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Wednesday, 26 November 2008
Page: 11613


Mr GRAY (Parliamentary Secretary for Regional Development and Northern Australia) (11:03 AM) —I have listened to this debate since it started earlier this morning, and the contributions have in general been both insightful and pretty solid, but I cannot miss the fact that, over and over, those opposite tend to view the Building Australia Fund merely as a pork barrel. They view it that way because that is how those opposite governed. I remind the member for Gippsland of an aside which he made in his own re-election campaign, which at the time might well have been a joke but which says something about a political culture. It was at a breakfast in the Gippsland campaign where the candidate then said, ‘I love the smell of pork in the morning.’

The importance of that is that, from the point of view of good public administration and good public policy, this government does try to get it right. This government has as its focus getting good public policy outcomes. It is why the member was able to reflect on the decisions of last week in a way that is positive. It is unambiguously the case that, in allocating $250 million of taxpayer money to local government, the indicators that were used were population, growth and the financial assistance grants equations used by state governments—the most transparent process which had been used for giving such funds in the last 13 years. Why? Because when funding was allocated by the previous government it was done overwhelmingly on a political basis. Not exclusively—there were some very good programs funded by the former government under the Regional Partnerships program. But, having said that, there became a political cast that was set on that fund.

The Nation-building Funds Bill 2008 establishes three new nation-building funds, the Building Australia Fund, the Health and Hospitals Fund and the Education Investment Fund. On 14 October 2008 the Prime Minister announced that the government is fast-tracking the implementation of its nation-building funds as part of its Economic Security Strategy. The government is committed to this major new infrastructure investment program allocating funds for transport, communications, energy, water, education and health. This year the government will contribute a total of $12.6 billion to the Building Australia Fund for transport, communications, energy and water infrastructure, including, as the member opposite said, the proceeds from the T3 sale and the balance of the Communications Fund. A total of $8.7 billion will be allocated to the Education Investment Fund for education infrastructure, including the balance of the Higher Education Endowment Fund, and $5 billion will be allocated to the Health and Hospitals Fund for health infrastructure. The government has committed to making future allocations to these funds as budget circumstances permit.

We have said there will be a rigorous evaluation of projects. Spending from the funds on specific projects will be subject to rigorous evaluation by independent advisory bodies. In view of the government’s commitment to strengthening the Australian economy in the face of the global financial crisis, this bill and the Nation-building Funds (Consequential Amendments) Bill 2008 will allow for interim advisory bodies for the Education Investment Fund and the Health and Hospitals Fund to be established as soon as possible. The advisory bodies will assess projects against evaluation criteria which are being developed by portfolio ministers. Interim evaluation criteria are also being developed to allow work to commence as soon as possible.

Time is critical because the global economic crisis, the credit crunch, is getting closer and closer to our shores. In my own patch in Western Australia I note that workers are already being asked to take early Christmas leave and untaken annual leave and that companies are beginning to stop employment of new staff. All of these are dark indicators of a tough year in 2009, and that is why a start as soon as possible on the infrastructure spending is important for the long-term health of communities. It is important for establishing industrial capacity that can be maintained rather than industrial capacity that will be damaged by the short-term impacts of the global credit crunch.

The Building Australia Fund will provide crucial funds for investment in critical economic infrastructure and transport, communications, water and energy. Examples, of course, include roads, rail, urban transport, port facilities, irrigation and broadband. The government has already set aside $12.6 billion as the initial payment into this fund. Spending proposals will be subject to rigorous evaluation by Infrastructure Australia. The national broadband network will be subject to government consideration.

Infrastructure Australia is an independent advisory body, with representatives from all levels of government and the private sector. The government has asked Infrastructure Australia to bring forward its interim priority list to December 2008, three months earlier than originally planned. Members will recall that at the COAG meeting in December 2007 originally the Infrastructure Australia time line was for a national audit to commence in the first quarter of 2008 and be carried out through the course of 2008, with a report to COAG in the fourth quarter of 2008 and decisions to be made in the late first quarter or early second quarter of 2009.

The acceleration is deliberate, the acceleration is significant and the acceleration is taking place in order to best counter in an orderly and substantial way the expected impact of the global economic crisis. We will be allowing funding for some projects to commence in 2008. The fast-tracking of infrastructure projects is part of the government’s Economic Security Strategy. We must boost Australia’s economic capacity through nation building. This has been a central tenet of Labor governments over the 117 years of the Australian Labor Party.

Projects will be assessed by Infrastructure Australia against such factors as their ability to increase Australia’s productivity, contribute to economic growth, build our global competitiveness, develop our cities and regions, and reduce greenhouse gas emissions and carbon pollution. Fixing our roads and rail networks, unclogging our ports, making our major cities work better and connecting Australians to high-speed broadband are too important to be delayed by partisan politics. In 2007 the Bureau of Infrastructure, Transport and Regional Economics released a report estimating that urban congestion alone cost Australian families and businesses approximately $9.4 billion in 2005. Furthermore, the same report indicated that, in the absence of additional investment or significant changes in the cost of travel, the cost of urban traffic congestion would increase to around $20 billion by 2020.

The costs created for the Australian community through inadequate infrastructure investment and through congestion are significant. Bottlenecks have been a common sight in Australia’s mining sector. Many will be familiar with the sight of ships queuing off Newcastle and Dalrymple Bay waiting to be loaded with coal exports. The 2008 report by Access Economics commissioned by the Minerals Council of Australia shows the extent of the problem of insufficient supply capacity in the mining sector. The report indicates that, while Australia’s mineral exports have risen in recent times, the global market share for a number of minerals declined between 2002 and 2007. This is significant because it is an indication that even at the time of the most significant global boost in demand for our mineral exports, from the early 2000s to late 2007, there was an underperformance by Australia’s mining sector.

I am not about to allocate blame to the former federal government. I think the former Minister for Industry, Tourism and Resources, Ian Macfarlane, and his predecessor, Senator Minchin, were outstanding ministers. Many of those bottlenecks arrived because of inappropriate investment decisions by companies and sluggish and inappropriate approvals processes in state government departments. But it does suggest unequivocally that Australia’s performance through the five years of that significant global increase in demand for our minerals exports was an underperformance.

The report suggests strongly that the rise in demand by economies such as China had caught Australia’s infrastructure napping and a number of our governments napping. The report also indicates that, if Australia had maintained its market share over that period, miners would have earned our nation an additional $17 billion to $20 billion. That is not to be sneezed at in terms of national income and, most importantly, not to be sneezed at because every bit of market share that we claim during the good times is market share that our nation can hold during the tough times. Market share in minerals is where the game will be played in the immediate future.

The Building Australia Fund has been commented upon in a significant way in the media. The third-party endorsements of the Building Australia Fund have been almost embarrassing for the government. International organisations and domestic commentators have heaped glowing praise on the Australian government for the insight, the foresight and the courage to establish the Building Australia Fund. The IMF said:

Saving some of the revenue from the commodity price boom in three new funds will take pressure off monetary policy in the near term and enable increased infrastructure investment over the medium term.

What seems like an almost bureaucratic economic assessment is in fact an insightful and glowing commendation of the government’s policy of putting these funds in place. Why? Because it integrates both the need for improved infrastructure with the necessary economic prudence and the necessary focus on monetary and fiscal policy to ensure that the national macroeconomic settings are right and within that there is a policy position which allows the government to pursue the construction of infrastructure.

The OECD had made the observation:

Over the past few years there has also been a sharp rise in spending, the quality of which was not always ensured.

This is spending by the former government, ‘the quality of which was not always ensured’. The recent creation of funds that will channel budget surpluses into financing investment in infrastructure, education and health could play a valuable role in improving the quality of spending, especially since the intention is to select projects on the basis of cost-benefit analysis. On what other basis would you select projects? It is certainly not, as those opposite have suggested, on the basis of electoral politics. No. The decisions here will be made on the basis of national need and economic impact. The OECD also said:

The programmed increase in physical and human capital is needed to overcome bottlenecks. Higher spending has been accompanied by reforms in these priority sectors.

All members of this House will recall the dozens of Reserve Bank warnings to the former government that it needed to focus infrastructure spending on bottleneck areas of the economy and also to increase spending on training.

David Crombie is President of the National Farmers Federation. David Crombie would never have voted Labor in his life. David Crombie is no Labor supporting little socialist. No, David Crombie is a substantial farmer and a man with a great reputation for being forthright and frank. David Crombie, President of the National Farmers Federation, said:

Tonight’s announcement of the $20 billion ‘Building Australia Fund’ is a positive move towards addressing critical transport and communications infrastructure. Too often Australia’s farmers face antiquated and grossly inefficient national and regional infrastructure in these areas, undermining the farm sector’s strong record of productivity growth.

David would know. Tony Shepherd is another significant Australian—significant because of the work he has done to help build Transfield as a great Australian company. Tony Shepherd said:

The $20 billion injection into the Building Australia Fund is a great development for the country. Finally, at a federal level, we have recognition of the government’s obligation in terms of the investment and development of infrastructure.

There is no doubt that in Tony Shepherd’s observations there is a tone of exasperation that the previous 13 years had seen an Australian government that did not focus on significant infrastructure needs and whose focus had been myopic to the point of only focusing on its direct electoral needs.

Peter Verwer, Chief Executive of the Property Council of Australia, said:

The government’s $20 billion investment in critical infrastructure confirms its commitment to nation building. The Rudd government’s first budget has delivered the funds to help tackle Australia’s infrastructure deficits.

Sol Eslake, ANZ’s Chief Economist, said:

In this budget, the Treasurer has created a more compelling vision of how it will deploy the enlarged surpluses which it is projecting over the next four years. This is exactly what the government should be saving its surpluses for.

There is an important point that comes out of that solid endorsement by the ANZ Bank’s Chief Economist. Firstly, it is the critique that the former government took its potential surpluses and delivered it back to the community in terms of tax cuts, which did nothing more than increase our import bill, make the national economy poorer and place pressure on inflation through escalating costs due to ageing and inadequate infrastructure.

But, more importantly, it was an observation made in the second quarter of 2008, at a time when even the ANZ Bank’s chief economist—a significant economist both in Australian terms and in international terms—had no reason to believe that the enlarged surpluses would continue to occur over the next four years. It now appears that, as a consequence of the global financial crisis, it is highly unlikely that we will see anything like those projected surpluses over the next four years. Indeed, the MYEFO figures released just a few weeks ago suggested quite the opposite: that we could well be looking at significant hits to government revenues and, in the course of the coming year, $40 billion.

Greg Gailey, of the Business Council of Australia, another great hotbed of Labor support, said:

The establishment of the Building Australia Fund is an effective way of ensuring that today’s strong revenue growth can be better directed to meet Australia’s long term infrastructure needs.

Ivan Backman, of the Australian Logistics Council, said:

$20 billion for infrastructure announced in tonight’s budget is a substantial commitment to building the road and rail networks and ports required for our national future and will be embraced by our Transport and Logistics industry.

Peter Anderson, chief executive of ACCI, said on the budget that there was good planning for investment in infrastructure, health and education.

It is important in contemplating those significant endorsements of the government’s Building Australia Fund that we do understand that these endorsements are made by people who understand the business that they are in. They are in the business of building Australia. The Australian government is in the business of building Australia. The Australian government is also in the business of protecting families, the Australian community and our industrial capacity from the worst excesses of the coming international financial gloom that will descend on our economy as a consequence of the global financial crisis. To get working early, to have our funds deployed early on substantial projects that build the infrastructure for our nation, is clearly an appropriate decision to make.

We have a number of other funds. The Education Investment Fund was announced in the 2008-09 budget as one of the three nation-building funds along with the Building Australia Fund and the Health and Hospitals Fund. In that announcement it was said that the government will transform Australia’s higher education and vocational education and training institutions over the next decade with a new $11 billion Education Investment Fund, demonstrating the depth of attention paid by the Australian government to the investment deficit in hard infrastructure, in health infrastructure and in education infrastructure, and that that deficit is at last being addressed in a way that makes sense and in a way that demonstrates the government’s commitment to the ongoing needs of our economy and of our communities.

I am proud to be part of a government that has the strength, the dedication and the determination to put these funds together, but most importantly I am proud to be part of a government which has the capacity to be flexible enough to move quickly enough to meet the global crisis head-on in a way that keeps our nation moving forward and does not step back. I commend the bills to the House.