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Rural and Regional Affairs and Transport Legislation Committee
23/05/2012
Estimates
INFRASTRUCTURE AND TRANSPORT PORTFOLIO
Infrastructure Australia

Infrastructure Australia

[15:18]

CHAIR: Welcome, Mr Deegan. It is great to see you. Senator Macdonald.

Senator IAN MACDONALD: How is the National Port Strategy progressing? We have spoken about it before and I had a quick glance through it.

Mr Deegan : There is an out-of-session approval process underway within the Council of Australian Governments. In the meantime, a number of jurisdictions have proceeded with both individual state port plans and individual port plans which are recommendations within the National Port Strategy. For example, Minister Buswell in Western Australia has completed a major review of ports and their governance in Western Australia. The Queensland government has a Queensland port strategy underway, and there are a range of activities around most of our ports as a consequence of that work.

Senator IAN MACDONALD: In the strategy there are a series of recommended actions which are summarised in 20-odd pages, with responsibilities and timings, most of which were at the end of 2011. Can you tell me how we are going in meeting those targets? Have most of those recommended actions been done on time?

Mr Deegan : Work is underway on those. A number of the jurisdictions are waiting for formal sign-off from the Council of Australian Governments to finalise that work. Most of that is underway.

Senator IAN MACDONALD: As I say, the recommended actions show the timing was at the end of 2011, which has passed five months ago. Is this something that you monitor?

Mr Deegan : We are engaged with the governments and the ports across the country in working on this activity. At the moment there are a number of jurisdictions, in terms of formal sign-off, waiting for the Council of Australian Governments formal arrangements to be finalised. It is in hand. It is a long-term project in any event. We are seeking for each of our ports to have a 50-year plan. People are working pretty hard at that work, the development of key performance indicators, so that we can get our ports in better shape.

Senator IAN MACDONALD: Thank you for that.

Mr Deegan : To give you an example, Mount Isa to Townsville, there has been undertaken a magnificent piece of work driven by the private sector with their public sector counterparts. I think they are hopeful of releasing their 50-year plan for the whole of that supply chain in the next short while, as an example of the sort of activity that is underway.

Senator IAN MACDONALD: I have one specific thing and then a more general thing related to Moorebank, which I will start with. I know Senator Nash has a number of more detailed questions on that and I will pass to her. The Abbot Point proposal, you have done some work on that?

Mr Deegan : Yes. There has been a proposal from the previous Queensland government to Infrastructure Australia for support for the activity at Abbot Point. I have been advised, and as you will know from the media, that the incoming government have taken a different direction on Abbott Point. We hope to have further discussions with them about the future proposals about that important piece of infrastructure.

Senator IAN MACDONALD: We have spoken about this before. Can you just remind me what work Infrastructure Australia had done in relation to Abbot Point, at whose request, what was the purpose of your work and is your work to date concluded?

Mr Deegan : They are all good questions. There are a range of things that we have been doing with North Queensland Bulk Ports in relation to Abbot Point and a number of other ports under their control. Abbot Point is seeking to expand in quite a large way to take on the increasing demand for moving goods and services out of that part of Queensland. We have been working with them on the 50-year planning arrangement for the port, in particular the rail connections in and out of that port, the long-term channel issues and others about the design of how they might be working, loading points. Some of the detail that they were working through includes issues around environmental approvals, which are significant issues off the coast of Queensland with the Barrier Reef, and working with them on how we might help them facilitate some of those processes and of course the funding issues that might be associated with the development of such a large piece of infrastructure.

Senator IAN MACDONALD: You are doing that at the direction of COAG or the Australian government?

Mr Deegan : The National Port Strategy was an outcome of the work that Infrastructure Australia had done and provided that advice to the federal government. The federal government encouraged us to work with the then Queensland government and indeed now the new Queensland government on a range of issues to do with the ports in that state.

Senator IAN MACDONALD: Your role was simply advice? Were you doing some calculations and—

Mr Deegan : Primarily advice.

Senator IAN MACDONALD: Design work?

Mr Deegan : Advice on some of the detail of the port but also the funding issues that would develop around that.

Senator IAN MACDONALD: Have you been officially advised of the change of focus?

Mr Deegan : We have read in the media. We had a brief discussion around a range of port issues with the new minister for transport in Queensland last Friday and his new head of department. We will continue those discussions.

Senator IAN MACDONALD: I guess I cannot take it further.

Mr Deegan : We will keep you informed.

Senator IAN MACDONALD: The new Queensland government has been very open with you on it and on their strategies, and where they are going and what their reasoning is, which I will not go into. You will continue to have a role in that?

Mr Deegan : To the extent that is necessary. We are a small organisation but we will continue to work with them.

Senator IAN MACDONALD: I must say your reputation is continuing to increase.

Mr Deegan : We have our moments.

Senator IAN MACDONALD: The final one I want to touch on, which I know Senator Nash has some other questions about, is the Moorebank intermodal proposals. Have they been referred to Infrastructure Australia?

Mr Deegan : Originally there was a request from the federal minister for advice on the development of an intermodal terminal at Moorebank. Subsequently the Commonwealth government decided to set up the Moorebank Project Office, which is run through the minister's department and the department of finance. Other than recommending the need for the intermodal terminal as part of the National Freight Strategy, we have not been directly involved since then. Mr Mrdak has had the running of that.

Senator IAN MACDONALD: Mr Mrdak, you do not need Infrastructure Australia's advice on this, your department is going to direct the—

Mr Mrdak : As Mr Deegan has indicated, Infrastructure Australia has completed its work. They did some work in 2009 in relation to Moorebank, identified the need for the site and the way it should develop. That advice was then provided to the Commonwealth government. That fed into the decision in 2010 to set up the Moorebank Project Office and move to implementation. In this budget round just gone, the government has reached firm decisions in relation to the relocation of Defence and the funding of the development of that site. Infrastructure Australia's advice role in terms of identifying it as a priority project and also some of the issues involved was then handed to the government for implementation.

Senator IAN MACDONALD: Your department and the department of finance comprise the Project Office; is that correct?

Mr Mrdak : That is correct. It is in fact the department of finance, ourselves and also the Department of Defence.

Senator IAN MACDONALD: Would it be right to say that those three departments, through the Project Office, are now going to do the work that perhaps one would expect Infrastructure Australia would do?

Mr Mrdak : No. Infrastructure Australia did do the advice and prioritisation work in 2009. Subsequently it has become an issue of managing some of the Defence issues, about Defence's timetable for relocation and the threshold decision by the government to relocate Defence from that precinct. It now becomes an implementation task which will be undertaken by the Moorebank Project Office initially. The intention of the government then is there will be a government business enterprise that will be set up that will manage that site into the future to manage Defence relocation and any of the clean-up and availability of that site for private investment.

Senator NASH: What did you say?

Mr Mrdak : The intention is that over the next year or year and a half Defence will move off the Moorebank site, the School of Military Engineering site. The intention is by early next year there will be a government business enterprise formed which will be essentially a company structure which will have a board appointed by the government. The intention is to have people with expertise in development of such projects, which will effectively bring that project to market. Essentially the intention is, and the way it has been structured, is to de-risk the project for the private sector investment. Basically the critical issue is Defence's relocation from that site. Then the clean-up and preparation of that site can go to market, seeking market expressions of interest from the private sector for the development of that site as an intermodal freight hub.

Senator NASH: Then you were saying that the GBE would be privatised; that was the short version of what you were saying?

Mr Mrdak : The GBE will bring it to market, run the tender process. Essentially the GBE would be the landlord, in the same way as we have with airports. We have a landlord model where the Commonwealth is a landlord, there is a lease and then at some point in the future the government flags its intention to sell the GBE.

Senator IAN MACDONALD: It will sell the GBE like they are going to sell the NBN. Ha, ha! Is the advice from Infrastructure Australia in 2009 a public document?

Mr Mrdak : I do not believe it is. I think it is advice to the government. Certainly Infrastructure Australia reports to government have indicated the project as a high-priority project. I do not think the evaluation report itself is public. I will take that on notice, if you do not mind.

Senator IAN MACDONALD: Yes. If there is any way of this committee having a look at that advice, it would be interesting to see it. Because of that, I am not going to embarrass Mr Deegan by asking him what advice he might or might not have given. As I understand it, Defence have a commitment on the site until at least 2014.

Mr Mrdak : That is our estimate of how long it will take for Defence to be relocated from the site. We anticipate the site being available from the end of 2014.

Ms O'Connell : Mid-2014.

Mr Mrdak : I am sorry; mid-2014.

Senator IAN MACDONALD: Defence will leave by mid-2014?

Mr Mrdak : That is our expectation on current planning—around mid to late 2014.

Ms O'Connell : The end of 2014.

Senator IAN MACDONALD: I will be asking Defence about this next week; you might like to tell them so that you have a consistent answer. I would be surprised if they think they are going to be going by 2014.

Mr Mrdak : Certainly the government's decision is that they will relocate in that time frame. I think some of the public commentary on this is not quite understood. There are various parcels of Defence land in that precinct. There is a portion of Defence land, which is the School of Military Engineering site, which is some 220 hectares. That is the site from which Defence will vacate and principally move those operations to the Holsworthy base. Separately, there are areas in that precinct which Defence holds as storage centres, some of which are under lease from private sector operators.

Senator IAN MACDONALD: I understand all that. Defence have to build a new school of engineering with a $5 billion cutback in this year's budget. So it is going to be interesting to ask Defence where they are going to get this money from.

Mr Mrdak : Certainly, provision has been made in the budget from across the portfolios, including Defence, to allow for this relocation.

Senator IAN MACDONALD: Yes; along with the other cutbacks. Mr Mrdak, I understand that you are an implementation department; you do not make the decisions. But, of course, the elephant in that big area of land is the private sector proposal, which would be up and running, I understand from media reports, prior to even your starting to move the school of defence. That is why I would be interested to see what Infrastructure Australia might have told the government back in 2009 about the desperate need for that work to be done, the intermodal for Port Botany. I would be interested to see what Infrastructure Australia would say.

Mr Mrdak : I think the media reporting of the availability of what is called the DNSDC site, which is a logistics site, owned by the private sector but leased to Defence—there is no indication that Defence could vacate that site any earlier than 2014. Defence has a lease until—

Ms O'Connell : It has a current lease, with two five-year options, that goes out to 2026.

Senator IAN MACDONALD: This is for the storage?

Mr Mrdak : The storage—

Ms O'Connell : That is 2023—two five-year options.

Senator IAN MACDONALD: This is for the storage?

Mr Mrdak : That is correct.

Ms O'Connell : Correct.

Senator IAN MACDONALD: Are there buildings on that?

Mr Mrdak : There are.

Senator IAN MACDONALD: But flimsy buildings; they are not terribly permanent buildings?

Mr Mrdak : No. They are quite large logistic centres. They also include Defence's major fuel facility for the region. So it is not an insubstantial facility located on that DNSDC site.

Ms O'Connell : Largely warehousing—

Senator IAN MACDONALD: Media reports from the private proponents suggest that the private alternative would be up and running long before a government business enterprise, like NBN, could even get to their first meeting.

Mr Mrdak : I think the issue here is that Defence has advised the owners of that site that they intend to exercise their lease renewal option for at least one more term of five years. So Defence does not believe it is in a position to vacate that site. There is further work going on, as part of the Defence logistics consolidation process, to see whether they can move off that site earlier. But at this point in time, pending further decisions by Defence, the advice that has been provided to government is that they are not in a position to vacate that site and will exercise their next five-year option because of their need for logistics space. So it is not quite correct to say that at this stage, based on the information we have, the private sector developer can have that site vacated much earlier than the SME site can be vacated.

Senator IAN MACDONALD: The private sector proposal perhaps had an offer you cannot refuse to Defence for perhaps alternative sites.

Mr Mrdak : It does require considerable—

Senator NASH: Mr Deegan, was Infrastructure Australia aware at all or did you have any discussions with the proponents of the private sector proposal for the Moorebank Intermodal?

Mr Deegan : Certainly, back when we did our report we had discussions with a range of players, including those with property rights over the site, both private and public sector, and then a range of other logistics players who are seeking to get access to the site—the Woolies, the Coles and others.

Senator NASH: I am just trying to get a handle on all of this, so correct me if I am wrong. I understand that there are two separate sites though. There is one site for the government proposal and one site for the private sector proposal; is that correct?

Mr Deegan : Mr Mrdak has been more intimately involved in the last couple of years and might be able to respond more directly on that.

Senator NASH: Sure; but they are separate land areas—

Mr Mrdak : Essentially they are. There are two parcels of land. There is the consortium Qube Logistics, which now controls the site, which is an 80-hectare site on one side of Moorebank Avenue; and on the other side is the School of Military Engineering base, which is 220 hectares.

Senator NASH: What sort of determination did you come to, Mr Deegan, about the private sector proposal? Obviously you have given advice back to government about that particular proposal. Part of your job is to deal with the big end of town, and I would suggest that this is a very big-end-of-town quite well-structured proposal. In what context did you look at it and who did you give advice to about it, and how did that process work on the private sector site?

Mr Deegan : Yes, this is a very important project. This is vital, not just to Sydney, but to the nation. This is a significant project—

Senator NASH: When you say 'significant project', there are two. So you mean an intermodal—

Mr Deegan : The whole of site. All the bits are an important part of the solution to Sydney's needs and the nation's needs. When we did our work in 2009, we were asked by the federal Minister for Infrastructure and Transport for advice about the significance of the site, the importance of developing a large intermodal terminal to take the weight off both Botany, and then some of the logistics issues about road and rail through to Melbourne, Brisbane and the like—

Senator NASH: Which all makes good sense.

Mr Deegan : It is a complex piece of work. That was the nature of our advice. Since then, I think, as Mr Mrdak has indicated, the government has taken some steps for a process to handle the detail of those matters with the proponents involved.

Senator NASH: At what point did you stop interacting with the private sector proposal? Obviously there was a point at which the department finished the need for advice from Infrastructure Australia about that particular proposal. So at what point did the interaction with the proponents of the private sector proposal cease for Infrastructure Australia?

Mr Deegan : In a formal sense, once we produced our 2009 report. But, clearly, we have been involved with a range of these logistics players on a day-to-day basis.

Senator NASH: Absolutely. And since that time?

Mr Deegan : Yes, we had involvement with them, but the formal process has been conducted by the various departments.

Senator NASH: Would you say then that the proposals are competitive in nature or complementary? Again I am just trying to get a handle on this. At the end of all this, will one go ahead, or are we going to end up with both going ahead for some reason and have duplicating, competing interests? Are they two entirely separate proposals or are they in some way complementary? It does not seem like they can be.

Mr Deegan : Mr Mrdak might be in a better position to respond.

Mr Mrdak : Our view is that they are complementary. As Mr Deegan has indicated, you can look at the freight forecasts for Sydney growth—Sydney's intermodal terminals and Port Botany and the national freight task. Essentially, when we started this process we had three major objectives. Moorebank defence site, the SME site, was identified some years ago, in 2004, for this type of development because of its proximity to the southern Sydney freight line and the M5. Also, it was a large enough parcel of land which could be developed. So, when the decision was taken in 2004 to start investigating this site, it was driven by three things: firstly, a site large enough to accommodate a port operation to support getting more boxes on rail out of Sydney ports; secondly, a facility large enough to be able to provide for an interstate freight facility—and this is critical in terms of the decision that the government has reached. There are so few sites remaining in Sydney which can accommodate an interstate train—essentially a train of up to 1,500 or 1,800 metres which can be broken up or built up into larger trains for interstate trade. The third area is to provide a facility which provides open access for a variety of players into the freight logistics market. At the moment Sydney's intermodal freight needs coming out of Port Botany seem to be served by two rail locations—Chullora and Enfield. Both are relatively small facilities. They are capped and constrained and have a very limited life. Also, neither facility is of a size able to undertake the interstate freight task. The difference here is that, when we look at the proposal that is on the table from the private sector proponents—

Senator NASH: Mr Mrdak, can I just pull you up? I am very conscious that the general nature of the Moorebank Intermodal probably sits better in 'nation building', and I know that other colleagues have questions specifically of Infrastructure Australia. So perhaps I can just finish specifically on the bits that impact Infrastructure Australia, if that is okay, and we can move back to what you were saying in a broader discussion around nation building.

Mr Mrdak : I am happy to do that.

Senator NASH: Thank you. Mr Deegan, in terms of demand for the intermodal in the region—I imagine that was at the forefront of what you were doing, regardless of which one—how much of a priority would you say is the demand for this particular type of intermodal? How quickly does it need to be built in terms of those demands you were talking about before? What sort of priority is it; and how quickly does it need to be expedited?

Mr Deegan : In terms of the issues surrounding Sydney, the current Port Botany is moving roughly 1.9 million containers. The third terminal has been developed and is close to ready for proceeding, which would bring Sydney up to between seven and eight million containers per annum, which is the size of Hamburg in Germany, which is a major port in its own right. The current planning approval is capped at 3.2 million containers, so there are some planning issues associated with this as well. But, in terms of the demand we see coming through Sydney and the need to get the road and rail issue sorted out, the M5, the southern Sydney freight line—the issues that you would be familiar with—Moorebank is one of the highest priorities that we would accord to national infrastructure.

Senator NASH: Given that there seem to be competing interests here, is there sufficient demand for two intermodals side by side—which, to me, as a layman, seems not likely? Or, in the view of Infrastructure Australia, which has all the knowledge in this area, is there only room for one?

Mr Deegan : This is a large site and the internal issues are being resolved between the departments and the proponents.

Senator NASH: That is a very good answer; I like that one. I have just a few more questions and then I will defer to colleagues. You have looked at both proposals. How do they compare and what are the differences?

Mr Deegan : No. We did not look at the detail of each of the proposals—the departments have undertaken that work.

Senator NASH: As you looked at both of those, obviously then in a superficial way, was there anything that sprung clearly for Infrastructure Australia where there were any differences?

Mr Deegan : Our concern—and, if I can say on their behalf, the concern of Infrastructure New South Wales—is that this site get moving as quickly as possible and that the challenges that are facing Sydney are resolved as expeditiously as possible.

Senator NASH: So out of all of those priority areas that you very clearly outlined, is the issue of the interstate ability to shift the freight as much of a priority as addressing all of these other key areas that you are talking about?

Mr Deegan : Those issues are all combined. It is a complex issue, moving both intrastate and interstate. Most of the containers from Port Botany are distributed in Sydney. But moving from Port Botany across the M5 or the M4 is a significant constraint, as are rail issues. The advantage of having an inland port, as proposed with the Moorebank Intermodal terminal, is that you take the pressure off those other systems and provide an opportunity to break loads, pick and unpack and move goods and services in a more efficient and effective way throughout Sydney. So it is a combination of intrastate, Sydney and interstate. You have a whole host of these issues.

Senator NASH: I think Mr Mrdak said before that that proposed site is more suited to interstate. Is there any reason that the private consortium could not do interstate facilities as well?

Mr Deegan : I am sure that Mr Mrdak has had a look at that.

Senator NASH: I will come to that—

Mr Mrdak : Essentially it is the size of the site. It is only an 80-hectare site and would not accommodate interstate trains.

Senator NASH: Finally then, Mr Deegan, in terms of the two projects—and I understand that you have had only an overlay kind of look at these—did you get a sense of time frame-to-completion for both projects?

Mr Deegan : They are two different propositions. One is in the private sector and then the Commonwealth is dealing through the Moorebank project office. They would be in a better position to advise on that matter.

Senator NASH: Okay; I will come back to that.

Senator LUDLAM: Mr Deegan, it will not surprise you to hear that I have a question for you about oil prices and the way infrastructure—for the Hansard record, Mr Deegan just nods in resignation.

Mr Deegan : Not in resignation; it is an important issue.

Senator LUDLAM: In intense anticipation.

Mr Deegan : In anticipation.

Senator LUDLAM: Of another round. I put to you that in the May 2012 IMF report—probably not often quoted by Greens senators in this place, but anyway—The Future of Oil: Geology versus Technology, they talk about crashing through a pain barrier as the price of oil doubles in inflation-adjusted terms over the next decade. The basic premise is that economists cannot find oil. The price signal is going to be pushing upwards as we move into the age of depleting oil. Has that report had any bearing on the way you assess prioritisation of your proposals or recommendations to government?

Mr Deegan : I have not yet read that report, but I will make sure that it is reading for tonight.

Senator LUDLAM: Great. It will probably be an excellent read. In the broader context, what can you tell us, since the last time I asked you, about the way the IA assesses infrastructure proposals as to whether they are going to be obsolete by the time they are built if, for example, the IMF turns out to be right?

Mr Deegan : We have been looking—and I hope that I have left you with this information—at the detail of a range of proposals that are coming before us, including the opportunities that may arise out of doing things differently. You might have seen, for example, my counterpart from Infrastructure New South Wales talking about moving people out of travelling at peak hour; starting to change the load we put on our systems, whether they are road or rail; whether there are ways of more effectively using our road transport by bulking up, using more public transport, buses and the like; finding ways to work through where we locate our citizens. There is a fairly robust debate going on in the state of New South Wales as to the location of a particular rail project. Is it best to try to get the people from north-west Sydney into Sydney CBD or should we be looking at alternative options, a range of options, including the Sydney CBD but as well as, say, Parramatta? Are there opportunities for more people to work from home? A whole host of these issues, including the issues you have raised, we try to consider in our strategic assessment of projects that come before us.

Senator LUDLAM: Can I bring you home for a second though? Not on the scale, obviously, that is going on in Sydney but a similar kind of situation is occurring in Perth, where there is a colossal investment underway at the moment into urban freeways and road widenings and the Great Eastern Highway, primarily funded by the Commonwealth government. So, while on paper it looks as though these things are certainly been borne in mind, there is not a kilometre of light rail under construction in Perth—

Mr Deegan : Senator, I am shocked. There is a significant investment in public transport in Perth—

Senator LUDLAM: How much is that funded by—

Mr Deegan : recommended by Infrastructure Australia. They are currently under construction right in the middle of Perth.

Senator LUDLAM: You are burying the railway line. We have had this discussion before. It is a good project—

Mr Deegan : It is a great project.

Senator LUDLAM: It is a great project—

Mr Deegan : As long as we are all very clear on that—it is a great project.

Senator LUDLAM: But not a single additional kilometre of rail is going into my home city.

Mr Deegan : But it will make a substantial difference to the operation of that railway. It will bring more people to public transport. It is a very important project for many of the reasons you have articulated.

Senator LUDLAM: All right; but I do not think—

Mr Deegan : There are proposals, as I understand it, for light rail that are being considered between the state and federal governments.

Senator LUDLAM: I am going to put this to the department a little later: has Infrastructure Australia got any kind of submission or proposal from the state government for light rail, either an implementation study—which is, as you are aware, underway—or project funding?

Mr Deegan : I think the implementation study is funded through the department. But we are in close dialogue with the state of Western Australia. I have another meeting organised with their senior officials in the next week or two to discuss this and a number of other proposals.

Senator LUDLAM: Great. Did the state government, either at a political level or a departmental level, request the $4 million that was allocated in the last federal budget for the study?

Mr Deegan : Mr Mrdak might be in a better position to advise you on that.

Mr Mrdak : Yes. It was developed with the Western Australian government.

Senator LUDLAM: So there is no cause and effect going on—but it was not a surprise to them that four million bucks fell out of the sky on budget night?

Mr Mrdak : No. There were discussions with the Western Australian government, but there is no doubt that the Australian government led the initiative in terms of progressing it.

Senator LUDLAM: So it was proposed by the federal government that the Commonwealth make a contribution to that study?

Mr Mrdak : Certainly the Australian government has been looking to try to progress consideration of light rail in Perth for some time.

Senator LUDLAM: Good. No project on the cards yet, I am aware, but at least it is under study. Last time we were here you confirmed that there is an allocation within the federal budget, if it comes through, for the development of a private port at Oakajee. On a broader level, I am interested in the ratio of Infrastructure Australia funding to benefit private industry over the general public. I am interested to know—you can table this for me on notice if you would like, because I do not imagine that you will have it here—the breakdown nationally of IA funding that has been awarded to port and rail projects that specifically support private industry as a ratio to public projects, such as road funding, passenger rail—

Mr Mrdak : I do not think you can describe the Australian government's contribution to Oakajee as a contribution to the private sector; it is a common use infrastructure, which has enormous opportunity to open up the mid-west region of Western Australia for—

Senator LUDLAM: For private mining—

Mr Mrdak : No; for the community of that region.

Mr Deegan : And for the nation. I agree with Mr Mrdak. This is about building the nation. We are looking at projects of economic significance to grow the wealth for all Australians.

Mr Mrdak : And the Oakajee port project is common use infrastructure for a variety of users, which opens up economic development in the mid-west.

Senator LUDLAM: What users could you list for me, apart from private mining companies, in the mid-west?

Mr Mrdak : The development of the port facility opens up the port. It is not just for the mining companies but also other port users, including recreational users, in that region.

Senator LUDLAM: There is a perfectly good port 20 kilometres to the south of Geraldton. This is a port for mining exports. Let us not pretend it is something else.

Mr Mrdak : No; it also supports a significant Western Australian government initiative around creating a business development zone around that port area which will drive growth in the mid-west region. So I do not think we would accept your assertion that this is about driving or about supporting the mining sector alone. It is certainly an opportunity to support mining, but it also opens up broader economic opportunities for the mid-west.

Senator LUDLAM: I would be delighted to know what they are.

Mr Deegan : Including employment, including the sorts of services that Geraldton cannot currently provide because of a range of constraints that it has both as a port and for the development area to the south. There is a whole host of issues associated with Oakajee that will drive benefit and wealth for the nation.

Senator LUDLAM: I wonder whether this has a bearing—or whether you have said, 'No I will not provide an answer to that question on notice'—on funding that has been awarded to support extractive industries as opposed to funding that has been awarded to support roads or passenger rail or public transport initiatives. Is it possible to provide a break-up?

Mr Deegan : Projects are all available in our June 30 report that we publish each year and they are all available on our website—the ones that are being funded. It is easy enough to give you a printout of the page and mark up which is which. But they are all driven, rather than on a political basis—that might have been the case in the past—on an economic assessment about the benefit that these projects will give to Australia. So it covers a range of areas.

Senator LUDLAM: No, I do not need help with a printout; but I could use a hand with a mark-up, if you are offering to do that for us.

Mr Deegan : Sure; happy to do that.

Senator LUDLAM: Just in two different colours of highlighter pen; that would be appreciated.

Mr Deegan : I am not sure whether that will survive the computer, but we will find a way.

Senator LUDLAM: Yes. You would be familiar with the COAG Reform Council's Review of capital city strategic planning systems report—a bit of a mouthful—which was released in April. Infrastructure Australia does get a passing mention in that report. Have you had a chance to go through that yet to view the bits that are relevant to IA?

Mr Deegan : Yes. We have worked very closely, as has the department, with the COAG Reform Council in preparation of their report.

Senator LUDLAM: Do they acknowledge your role?

Mr Deegan : You would have seen our press release that was issued on the day of the report, supporting very much the work that the COAG Reform Council had done.

Senator LUDLAM: Good. It is a very useful study. I think it is going to improve decision making and allocations. That is what I want to get to. They note your role, your independence and your place on the institutional map. But then they note that it is not clear how integral this advice—that is, your advice—is to Commonwealth government budget decision-making. I put that to the CRC the other night and got an interesting response. What is your view of what they are on about there?

Mr Deegan : What was their response—so that I do not cross over their view?

Senator LUDLAM: No; I would be happy for you to cross over it.

Mr Deegan : We have a good working relationship with them. Our advice is recognised by governments. As my chairman would indicate, advisers advise and governments decide; that is the appropriate mechanism.

Senator LUDLAM: However, reading that—hopefully not maliciously—your advice is not turning up in the federal budget perhaps as much as the CRC thought it should.

Mr Deegan : Of the original 10 projects we recommended, 10 of them have been funded. That is not a bad score.

Senator LUDLAM: How is Infrastructure Australia working with the CRC currently? That has now gone off to one of the COAG subcommittees. Are you still directly engaged with them?

Mr Deegan : We have a very close working relationship with the COAG Reform Council. We continue our work on the theme established by the council about projects and strategies and planning to transform Australia's cities, and we will continue that work.

Senator LUDLAM: I want to put this to you: I do not know whether you have what you would call a rating tool or some formula or some mechanisms for evaluating projects that come before you. I guess I should get my language clear before I proceed. What do you refer to your model as?

Mr Deegan : We have a seven-step assessment phase. The key issue we seek from proponents is a clear identification of the problem that they are seeking to resolve and then a range of options that might best meet that and then an economic assessment on a cost-benefit analysis of the preferred option.

Senator LUDLAM: Okay.

Mr Deegan : Often we have people—as you know; we have had this discussion—come and say, 'Here's the answer,' and we have asked, 'What was the question?'

Senator LUDLAM: 'What was the question you were asking?'—indeed. Are you aware of the Australian Green Infrastructure Council's new—and to my knowledge the first—national infrastructure sustainability rating scheme?

Mr Deegan : Yes.

Senator LUDLAM: You would be well aware of that. That looked reasonably comprehensive to me as something that is a bit more transparent than the methodology that IA uses.

Mr Deegan : Ours is completely transparent. It is all available—

Senator LUDLAM: But you have never been able to tell me how you assess projections for future oil prices.

Mr Deegan : It is all through there. We publish it. We can walk you through it in detail.

Senator LUDLAM: Okay.

Mr Deegan : But we will be using—

Senator LUDLAM: But not here or in the previous session or in the one before it.

Mr Deegan : We will be using the Australian Green Infrastructure Council to guide our work as well.

Senator LUDLAM: You will? Yes, that was where I was heading. Were you involved in the development of that tool?

Mr Deegan : No. They have done that independently, but we are certainly aware of the work they have undertaken and we are close to a number of the players in that field.

Senator LUDLAM: How will that work guide your decisions from here on?

Mr Deegan : We will take it and have a look at it and see how we might adapt that to—

Senator LUDLAM: Will it be incorporated into your assessment?

Mr Deegan : We will look at that.

ACTING CHAIR ( Senator Gallacher ): At this point, can you consider perhaps putting some of these questions on notice?

Senator LUDLAM: Yes. I will wrap it up there and bung the rest of these in, in writing, if you would like, Chair.

Senator BACK: Turning to questions in tourism, starting with the Australian Rural Road Group's concerns with regard to the road crisis. In 2011 in your annual report to the Council of Australian Governments, entitled Communicating the Imperative for Action—you called on the Prime Minister and the premiers to install a national reporting system and a national road portfolio manager to analyse and report on the nation's road condition and cost pressures. Can you tell us what reaction there was to that recommendation to COAG?

Mr Deegan : There has not been a formal response, but we continued negotiations and discussions with the states and the Commonwealth on a range of those issues. We felt that report by the Australian Rural Road Group was well considered and properly thought through, with the private sector interested in taking a role in road funding where it would be of economic benefit to them and starting to have a different discussion about a road system, as to those roads that might be considered economic versus those that are of social need, that the rest of the community may need.

Senator BACK: They are frustrated, of course, with the fact that they believe a lot of information that is required and could be accrued centrally does not exist at local government and other levels. Can you assist the committee at the moment with the extent to which there is nationally coordinated information on the actual local road network and its condition, or are we not at that point yet? If not, what action is being taken to get us there?

Mr Deegan : Sure. The department may be able to respond further as well. We are aware that a range of councils across the country do have detailed asset management plans, and in many cases they work closely with their state counterparts. The proposal that has been worked up by the Australian Rural Road Group is to bring that into a national portfolio approach, so that you can take some decisions about where roads need to be funded, and how the private sector might play a different role in that. We are starting a different journey.

Senator BACK: A pleasing aspect of their report is that they say there is not actually a need for more money; there just needs to be a distribution or allocation of funds to where the priorities are greatest in a whole range of areas—road safety and deterioration, et cetera.

Mr Deegan : That is right. I think it is a well thought through report and it is an initiative both from the councils and the private sector that should be acknowledged. I appreciate that you have brought it up and I am sure they will, too.

Senator BACK: The other area, totally unrelated, is that we have an education and workplace relations committee looking at engineering and related skills in this country. Engineers Australia and another witness reported to us the other day that their best estimate is that we are losing—'we' presumably being the taxpayer—upwards of $6 billion a year in infrastructure projects that, because of inadequate supplies of engineers and those linked to them, are not being properly defined in the first place. Tenders are not being correctly written, reviewed and allocated, there are delays in projects actually being undertaken and completed, there is poor quality work and then there is the need to go back and redo work post completion. Are you familiar with that evidence, or that information presented to us as evidence, and does that figure of $6 billion per annum on infrastructure projects surprise you?

Mr Deegan : Senator, I am not familiar with the evidence, but I will take that on board.

Senator BACK: I only raise it because, if there is any element of truth anywhere near that figure, it seems to me that there is the potential for us to dig into it for the benefit of all parties.

Mr Deegan : In terms of tendering, the Infrastructure Australia council will consider on Friday a report on the procurement processes. We will be providing advice about a benchmarking project so the private sector can see the sorts of time lines there should be for simple tenders, more complex PPPs and the like. We have had a very positive response from jurisdictions to that. They feel there is a need to benchmark and to push people to draw the time lines tighter and get the information prepared upfront. That would make a substantial difference to some of the cost issues and certainly some of the frustration issues that go with tendering, and we would try and drive some of that change. In terms of the impact of loss of engineers on that particular issue, I will take that on notice.

Senator BACK: Finally, and very quickly, regarding the Western Australian port-to-port intermodal program, for which there is of course support from you: where are we now? Where is the Western Australian government and where is the federal government in that process with the hub based around Kalgoorlie?

Mr Deegan : Again, the department might give you the details of the funding, but there was an announcement by the federal minister and the state minister about the Port Link project to link Kalgoorlie to five of Western Australia's major ports—Esperance, Bunbury, Fremantle, Oakajee and potentially Hedland in the future. That is a significant piece of work and it will fit very neatly into the National Land Freight Strategy, which will be released shortly by the federal government. We are in some discussions, again with the Western Australian minister, about the north-west highway and how that might fit and, indeed, the longer term capacity for rail into that precinct as well.

Senator COLBECK: I want to ask some questions about the work that you are doing in Tasmania around the export freight issues that they have been dealing with. My understanding is that you were going to hand a report to the government by early May; is that correct?

Mr Deegan : That is correct. I am hoping that it will be released shortly. The federal minister asked that I undertake some further consultation after a discussion I had with him towards the end of April, which made a lot of sense.

Senator COLBECK: That is fine. So you have handed him the initial report?

Mr Deegan : I have had a discussion with him about the report. I have not yet handed in my report. That is imminent.

Senator COLBECK: Okay. Can you give me an indication of the general issues that you have looked at in the report?

Mr Deegan : Sure.

Senator COLBECK: I know you cannot tell me what the findings are.

Mr Deegan : I will just give you a copy to save time and we will move on. There are a host of issues. I have been looking at the medium- and long-term issues, while the department has been dealing with the particular impact of the removal of international shipping or the change in approach, particularly around the coordination between both road and rail and access to the ports.

In the National Land Freight Strategy we are looking at different truck combinations that Tasmania, I think, would be well advised to consider. Considering the long-term impact of rail and moving to 25-tonne axle loads will be a big change. Again, we are looking at this as a national standard and what impacts that might have on the state of Tasmania. Further to that, there is in my view—after meeting with many, many of the exporters and people moving goods and services to Melbourne and elsewhere—a need for that integration and coordination around the supply chain.

There are lots of fragmented pieces of work that just need to be joined together and, in my view, driven by the private sector. Industry will need to get an opportunity to grab hold of these issues and try to resolve them. It is also about working a lot closer with the Port of Melbourne and their mainland supply chain issues as well. You are moving fruit, vegetables, cattle, chocolate—whatever it might be. What are the supply chain issues all the way through that need to be considered? I think there would be a considerable benefit for Tasmania by drawing this together in a more concerted fashion.

Senator COLBECK: What about the specifics of the export issue and the loss of the AAA service? That has been one of the key elements of it. You have a couple of major players in that particular district but plenty of others who have suffered a significant increase in cost by virtue of the fact that they then have to tranship through Melbourne and the cost impost that comes with that.

Mr Deegan : The federal department and I have met with a range of those players. The government—and, again, the department might be in a better position to comment on this—has announced a $20 million package.

Senator COLBECK: I am aware of that.

Mr Deegan : The details of that are being finalised with the Tasmanian government.

Senator COLBECK: I think that is being administered by the Tasmanian government.

Mr Deegan : Yes, the Tasmanian government and the federal department.

Senator COLBECK: That is a short-term measure to deal with—

Mr Deegan : Principally, yes.

Senator COLBECK: the current issues.

Mr Deegan : There are some issues around Burnie Port—whether some money on infrastructure there might be suitable. Those sorts of things are being considered.

Senator COLBECK: It appears that you are looking at local mitigation within the local supply chain getting to what is effectively the export hub in Melbourne.

Mr Deegan : That is correct.

Senator COLBECK: There is no discussion around what might facilitate a direct service out of one of the northern ports in Tasmania?

Mr Deegan : The evidence we have to date from the suppliers, the customers and the shipping lines is that it is unlikely to see an international shipping arrangement in the short, medium and potentially longer term, principally to do with the greater size of ships, and I will be covering this in my report in greater depth. The channel depth for each of the major northern ports in Tasmania will be insufficient to cope with that and there is unlikely to be sufficient demand for a large ship to do the 'milk run', if you like, in Tasmania.

Senator COLBECK: I understand.

Mr Deegan : There is a significant change in international shipping that will affect Tasmania.

Senator COLBECK: What about issues around the TFES and its incorporating capacity to take up export product as far as that scheme is concerned?

Mr Deegan : In my report I am going to make some comments around the TFES.

Senator COLBECK: Do you have any thoughts at this stage around the WTO implications of that?

Mr Deegan : I think that is being considered by the department in terms of some of the advice that they have. The department manage TFES. There are some concerns around its long-term viability and issues associated with getting the freight logistics in Tasmania better linked into Melbourne and then the mainland supply. There are a range of distortions within the current system as well.

Senator COLBECK: I accept and understand that. This is something I have been following over a fairly reasonable period of time, in fact, particularly since the productivity review and the commission review in 2006.

Mr Deegan : We went back to read the Nimmo Report and it is original comments around rail.

Senator COLBECK: That does not effectively get over the issue of Bass Strait being a very expensive piece of water, regardless of anything else. I think a container out of Bell Bay to Singapore was something like $1,800. It was a similar price from Melbourne to Singapore and you were adding perhaps $1,300 to $1,800 or $2,000, depending on what it was to get it across Bass Strait. It is a significant impost.

Mr Deegan : There are some significant issues in that discussion. It is a very expensive piece of water. Again, in my report I will be providing some advice to the federal government on that issue.

Senator COLBECK: Do you have a final view as to whether it might breach WTO obligations?

Mr Deegan : I do not at this stage. The legal issue is being dealt with by the department.

Senator COLBECK: I will ask them about that later. I have asked the Parliamentary Library to do something for me. I have a paper they have done on that for me, which gives me some indication. I am just interested to know what the broader government thinking is. I am not sure that I can take that too much further. Did the proposal from Geoff Lyons for $20 million to attract some Bass Strait based shipping to Tasmania come across your desk?

Mr Deegan : I have seen a copy of the correspondence to Mr Albanese, yes. That then triggered the request from the minister for me to do some work on the medium and longer term issues associated with freight. The department has been dealing with the issue of allocating funds.

Senator COLBECK: Was that not separate to the other process that was occurring?

Mr Deegan : The minister took the view that he wanted advice on the immediate issue but also some of the longer term issues. I have been dealing with the longer term issues.

Senator COLBECK: I understand that is certainly a consideration.

Mr Deegan : The refreshing part of this is that we are starting to think in the longer term—the 10-, 20-, 50-year approach—on some of these big issues rather than just in terms of today. That gives us some heart.

Senator COLBECK: That is appropriate if the circumstance is that Melbourne does become the regional hub for the port. In the circumstance that Melbourne is accepted and acknowledged as the regional hub for export for the region, does that change the perception in relation to the WTO issues around the TFES?

Mr Deegan : I could not answer that at this stage. The department might be able to answer that later, or alternatively we will take that on notice and get you the detail on that.

Senator COLBECK: I would be interested in an answer, if you could take it on notice. It is one of the sixty-four million dollar questions as part of this whole discussion. I understand that the department and others have been struggling with the question as well, as part of this overall process. The proposal that is in front of you from the Tasmanian government in relation to the intermodal and the port expansion at Bell Bay forms part of this overall discussion?

Mr Deegan : It does, yes.

Senator COLBECK: It would be integrated into that paper?

Mr Deegan : The report will be the response, yes.

Senator COLBECK: Thank you.

Senator EDWARDS: My question goes to the Building Australia Fund and particularly the national projects—the Goodwood and Torrens junctions in Adelaide.

Mr Deegan : The question could come to me first.

Senator IAN MACDONALD: We are all on our neck, so go your hardest.

Senator EDWARDS: I am interested to know: there is $232,100,000 committed to that from the Commonwealth. It is in its planning stages. Have the South Australian state government locked into their part of the deal on that?

Mr Deegan : That will be a question for the department.

Senator EDWARDS: It is in planning at the moment. What is the next phase? When does it go to the next level?

Mr Deegan : The department will need to respond to that. Our process has been to assess whether this is a project of national economic significance and is one that has passed our testing process. The implementation and funding arrangements are managed by the department, quite appropriately.

Senator EDWARDS: How did it come about that these projects came to your attention?

Mr Deegan : It is a process that we have had over the last four years dealing with governments across the nation on a range of projects. Originally, in the first round, 1,000 projects came to us. We have been going through a detailed assessment of those and other projects that have developed from the National Ports Strategy, the Land Freight Strategy and others. It is an iterative process about trying to develop that national infrastructure.

Senator EDWARDS: Has the member of Adelaide dealt with you on these projects, given that they are all solely in the member for Adelaide's electorate?

Mr Deegan : Various members may have been in touch with the minister but certainly not with me.

Senator EDWARDS: Could you take on notice what involvement there has been?

Mr Deegan : I have not had any involvement from them.

Senator EDWARDS: No, with the department.

Mr Deegan : The minister would respond to that.

Ms O'Connell : We have not held discussions with the member for Adelaide on the project. The project, as Mr Deegan outlined, was part of South Australia's submission to Infrastructure Australia seeking funding and support for the project. It was rated as ready to proceed, I think, in the 2009 Infrastructure Australia report. The federal government in its budget made a decision to fund half of the cost of the project, the $232.1 million.

Senator EDWARDS: Effectively, you are finished with it, Mr Deegan—your side of it—but it will come up in the next—

Mr Deegan : Yes.

Ms O'Connell : Correct.

Senator EDWARDS: Thanks.

ACTING CHAIRMAN: Thanks very much, Mr Deegan, and Infrastructure Australia. We will now break for afternoon tea.

Proceedings suspended from 16:15 to 16:31