Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Hansard source

I am proud to speak on the next instalment of Labor’s nation-building agenda: the establishment of Infrastructure Australia. Labor is the party of nation building. From the establishment of the Commonwealth Bank and the Snowy Mountains Hydro-Electric Scheme to the urban development of the western suburbs of Sydney and Melbourne, Labor governments have built this country, and this tradition will continue with the Rudd Labor government. In this vein, Labor committed to establishing Infrastructure Australia within 100 days of forming government, and I am proud to see this promise honoured.

Infrastructure Australia will take a nationally coordinated approach to tackling infrastructure bottlenecks and will drive investment into fuelling the nation’s productive capacity. There is a critical need for this after 11 years of economic neglect by the former Howard government. The 11 years of neglect is inexcusable given that, since the December quarter of 1998, we have seen the terms of trade improve in Australia by nearly 60 per cent. The resources boom has kept export prices high at the same time as the prices of goods and services we import have remained relatively stable. This has provided a surge in government revenue to the point where the budget surplus over the next four years is projected under the MYEFO for 2007-08 to be $62 billion.

We have a once-in-a-generation opportunity to save and invest wisely, to conduct our fiscal strategy conservatively and carefully, to sustain the nation’s prosperity and improve the productive capacity of the Australian economy. Instead, under the former government, we saw essentially lazy economic policy. Instead of investing in the productive capacity of the nation, relieving the bottlenecks in the expansion of our exports and resourcing the education and skills system, the previous federal government delivered regional rorts and poorly targeted tax cuts. The result is a surge of inflationary pressure that is the greatest danger to the Australian economy.

We are now facing a great challenge, with the highest underlying inflation rate in 16 years. The most vulnerable in society are the ones that will mostly bear the brunt of this inflation damage because they have the least capacity to improve their income to cope with rising prices. Unless we can address the underlying drivers of inflation we will face even more serious constraints on future growth and competitiveness at tremendous cost to Australian living standards. That is why fighting inflation is a key economic priority for the Rudd Labor government.

The fact is that demand has been rising faster than supply. There are two essential ways to rectify this. One is to increase inputs, capital and labour so that output will approximate demand. The second is to seek to increase productivity. On that point, productivity growth stalled to around nil in the December quarter of 2007. We must improve that performance. On the former issue, trying to ensure that the capacity constraints are overcome or tackled, this government is committed to increasing the supply of capital and labour. For example, the government has announced an extra 5,000 places for permanent skilled migrants, and this, of course, will increase the supply in the labour market.

The equally important method of combating inflation, as I said, is to lift our productivity growth rate. Unfortunately, the previous government failed on this challenge. According to the OECD Economic Outlook, Australia’s labour productivity growth this decade is almost 40 per cent below the average productivity growth for all OECD countries. In the previous decade, from 1991 to 1999, Australia’s productivity growth was almost 50 per cent above the OECD average. As I said before, the latest ABS data shows productivity growth fell to zero in the year to December 2007. A major reason for that worrying slump is that over the last 11 years the government not only underinvested in education and skill development; it also did not lead the issue of investment in infrastructure.

Developing additional economic, social and innovation infrastructure is essential to improve the performance of the economy and our quality of life. It will relieve capacity constraints, increase productivity and put downward pressure on inflation. We are seeing the impact of infrastructure bottlenecks, whether it is clogged ports preventing resource exports or congested roads preventing efficient transportation of goods and services. The arteries of the national economy are clogged and we are taking the strain. Conversely, infrastructure development can play a pivotal role in the economic growth of a nation. However, we should not underestimate the quantum of the infrastructure challenge that the country faces.

Infrastructure Australia, established under the Infrastructure Australia Bill 2008, will be required to audit the adequacy of the nation’s infrastructure, which is a vital task. Australia is ranked 20th out of 25 OECD countries for its spending on public infrastructure as a proportion of GDP—a performance that needs to be improved. According to the Business Council of Australia, the total infrastructure deficit is more than $100 billion and, if we fixed the current bottlenecks, we could boost our economy by $20 billion per year.

According to another study, which was undertaken by the Australian Council of Infrastructure Development and Econtech, just to clear the backlog of underinvestment in electricity, gas, road, rail and water would require just under $25 billion worth of investment. Econtech further argues that clearing that backlog would result in a long-term increase in GDP of nearly one per cent and nearly a two per cent increase in exports, which of course would play a vital role in attacking the trade deficit the country is experiencing.

Infrastructure Australia will develop an infrastructure priority list based on the audit to be considered by COAG. This is essential if we are to set about fixing this problem. The second part of the commitment is also important to note. The priority list will be considered by COAG. It would be wonderful if we had greater federal-state cooperation in this important area of economic activity. With a break from past approaches, Infrastructure Australia will also involve the private sector, which is critical. It is critical if we are to improve the productive capacity of the country. Governments cannot take decisions in isolation and, in a period of declining direct investment in infrastructure and a very tight labour market, it is vital that we develop a cooperative approach with the private sector. This does not mean using government infrastructure grants to advance a narrow ideological agenda, as the previous government did by making its AusLink funding contingent on its companies using Work Choices legislation.

Related to the public-private sector cooperation I am referring to is Infrastructure Australia’s task of looking at the financing of infrastructure and how best to attract private capital while guaranteeing maximum value for money for taxpayers. As a former board member of the second-largest superannuation fund in Australia, with $30 billion under management, I can tell you that investors have a great interest in infrastructure projects where this can be shown to produce reasonable and stable returns to fund members. However, at the moment trustees of super funds have insufficient opportunities for such investment and this has necessitated greater investment than many funds would like in Australian and overseas equities. There is a great need for a national leadership to identify project-funding models, including the efficient use of public-private partnerships with federal-state coordination. It is to be expected that Infrastructure Australia will fill this role—and it is sorely needed.

I am pleased that Infrastructure Australia will develop nationally consistent guidelines for public-private partnerships. These will ensure that maximum value for money is achieved and that there is greater transparency and greater public accountability. It is fair to say that, in the past, some PPPs have enabled excessive fees to be included in the project structures, and there is a clear need for better guidelines and the development of further competition in the private sector to strip away unwarranted fees being generated from such projects. Part of the guidelines will be the development of a strong public sector comparator that can be applied to all potential PPP projects. This will help guarantee that value for money is maximised. The public sector comparator details the most efficient public sector delivery option that can be achieved for the relevant project and will be used as a benchmark against PPP options. All these projects involve the expenditure of taxpayer’s money, and our first duty is to ensure that none of it is wasted. The public sector comparator will be an important part of this effort.

Another vital role of Infrastructure Australia will be to provide advice on infrastructure policy issues arising from climate change. We have moved from a government that did not even believe in climate change to a government that recognises that almost every policy area will have to include serious consideration of the impact of climate change. Reducing congestion and improving the efficiency of transport networks will play an important part in the abatement of greenhouse gases and improve urban amenity.

The question for this place is whether Australia is to take the high road to securing Australia’s economic future or the low road. The previous government chose the low road believing that the only way to compete was by driving down wages through Work Choices and by underinvesting in skills and education. By contrast, the current government is committed to the high road. We are committed to the education revolution, to rebuilding the skills base, to innovation policy and to fighting inflation, so in the future our children will compete with the rest of the world on the basis of their skills, ideas and inventiveness—and that is an important goal to achieve.

Establishing a cohesive, coordinated approach to infrastructure investment is vital in this strategy. In cooperation with the state governments, the Rudd Labor government will ensure that there are competitive and efficient national infrastructure markets. It will set clear investment priorities and put in place appropriate regulatory environments. Infrastructure Australia will ensure that infrastructure investment will add to the economy’s productive capacity, and that is an important goal to achieve.

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