According to Nick Greiner, infrastructure in Australia is a tale of two countries.
North of the ‘Brisbane line’, the country is awash with infrastructure projects servicing, and funded by, mining interests. Investment in mining is massive, and associated infrastructure is booming.
But in the south, “traditional” infrastructure – roads, railways, ports, transport – plays the role of poor cousin.
It is the southern half Greiner wants to fix. Infrastructure here “is much more constrained because governments – state and federal – have got very restricted financial capacity, and [that’s] likely for a number of years,” he says.
Greiner – a former premier of NSW – has been reborn as an infrastructure guru. A patron of industry forum Infrastructure Partnerships Australia, Greiner is also chair of Infrastructure NSW, a body established last year by the NSW Government to ‘take the politics out of infrastructure’.
Politics, Greiner says, is one of the two biggest challenges facing infrastructure delivery in Australia. The other is “the usual public sector inertia”.
Funding is also an issue, and many have said deploying super funds into the breach is a solution.
But it’s not the only solution because, as Greiner says, “at the end of the day someone has to pay the returns super funds want”.
“There is no silver bullet” solution to delivering infrastructure, he argues. “If there was, people would have done it.”
“The notion that there is ‘money from heaven’ is bizarre. If you want better infrastructure you need, surprisingly, to have to pay for it. The ‘you’ in that sentence is ‘Joe Public’.”
Public-private partnerships (PPPs) are another option, but they’ve had a tumultuous history in Australia.
Of PPPs, Greiner says “I am an unadulterated fan”, but the private sector needs a return on investment in order to commit.
Greiner says PPPs currently represent 10-15 percent of the infrastructure equation in Australia, and could ultimately rise to 30-40 percent. And yet, “PPPs are certainly an important part of the answer, but they’re not the only part.”
So what is the answer to infrastructure delivery in our country?
Bigger, bolder, more organised solutions are required.
Greiner says infrastructure planning has to be improved so the quality of the projects is lifted.
“What’s needed is a national planning process which gives priorities to benefit-cost ratios” – planning processes that focus on good projects, which deliver bang for the buck.
A blueprint for the perfect infrastructure delivery system would look something like this: (1) a pipeline of projects paired to (2) funding ready to be brought online, decided by (3) a modern, commercial approach to procurement and matched against (4) a willingness to consider a range of funding models.
“Put those four things together (you’ve) got something akin to the best model you can have,” Greiner says.
Were a national infrastructure planning body to be established to manage that blueprint, however, it would need to last longer than the political cycle.
It would be possible to harmonise Australia’s approach to infrastructure delivery, but that’s easier to achieve when governments have money.
“All governments, state and federal, aren’t going to produce surpluses for a long time,” Greiner says.
“There is, without doubt, a government funding problem for infrastructure. The private sector is part of the answer ...”
Which brings us back to public-private partnerships.
According to Greiner, the PPP deadlock in NSW was brought about by a combination of excessive greed, a flawed up-front payment model, a market with easy access to debt, overly optimistic traffic forecasts for transport projects and, finally, the GFC.
“The GFC has brought a touch of reality back to all this,” he says, but adds “I don’t think it’s at all beyond the wit of man to produce PPPs successfully.”
“I think people have learned the lesson of the past 10 years. The need is there and lots of companies are interested.”
Infrastructure NSW (INSW) is the organisation charged with getting infrastructure in Australia’s most populous state back on the rails.
A statutory body, its mission is to understand the state’s infrastructure needs over a 20-year horizon and advise the NSW Government by identifying and prioritising the delivery of critical public infrastructure.
It will develop a State Infrastructure Strategy to identify requirements over the next two decades, highlight barriers and activate the public and private sectors to deliver projects.
The Strategy is due for delivery in September 2012.
INSW is also responsible for evaluating unsolicited proposals from the private sector and projects greater than $100 million; advising the Premier on funding models; assessing PPP proposals; and co-ordinating state infrastructure funding submissions to the Commonwealth.
The organisation also has responsibility for some individual projects, such as the Port Botany – Sydney Airport precinct, and will also manage the delivery of the new Sydney International Convention, Exhibition & Entertainment Precinct at Darling Harbour.
Port Botany – Sydney Airport precinct
The precinct is crucial to the NSW economy. It generates $10.5 billion in economic activity and close to $100 billion in freight management each year.
INSW is scheduled to deliver recommendations for a strategy before July 2012 to address the precinct’s anticipated growth in container freight, air travel and general traffic through and around the locale.
Public transport, congestion, traffic bottlenecks and rail freight reliability are all targets.
Sydney International Convention, Exhibition and Entertainment Precinct (SICEEP)
Following an expressions of interest campaign which closed in late 2011, three consortia have been shortlisted to build and operate facilities within the 12 ha precinct. They are:
Destination Sydney – comprising AEG Ogden, Lend Lease, Spotless, Capella Capital and InfraRed Capital Partners
Key Partners – comprising Laing O’Rourke, John Laing Investments, Macquarie Capital Group, GL Events and Honeywell
VeNuSW – comprising Plenary Group, Brookfield Multiplex and Suntec.
The successful bidder is to be appointed in late 2012, with new and expanded facilities due for completion by late 2016.