Paul Fletcher (Bradfield, Liberal Party, Parliamentary Secretary to the Minister for Communications) Share this | Hansard source

I am very pleased to rise to speak on the Infrastructure Australia Amendment (Cost Benefit Analysis and Other Measures) Bill 2014. This is an important bill which will provide clarity about the role of Infrastructure Australia and ensure that cost benefit analyses are entrenched under the Infrastructure Australia Act. It will implement the government's promise made at the 2013 election that Infrastructure Australia will assess projects with a capital expenditure amount of $100 million or more.

In the time available to me today I would like to make three points, firstly, that the policies of the previous government, the Rudd-Gillard-Rudd government, in relation to Infrastructure Australia involved some sensible aspirations, aspirations that sadly were not reflected in reality. Secondly, I want to argue that the saga of the national broadband network is a good example of why it is so important to have a cost benefit analysis before a major infrastructure project. Thirdly, I want to highlight that the measures in this bill will entrench the role of cost benefit analyses in the process overseen by Infrastructure Australia.

Turning to the first point, the previous government stated some high-minded aspirations in relation to Infrastructure Australia and the way that it would work. Infrastructure Australia was announced by Kevin Rudd in 2008 and at the time it was said that this new statutory body was to have three key objectives: to conduct audits on all aspects of nationally significant infrastructure, in particular water, transport, communications and energy; to draw up an infrastructure priority list involving billions of dollars of planned projects; and to advise government, investors and infrastructure developers on regulatory reform aimed at speeding up projects.

A key principle articulated by Infrastructure Australia in all of its materials was the importance of cost benefit analysis. Indeed, that principle was reflected in some of the things that were said more broadly by the Rudd-Gillard-Rudd government. In the 2008-9 budget, the then government—from memory, at that stage it was only the Rudd government and was only later to achieve its full magnificence as the Rudd-Gillard-Rudd government—stated that efficient public sector infrastructure investment required 'a commitment to transparency at all stages of the decision-making process'. Sadly, that high-minded aspiration was not lived up to and within the following year the then government failed to release the cost-benefit analysis of the 15 projects with a total investment value of $80 billion that were selected for partial government funding in the 2009-10 budget. Six of these projects, in fact, were not on the priority list established by Infrastructure Australia. Even more troubling is that Labor decided that it would build a national broadband network, a network whose culmination we now know—based upon analysis conducted by NBN Co and released publicly just before Christmas last year—would have involved an expenditure of well over $70 billion, but there was no cost-benefit analysis. And yet Infrastructure Australia issued guidelines which articulated its stated principle of the primacy of cost-benefit analysis. Infrastructure Australia said it:

… will only give advice to governments—often in relation to hundreds of millions of dollars of public funds—on the basis of a comprehensive and robust evidence base.

At the same time, throughout the time of the previous government, there was in place the provisions of the best practice regulation handbook, which said that the Australia government is committed to 'the use of cost-benefit analysis to assess regulatory proposals to encourage better decision making'.

Cost-benefit analysis is important for a host of reasons. We know that, sadly, there are always more calls on government funding than government is able to meet. Therefore, there is a need to prioritise the projects which government is considering funding. Clearly, a rational basis on which to prioritise funding is to have regard to a formal analysis of the likely benefit to be delivered by the project and weigh that up against the likely cost of the project. This is summarised, of course, in the notion of the benefit-cost ratio. It is very important to measure the costs and benefits of different policy options, including, of course, indirect costs or benefits such as gains accruing to the community rather than to individuals—that is to say, public gains rather than private gains—on a common basis so that these costs and benefits can be fairly compared. Unfortunately, the previous Labor government—the Rudd-Gillard-Rudd government—failed to live up to its bold claims and stated aspirations in relation to both Infrastructure Australia and the cost-benefit analysis as a principle. Despite the bold rhetoric, the profligate spending of the previous government meant that it was soon the case that Infrastructure Australia was not in a position to make recommendations which were supported by funding commitments.

There is a very stark contrast with the clear commitment that the Abbott government has made in relation to infrastructure as part of the 2014-15 budget, where there was laid out a historic $50 billion infrastructure investment program designed to deliver vital transport infrastructure right across our cities, regional centres and rural communities. First of all, Infrastructure Australia failed to live up to aspirations because it became increasingly irrelevant as it became obvious that the federal government had spent all of its money and more. Secondly, it failed to live up to the stated aspiration of using a cost-benefit analysis as a key requirement before any major project.

Let me turn to the National Broadband Network as a case study of why it is so important to have a cost-benefit analysis and why, sadly, the previous government failed to live up to that principle. In 2009, the then Prime Minister, Mr Rudd, announced that the government was going to invest up to $43 billion together with the private sector over eight years in a super-fast national broadband network which he described as 'the single biggest infrastructure decision in Australia's history'. Some 15 minutes after the press conference, Mr Rudd updated his Twitter account and said: 'Just announced biggest ever investment in Australian broadband, really exciting infrastructure for the future.' There was no mention of cost-benefit analysis in that tweet. The then communications minister, Senator Conroy, said that the decision was a historic moment for Australia's telecommunications sector. But with this announcement and with the very big commitment of spending there was no cost-benefit analysis, despite the stated policy of the than Labor government that there would be a cost-benefit analysis conducted through the Infrastructure Australia process before major infrastructure commitments. Indeed, then broadband and communication minister Conroy repeatedly dismissed calls for a cost-benefit analysis. In May 2009, he had this to say:

We do not need any more studies, any more cost-benefit analysis, to know that this is an infrastructure investment that this country is crying out for.

When in opposition, the coalition sought to help—we sought to assist. We proposed legislation designed to remind the then government of its commitments and designed to require the Productivity Commission to conduct and publish a cost-benefit analysis of the National Broadband Network. Sadly, that legislation was not supported by the then government. As late as 2013, the then Prime Minister—back for a second time—Mr Rudd, was still boasting about the National Broadband Network and glossing over the lack of a cost-benefit analysis. In his speech to the Urban Development Institute of Australia Congress in 2013, he said:

… the Government has undertaken the single biggest capital investment program in the country's history in the NBN to turbo charge productivity growth for the future by providing businesses with new technology platforms …

When the coalition came to government, we acted, consistent with our policy commitment, to rectify this yawning gap and we established a process to carry out a cost-benefit analysis. Before we did that, Mr Bill Scales AO, a very eminent public servant and a significant contributor to public policy in Australia over many decades, was commissioned to conduct an independent audit of NBN policy process, and he had this to say:

There was no business case or any cost-benefit analysis, or independent studies of the policy undertaken, with no clear operating instructions provided to this completely new government business enterprise, within a legislative and regulatory framework still undefined, and without any consultation with the wider community.

That is about as damning a summary of a chaotically mismanaged public policy process as you could imagine.

We have sought to correct this yawning gap. Last month the government released the independent cost-benefit analysis of the National Broadband Network, a piece of work done by an eminent committee chaired by Dr Vertigan, again an eminent former public servant. That piece of work assessed the costs and benefits of deploying broadband through a range of models. It confirmed that there are economic and social advantages in deploying high-speed broadband infrastructure. Indeed, it found that nationwide access to superfast broadband will deliver total benefits to Australia worth more than $40 billion in today's dollars.

Very importantly, it considered the preferences and potential future demand for high-speed broadband in Australia and it estimated consumer willingness to pay for increased broadband speeds—an absolutely critical part of the analysis and something that the previous government never bothered to do. The report found that consumers do not need and are not willing to pay for speeds greater than those that will be available under the Abbott government's commitment of 50 megabits per second by the end of 2019 to 90 per cent of the fixed line footprint.

The cost-benefit analysis that was conducted under the auspices of the current government also concluded that the present government's approach to deploying the National Broadband Network through an optimised multitechnology mix model, as recommended in the strategic review conducted by NBN Co, will provide net benefits of $18 billion compared to a baseline in which there is no further rollout of superfast broadband. Indeed, one of the particular merits of the cost-benefit analysis conducted by the Vertigan panel was to systematically assess the various paths forward from the starting point and say: what are the options, what are the costs of each of those paths and what are the benefits that will be captured if we choose one or other of these paths? I am pleased to say that it found that the multitechnology mix model, which is the one that the current government is now pursuing in relation to the National Broadband Network, is one that will offer $16 billion more in net benefits than the fibre-to-the-premises plan that the previous Labor government was following.

Indeed, the cost-benefit analysis found that the previous Labor government's plan would have had net benefits of only about $2 billion. There is a very clear reason for this. The multitechnology mix model will deliver broadband to most Australian households considerably more quickly than the plan which the previous government was following and people get benefit from getting the broadband network delivered more quickly. So it was a thorough and rigorous analysis that looked at the costs and the benefits. It was a very important approach and one that is delivering tangible public policy benefits.

The third point I want to make in the brief time available is that the bill before the House will entrench the requirement to carry out a cost-benefit analysis and, as the experience with the National Broadband Network shows, this is a very desirable thing. The lack of such a step being taken by the previous government has been highly regrettable in that it has led to delays and it has led to a path being followed which was not the optimal path, a path that needed to be corrected by the present government. I am pleased to say we are getting on with correcting it.

It is uncontentious that investing in infrastructure is of the highest importance, but there are finite funds available to government so to allocate those funds rationally it is very important to engage in cost-benefit analysis. That is what this bill will ensure happens.

See this speech in context