Mr WILLIS(10.59 a.m.) —I welcome the opportunity to make a few remarks in this debate on the Development Allowance Authority legislation. There have certainly been some fairly wild statements made about the position of the opposition in regard to this matter. Let me make it clear at the outset that we absolutely support the original provisions in the bill that was sent to the Senate, which were meant to redress some shortcomings in the DAA legislation as it turned out over time, particularly where there were changes in company structures or changes of ownership which meant that companies that had made application for the development allowance would be ineligible unless the legislation were changed.

I understand there are some 40-odd companies with projects valued at around $2.5 billion involved. Clearly, given our support in government for the development allowance and the fact that we proposed these amendments, we certainly want to see them go through.

Let there be no doubt about our position. This is not an attempt by us in any way to sabotage what we see as worthwhile legisla tion, which we, in fact, proposed in government but did not get through the parliament before the election. Contrary to what the Treasurer (Mr Costello) said yesterday, where he accused us of economic sabotage, our position is absolutely one of support for the changes to the act regarding the Development Allowance Authority to enable these companies which would otherwise be excluded from the development allowance to qualify.

There is another issue which was brought into the ring by the Treasurer himself earlier this week, as has been mentioned by the speakers on this side of the House, when in question time he arranged to have a question from the government side and announced that he was going to reverse the policy announced by myself, as Treasurer, and the then Minister for Transport, Mr Brereton, last December, where we jointly announced a government decision to ensure that there would be no further use of infrastructure bonds for urban roads.

Contrary to what the Treasurer says—and he said in parliament that this was taken for factional reasons—there was no such element involved whatever. This was a considered decision by the government of the day in the light of what we saw as developing experience in relation to the use of infrastructure bonds and urban roads, and the private sector development of urban roads, which, of course, was facilitated by the infrastructure bonds. We were concerned that we may have gone too far in respect of providing the infrastructure bonds for this purpose.

Of course, there was a backing for that from the EPAC task force report on private sector infrastructure, which gave us an interim report in May of last year and a final report, I think, in October. The tenor of that report was fairly anti the whole notion of infrastructure bonds and recommended a review by 1997-98 and, generally, was fairly unsupportive of this additional incentive for private sector involvement in infrastructure.

The task force were particularly critical of the use of infrastructure bonds for urban roads. They did that on the basis that they saw both the transaction costs and the regulatory risks as being higher where private sector capital was used to build this infrastructure than would be the case where there was the normal development of roads by way of public sector borrowings and contracting out of the actual construction arrangements.

In looking at that, they came up in their interim report in May of last year with various examples about the additional substantial costs of raising capital; the legal costs involved in putting together the financial arrangements; and the financial consultant costs, which were millions and millions of dollars. They generally found that this was a much more expensive business, in relation to the legal and financial costs for putting together the overall financial plan where private sector capital was involved, than was the case with the public sector.

They also found that there was considerable regulatory risk. In particular, they were pointing to the fact that operating a private sector road in a public sector network of roads does bring with it considerable diseconomies, and that those diseconomies come about because of the need to try to ensure to the private sector owners of the toll road that they are going to have sufficient traffic to ensure that the project is viable over a long period of years.

These BOOT—build, own, operate, transfer—projects are relatively new in this country, but we have had some experience already. City Link, which has been mentioned by the previous speaker and others, is a very substantial example. Already we have seen with that substantial evidence of the kinds of circumstances which the EPAC task force had been pointing to; that is, the need to close off roads, for instance, to try to ensure that you funnel traffic into the toll road to make the project viable and to give some certainty of traffic to the proponents so that they will, in fact, finance the project.

That, of course, involves various diseconomies. It means that the rest of the road network is not being used to its fullest. It means that roads which are currently productively used have to be narrowed or closed off. We see this in relation to City Link in Melbourne, where various roads are proposed to be reduced in their operation to try to ensure that the City Link road can be a viable operation. Without that, the proponents would simply say, `We haven't got the certainty that this project is going to be viable and we won't finance it.' So there you have the absurdity of existing good roads, or reasonable roads anyway, being cut down to help finance a new road. That does not happen anywhere, to my knowledge, in relation to the provision of new public sector roads, but it is a feature of private sector urban road development.

With the City Link project, Footscray Road, a major road that leads from the city to my electorate, is being downgraded to two lanes in each direction between the Flinders Street extension and Dudley Street. Boundary Road is being downgraded to one lane in each direction. Batman Avenue will be absolutely closed west of the Morell Bridge, and the bridge itself will be closed in Anderson Street. Alexandra Avenue will be downgraded to one lane in each direction, and so on. There is a whole series of road narrowings or closures around the centre of Melbourne, where the City Link project will be particularly concentrated around the Domain tunnel.

All of this is happening to try to ensure that there is viability for a project which will mean that the people of Melbourne will have to pay substantial amounts of money to travel across areas which they can currently travel across for nothing. But, with the narrowing or closing of these other roads, they will not have alternatives. The traffic will be too heavy on these narrowed roads or there will be no road at all because it will be closed off. These sorts of network risks are clearly quite serious.

The EPAC report pointing to these deficiencies and the experience with City Link led us to the point of saying that we could not go back on what we had already put in place. We had originally decided that urban roads should qualify. They seemed to fit the general nature of infrastructure bonds and facilitating private sector investment and helping to get roads built that would not otherwise be built. But we never foresaw that we would have this absurdity of the closure of roads or the narrowing of roads and the restriction of the network that currently exists, resulting in a less efficient arrangement.

In those circumstances, we decided that the sensible thing to do was to take the decision that no more urban roads would qualify for infrastructure bonds. It was not an off-the- cuff decision, it was not a factional decision; it was a considered decision on the basis of a theoretical report from a respected body, EPAC, and on the basis of the experience of the largest private sector road development project in the nation's history—City Link in Melbourne.

In light of that we believe it is absurd for the government to now try to overturn the decision which was made by cabinet and announced last December by me and the former Minister for Transport. It is ridiculous to go back on that. It is against the advice of the EPAC task force and it is against commonsense in relation to what we are seeing happen with City Link in Melbourne.

That is not to say that we do not see a role for infrastructure bonds more generally. The EPAC task force makes the point that infrastructure bonds can still be used for roads where there is not that private sector competition or network. So there may be cases where it is still appropriate outside the urban area. That is a matter for consideration. Our decision was in relation only to urban roads; we did not foresee any further restriction of infrastructure bonds. As against our original introduction of infrastructure bonds, the areas of economic activity that qualified for infrastructure bonds had been considerably expanded by us subsequent to our original introduction of them in, I think, late 1992.

I very much reject the government view that our decision was flippant, not thought through, and done for unsubstantial reasons. Our position was a very substantial, considered one, and I believe it is one that the nation ought to adhere to. The bill as amended by the Senate contains that exclusion of urban roads. We strongly believe that that is the appropriate course of action. It was the action that we announced in government. We are being consistent in pursuing that in opposition. We are not changing our position in any way from what it was in government.

We support the amendment to the Development Allowance Authority arrangements to enable companies that will otherwise be excluded to qualify. We also strongly believe that the decision that we made in government on infrastructure bonds should be carried through. Therefore, we support the bill as amended by the Senate and see no reason why we should change our position on that one iota.