Infrastructure Australia & rail in 2011

Last month, Infrastructure Australia (IA) released its annual Infrastructure Priority List, and last week’s newswire provided a summary of some of the major rail projects identified as having potential or having been developed to a stage where they should considered to have priority in the funding pipeline.

In total, IA has identified close to $87bn worth of infrastructure projects across all modes and themes that it believes tick all the right boxes, of which between 20% and 25% in value would be potential rail projects.

In fact, the bulk of the proposed rail projects in the current priority list revolve around urban public transport developments which have been identified under IA’s “Transforming Our Cities” theme.

The proposed urban rail projects are:

• Melbourne Metro - Stage 1 and Stage 2
• Brisbane - Cross River Rail
• Melton (Victoria) - electrification and duplication
• Gold Coast rail - duplication and extension
• Sydney Cityrail - capacity improvements and expansion
• Grade separation of the interstate corridor at two locations Adelaide that will also greatly benefit the suburban rail network 

With the exception of the Cityrail and Adelaide projects, all of these proposals have pretty hefty price tags, anywhere between $1bn and $8bn. All are currently largely unfunded and this reflects a key issue with all of IA’s infrastructure "themes".

The question continues to be though, where will the money come from?

Reading between the lines of IA’s report it is obvious that there is a good degree of frustration with the overall pace of reform in regard to infrastructure development and investment, which IA chairman Rod Eddington describes as, “frustratingly slow”.

In response to this Infrastructure Australia has set up an Infrastructure Financing Working Group to identify new ways of financing infrastructure.

The Group includes experts from the public and private sectors and will consider:

• Encouraging superannuation funds to invest in infrastructure by restructuring how projects are put to the market
• Updating guidelines on public-private partnerships, particularly in the area of demand risk
• Recycling of Government assets to fund investment in new infrastructure
• Finance models such as land value capture

Eddington says a key focus for IA over the next four years is financing reform - developing practical ways to secure additional private funds for investment in infrastructure.

“Action is needed to reform the way governments choose the right projects, finance those projects, and operate and maintain them," he said.

Even if some of this reform can be implemented, a hard enough task on its own, when it comes to public transport infrastructure is it really going to be possible to turn to the private sector for investment, especially when rail projects in general have such a poor track record with the private sector?

Governments have to recognise the nature of the beast and that the risks and returns generated by most rail infrastructure projects are just not attractive to the private sector and that a lot will have to change before they are.

While IA appears extremely supportive of public transport initiatives, it questions the commitment of governments and suggests some of the policy decisions that it feels will need to be made if we are to follow international trends and “drastically improve the provision and utilisation of public transport by 2025”.

The report questions whether governments can work together to improve public transport safety and reliability; introduce a single fare and ticketing system across Australia; and also extract better use from existing infrastructure.

It suggests better integration of public transport with land use planning, a policy that while blindingly obvious and the subject of countless reports and studies continues to virtually lacking at a state government level in Australia.

IA says it is strongly of the view that governments need to focus strongly on public transport in Australian cities and that this should include some continuing role from the Australian Government, something that until recently has been lacking.

It also highlights that more, and better, submissions will be required in the future to achieve the public transport system that Australia needs, and notes that many of the current public transport submissions are light on detailing the wider community benefits of their proposals.

To this end, IA is finalising a number of studies that are aimed at providing the foundation for a national public transport strategy.

It’s not just rail where there will need to be some innovative thinking in the future, as IA has shown that it will not be hoodwinked when it comes to new proposals.

IA received a number of submissions this year focussing on the development of large urban motorway projects which were presented as “freight” roads, despite the fact that 80% to 90% of the anticipated traffic be from private vehicles.

The expectation in these submissions was that the Australian Government would have to fund the lion’s share of the cost, but IA says that it is unlikely to support these projects in the future unless tolls are used to recover the bulk of the construction cost.