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Tuesday, 25 November 2008
Page: 11266


Mr BUTLER (5:29 PM) —It is with great pleasure that I rise to speak in support of the Nation-building Funds Bill 2008 and related bills, because they reflect the fact that the Labor Party under Kevin Rudd came to government with a very clear agenda to build the long-term productive capacity of our nation. That is in stark contrast to the previous government, which, in the face of a resources boom that, frankly, none of us had seen before, took the opportunity to simply sit back, put their feet up and suck on a pina colada while the Chinese yuan flowed over them with gay abandon.

We take a different view on this side of the House. We take that view against the background of a very long history of nation building. It is true that the immediate economic circumstances have changed dramatically since both the election and the first stage of this program—the introduction of the Infrastructure Australia Bill earlier this year. But it is equally clear that the social and economic imperatives behind this package of bills have not changed. Along with the education revolution and Minister Wong’s climate change agenda, the renewal of our social and economic infrastructure is one of the three key pillars of this government’s program. All three pillars are critical to building the long-term prosperity of Australia.

They come against the background of some 20 warnings by the Reserve Bank of Australia about capacity constraints that have been growing in the economy of this country for many months. When that is raised, those opposite usually scream, ‘Well, table them!’ I have not tabled them but I did flick into one folder that was handy which contained 2006 RBA and other economic papers. I looked at then Governor Macfarlane’s speech to the House of Representatives Standing Committee on Economics, Finance and Public Administration in February 2006. After discussing various global disinflationary forces at play, he said:

The issue, over the period ahead, will be whether these latter forces—

namely, those global disinflationary forces—

prove sufficient to contain inflation in an economy operating with little spare capacity.

Some months later in the RBA statement on monetary policy in May 2006, the Reserve Bank stated:

In summary, the economic situation reviewed by the Board has for some time been one in which international conditions have been favourable to growth in Australia, the economy has been operating with limited spare capacity, and underlying inflation has been forecast to increase gradually. In these circumstances, the Board had taken the view that the next move in interest rates was more likely to be up than down, and this was signalled in the Bank’s policy statements.

For a considerable period of time a number of constraints on our productivity, and hence drivers of higher inflation and higher interest rates, have been readily apparent. The previous government did nothing to address them. The first readily apparent driver of inflation and interest rates over the last few years has been very clear skills and labour shortages. Under the previous government there was no skills agenda. There was a very willing ideological fight between the previous government and various state governments about what type of building should house vocational training—whether it should be a TAFE college or a technical college. There was also a flawed 457 visa scheme, but no overarching, meaningful skills agenda. In contrast, in addition to the education revolution, which has been the subject of significant debate in this chamber over the last couple of days, 630,000 training places have been promised by the new Rudd Labor government and have already started to flow to industries that have been crying out for trained workers.

Under the previous government there was a dismal record on workforce participation, in spite of a very significant period of economic growth. Australia remains in the bottom half of OECD tables in key age groups for workforce participation—in particular, participation by women, which has been the cause of significant employment growth over the last couple of decades. We have seen women’s participation plateau at about 58 per cent of the available female workforce. That is about 10 per cent lower than the female participation rate in the United Kingdom and Canada and about 15 per cent lower than that in most Scandinavian countries. But, again, we saw no serious policy agenda to deal with that—in stark contrast to the different agendas that our government has.

The second significant drag on productivity growth in the long-term prosperity of our country has been in the area of infrastructure. To appreciate the depth of that deficit I would like to talk about the economic context. Since 1991 we have experienced uninterrupted growth in our economy, on the back of the significant economic reforms introduced by the Hawke and Keating governments. Over that time we have moved from about the 17th richest country—measured by per capita GDP—to the seventh highest per capita GDP in the world. Over the last several years in particular we have seen our terms of trade dramatically increase with a huge injection to national income and, consequently, a huge increase in Commonwealth government tax receipts. The Business Council of Australia recently estimated windfalls in the last five years of the previous government—that is, income not budgeted for—to be in the order of $87 billion.

On any measure, this was a historical opportunity to invest in the nation’s long-term prosperity. But instead nothing happened. All members in this House, and probably in the other place as well, have a long list of infrastructure gaps and ageing assets in their own electorates. From an electoral perspective, a more scientific analysis than our own perhaps rather parochial analyses of infrastructure in Australia was conducted by Infrastructure Partnerships Australia in a significant report entitled Australia’s Infrastructure Priorities: securing our prosperity. In this very detailed report IPA details infrastructure deficits in the areas of ports, roads and rail, with the land freight task projected to double by 2020. In the area of energy, ABARE—the Australian Bureau of Agriculture and Resource Economics—estimates that $30 billion to $35 billion of investment would be required in Australia’s energy sector by 2020. Importantly to me as a South Australian member of this House, the IPA report also looked at the area of water.

In these and other key sectors of the economy, we know that demand is already straining capacity. Forecasts show that demand is going to grow dramatically, and these infrastructure deficits—on ageing assets, by and large—are going to get far more severe. This will happen especially as our international gateways become more globally connected.

In the minister for infrastructure’s second reading speech on the Infrastructure Australia Bill, he pointed out to the House that international container trade was forecast to triple by 2020 and international air travel was forecast to increase by 160 per cent by 2025. These are increases which will put incredible strain on already strained infrastructure in those international gateways. But in some sectors you do not need to look out to 2020 or 2025 to see the infrastructure deficit already constraining economic growth—for example, if you look at the powerhouse of our national economy over the last few years, the Western Australian resources sector. Don Argus, a very prominent and widely respected businessperson, said last month that he was deeply concerned about infrastructure performance over the last decade. An article in the West Australian on 8 September 2008 reported:

Don Argus, chairman of BHP Billiton, … last week fleshed out some future infrastructure requirements in just a few areas.

He said the ramp-up in expected iron ore and coal exports will require the equivalent of eight new 50 million tonne ports by 2015 at an estimated cost of $16 billion.

If you want to get your head around that, consider that Fremantle Port handles about 29 million tonnes a year.

Mr Argus said Australia’s infrastructure capital stock to GDP ratio had fallen 10 per cent over the past 12 years (which neatly covers the term of John Howard).

To get it back to where it was back in the mid-1990s would require $103 billion in spending. ‘Australia does need better infrastructure policy to attract the necessary private sector investment,’ he said.

Estimates of our infrastructure deficit vary a little—the Business Council, for example, recently estimated that the deficit was in the order of $90 billion—but everyone agrees that it is significant.

At the end of the previous government’s term, Australia ranked about 20th out of 25 OECD countries in terms of its public infrastructure investment—and, to be fair, we are not alone. Countries such as the United States are also labouring under a significant infrastructure deficit. After the bridge collapse in Minneapolis earlier this year, the Economist magazine reported:

… the American Society of Civil Engineers estimated that $1.6 trillion was needed over five years to bring just the existing infrastructure into good repair.

Equally, as we are not alone in experiencing a significant infrastructure deficit, this government is not alone in its resolve to address years of neglect. Only in the last couple of days, President-elect Obama has indicated his intention to give the renewal and repair of America’s infrastructure the sort of priority the Rudd government have given infrastructure here in our own country. For the interest of the House, the Economist at about the same time reported that emerging economies in the world are predicted to spend in the order of US$22 trillion over the next decade in infrastructure spending. China alone is predicted to spend almost US$10 trillion between now and 2017.

Historical comparisons of our infrastructure investment are complicated by two factors: firstly, many public entities that have historically been responsible for driving and spending money on public infrastructure have over the last decade or two been privatised; and, secondly, we have seen the private sector’s entry into the public infrastructure market in a very big way, particularly through public-private partnerships, or PPPs. As difficult as those historical comparisons are, if you do adjust for those changes to the way in which the public infrastructure market operates, you can see that our public infrastructure spend as a country is not significantly different from what it was in the late 1980s as a percentage of our GDP. Given the terms of trade and the increase in national income that we have enjoyed over the last several years, that is a very, very poor performance.

To be fair, as the Deputy Leader of the Opposition belaboured significantly, this is not just the fault of the previous Commonwealth government; the performance of state governments in this area has been highly variable, to put it politely. As a South Australian member of this House I am lucky that our own state government has had a state infrastructure plan in place for many years, operating under a very talented state infrastructure minister. In South Australia our infrastructure performance has been particularly good where it concerns the connection between goods and ports, a subject I am particularly interested in as the representative for Port Adelaide. We have seen the Port River Expressway project completed. We have seen the Northern Expressway, which connects our port to various northern product markets, commence and proceed according to schedule. We have seen the bridges over the river open. We have seen the deepening of our harbour to take in the new container ships that ply their trade through the world’s oceans. That was well before Melbourne got their act together to start doing theirs. There are many more examples.

However, the variability of the states’ performance in this area is only more reason for the Commonwealth government to have taken a central role much earlier than has happened. This government will take that role, as is well known now. This government has introduced the first Commonwealth infrastructure minister and the first Commonwealth infrastructure department, and one of this government’s earliest acts was to establish Infrastructure Australia under the chairpersonship of Sir Rodney Eddington, with very significant and widely respected board members to oversee the development of a list of national infrastructure priorities.

This bill provides for the investment of three funds in the pursuit of those objectives: firstly, the Building Australia Fund through IA; secondly, the Education Investment Fund of about $11 billion, where money may be expended for capital expenditure projects or renewal projects in universities, vocational education and training institutions and various research facilities; and, thirdly, the Health and Hospitals Fund, which at $10 billion will be the single largest investment in health infrastructure ever by an Australian government. I note that the Minister for Health and Ageing recently announced the chair of that advisory board, a very prominent and respected Australian, Mr Bill Ferris.

In contrast, again, to the Deputy Leader of the Opposition’s lecture on transparency, the approvals process for the expenditure of money from these funds could not be more different from the previous government’s approach to these things. All funds have the same formula for this, so rather than going through three different processes that are essentially the same I will just look at the Building Australia Fund, which is focused on the development of transport and communications infrastructure. This fund is made up of about $7.5 billion from the 2007-08 surplus, plus proceeds of the T3, or Telstra 3, sale and assets of the Communications Fund, which is to be closed—although I note the Deputy Leader of the Opposition’s indication that amendments will be moved in that respect. The government will add to the Building Australia Fund and other funds from future surpluses as is appropriate and as economic circumstances allow. Importantly, the funds will be managed in exactly the same way as the Future Fund was set up to be managed by the previous government. For the Building Australia Fund, the Minister for Infrastructure, Transport, Regional Development and Local Government will be required to formulate evaluation criteria to be applied by Infrastructure Australia when, firstly, evaluating projects and, secondly, providing advice to the infrastructure minister and other relevant ministers on the expenditure of funds. The bill provides that Infrastructure Australia is to provide the minister with advice about potential payments from the Building Australia Fund and that the minister is legally obliged to have regard to that advice before recommending any payment from the Building Australia Fund.

This rigour, transparency and accountability stand in stark contrast to the approach of the previous government to the expenditure of funds in these areas. I need only draw the attention of the House to the regional rorts projects, which have been the subject of significant debate over the last 12 months and one day in this House. I do not intend to go over those examples—only because time does not permit, not through lack of inclination; I would like nothing better, but time does not permit. Suffice it to say that numerous examples have been presented to this House by the minister for infrastructure, and I think that they are evidence enough of the previous government’s poor performance in rigour, transparency and accountability in this area.

These bills provide for a visionary, long overdue and vigorous approach to our long-term prosperity in three areas of the utmost importance to the long-term growth and skills base of our country: the national economic and social infrastructure, the education sector—leading to the building of a long-term skills and training base in our country—and, just as importantly, the need to put in place a health and hospitals infrastructure that will meet the long-term health demands of a growing and ageing population. These bills together mark an extraordinarily exciting new future for our country, and I commend them strongly to the House.