Industry News

Is the infrastructure pipeline really offering value for money?

Election time – that triennial event when voters run for cover from politicians on the hustings. By 2 July, our elected representatives will have inundated us with rhetoric and fearmongering and promised lots of dollars that already belongs to us!

The Federal Budget was the first salvo of a 55-day election campaign. On the upside, there were tax cuts for small business and an increase to the asset write-off for purchases of items up to $20,000. This should enable quarries to reclaim on ancillary items (eg refrigerators, coffee machines, hot water urns, stationery, etc), if not plant and equipment. For an industry in need of specialised, skilled workers, there may be incentives for quarries to take on jobseekers as interns, with a view to long-term employment.

On the downside, the budget lacked significant new infrastructure spending. Almost $8 billion, including an additional $2.5 billion, has been dedicated to road infrastructure for 2016-17, while $600 million was announced for a Northern Australia roads package. There was also increased funding for rail projects to 2019-20.

Foremost amongst these is the Inland Rail project (from Brisbane to Melbourne via regional New South Wales), the Perth Freight Link and Victoria’s Murray Basin Freight Rail. These rail links are years from fruition but may favour the quarry industry by offering cost-effective alternatives for the transportation of aggregate to urban markets, particularly as quarries relocate to regional areas.

The long-mooted Western Sydney Airport is gaining legs but construction materials for the airport won’t be required for at least five years. What’s most perplexing is the Commonwealth’s insistence on funding the “deceased” East West Link instead of the Melbourne Metro Rail project — that’s $3 billion of hypothetical money stuck on a balance sheet. The construction materials industry “burns” while Canberra and Victoria “fiddle”!

Political parties notoriously pick winners, and there will be plenty of promises in marginal seats before election day. In the Victorian seat of Corangamite, the $182 million Princes Highway West­–Winchelsea to Colac duplication was recently cited by the Grattan Institute as an example of largesse in a marginal seat. The Princess Highway West certainly seems inflated — $40 million in 2016-17 towards duplicating a mere 15km of road from Armytage to Warncoort. While sitting MP Sarah Henderson argues that regional communities are as deserving of improved infrastructure as urban ones, there are strong arguments that it is money diverted from “worthier”, big ticket projects.

It’s typical for government to ignore advisory bodies like Infrastructure Australia (IA) when they critique the inherent value of projects. To win marginal seats in Sydney, Opposition Leader Bill Shorten has promised $175 million towards a rail freight duplication between Sydney’s Port Botany and Mascot, as well as a rail crossing loop at Warwick Farm. If he’s elected to office, will he abide by IA’s ruling if it dismisses the business case?

As the Grattan Institute has argued, current oversight mechanisms are insufficient and taxpayers cannot hold politicians to account for frivolous infrastructure spending. Perhaps an independent body’s evaluation of a project’s net benefit must be tabled in parliament and passed by the lower and upper houses before going to tender. That adds a whole new layer of red tape but the call wouldn’t be necessary if governments were transparent from the outset. The upside to this proposal is that the construction materials industry could make submissions to a project evaluation, outlining how it would support that project – which the industry doesn’t do enough.

While the infrastructure pipeline between now and 2020 looks impressive on paper, is it value for money — for the construction materials industry and taxpayers alike? Regardless of which parties form government after 2 July, their focus should be on addressing the pipeline, eliminating the loopholes that allow projects to proceed without solid business cases, and giving bodies like IA more teeth.


Leave a Reply

Send this to a friend