Australian Financial Review Infrastructure Summit

Beyond the Boom

Bridget McKenzie
Shadow Minister for Infrastructure, Transport and Regional Development

 

(Check against delivery)

 

Thanks, Mark. I’d also like to pay my respects as someone committed to reconciliation, to our first Australians on the land we meet today. I want to firstly say thank you to everyone in this room, and those who sit behind so many of you for really deeply engaging with me as the Shadow Minister for Infrastructure, Transport and Regional Development over the last eighteen months. I have visited a lot of rail facilities, road projects, ports, airports, and it’s been fantastic to get under the bonnet shall we say. But as we’ve seen today with DP World, shocks can have significant impact on our national supply chains.

When products are held up at port it reminds us why the debate about infrastructure is just so important. Ultimately, infrastructure is what facilitates the movement of people and goods, to school to work, sport, family and friends, goods to where they need to go so that we can then have a vibrant, sustainable, prosperous society. We don’t build bridges and roads and ports and airports just because politicians like to cut ribbons. There is an actual social good and purpose to actually rely on infrastructure. It’s about the essentials of life. And as an island nation, we are reliant on foreign trade of goods the vast majority, 99.96% I think, arrive by ship. As a large and vastly populated nation, weather events can cut that critical east west, north south road railway lines and disruptions like last week’s cyber attack, a global pandemic or more frequently industrial action can result in critical imports being stopped from getting where they need to go. When disruptions impact a single enterprise, having competition at our ports can help us as commercial arrangements can be entered into to keep the product moving until the situation is resolved. If disruptions are extended they can impact the wider national economy and shorter disruptions are often most impactful on small businesses.

The AFR Summit transverses many contemporary and pivotal issues facing government and policymakers including future city design, the challenges at our ports and airports through which our great product is exported, to the Inland Rail and freight supply chain issues, and finally to the capital and risk challenges of key investors without whom infrastructure investment can’t happen.

I know you all want to hear about the fate of that Infrastructure Investment Pipeline, and the Opposition’s position on that but it needs to be released for me to actually give you my opinion. So I’ll be chatting about that a little bit later.

But I think the title of this year’s summit is phenomenal, ‘Beyond the Boom’, because this is actually such an inherent feature of the Australian economy post European history; it has been about boom and bust. A long period of largely uninterrupted growth that Australia has recently enjoyed is the exception rather than the rule, as previous deeply painful, but largely and unfortunately forgotten recessions and depressions can testify. But for a quarter of a century most Australians in the workforce have never known anything other than benign economic conditions, with the occasional brief downturns. And yet this week, the OECD officially confirmed what most Australians are actually experiencing, household incomes have slumped an extraordinary 5.1%, which is the sharpest fall across all OECD countries, who’ve actually enjoyed increases. Seven consecutive quarters of decline has meant Australians real household incomes are lower than the OECD, as a whole since 2007. And we know for many, many households, especially mortgage holders and renters, the current falling living standards is much more severe. For the wealthy baby boomers, who own their own home or more than one home, a spate of rate rises may be beneficial, boosting their superannuation savings and spending power, and for the younger generations, the future users of the infrastructure we’re building, not so much.

Treasury Secretary Steven Kennedy remains confident that we can navigate the goat track, lowering inflation without triggering a recession. In his recent evidence in Senate estimates suggests his optimism in that regard is growing. But the problem for the Government is that they’re pulling contradictory levers, bringing in what may well end up being 600,000 new immigrants at the same time as warning that excessive infrastructure to actually accommodate and facilitate that population growth needs to be pared back.

Creating uncertainty in infrastructure has a debilitating impact on investment decisions, on employment and training decisions, leading to contractors paring back their investments in workforce training and equipment, and we are hearing of that happening right now in regions and suburbs across the country. If the Government will begin to divert funding away from road and rail towards energy infrastructure, some but not all of those skills could be transferable, but will leave a backlog of infrastructure projects that are still going to need to be built. It’s not as if when the IMF spoke about smoothing and coordinating the infrastructure build between State governments and Commonwealth governments, they never talked about slashing the investment profile. And no matter how much the Government tries to use this as a cloak of convenience to justify their lack of action on getting inflation under control, the fact that Minister King is now arguing and backed in by Jim Chalmers that the infrastructure project cuts are an inflation fighting tool, is completely ironic and shouldn’t be lost on anyone.

Mr Albanese, the Prime Minister came to power at the last election after one of the longest apprenticeships in infrastructure policy making both as a Minister, and Shadow Minister, my current job, with the self created slogan that he would become Australia’s Infrastructure Prime Minister, except he hasn’t. We’re now halfway through his first term as Prime Minister and the Government has next to nothing to show when it comes to infrastructure builds. The only new infrastructure commitments this Labor Government has made are not in roads or rail or ports, critical logistics supply chain connections that we all know are needed, but in music and sporting stadiums and pet projects for his Labor Premier mates. They’ve hit the ground reviewing not doing, not happy to review the subject once Minister King did one review of infrastructure pipeline and regional development projects leading into the October Budget last year.

She then threw it all into her now infamous 90 day, it’s 197 days and counting, Infrastructure Review Pipeline. She’s also reviewed the Maritime Strategic Fleet Taskforce, two reports, not one, one in December second by June this year. The Aviation Review, well hasn’t that been timely, we’re going to do it from Opposition if she can’t do it from Government. We’ve got a White Paper process which won’t be implemented until past the next election. Meanwhile, they’re slashing the ACCC monitoring of cancellation and delays.

We know we need a consumer protection framework particularly given the egregious behavior of one dominant player in the aviation market itself. The proposed fuel efficiency standard has been reviewed twice with further action delaying consultation expected over summer holidays, and the potential beneficiaries of Labor’s community infrastructure election promises, remember they were made prior to the end of May 2022, have been asked to apply twice to the Government. Twice, with a mind boggling display of red tape and incompetence with only about 3% of those projects contracted, let alone be finished by the time the next election rolls around. And of course, the infrastructure pipeline. Instead of building infrastructure the Albanese Labor Government has cut the budget, shelving programs and congestion busting projects deferring others. And at the end of its full financial year in office they spent $2.9 billion less on road and rail infrastructure than they budgeted for last October. Based on recent reports, Labor intends to slam the break down even harder as they became concerned about the inflationary impacts of the national infrastructure spend.

Think about that for a moment. High inflation and rising interest rates have been characteristic and concurrent, for the first 18 months of this Government. Yet with the Prime Minister out of the country, the Treasurer decides his own mini Banana Republic moment to sound the alarm bells for infrastructure and inflation ahead of the Reserve Bank decision to raise rates yet again. He jumped on the lifebuoy of the IMF mission report to warn that they’d be cutting back on infrastructure spending, an intelligent conversation about infrastructure investment was being jettisoned. The Prime Minister was caught bringing his own Godfather Donnie Farrell, had to put him on a plane, send him back to Canberra from China quick smart to help clean up Chalmer’s mess.

So the Infrastructure Review was never about getting inflation under control. It was actually about budget priorities and a change of government, it’s as simple as that. I’ll read exactly what the IMF reports said:

That the Commonwealth and State and Territory Government should implement public investment projects at a more measured and coordinated pace given supply constraints.

And I absolutely agree with those statements. When I spoke last year at this conference, I wanted to be a constructive player as the Shadow Minister to drive deeper coordination between state and federal governments, particularly when it comes to the phasing and delivery of infrastructure projects. Federal government should not be just a bank for state governments to come and apply for loans for their pet projects. I’m going to continue to advocate for more robust arrangements through national partnership agreements with state governments.

You cannot rule out the role the CFMMEU has had in clipping the ticket on all the infrastructure projects that have been rolled out across state and territory governments too, in terms of the cost blowouts. I just want to make clear, when we talk about inflationary impact of infrastructure spend, it would have to be recognised that transport infrastructure makes around less than 2% of the entire $637 billion Federal Budget. There are five points to be made about the Albanese Government’s damascene conversion on the need to rein in infrastructure spending. They’ve already cut $10 billion from the spend in their first two budgets.

The only reason why nothing has been done about cutting infrastructure pipeline for many months is the Voice Referendum got in the way. Now 107 days overdue and Labor chose to put the interests of winning a referendum campaign ahead of actually fighting inflation. They did not want any other topic being discussed, and it may be uncomfortable for me to say that this morning, but it is the truth. And whilst the Minister and Prime Minister were running around the country on a referendum campaign, Australian families are sitting down at kitchen tables trying to work out do they pay for the kids swimming lessons this term? Or how do they actually make up the difference in their income and their mortgage or rent bill? Now the cost of living seems to be, and now inflation fighting seems to be something this Federal Government is interested in addressing. And the vast majority of projects the Government intends to act are critical small projects, projects that are in the planning stages and axing them will actually have no impact on inflation. You will never get a Sydney Harbour Bridge if you don’t spend the tiny sliver of the total cost that is needed in planning and design work to get that actually on the table for future generations to enjoy the benefit of.

State governments, beside them being the same political colour, do not buy the inflating argument. As Deputy Premier Steven Miles said last week, that “the Australian Government objective in proposing infrastructure is to help reduce inflation. It’s too late and will probably make it worse.” Investments in productivity enhancing infrastructure is likely to reduce pressure on inflation in the longer term. And so it is about what to invest in. How? Where? Making sensible decisions that aren’t going to leave us in a decade’s time in a worse situation.

With Labor holding the Treasury benches in Canberra, and right around the mainland, it should actually be a cakewalk for Minister King to negotiate a sensible coordinated infrastructure program. And finally, most egregiously of all, my hunch is that when the Minister does finally get around to announcing the outcome of her 90 Day Review tomorrow, or more likely as people switch off before Christmas, is that there’ll be a negligible actual reduction in funding, making the whole argument moot. And the clue for this was last week during the doorstop when the AFR extracted from Minister King, the concession that any changes to the infrastructure pipeline would provide “headroom” for the Government to divert spending to its own priority projects. This is a completely political exercise after all. I contend that the headroom that Minister King is talking about is that the reprioritisation of the Government infrastructure spend to meet Labor’s ambition of 82% renewable energy by 2030. And along with the rest of the world we are going to be competing for the same people, the same knowledge, the same products, in the same timeframe and that’s going to make it very, very expensive.

Thanks to the work of IPA, which analyzed the upcoming major infrastructure expenditure across the entire Australia infrastructure pipeline, we know that public and private expenditure on transport infrastructure is about to peak around late next year before declining rapidly. The new Mecca shall we say, in infrastructure spending is set to be energy: 28,000 kilometers of transmission lines, solar panels carpeting the rural landscape, and bird nest and bat annihilating wind towers across our ranges and coastlines. Bearing in mind, they will be on private land, this is not a shared task apparently, they are going to be rolled out over private property not shared with public property.

Infrastructure Partnership Australia analysis suggests surging energy infrastructure investment will drive the pipeline to progressively hit a quarterly peak likely to exceed $24 billion by the end of 2025, representing a 50% increase on the national infrastructure investment compared to quarter two this year. The forward pipeline of major infrastructure investments projects yet to be awarded is estimated to include $328 billion of energy projects, representing 54%, more than half of all the projects in the pipeline, let alone the fraction of that that’s been potentially cut by the Government.

This massive pipeline of investment on energy projects is going to put new strains on supply of labour and inputs across the construction industry, both civil and residential. $328 billion. I mean, that’s more than two thirds again of the infrastructure pipeline, the current one, that is supposedly fueling our inflation. We’ve already seen the CFMMEU-friendly big build agenda result in a drain of workers chasing the big money on publicly funded infrastructure projects. The casualty is our domestic housing build with new starts falling dramatically this year. Homeowners with mortgages and renters trying to save for their first home may well pray for the good health of the brave farmers across the country who will be the last line of defense in Minister Bowens bulldozing farmland for transmission lines. Those farmers asking to be heard and considered and consulted with are actually helping to stop or moderate or smooth out the rollout of that $328 billion worth of energy projects. This will result in power bills rising and that will be charged back to customers on those generous regulated rates as they return to kick in.

The Coalition’s attempt to have an inquiry into the transmission line agenda by Labor and its community impact has been refused. I asked the Labor Party, what are you trying to hide? With this level of public funding and this much public angst the right thing to do if you’re a Government that’s prepared to lead is to back your convictions, back your policy agenda, put it in front of the public and hear from those impacted, but they’re so far steadfastly refusing any scrutiny on that transmission line agenda.

As was written in the AFR by Jacob Greber this weekend, “Labor are willing to risk their legislative agenda to actually avoid that inquiry.” We sat last week, we sat all week. The most successful Senators in the chamber were Jacqui Lambie and David Pocock who got four fabulous IR bills up. The Government got two non-controversial bills in a whole week of sitting, all because they refuse to have a sensible public inquiry about electrifying our nation and allowing all sides of the debate to actually be heard.

It would be a mistake for Labor to cut deep into the transport infrastructure pipeline. It’s got a massive immigration agenda and we need to keep delivering road and rail projects to accommodate a growing population in our already congested suburbs and growing regional centres. Most projects in the pipeline have been recommended by states and were supported by funding from the previous Coalition Government. The states have been responsible for delivering these projects and any cost increases that they’ve been subjected to, they’re the delivery agent, not the Commonwealth Government. And the focus on a relatively small number of projects nominated by the Commonwealth really miss the key realities, and state governments clearly agree. We’ve heard them scathing, whether it’s Rita Saffioti from WA, Michael Ferguson from Tasmania or indeed Queensland Deputy Premier and Transport Ministers are scathing in the fact that this Government seeks to roll back things that were agreed in the spirit of the National Partnership Agreement.

So while state governments may be defending their own interests in opposing federal cuts, at least they understand the challenge of building and maintaining infrastructure that’s needed. Commonwealth governments don’t get that because they’re not the ones that are rolling out the bulldozers, signing the contracts. They’re the ones just shoveling out the money typically. And I don’t think therefore, Minister King has an appreciation or considers it important to have convened one single meeting of the planning ministers during her first year in office. You think if you wanted to get across it, if you wanted to understand the impact of your investment, and the impact of Claire O’Neil’s decision to bring in one and a half million additional people, that you would have your planning ministers in the room; how can we get more residential housing online, how can I help and coordinate an approach that means our infrastructure investment is making the lives of Australians better, both in a productive sense but also in the livability sense, but she didn’t.

The ten year infrastructure pipeline was introduced by the Coalition to help provide long term certainty to the whole construction supply chain. Recognising the long lead time and often multi year builds. Labor will be undermining that certainty in certain political risk. But more importantly, by scaling down transport infrastructure investment, while at the same time rapidly adding to the population the government will be exacerbating an infrastructure backlog. Australians will be left to pay for over many, many generations and our children and grandchildren may not forgive the Albanese Government if it walks away from this critical infrastructure.

In October last year, the Government was handed a report on reforming Infrastructure Australia. A whole year has passed and still no action. So they came to government, they did a big review into how to make Infrastructure Australia better in response to the shocking behavior of the former Government, and that review has been sitting on someone’s desk since October last year. We’ve got the Infrastructure Australia Bill which seeks to implement some of the recommendations, not all of them, refusing to be put to debate in the Senate chamber. This is despite us saying we know that they had a mandate to bring this legislation forward. Instead of accepting all the recommendations that the review handed down in October, it’s ring fenced its election promises deals on stadiums with Tasmania and Queensland and most egregiously I think, it’s also ring fenced the Suburban Rail Loop, $125 billion project from independent scrutiny.

Labor has swapped commuter car parks for stadiums and the Suburban Rail Loop for Inland Rail. Not one single project has been referred by this Government to Infrastructure Australia at all. So today I urge the Government, I urge Minister King to bring forward the Infrastructure Australia legislation to Parliament this week. I’m happy to go home today and start debating it. As it stands, the Government’s Bill will weaken the effectiveness, authority and independence of Infrastructure Australia. It’s no longer going to be sitting outside of government however, we recognise the mandate and we will support it with a few amendments.

One, we want the Commissioners to actually understand and appreciate the challenges of the regions and the need for specific regional transport infrastructure that facilitates exports in particular. We want to improve the transparency over infrastructure priority and the decisions taken by future governments of all colours. So we will be supporting amendments that actually achieve those outcomes and back in the review’s recommendations, the only statement short, that should advise the government on national infrastructure priorities ahead of the annual budget process.

And secondly, it needs to report on the effectiveness of the delivery of Commonwealth funded infrastructure. Right now, if you can ask Infrastructure Australia, because the delivery partners are the state, there’s not a really tight line of sight on how individual projects are being rolled out, that are being paid for by the Government. And that actually would assist Commonwealth governments and future ministers to see their runaway costs before it becomes too late. We want to make sure that those projects that are identified as national priorities are actually delivered. This is an important reform, as I intend, the future Coalition Government to not just be a passive investor in public infrastructure, but to be able and willing to ensure where required the Commonwealth has it say to ensure the best outcomes for the nation are achieved for each of the projects that we assist state governments to fund.

For too long, we’ve been hands off parents here and look where our state governments infrastructure builds are and budgets are as a result of that. I think there absolutely needs to be a tighter line of sight and arrangement between Commonwealth and state funding because we don’t just fund 50% of projects. Increasingly it’s up to 80% of project costs in the land transport sector are funded by the Commonwealth.

Given the Albanese Government’s only significant infrastructure has been to build music and sporting stadiums, the Coalition will also be supporting amendments to the IA bill to include nationally significant social infrastructure under the remit of Infrastructure Australia. Not only would this give IA the amendments that we’re proposing, it would actually mean projects like the Suburban Rail Loop will have to come under the assessment of Infrastructure Australia, but so would the $2.5 billion Brisbane Live music arena, and Macquarie Point Stadium. It could provide an alternative independent gaze on Labor’s deliberations on whether to move the AIS to Queensland from its national location in Canberra.

Infrastructure Australia needs to be empowered to conduct its own inquiries and its own deliberations. They need to be the experts and they need to be able to investigate the Suburban Rail Loop project as I’ve said, because so far the Victorian Government has failed to provide the business case to Infrastructure Australia. So the Government’s got $2 billion already on the books for this project. It’s been derided by the Auditor General in Victoria. It’s waiting for the business case and yet you will see continual amount of money in future budgets.

I guess this incredible boondoggle, that I would argue was committed to for political reasons, not because it is actually going to be the type of project that we should be investing in at this time. All of these measures would strengthen the role and importance of Infrastructure Australia and help build public confidence in the infrastructure investment decisions taken by governments, by state and federal, Labor and Coalition.

Last week Minister King said we’re playing games with the Infrastructure Bill. Well, I’ve been pretty upfront with you today. I want an Infrastructure Australia that delivers competence around the pipeline, is empowered to do the detailed work it needs to, that assesses all big investments by the Commonwealth, including the Labor Party’s election promises, including the stadium deals with Premiers, including the Suburban Rail Loop. Because right now, as the Bill is proposed, they’re explicitly excluded, and I believe that is not in the best interests of our nation. There is great public appetite for greater transparency on the infrastructure spend, and on government decision making.

As you spend the next couple of days ruminating on issues around future infrastructure in Australia in all its glory, I just want to finish with one salutary point. A week ago in Austin Texas, Google was testing its own driverless car, joining a growing throng of companies trialing in one of Australia’s most hip tech friendly cities. Here in Australia we’ve already had autonomous vehicles in some of our major mines, in airports and warehouses. But the transition to open roads is far more challenging because of the multiple thousands of traffic and situational variables and scenarios that will be have to be built into the driverless technologies. Autonomous vehicles will start with predictable routes, airport shuttles and the like. And the extent to which they’ll take hold more broadly is unknown, but the great promise of accident reduction and other benefits.

But on the other hand, they also bring the nightmare scenarios of the government knowing who, where and how we travel. The ramifications for autonomous and other technological developments are mind bending in terms of what it will mean for alleviating congestions, for city planning, for interconnectivity, greater efficiency, work productivity benefits and improving traffic management. So the decisions and the debates that you will be having over the next two days, and I look forward to seeing the outcome, all play into that.

I was recently asked to speak in Singapore at a road user charging conference. I think these are the really difficult conversations that we need to have, not just building the infrastructure, but how do we pay for the infrastructure? Unfortunately, this Government despite the High Court ruling… I assume you all know what I’m talking about, the road usage charge on EV vehicle owners in Victoria has been ruled unconstitutional, and that it is instead the Commonwealth government’s responsibility. This Government has refused already, ruled that out as part of their deliberations, and so when we are looking at how we use our road, what we’re going to spend our money on, where it’s going to be built, who’s it going to benefit, we should actually also simultaneously be asking how do we pay for it? And as our vehicle fleet transitions to low emission vehicles, moving forward fuel excise standards will not be enough and we need to make sure it is fair and adjust process as well. We can’t take a backward step in these efforts. Now is not the time to hold back on investing in infrastructure that will make us a more prosperous, safer and sustainable country.

Good luck, and I look forward to hearing the outcomes of your summit.