sector. The application of a lower discount rate would make projects with a longer term outlook more viable in comparison with the toll roads, airport trains etc that can charge high prices to consumers to justify a business case.

    • If we deliberately run an over-valued currency, by selling assets to boost the A$, then ANY assessment evaluated in A$ terms is just BS.