Action required on public infrastructure investment

A draft report by the Productivity Commission has found an abundance of flaws, mythologies and forgone opportunities in infrastructure financing, funding and procurement. The Commission draft outlines a proposed process for improving infrastructure investment across all levels of government; and, as a consequence, attracting increased private investment.

Peter Harris, the Presiding Commissioner and Commission Chairman said “Governments have it in their power to attract higher levels of private infrastructure investment, and to improve their own capacity to fund infrastructure, even in the presence of apparent borrowing constraints. They can do this through the judicious use of pricing mechanisms and by collectively establishing stronger transparent processes for project identification, selection, design and implementation.”

“A visible project pipeline should naturally emerge from adoption of these reforms.”

The Commission also proposes to examine further a number of potential improvements to financing mechanisms for infrastructure, including options proposed to address specific concerns related to the role of superannuation funds in greenfields projects.

“Australia is not a cheap place in which to build infrastructure, but the sources of the cost pressures that have created this situation are numerous and no single reform is likely to alter them. Action on a number of fronts is necessary,” Peter Harris said.

The report finds poor industrial relations arrangements in some major projects, with adverse effects on costs and productivity, but less persuasive evidence that the effects were relevant across the whole construction sector. The report finds that pursuit of these reforms could readily save $1 billion dollars a year, as a conservative target. The Commission is seeking written feedback on the draft report by 4 April, and will hold public hearings in early April. A final report will be provided to the Australian Government in late May 2014.