Don't laugh too hard at the ABC's new satire, Utopia, and the wasteful
and appearances-driven antics Rob Sitch gets up to as head of the Nation
Building Authority. It's too close to the truth to be funny.
One of
the foremost areas where governments need to lift the efficiency of
their spending - as opposed to cutting payments to the needy or
short-sighted cost-shifting - is infrastructure. It has become an area
where too much spending is never enough and anything labelled
"infrastructure" is above critical scrutiny.
In recent days,
however, we've been given cause to cast a more sceptical eye over
spending on capital works. Consider first the views of a highly
experienced former econocrat, Dr Mike Keating: "Australia has a long
history of over-investment in infrastructure, with the costs exceeding
the benefits, and under-charging the beneficiaries so that they demand
more and more.
"It is therefore most reprehensible that this
budget prides itself that new spending decisions will add $58 billion to
total infrastructure investment, when none of the projects announced
have been ticked off by Infrastructure Australia as having completed
proper cost-benefit appraisals, probably because a great deal of this
investment never could pass any proper evaluation.
"And this from a
government that was properly critical of the former government and its
approach to the national broadband network. Clearly this improper use of
the nation's savings is not an acceptable reason for the other budget
cuts, and the increase in petrol excise should not be tied to an
increase in uneconomic road funding."
Yes, indeed. It's
disillusioning behaviour from Tony Abbott, who promised "rigorous,
published, cost-benefit analysis" of infrastructure projects.
Last
week, Garry Bowditch, chief executive of the University of Wollongong's
SMART infrastructure facility, offered a sobering assessment of capital
works spending, noting that cost overruns have reached between $4
billion and $5 billion a year.
Value for money is thrown out the
window, he said, when governments fail to time the construction of
infrastructure to make sure they're not inflating the prices of labour,
materials and equipment by competing with the private sector during
booms.
Adjusted for inflation, Brisbane's Gateway Bridge, built in
1986, cost about $300 million. But when a second, identical bridge was
built in 2010, during the mining construction boom, it cost $1.7
billion.
Bowditch, a former econocrat, called on governments to
release cost-benefit analyses for Sydney's proposed $11.5 billion
WestConnex motorway and Melbourne's $8 billion East West Link tunnel.
He
argued that poor long-term planning by federal and state governments,
which don't communicate well with each other, had led to unnecessary
costly construction methods, such as tunnels, because land corridors had
not been reserved for rail and road development.
Sir John Armitt,
former chairman of Britain's Olympic Delivery Authority, said we should
be using technology to improve the capacity of existing rail, road and
energy networks, and to prepare for driverless cars.
Good point.
Politicians love cutting ribbons and announcing grand, nation-building
projects. But they'd waste less taxpayers' money if they got the pricing
of existing infrastructure right first, and so had a more realistic
estimate of the demand for additional infrastructure. It's called
efficiency.
The credibility of economic modelling by allegedly
independent consultants is surely shrinking before our eyes. Not long
ago we were treated to the spectacle of two leading firms of economic
consultants producing diametrically opposed modelling of the cost of the
renewable energy target. Why? Surely not because they were commissioned
by outfits with rival axes to grind?
Last week we learnt that
AMP, whose funds lost a lot of dough after the failure of the outfit
owning Sydney's Lane Cove Tunnel in 2007, is suing the consultants who
provided excessive forecasts of the likely traffic flows, accusing them
of producing figures that were "reverse engineered" by working backward
from their client's commercial objective. Surely not.
One reason
it would be good to see cost-benefit analyses of the aforementioned
infrastructure projects adopted by the Coalition is to test the
efficiency of Abbott's insistence that he'll finance roads but not
public transport.
So far the NSW and Victorian governments have
done a hopeless job of limiting congestion. Since building extra
motorways adds to demand rather than reducing delays, my guess is
neglect of public transport is the culprit.
But the Grattan
Institute's report on cities as engines of prosperity reminds us that
the longer it takes people to move between home and job, the harder it
is to fully exploit the "knowledge spillovers" that drive the knowledge
economy. Didn't you guys say you were worried about slow productivity
improvement?
