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Address to CEDA 'State of the Nation' Convention 2008, Canberra.



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AddresstoCEDA'Stateof the Nation'Convention 2008

Friday,6 June 2008

HotelRealm,Canberra

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Introduction Thank you for that introduction Jim, and good morning ladies and gentlemen.

I’d like to start today by going back a few years to 2004, when CEDA released Working Paper 54, entitled ‘Infrastructure: Getting on with the Job’.

The report remains one of the most important and influential publications you have produced over the last 48 years.

It not only helped put infrastructure on the contemporary national agenda, it also helped cement your reputation as a body committed to articulating Australia’s most significant economic challenges.

Headlining the report was CEDA’s research arguing Australia faced an infrastructure backlog of some $25 billion.

It’s a figure I’ve quoted on more than one occasion to highlight the enormity of the job ahead of us.

It also shined a light on how the previous government got itself into this predicament.

It said, and I quote:

State and federal governments are at loggerheads… Governments appear unjustifiably shy of assuming the long term liabilities needed to fund long-lived infrastructure. And governments may now lack some of the skills required to assess infrastructure needs.

Back in 2004, I could not have agreed more.

But with the election of a Rudd Government committed to continuing the proud Labor tradition of nation building, these sentiments simply don’t ring true anymore.

Today I will outline how the Government is putting the necessary structures in place to tackle some of the issues identified in your working paper.

I will discuss why we are taking a long term view of Australia’s infrastructure needs, not just in the three years between election cycles.

And how well-planned infrastructure provides the arteries of a successful, modern economy, helping to lift productivity and drive sustainable low-inflationary growth.

I will talk about how we are making sure the Government has the necessary expertise in place to advise us on our future infrastructure challenges.

And I will outline how this Government is improving cooperation with the states, for example, through the development of the National Transport Plan.

The Costs and Benefits of Infrastructure

The Rudd Government has been in office for only six months, but in that short period of time, we’ve been laying some very important foundations to tackle our nation’s infrastructure shortfalls.

We’ve made infrastructure a number one priority, because for too long Australia’s infrastructure needs have been neglected.

Because of this neglect, our nation has fallen behind the rest of the pack.

Inaction - despite warnings from the Reserve Bank of Australia about the inflationary pressure on the economy caused by capacity constraints.

According to the OECD, Australia rates 20th out 25 countries when it comes to investment in public infrastructure as a proportion of national income.

Our response is built around new structures like Infrastructure Australia, the Building Australia Fund and the Major Cities Unit.

Establishing these new structures has been a priority for us, because we understand the costs of inaction are high, and rising.

On one estimate, infrastructure shortfalls are costing us 0.8 percent of GDP in lost production each year.

We know that when our infrastructure networks are under-funded, over-stretched or out-of-date, our economic prosperity is threatened.

My Department’s Bureau of Infrastructure, Transport and Regional Economics also estimates that, if no action is taken, the cost of urban congestion for families and businesses will be something like $20 billion in 2020.

Tonight, many of you will board a plane bound for Sydney and Melbourne.

I’ll bet that many of you will spend more time trying to wind your way through the traffic when you get home, compared to the time it actually took to fly there.

Quite frankly, I find it an absolute travesty that many working parents living in our major cities spend more time commuting to work each day than they do spending it with their kids.

Making in-roads into this problem won’t be easy - it will take time and a considerable amount of cooperation from everyone.

And it will require a systematic approach - action across all modes of transport and action across different infrastructure types.

Tackling these bottlenecks is a key component of the Government’s efforts to put downward pressure on inflation, and to boost our nation’s productivity.

For too long, investing in our infrastructure has been viewed as a cost, rather than an investment in our economic capacity.

In terms of transport infrastructure, investing in our freight routes - particularly those to ports and inter-modal facilities - enables our

manufacturers, farmers and miners get their goods to domestic markets quicker and more safely.

Faster, more efficient freight travel means we reduce the transport costs for groceries on the supermarket shelves.

Less stop-start congestion reduces fuel consumption and limits greenhouse gas emissions from vehicle exhausts.

For exporters, better road and rail links are vital if they are to remain competitive on the world stage.

Looking outside the realm of transport infrastructure, 21st century broadband is another crucial component to improving our nation’s economic capacity.

That’s why we are investing up to $4.7 billion in the National Broadband Network, so Australians can access fast broadband services.

Investing in these crucial areas - roads, rail and broadband, not to mention energy and water - are crucial to sustaining our long term economic prosperity.

Getting the structures in place

We are committed to taking a long term policy perspective with an eye to future generations, not just those of us in this room today.

I mentioned earlier that in your 2004 report, CEDA identified a lack of skills within government as a barrier to assessing Australia’s infrastructure needs.

Up until now, we’ve lacked the involvement of experts from outside government to help find innovative solutions to Australia’s infrastructure challenges.

Infrastructure Australia

Just a few weeks ago I announced members of Infrastructure Australia, which sent a very clear signal the Government is serious about working with the private sector when it comes to investment in infrastructure.

We are committed to being inclusive and giving experts from the private sector a long overdue seat at the table.

The Council includes Phil Hennessy from KPMG; Mark Birrell from Infrastructure Partnerships Australia; Heather Ridout from the Australian Industry Group; Ross Rolfe from Babcock and Brown; and Garry Weaven from Industry Funds Management.

Ably assisted by appointees from the public sector, and led by the experienced Sir Rod Eddington, this group will be able to cut through and identify the critical issues facing Australia’s infrastructure.

The Council met for the first time on Wednesday, and it demonstrated to me that each of the board members is personally committed, like I am, to make sure Australia has the infrastructure it needs to enable our nation to prosper, and to reach its full economic potential.

Infrastructure Australia has a few busy months ahead of it.

This year its first two tasks will be to provide COAG with best practice national guidelines for public private partnerships, and to undertake an audit of nationally significant infrastructure.

After their audit is complete, Infrastructure Australia will provide COAG with its priority list, which is set down for March next year.

It’s this priority list that will help guide future investments we make from the Building Australia Fund, which the Treasurer unveiled on Budget night last month.

The Building Australia Fund shows we are putting our money where our mouth is when we say the Government is back in the business of nation building.

We have already made a $20 billion down-payment into the fund which will be used to build modern infrastructure such as roads, rail and ports.

Establishing Infrastructure Australia and the Building Australia Fund embodies the Government’s new approach to providing long term solutions to our infrastructure needs.

And working behind the scenes, the COAG Infrastructure Working Group is meeting on a regular basis to provide ongoing guidance, national coordination and support to Infrastructure Australia.

As you can see, the Government is adopting a systematic approach to implement our infrastructure agenda.

It is one based on thorough research, engaging the brightest minds, and making decisions in Australia’s best long term interests.

Critically, our approach has moved us away from short-term decision making, which pervaded the previous government’s way of thinking when it came to funding infrastructure projects.

This Government is committed to nation building, in the national interest.

Not funding projects that will help to get us elected in three years time.

Major Cities Unit

Working closely with Infrastructure Australia will be a new body in my department called the Major Cities Unit that I’d like to take a few moments to talk to you about.

Australia has become one of the most urbanised countries in the world, with over 80 percent of us living in urban areas.

ABS data shows Australia’s eight capital cities contributed nearly 80 percent of the nation’s economic growth between 2001 and 2006.

Despite this, the previous Commonwealth Government disengaged itself from our cities, and took a hands-off approach to their growth and development.

A national government cannot simply ignore over 80 per cent of the population.

Australia’s major cities are facing their many challenges.

For example, requirements for urban water are expected to grow from approximately 3700 GL in 2006 to between 5000 and 8000 GL per year in 2050.

But major cities don’t just include the capitals.

It also includes places that are experiencing rapid growth, urban areas where communities have limited access to public transport and community services.

Communities that, as a result, become vulnerable to fuel prices and sometime suffer social isolation.

Consider places like the Gold Coast - it is expected to grow by more than a third over the next decade, with its population rising from 470,000 a few years ago to 630,000 by 2021.

The challenge is putting in place modern and efficient infrastructure to help cities like the Gold Coast cope with rising levels of demand.

What doesn’t help is that cities currently have to deal with a range of federal government departments and agencies on issues affecting them, which can be confusing, cumbersome and costly.

A more coordinated and integrated approach is needed.

The Major Cities Unit will do just that.

When it comes to nationally significant infrastructure in urban areas, the Major Cities Unit will work closely with Infrastructure Australia with the aim of making our cities more productive, sustainable and liveable.

I should point out the Government is not sitting idle while we wait for the $20 billion from the Building Australia Fund to come on line.

We are meeting each and every one of the election transport commitments we took to the people at the last election.

We are investing $3.2 billion in road and rail projects next financial year, including over half a billion dollars to make an early start to our election commitments.

In fact, over 40 per cent of the Government's investment under Auslink 2 is to improve transport in cities.

This is the greatest Federal Government commitment to cities ever made.

We will provide $75 million so the States can undertake a series of extensive studies into projects aimed at tackling urban congestion.

Our partnership with the States is about unclogging the roads of Australia’s big cities, making them easier places to live, a better place to do business and a healthier place to raise a family.

National Transport Policy - the value of coordination and cooperation

Ladies and gentlemen, one of the criticisms in your 2004 report was that our nation was being held back because state and federal governments were at loggerheads.

I couldn’t agree more.

One of this Government’s priorities is to take a national approach to transport policy.

We are working closely with the States and Territories to reform many of our out of date transport regulations.

At February’s ATC meeting, state and territory transport ministers laid the groundwork to build a truly national transport policy.

At that meeting, I was struck by the genuine level of cooperation between all of the jurisdictions involved, and the desire by all parties to end the Commonwealth-State blame game which in the past permeated the relationship between us.

Following the meeting, all jurisdictions went away and developed a section of the transport policy framework.

These areas included such things as urban congestion, climate change and infrastructure investment.

When transport ministers reconvened again last month we built on this early work by agreeing to take a historic first step towards a national set of national transport reforms.

We also agreed that we would make a serious attempt to achieve some early agreement on national truck driver licensing, heavy vehicle registration, a national rail safety regulator and a national rail safety investigator.

In addition we agreed to look at the establishment of a road safety council and uniform maritime regulation.

This work is now underway and Ministers are due to meet again towards the end of July with a view to taking the first stage of the new transport policy framework to COAG in October.

Maritime

The Rudd Government’s transport reform agenda is not just limited to improving the movement of freight on our roads, and unclogging urban congestion in our cities.

It extends also to aviation and shipping, two areas where we are conducting significant and long overdue reviews.

We need national leadership on these two issues, not just a business as usual approach which has been the norm over the last 11 years.

In the ten years between 1996 and 2006 the number of Australian registered trading vessels fell from 75 to just 46.

When you consider that the amount of freight needing to be transported around the country is expected to grow by 40 percent between 2007 and 2020, it’s clear that a competitive and

sustainable coastal shipping industry is critical to meeting Australia’s transport needs.

The House of Representatives Standing Committee Review into Coastal Shipping honours our election commitment to look at the issues facing Australia’s shipping industry, including cabotage, competitiveness, skill shortages, safety and security.

The Committee will consult widely and provide the Government with recommendations on these, and other critical issues, when it reports back to us in October this year.

Aviation

Australia’s aviation industry plays an important role in developing Australia’s economy and connecting us to each other and to the world.

On 10 April this year I announced that the Rudd Labor Government would be developing over the next year Australia’s first ever National Aviation White Paper.

Today, I am releasing a new report published by the Bureau of Infrastructure, Transport and Regional Economics:

Air passenger movements through capital city airports to 2025-26.

It shows that the nation’s airports are set to become even busier, with passenger numbers predicted to double within just two decades.

Last year, the number of international passengers arriving and departing from Australian airports rose by 6 per cent to almost 22.8 million, the highest number ever carried in a single calendar year.

And according to the report, the overall number of air passenger movements through Australian airports is projected to grow by 4 per cent annually to 228 million by 2025-26, largely due to a positive economic outlook for Australia and its trading partners.

The largest forecast growth in annual passenger numbers is expected in Perth, likely to reach 17.7 million passengers by 2025/26.

The report’s long term predictions pose a fundamental question for both government and the aviation industry - will Australia be able to cope with the growing number of people wanting to fly?

Already many of our major airports are operating at close to capacity during peak times; pilots, engineers and air-traffic controllers are in short supply; flight delays and cancellations are becoming more frequent; and planes account for at least 2 per cent of global greenhouse gas emissions.

This is the legacy inherited by the Rudd Labor Government - the product of the previous government’s indifference towards the aviation industry and its importance to Australia’s economic development within the era of globalisation.

The report I am releasing today emphasises the need for a national Aviation policy.

More than ever, the aviation industry underpins domestic economic growth and provides the nation’s gateways to the global economy.

More than ever, there is a need for national leadership and a national strategy for aviation - one which looks to the long-term, and closely links the development of aviation to the economic

development of the nation.

Conclusion

To close, let me try to pull together these threads of infrastructure investment, regulatory reform and reviews into our aviation and maritime sectors by simply saying this.

The Government is putting place the structures necessary in a systematic and coordinated way to help drive future economic growth and prosperity.

We have established Infrastructure Australia and the Major Cities Unit, announced the $20 billion dollar Building Australia Fund, and we are developing a truly national transport policy.

These initiatives are central to the Rudd Government’s reform agenda.

They will help lift productivity and drive sustainable low-inflationary economic growth.

As I’ve said on a number of occasions today, we realise one of the keys to driving this process forward and achieving the best outcomes possible is through close collaboration with all levels of government and with the private sector.

This includes bodies such as CEDA, who are an active participant in the infrastructure debate.

Your interest is as deep as it is genuine, which is why I’m so pleased to be here with you today.

I look forward to your ongoing involvement and contribution to the debate which is so crucial to Australia’s future.

ENDS

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