Infrastructure Australia plays its cards for maximum effect

For Philip Davies, a fulfilling year as Infrastructure Australia’s top executive has reinforced the need for a neutral go-between in a national conversation with lots of loud voices.

Davies was the first CEO appointed under new governance arrangements that made the organisation much more independent of government, brought in by a 2014 legislative amendment that also gave IA new marching orders. Most recently, it delivered the 15-year Australian Infrastructure Plan and a national list of priority projects in February.

“I think the levels of collaboration that we’ve achieved with state and territory governments as well as industry and associations and so on, I think that’s been very pleasing and we’re very appreciative of that support and very pleased with the response that we’ve had to the Plan,” he told The Mandarin.

Davies says the Australian Infrastructure Audit, completed and published a month after he got the job, was “a crucial step forward in terms of providing a strong evidence base for both reforms and investments” that he could take on the road and consult with local, state and territory governments, industry bodies and relevant associations. What resulted was “a very authentic process with strong dialogue and great input” from participants.

“I think what has also helped is our independence, that we’re arm’s length from government, and that means that we’re not representing government when we’re having those conversations; we’re representing an independent view,” he said.

“And I think that has resulted in some strong relationships, a high level of trust between ourselves and our state and territory colleagues. They’re prepared to engage with us and share information and work together to solve some of these longer term problems that we’re seeking to address.”

The Plan gives Australian governments 78 recommendations to chew over, from simple suggestions to brave reforms that are unlikely to happen on a whim. Its authors admit some of their ideas will be tough for politicians to pick up and run with, but Davies says he’s had some productive discussions about the political realities and potential reform pathways.

Smart Cities a nod to IA’s work

The influence of the 15-year Australian Infrastructure Plan can be seen in the Smart Cities Plan that Prime Minister Malcolm Turnbull launched on Friday, proclaiming “the adhockery has got to stop” and calling for more sensible long-term planning.

Assuming Turnbull survives the upcoming election, the new policy would commit $50 million to “accelerate planning and development works on major transformational infrastructure projects, including urban rail” and establish a new infrastructure financing unit to co-ordinate how projects are bankrolled:

“The unit will create integrated project teams with the private sector and key agencies to broker investment in landmark projects through innovative financing solutions including private partnerships, balance sheet leveraging and value capture for major projects.”

Under the shiny new policy and related principles for “innovative financing” to be administered by the Department of Infrastructure and Regional Development, the federal government would see itself as a “cornerstone investor” which demands to be more “informed and involved” in the projects it is funding but is also willing to look at “new ways” to come up with the money.

Also, the Commonwealth now wants to take part in “planning and business case development for major projects” at an earlier stage than it has in the past. Smart Cities notes the recommendation in the 15-year Plan that governments should undertake such “project development studies” before deciding to commit huge amounts of public funds to a project.

One of Infrastructure Australia’s most important recommendations, according to Davies, has flowed into Turnbull’s proposed City Deals, which promise “funding will be linked to reform and incentivise actions and accountabilities at the state and local level”.

Davies says the idea of reform incentives recognise that “much of the hard work and pain of delivering reform naturally sits with state and territory governments, whilst many of the benefits flow back through taxes to the federal government” and builds on earlier federal policies like asset recycling and national competition policy payments.

“Getting back to good long term planning and integrating the land use and transport planning is a key task for all jurisdictions, in terms of integrating that land use planning, the transport planning, thinking for the long term, thinking about systems and networks,” he adds.

“A true integrated approach; I think that’s necessary.”

A lesson in patience

There are always critics who are disappointed with the impact that independent research and advisory bodies like IA or the Productivity Commission can have. The strength of such bodies is the public nature of their advice and the evidence it is based on, and it can be maximised through heavy stakeholder engagement, especially for bold policy proposals that give politicians the willies.

Some the most controversial reforms suggested in the Australian Infrastructure Plan — such as the introduction of user-pays road charges for heavy vehicles within five years, extending to light vehicles within 10 years — would require a lot of such groundwork. The IA boss reckons the best way forward is to have the debate.

“One of our recommendations therefore is that the government consider setting up a public inquiry to actually explore that further and I think that’s necessary because one of the steps in there will be to explore the flaws in the existing charging framework,” Davies explains.

His team concluded the current system is “unfair, unsustainable and economically inefficient” but he doesn’t expect the community or their elected representatives to take his word for it. An inquiry would allow a deeper exploration of why IA came to that conclusion and why it believes the solution is pay-per-use charges based on time of day, distance and location.

A lot of what happens next with the Plan depends on how governments react to it, especially in the earlier part of the 15-year period, but it’s not a rigid set of steps or an all-or-nothing proposition.

“Some of the recommendations are linked to each other but certainly not all of them,” said Davies. “One wouldn’t expect to see every single recommendation done straight away; it’s representing a 15-year picture and some of the baby steps will be necessary to start those pathways to reform.”

Grown ups and governments

The view that governments cannot be trusted to make sensible, long-term decisions about public infrastructure remains strong, including among the various professional bodies with expertise in the area and industry lobby groups with skin in the game.

A recent report from Grattan Institute demonstrated the level to which pork barrelling in marginal electorates skews public infrastructure funding and noted that more than half of federal spending alone went to projects that hadn’t been evaluated by IA. Its words are likely to resonate for some time to come:

“Too much money has been spent on the wrong projects in the wrong places. In particular, governments have spent up big in electorates where federal elections are won and lost, funding roads that are not very important to the economy, but are popular with local voters.”

Davies says the Grattan report is a “useful contribution to the public debate that we need to have” and hopes the national conversation continues, while he works on maximising the impact the statutory body can have over future decisions.

Like the Plan, the infrastructure priority list is not set in stone but he’s optimistic that providing governments and voters with an evidence-based “menu of options” to choose from — and assess the costs and benefits further before committing — can only make things better.

The Prime Minister is talking the talk and his Smart Cities Plan commits to actions in line with some of IA’s key recommendations. But with less than two weeks before the May 12 deadline to trigger a double dissolution, the glossy brochure will have to survive an election before it can be taken forward.