One of Rudd 1.0’s less trumpeted, but more far-reaching reforms was the creation of Infrastructure Australia. Its latest report to the Council of Australian Governments is essential preparatory reading for an election campaign.
Tony Abbott’s road building list, for instance, starts to look rather strange when you have a look at IA’s updated project readiness rankings. The WestConnex project, for instance, is ranked as an “early stage” project, the lowest of the four project readiness rankings. Melbourne’s East-West Link is listed as a project with “real potential”, the next ranking up. Midland Highway upgrades in Tasmania are ranked as “early stage”. It’s old-school marginal seat vote-buying, pure and simple.
But the federal Liberals aren’t the only ones challenged by the report. The report strongly endorses user charging for transport infrastructure:
Governments alone cannot deliver the truly competitive infrastructure we demand in our cities. User charging for urban transport should be the norm – but it requires courage by Governments. Efficient road pricing for major city roads creates sustainable
revenue sources for new infrastructure and makes much better use of congested road assets. Road charging also has the benefit of improving use on surrounding public transport networks.
But the federal government is actively trying to discourage road user charging for existing roads, by making WestConnex funding conditional on no tolling on existing roads.
Leaving aside the election-driven populism for a moment, there are more systematic challenges for Australia’s governments in the report – many of them controversial, and many of which I wouldn’t uncritically endorse.
But perhaps the biggest challenge to Australia’s governments is the question of how we can fund the infrstructure we would want. The report makes two key claims:
There is not an endless supply of funding for infrastructure. To bridge the funding gap, a good starting point is tackling two hurdles to getting the infrastructure we need.
The first hurdle is accepting that Government budgets do not have sufficient headroom to fund all the infrastructure we require, even if they increase their borrowings.
The second hurdle is a fundamental disconnect between the infrastructure we want and our willingness to pay for it – either through higher taxes or user charges.
The second of these “hurdles” should be fairly uncontroversial, and is a point that needs to be hammered home to Australia’s voters – if you want nice stuff, you’ve got to pay for it somehow. But the first? According to Michael Pascoe, ANU economics professor Warwick McKibbin has recently argued that Australia’s governments should “borrow big” – hundreds of billions of dollars – at the low rates currently available to fund the infrastructure deficit.
Yes, it’s an idea not without risk. But it seems to me like an idea we should at least debate.