Future Building 2016

The Australian Infrastructure Review Volume 7 Number Volume17 Number 1

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The Australian Infrastructure Review

Managing Editors: Sarah Dagg and Hannah Eves Editor: Giulia Heppell Design: Robert Smith Future Building is published by:

Executive Media Pty Ltd ABN 30 007 224 204 430 William Street Melbourne VIC 3000 Tel: +613 9274 4200 Fax: +613 9329 5295 E: media@executivemedia.com.au W: www.executivemedia.com.au Business Development Manager: David Haratsis Tel: +61 3 9274 4214 E: david.haratsis@executivemedia.com.au All stock images courtesy of iStock.com Cover image courtesy of Lendlease

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Chairman’s Foreword | Adrian Kloeden, Chairman, Infrastructure Partnerships Australia

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The Hon Tim Pallas MP | Treasurer of Victoria

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Politics, projects and people | panel discussion

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Frederick G Hilmer AO | Emeritus Professor, University of New South Wales

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Christopher Voyce | Executive Director, Co-Head Infrastructure, Utilities & Renewables, ANZ, Macquarie Capital

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Scott Charlton | Chief Executive Officer, Transurban

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Progressing road user charging | panel discussion

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The Hon Darren Chester MP | Minister for Infrastructure and Transport

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Chris Eccles | Secretary, Department of Premier and Cabinet, Victoria

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Benjamin Wyatt MLA | Shadow Treasurer of Western Australia

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Craig Michaels | Director, Sovereign and Public Finance, Standard and Poor’s Ratings Services

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Major projects | panel discussion

© 2016 Executive Media Pty Ltd. All rights reserved.

Reproduction in whole or part without written permission is strictly prohibited.

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Foreword I am delighted to present the 2016 edition of Future Building, which presents the proceedings of the 2016 Partnerships conference – Australia’s pre-eminent annual infrastructure policy and economic reform symposium.

Noting the wider global economic transition, this year’s proceedings saw a very strong focus on the structural changes that must occur to infrastructure markets – and to the structure of the government sector itself.

The depth and breadth of contributions – and their honesty – reflect the gathering momentum and understanding about what changes Australia needs to contemplate and to reform productivity and performance.

The launch of the Transurban-funded, yearlong study into the behavioural impacts of a whole-of-network road pricing is a solid example of the gathering consensus about major changes.

Through the upbeat opening address by the Victorian Treasurer Tim Pallas; the challenging but optimistic keynote address by Fred Hilmer; the leaders’ panel with David Gonski, Margaret Jackson and Terry Moran; and through Macquarie’s Christopher Voyce’s outline of global financial markets, these delegates shared pathways to, and opportunities for, better infrastructure.

And through the contributions of Standard & Poor’s Craig Michaels and the Western Australian Shadow Treasurer Ben Wyatt, we also shared respectively in the non-discretionary need for substantial changes – but also the political complexity of doing so.

I hope that you find Future Building of abiding interest, and I would welcome any feedback you may have.

Adrian Kloeden Chairman, Infrastructure Partnerships Australia

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The Hon Tim Pallas MP

The Hon Tim Pallas MP Treasurer of Victoria

In May, when I handed down the 2016–17 Victorian State Budget, I presented an economic plan for the year and, indeed, for the remainder of this term of government.

It was a plan focused on three key pillars: • bolstering our financial position • delivering infrastructure that drives productivity and growth • investing in the Victorian people to ensure that our communities are safe, and our living standards remain the envy of the world.

The Economist might have crowned Melbourne the world’s most livable city for the sixth year running, but the challenge for our government is to ensure that we keep investing and growing with an eye on the future.

When the Andrews Labor Government was elected, we were clear about what Victoria needed – a pipeline of economic activity that creates jobs and grows the Victorian economy.

Since then, the economy has generated more than 150,000 jobs; economic growth is running at three per cent; and work continues at a great pace on a strong infrastructure pipeline. In fact, Victoria’s employment growth leads the nation.

This optimistic outlook is a vindication of our policies over the last two years, and is the logical result of an economy that continues to exceed growth forecasts.

Key points: • Transport is at the centre of Victoria’s infrastructure – funded principally through the $10 billion lease of the Port of Melbourne.

• The risk allocation and value for money from Public Private Partnerships (PPPs) sees private finance being expanded.

• Victoria is committed to recycling taxpayer’s funds to fund new infrastructure, from surplus government businesses and assets that do not need to be public.

Victoria’s economic fundamentals are strong indeed. Victoria’s real gross state product (GSP) grew 2.5 per cent last year after two years of anaemic growth.

Not only that, but GSP is forecast to grow three per cent in both 2015–16 and 2016–17.

The strength of the Victorian economy is also reflected in the June quarter national accounts, which show Victoria’s annual state final demand growth to be the highest of all the states. Victorian state final demand has now increased for seven consecutive quarters.

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5.0 Productivity

4.0

Population

Per cent

3.0

Participation

2.0 1.0 0 -1.0 -2.0 Vic Aus Vic Aus 1990–91 to 1993–94 1994–95 to 1998–99

Vic Aus 1999–00 to 2007–08

Vic Aus 2008–09 to 2014–14

Source: Department of Treasury and Finance

The ANZ’s Stateometer report for June showed that Victoria’s economy is the only one in Australia to have grown above trend, which is consistent with figures showing that the total value of building approvals reached a record $31 billion in 2015–16, with an annual growth of 15 per cent in July.

This positive showing comes off the back of last month’s Westpac–Melbourne Institute Consumer Sentiment Index, which shows that Victorians are the most optimistic in Australia and display the highest consumer confidence.

Economic performance has been helped along by strong population growth, which is driving demand and bolstering the economy.

At 1.7 per cent in 2014–15, and now running at around 1.9 per cent, Victoria’s population growth is the strongest in the nation – more than 1900 additional people are choosing to call Victoria home each week.

While population growth is a welcome driver of economic expansion, we need to caution against it becoming the sole accelerant.

As you can see from the above graph, population growth is playing a disproportionate role in lifting Victorian living standards.

We want to see productivity growth making a greater contribution to the wealth of every Victorian.

That’s one of the key reasons the Budget contains a big boost in infrastructure spending.

Total estimated investments over the forward estimates include: • $6.8 billion in road infrastructure, including $5.5 billion for the Western Distributor road tunnel under the Maribyrnong River • $2.9 billion for rail infrastructure 4

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• nearly $1 billion for health infrastructure, including new buildings, vital health equipment and projects to increase the capacity of hospitals • nearly $900 million for new and upgraded school facilities across the state under the school capital programme.

This investment comes on top of $10.9 billion for the Melbourne Metro Tunnel project and $5–6 billion for the Level Crossing Removal Project over the next decade.

Transport makes up the largest component of our capital investment, a recognition of the role that it will play in boosting productivity.

The Melbourne Metro Tunnel packages are out to market, and regulatory and environmental approvals are in progress. Early works will begin next year.

The $324 million package includes the excavation of huge open shafts to enable the underground construction of the two new city stations.

This work will precede the beginning of major works, which will be delivered as a Public Private Partnership (PPP) and are scheduled to commence 12 months later, in 2018.

The Tunnel and Stations PPP will bore, build and fit out the nine-kilometre tunnel and the five new underground stations at Arden, Parkville, CBD North, CBD South and Domain.

Shortlisted bidders for the PPP will be asked to submit a formal proposal by early next year, with a contract expected to be awarded by the end of 2017.

The project has attracted a strong field of international and local contractors, and I am expecting highly competitive responses – perhaps from some of you here today.

Given the size of the Metro Tunnel project, there will be a mix of private finance and state capital

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contributions. We are open to alternative financing and capital market solutions that provide sustainable, low-cost finance.

Elsewhere on the rail network, our Level Crossing Removal Project is well underway.

As part of the project to remove nine dangerous and congested level crossings on the Cranbourne– Pakenham line, more than 11 Melbourne Cricket Grounds worth of community open space will be created for new parks, playgrounds, sporting facilities, car parking and a range of other uses that will be determined by locals.

The elevated design built over the existing rail line means that passengers and drivers will be spared years of disruption during construction – the majority of the work can be completed with trains and roads operating normally.

The package of works will also rebuild stations at Carnegie, Murrumbeena, Hughesdale, Clayton and Noble Park, and will rollout power and signalling upgrades along the line.

Construction has recently begun, and over the twoyear construction period, 2,000 jobs will be created.

Closely linked to the removal of level crossings on the Cranbourne–Pakenham line will be the purchase of a fleet of new high-capacity metropolitan trains.

The 455 carriages will make up 65 new trains, and will be ready for operation on day one of the Metro Tunnel. These trains make up the largest-ever order of trains in Victoria’s history, and will be supplied to the state as a PPP. Another key state investment that will be delivered as a PPP is the Western Distributor.

Three consortia have been chosen to tender for the design and construction of the project, which will slash congestion and take thousands of trucks off inner-west streets. The consortia are John Holland and CPB Contractors; Lendlease Engineering and Bouygues Construction; and an international consortium of Salini Impregilo, Fluor Australia and Lane Worldwide Infrastructure.

They will prepare fully costed designs for the Western Distributor, which includes the widening of the West Gate Freeway, a tunnel under Yarraville, a second river crossing, and connections to the port, CityLink and the city. The Western Distributor will Volume 7 Number 1

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provide a vital second river crossing as an alternative to the West Gate Bridge, slash travel times from Geelong by an estimated 20 minutes, and create 5,600 jobs. It is forecast to take 22,000 vehicles per day off the West Gate Bridge, including up to 6,000 trucks, as well as improve links to Port of Melbourne, Webb Dock and the inner north.

This year’s Budget provides a government contribution of $1.46 billion to the project over the forward estimates, which will also be funded through a combination of government funding outside of the forward estimates, tolls on the new road connections and an extension to the CityLink concession.

We use PPPs in Victoria for four key reasons: • because they maximise whole-of-life efficiencies in the delivery of government projects • to harness the innovations of private enterprise • to take advantage of the commercial opportunities they present • because they transfer risk.

I want to improve the way the Victorian Government engages with the market. On all types of procurement, we should be aiming to reduce the costs and time taken to tender.

In the next few months, I will release an updated PPP policy. My department has been consulting a range of market players to land on a standard base contract.

We will also develop standard Expression of Interest (EOI) and Request for Proposal (RFP) tender templates to achieve a consistent approach across projects.

My department has held more than 25 presubmission meetings this year alone, but there continues to be strong interest in market-led proposals.

I want the guidelines to set clear expectations that we welcome innovative proposals; however, there must be a good reason to justify exclusive negotiations.

Proposals need to be aligned to our priorities.

We recognise that sustainable long-term PPP contracts need to be able to respond to the changing landscape – to respond to different types of programmes and projects that we’re seeking to deliver.

That’s why we are undertaking a business case that explores packaging up arterial road upgrades, as well as maintaining existing outer-suburban roads into an availability payment PPP (OSARs PPP) to introduce whole-of-life considerations into road asset management in Victoria.

We think that there is potential to deliver arterial road upgrades as PPPs – to translate the benefits enjoyed by projects like Peninsula Link and EastLink 6

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to smaller-scale road projects throughout Melbourne.

We recognise that arterial roads are just as important as major freeway connections to efficiently move people and goods around our rapidly growing city. Not only will we get the benefits of construction risk transfer, but we will also get performance and long-term maintenance benefits.

This year’s Budget contained $10 million in planning money for a number of projects in the outer metropolitan area that have the potential to be delivered as PPPs. The Business Case is currently considering three packages: • a Western Package • a South Eastern Package • the potential of a Northern Package.

One of the biggest risks to any government road programme is poor-quality construction or a design that results in higher-than-anticipated maintenance and refurbishment costs down the track.

A private party is well placed to manage this risk through long-term arrangements with qualified and well-resourced subcontractors that can drive innovative design, build and maintenance solutions.

The OSARs PPP will be a path-finding project for arterial road infrastructure construction and maintenance, and will be the first of its kind in Australia.

Although government-funded PPPs do not expand the funding available to government, they allow us to use the funding available to purchase outcomes as well as physical assets. Through this process, we’re allocating to the private sector those risks that can be managed at a lower cost than government can achieve.

But it is important that we recognise that government has a responsibility to build and maintain project management skills in our own ranks. The greater the ability of the public sector, the more effective we can be when we collaborate with private companies.

One of our election commitments was to establish the Office of Projects Victoria (OPV) to centralise our skills and provide oversight of key projects. Of course, these kinds of bodies are only ever as good as the people who work in them.

The OPV has been established, and will be Chaired by Ken Mathers. Ken and I go back a long way. We worked together to deliver EastLink and Peninsula Link – projects delivered ahead of time and under budget. He was also on the board of Regional Rail Link.

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The West Gate Bridge, Victoria

As you know, Ken has unparalleled experience in, and knowledge of, major infrastructure projects, and he was recently honoured by Australia’s infrastructure sector for more than 50 years of public service through a Chairman’s Prize at Infrastructure Partnerships Australia’s National Infrastructure Awards. He will be joined by the Victorian Chief Engineer and a small, highly qualified team.

The OPV will build capability and skills in project development and delivery. It will provide advice on cost, scope and technical matters for asset investment decisions and project delivery arrangements.

Importantly, the OPV will monitor and oversee all major projects.

Despite challenges globally, Victoria is defying the broader trend, and is well on its way to once again becoming the engine room of the Australian economy. Just a fortnight ago, Standard & Poor’s reaffirmed our AAA credit rating, thanks to Victoria’s ‘very strong financial management and economy’.

Victorian business confidence has been in positive territory for the last 15 months, and consumer confidence is the highest in the nation. We are also the construction powerhouse of the nation, with recent figures showing building approvals up 15.3 per cent over the year. And our employment growth and economic growth lead the nation.

We have a strong infrastructure programme and, importantly, we have the means to deliver it.

We will fund our agenda through traditional means, like operating surpluses and asset recycling, and, where feasible, we will use innovative mechanisms like market-led proposals and PPPs. Where there is no pressing need to retain public ownership, we are highly receptive to unlocking capital in state-owned assets as part of the funding mix for new infrastructure.

Almost two years into our term of government, one thing is certain – we are not sitting idle; we are getting it done.

The Hon Tim Pallas MP, Treasurer of Victoria Tim Pallas was elected to the Victorian Parliament in 2006, and is the state member for Werribee. Following the election of the Andrews Labor Government in November 2014, he was appointed Treasurer. His first budget in May 2015 was the biggest education budget in Victoria’s history. Mr Pallas served in the Bracks and Brumby governments as Minister for Roads and Ports, and later added Major Projects to his responsibilities.

As Minister for Roads, he oversaw the M1 Upgrade, and the construction of the Deer Park Bypass and Geelong Ring Road, completed the upgrade of the Calder Freeway to improve links to Bendigo, and was responsible for commencing the Peninsula Link project on the Mornington Peninsula.

In the Major Projects portfolio, he was responsible for big-ticket items like the development of AAMI Stadium and the Melbourne Convention and Exhibition Centre, as well as the Melbourne Recital Centre and Melbourne Theatre Company’s Southbank Theatre.

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BARANGAROO URBAN RENEWAL WILL TAKE SYDNEY TO A NEW LEVEL Award-winning designs for residential, business and community hub.

Sydney’s $6-billion Barangaroo transformation is emerging as one of the world’s great urban renewal projects and a showcase for Australian infrastructure.

The groundbreaking project, on the north-west tip of Sydney’s CBD, is setting global benchmarks in infrastructure planning, design, construction and governance.

Barangaroo is redefining how government, community and the private sector can work together to shape infrastructure projects and create an outstanding legacy – one that goes beyond physical buildings and understands how intuitive infrastructure elevates a city’s sustainability, culture, community and identity.

‘Great urban renewal taps into the passions and aspirations of a city’s people, refines and reinterprets them, and gives them space to thrive,’ says Barangaroo Delivery Authority CEO Craig van der Laan.

‘Done well, urban renewal can change how a city is perceived, and how the city’s people perceive themselves.’

This will be true of Barangaroo. The 22-hectare project is reimagining the Sydney CBD’s western edge through public spaces, harbourside parkland, cultural areas, educational and recreational facilities, as well as state-of-the-art residential, retail and commercial buildings.

By integrating with new rail, pedestrian and ferry infrastructure, Barangaroo will deliver unprecedented connectivity in an urban renewal project, and will become a major centre of economic activity that attracts knowledge workers from across Sydney and the world.

When the final piece falls into place in 2024 with completion of a new metro rail connection, Barangaroo will support more than 23,000 permanent jobs, attract up to 33,000 visitors daily, house 3500 residents and contribute an estimated $2 billion annually to the New South Wales economy.

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Barangaroo, quite simply, will take Sydney to another level.

‘Barangaroo is a benchmark project of the New South Wales Government,’ says van der Laan.

‘It is showcasing the New South Wales Government’s capacity to deliver infrastructure that adds extraordinary value – not just in economic terms, but also in terms of community, cultural and social benefit.’

Delivering a series of firsts Barangaroo will boost Australia’s standing as a financial hub in the Asia-Pacific region, encourage new investment into New South Wales and help attract offshore companies and talent to Sydney.

Barangaroo South, one of the precinct’s three areas, is a vital extension of Sydney’s CBD. Developed through a partnership between the New South Wales Government and Lendlease Corporation, Barangaroo South will be a flagship address for leading Australian and international companies.

The first two of Barangaroo South’s three high-rise commercial towers have opened with anchor tenants including Westpac, KPMG, Gilbert + Tobin and Lendlease itself, with HSBC, PricewaterhouseCoopers and Marsh & McLennan to follow in the third tower, due to be completed in late 2016.

‘Barangaroo shows that New South Wales is open for business,’ says van der Laan.

‘This landmark location has already attracted leading global financial and professional service firms, and reinforces Sydney as the preferred destination for major organisations in the Asia-Pacific.’

Barangaroo South will include the landmark Crown six-star luxury hotel resort and VIP gaming facility, harbourside apartments, restaurants, bars, cafés and retailers – facilities that will strengthen

Craig van der Laan, CEO, Barangaroo Delivery Authority

Sydney’s standing as the gateway to Australia and one of the world’s great tourist cities.

Barangaroo is also delivering environmental firsts. The precinct aims to be climate positive – a first for an urban renewal project of its size. This will include being carbon neutral in operation, where all greenhouse gas emissions from energy consumption, water use, waste generation, and other on-site emissions sources are offset to zero.

A commitment to open public spaces enhances Barangaroo’s social credentials.

More than 50 per cent of Barangaroo is dedicated public space, including the 2.2-kilometre foreshore Wulugul Walk and the international award-winning Barangaroo Reserve.

The six-hectare harbour headland reserve, Sydney’s newest foreshore park, opened to acclaim in August 2015.

Barangaroo Reserve transformed one of Sydney’s oldest industrial sites, and

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opened an area of the harbour foreshore that had been closed to the public for more than 100 years.

Barangaroo Reserve includes a dramatic cultural space called the Cutaway, which is one of Australia’s largest internal spaces and has already hosted a range of important cultural and community events, as well as commercial functions.

‘The reconstruction of a harbour headland and the creation of Barangaroo Reserve was a bold statement of exceptional urban design, and raised the bar on standards of innovation and design in Australian landscape engineering,’ says van der Laan.

The work on Barangaroo Reserve has been recognised domestically and internationally.

Barangaroo Reserve and its lead designer, PWP Landscape Architecture, were awarded the prestigous World Architecture News (WAN) Waterfront 2015 Award.

In April 2015, Infrastructure Partnerships Australia (IPA) named Barangaroo Reserve as Australia’s Project of the Year in its National Infrastructure Awards, and the reserve won the Architizer A+ Award Jury Winner in the Landscape and Planning Public Park category.

Vibrant, active, connected and accessible The final stage will involve the development of Central Barangaroo, a 5.2-hectare site linking Barangaroo South with Barangaroo Reserve, intended to drive Barangaroo’s cultural and community aspirations with a vibrant and active, mixed-use precinct. A public tender for the right to develop Central Barangaroo is understood to be in the final stages.

Central Barangaroo will also include a dedicated metro station, linking the precinct to the city’s proposed new world-class rail system.

‘Central Barangaroo will be the beating heart of Barangaroo, with the metro

station to make the global business hub at Barangaroo South and the western waterfront of the CBD accessible to everyone,’ says van der Laan.

The Barangaroo Ferry Hub is due to be completed in early 2017. Two new wharves will service passengers travelling from the inner harbour and Sydney’s west to Barangaroo, and connect to the Sydney CBD via Wynyard Walk, a new pedestrian link between Barangaroo and Wynyard Station.

As Sydney’s newest pedestrian tunnel, Wynyard Walk will help Barangaroo move up to an estimated 56,000 workers and visitors each day. It was opened in September 2016.

Vision, planning and governance at the heart of the project’s success Mr van der Laan says that strong foresight and governance through the Barangaroo Delivery Authority on behalf of the New South Wales Government is helping to deliver a challenging project.

‘A visionary and ambitious urban transformation such as Barangaroo is always going to be complex, with many stakeholders having different and sometimes competing views. A key part of our role is to balance all those considerations and deliver an extraordinary outcome for the precinct as a whole.’

He believes that Barangaroo will continue to exceed expectations.

‘Barangaroo is a once-in-a-generation opportunity to create a truly extraordinary place and drive urban renewal in one of the world’s finest cities. Our commitment is to continue to deliver on the promise of this amazing place.’

To learn more about Barangaroo, visit www.barangaroo.com

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ENABLING SAFETY AND SECURITY FOR AUSTRALIA’S CRITICAL INFRASTRUCTURE Australia’s roads, postal services and power grids are no longer safe from cybersecurity threats.

As our nation’s critical infrastructure becomes increasingly connected and digitised, the risks posed by cybercrime and hacking attempts grow. By collaborating with other industry players and building vigilance among their people, infrastructure providers can continue to deliver robust and reliable services – and earn consumers’ trust in their brands at the same time.

Australia’s financial services infrastructure is as critical to the national interest as any transportation or utility network. ANZ and other financial services providers have been tackling cybersecurity issues ever since the first internet banking systems came online decades ago. The steps that financial services providers take to protect sensitive customer data and critical functionality are similar to many other infrastructure providers’ defences in relation to cybersecurity. The scale, sophistication and potential severity of the threats are often the same, no matter which particular organisation is being targeted.

Understanding the risk ‘In an offline world, traditional approaches such as creating “air gaps” between critical infrastructure and any internet-connected system made sense,’ says Craig Shortus, Head of Utilities and Infrastructure at ANZ. ‘However, with the rapid adoption of internet-of-things technologies, remote monitoring platforms and cloud computing, most of Australia’s infrastructure is now connected in some way or another.’

For infrastructure providers, robust cybersecurity requires comprehensive awareness of all physical and informational assets, as well as who has access to them. Regular scans and monitoring reveal how data may inadvertently flow out of the organisation via social media posts, cloud hosting or employees’ mobile devices.

‘Knowledge of emerging technologies can also help operators understand the potential threats they may face from malicious actors,’ advises Steve Glynn, Chief Information Security Officer at ANZ. ‘These actors tend to be true early adopters who employ or target these technologies before most organisations are

10X

Source: ANZ Institutional

aware of their potential.’

Of particular importance is an understanding of what motivates different malicious actors, and how this influences where they might strike. Hacktivists, for example, are likely to target control systems or sensitive data in a bid to cause an outage or embarrassing breach to an organisation. Cybercriminals, on the other hand, usually adopt a much more low-key approach, aiming to siphon funds through

phishing, social engineering and other types of online fraud.

Preparing for all contingencies With this awareness, infrastructure providers can begin to identify where their systems may be vulnerable, and can take the necessary steps to secure them. ANZ performs frequent threat modelling exercises based on its understanding of different malicious actors’ motivations, combined

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‘Collaboration is the key to the cybersecurity of our national critical infrastructure’ with intelligence about external and internal cybersecurity risks.

‘Sometimes, even the best-laid plans cannot prevent a cyber attack from occurring,’ cautions Craig Templeton, Head of Security Enablement at ANZ, ‘which is why infrastructure providers should run frequent exercises and drills that cover any contingency.’

At ANZ, teams drill their responses to a range of scenarios, testing not only

Source: ANZ Institutional

their technical skills, but also their ability to escalate, communicate and mitigate the situation’s impact on other parts of the business. ‘These drills often bring in practitioners from other teams as well, such as business continuity or communications,’ says Templeton. ‘Our goal is to test our overall response to the broader reputational and operational impact of an attack, not just how we address threats from a technology standpoint.’

Building trust with customers and industry In today’s environment, all infrastructure bodies are connected, and they often face similar threats. The future may see infrastructure providers – including banks – sharing intelligence, responses and even technologies with one another. This could enable the ecosystem to grow stronger as a whole.

‘This collaborative approach does come with risks, but they’re well worth taking to ensure organisations maintain continuous protection in a complex cybersecurity landscape,’ says Glynn.

‘Sharing intelligence helps to forge an industry culture of reciprocity: if you successfully alert another organisation to a threat ahead of time, they’re more likely to return the favour and potentially save you from a crippling attack. And if one infrastructure provider suffers a breach or an outage, consumers often start to question whether other providers might also be vulnerable, potentially creating a crisis of confidence in the industry as a whole.’

Infrastructure providers should also work with their employees and customers to build a culture of cybersecurity awareness.

Education is as important, if not more so, than technology when it comes to neutralising cyber threats. ANZ, for example, works with major organisations around Australia to ensure that cybersecurity messages to consumers are simple and consistent. As a result, consumers are much more likely to remember and practice good cyber-safety habits in their daily routines, benefiting a whole range of infrastructure providers, from banks to telcos and even supermarket chains.

‘Collaboration is the key to the cybersecurity of our national critical infrastructure,’ says Templeton. ‘When tackling threats or building up defences, infrastructure providers can draw on one another’s experience and intelligence – particularly those of the financial services industry, whose members have a diverse breadth of knowledge in this area.’

Doing so will help infrastructure providers not only gain greater trust – and brand loyalty – from their own customers, but it will also safeguard the services that Australians depend upon every day.

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Politics, projects and people – panel discussion

L–R: Terry Moran AC, Margaret Jackson AC, David Gonski AC and Brendan Lyon

Key points:

Politics, projects and people Chair: Brendan Lyon, Chief Executive Officer, Infrastructure Partnerships Australia Panellists: • David Gonski AC, Chairman, ANZ • Margaret Jackson AC, Independent Non-executive Chairman, Spotless • Terry Moran AC, Former Secretary of the Department of the Prime Minister and Cabinet

Brendan Lyon (BL): With governments serving threeor four-year terms, and private sector companies reporting on a quarterly basis, have we got the right ingredients for reform, or has Australia become too short term?

David Gonski (DG): Well, the answer’s yes.

I would say three things. Firstly, it’s not just the government; I think our whole way of doing business, whether that be in the private sector or the government sector, is short term. When I look at quarterly reporting, I look at how our investing shareholders have to compete in terms of what they do each quarter, and so on. The whole system is seen with a short-term approach.

You feel this most intensely if, as I’ve done, you sit on a board in Singapore or elsewhere in Asia.

The main difference of those boards is that they are longer term in their thinking. I have to be honest, I’m tired of people coming to me and saying, ‘I’m from private equity. You should privatise this or that because it allows you a longer-term vision’. I think that big companies, and indeed government, have to think longer term.

The final point I’d make is that those of us who have been involved in big companies know how difficult it is to put the money up front to buy or to invest in infrastructure when the returns are at the backend. We also know what it’s like to write off 12

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• Better infrastructure relies on consensus between public and private sectors about best long-term market and regulatory structures.

• Public sector should set clear expectations about what they want from infrastructure projects – and political government must honour contracts.

• Infrastructure is largely controlled by states, so the new Senate should have marginal impacts on infrastructure projects.

legacy systems. As a whole, we have to look at a new approach and seek understanding that if there’s a clear articulation of what we’re doing in the long term, then if we perform to that, it is okay, rather than needing to make short-term gains all the time.

BL: Thank you. And Margaret, your views?

Margaret Jackson (MJ): In Australia at the moment, apart from the fact that we’ve got short terms of government, right now we’ve got a problem with a lack of mandate. It feels like, federally, we’re sitting, waiting for decisions and waiting for action. It was fantastic to hear from Tim Pallas earlier; definitely in the state of Victoria, you get a feeling that things are actually moving.

But look at the companies that are involved in very long-term decisions – mining companies, aviation and telecommunications companies: companies with pressure for results. You have to make decisions that are based on what the right thing is for 25 or 30 years, and the infrastructure to support these investments, knowing that often the length of time that you’re going to make returns in is 30 to 40 years. In aviation, when you’re buying aircraft, you’re making a decision as to which aircraft you’re going to operate for 25 years.

So, whatever it costs in the short term – and it is very short term – you have to make the decision, the correct decision, to get a fabulous benefit over a very

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long term. A lot of the government decisions see the cost now, and the pain now, but you’re going to get a more economically efficient system over the next 20 or 30 years.

BL: Terry, you’ve been around public administration and business for all of your career.

What are your observations?

Terry Moran (TM): I agree that we are stuck in a period of short-term planning, but not for the reason that’s the premise of the question. Victoria’s had four four-year parliaments for about 15 years, and that doesn’t seem to have changed much. What commenced in Victoria’s case in the 1980s, when we abandoned any credible attempt at long-term landuse planning and strategic planning of infrastructure, occurred with the dissolution of what was then called the Melbourne and Metropolitan Board of Works.

However, we’re now heading into a period where planning in the long term is becoming fashionable again, both in New South Wales and in Victoria. In part, that’s because of the huge ramp-up, year on year, in population growth, which Treasurer Tim Pallas referred to in his presentation. For some time now, Victoria has been getting higher percentage increases in population growth than New South Wales, and we’re in danger unless we get serious about planning for the future.

Melbourne will probably grow by about two million people over the next 30 years, and happily, at least as far as infrastructure planning is concerned, Infrastructure Victoria has been asked to work on a long-term 30-year plan as to how it’s all going to roll out. That plan is expected to be released in the next few months [Editor’s note: a draft plan was released in October], and I’m sure that, given the quality of the people involved, it will be a good plan.

My final point is that we still haven’t figured out how to combine land-use planning and strategic planning of infrastructure so that there are more employment opportunities available close to where people live.

The Prime Minister has drawn attention to the problem with his ‘30-minute cities’; and recently, the Chair of the Greater Sydney Commission, Lucy Turnbull, also drew attention to it when she said that, within a reasonable period of time, 60 per cent of Sydney’s population will be in the west, alongside a high proportion of jobs.

Unless something is done to create jobs where people live, Sydney will have massive congestion problems and too many people trying to get into the

L–R: Margaret Jackson AC and David Gonski AC

centre of the city for jobs that, in many cases, could be available elsewhere.

BL: Working out what we need to do is one part of the puzzle. The other one that we have struggled with for a long time is how to pay for it, and one of the things that’s changed over the last little while has been the focus on asset transactions. The question that I want to ask is about the decision to reject two overseas bidders on Ausgrid, which took a lot of people by surprise. Do you think Australia put its best foot forward on this? Do you think that there are lessons we need to take for the discussion, David?

DG: I’ve been around a long time and have seen a lot of these decisions. The major thing, if you had asked me what was wrong with that decision, is not the decision itself. In my opinion, governments are entitled to decide whether they want to do it or not because that’s what the Act says. The mistake, in my opinion, is that there should be a clear statement right at the beginning as to what the procedure for considering approval of the project will be and, indeed, what the likelihood of success is. If I had spent money, I would’ve been pretty upset to find at the end of it that basically it was a ‘no’. It’s perfectly fair at the beginning to say x, y, z will not get approval. You need to set up at the beginning, knowing the rules.

BL: And do you think that this has done damage to our long-term relationships with Chinese investment and international investment, or do you think it’s a blip?

DG: Well, the first thing I would say is that I’m not the expert; indeed, just looking around the room, there are many here who’d know more than me. My own view after seeing a lot of these decisions over time is that it will be a blip.

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TM: There are really two questions. One was the decision to make the sale, and that’s perfectly fine. I agree with David that right at the beginning you usually know through the Expression of Interest process who the bidders are. It’s perfectly reasonable to say to government at the beginning, you should have your criteria set and actually go through a filter process at the beginning, and say these are the things that we’re going to knock out a candidate on. Do it at the beginning, not at the end, because it’s like pulling the rope at the end when they’ve spent all the money.

MJ: At Spotless, we do quite a number of contracts with people in the defence industry.

We probably would never approach a Chinese company to be a joint venture partner with us to provide something for the Department of Defence, even if they hadn’t told us what the criteria was, because you would think from a national interest point of view that it might not be the most sensible decision at the moment. I think it’s a blip. There have been periods in the past where for whatever reason we’ve rejected bidders from all over the world, but the world’s a big place, and we recover from these things. So, I think it will be okay, but I agree that it’s got to be worked out at the beginning.

BL: Terry, you used to run these processes. What can you share with us?

TM: I think Ausgrid was handled badly. I don’t think the decision should have been announced so late in the piece, and there was a difference between the two bidders. The Hong Kong–based corporation has been a long-term successful investor in various energy assets. To my knowledge, there’s never been a problem. There’s been a long debate in government about state-owned enterprises and their ability to invest in major strategic assets. I had thought that it’d been resolved in favour of not allowing stateowned enterprises to do that, so I don’t know what happened to that decision. But if the state-owned enterprise was allowed into the game, and if there was going to be a security problem, then they should’ve been told about that at the beginning so they could either find a structural way around it, or get out of the bidding process.

I think this has been mishandled by the Federal Government. I don’t think anybody will be too fussed when other transactions go through in a satisfactory way, but I’d stress that in policy terms, we need to know whether Chinese state-owned enterprises that are closely tied to the Communist Party should be 14

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able to invest in sensitive strategic assets in Australia, and my view is that they shouldn’t be.

BL: If I can just follow on from that Terry, we’ve also seen some uncertainty around the approach to greenfield hygiene down here, particularly a light rail project that’s the subject of a fairly bitter political debate in the Australian Capital Territory. I’m just looking for views across the panel, perhaps starting with you, Terry, on whether this is part of the new normal, or whether this is something that we can see past.

TM: When I talk with businesspeople, I often find that they are now more innocent than what used to be the case about the requirements of democracy.

If you want to do something that’s going to be a bit controversial, you’ve either got to take the community with you or find a way of neutralising what happens on the ground. In the case of the East West Link, I think that several things went wrong. Firstly, the Labor Party was saying before there was the signing of any contracts that if it were elected into power, it did not want to go ahead with the project.

Nonetheless, a consortium and the government of the day built into the project penalty clauses, which frankly were improper in my view.

Secondly, the consortium, having signed the contracts, had no regard for the communities affected in inner Melbourne. The project had amazing benefits that could have been presented if only they’d thought to try. The first thing to appear was a prominent ad in one of the newspapers, calling for a consultant to handle the recruitment of people from overseas to work on the project, which is hardly a way of saying, ‘We’re here to create jobs for Australians in Australia’s second-largest city’.

It was ham-fisted on all fronts. The contract was defective in the way that it brought forward penalties that would have to be borne if there was a change of government, which occurred, and I don’t think that it necessarily says anything about sovereign risk applying to big projects in Victoria, nor, for that matter, in Australia.

BL: Going back to the immediacy of the East West Link, and more about the principle and the flow-on around other projects, is it a concern?

TM: Successful consortia ought to think more about how they explain and justify to the community what they’ve been asked to do. So many people would’ve noticed that we’re starting to get commentary cropping up in the media about CityLink, its profitability and whether some of the contractual

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terms are justified. If you ignore those things and don’t deal with them, then there’s a danger that, over time, they’ll grow in significance and become a real obstacle to further work. If business realised that a bit of loving persuasion to the community is occasionally a good idea, it might soften some of the rough edges.

BL: Margaret, how much loving persuasion do you think is necessary?

MJ: Well, I agree. I think that the government has to explain what it’s doing, and that participants in these projects need to assist government in explaining to the community what they’re doing.

BL: Does this growing trend around political governments making commitments to walk away from worry you?

TM: I think that was a very specific, unusual set of circumstances, with the government in power determined to go ahead with the project, and an opposition that then came into power after saying that if they did, they would not go ahead with the project. So, the consortium took on a risk at the time by signing, which is probably why they had clauses in there, but I think that there was a bit of a noise around sovereign risk at the time. I think all of that’s now quietened down; projects have been accepted and they’ve moved on, so I think we’ll recover.

DG: I have a slightly different view. I understand what you said, but as I travel around, particularly in Asia, there are a lot of questions about sovereign risk, and I think that we’ve got to make it very clear. If a deal is done, it’s done. If there is – and I accept Terry’s point – some indication at the beginning that it will be undone, then that’s obviously part of the facts and maybe a deal actually wasn’t done. But when Terry talks about how they didn’t do such a good job of selling the thing once they had the deal, I am not sure they had to sell anything at that point – they had the deal. If, however, you have breached the terms of it, then that’s another thing. But if you haven’t breached, I’m not entirely sure you need to sell yourself into it again. I want to make it clear that corporations and those coming in to do business do have obligations to society, and should always do the right thing – of course they should. But for our sovereignty, it comes back to your question about FIRB. Everything is fine, provided there is a consistency in terms of sovereignty. I believe that if you have the deal and there isn’t some precursor that somebody has outlined, then you must be allowed to have it.

It is a different question to take it away from them

because of their conduct afterwards. It depends on what the contractual terms are.

BL: There appears to be a lot of breakthrough in infrastructure, as the community starts to engage on the real issues that underpin it. We saw that through the 1990s, and we will hear from Fred Hilmer shortly on the need for more long-term planning, more transparency and so on. What does that actually mean? What do we need to change? What do we need to do? How do we make these things explicit?

TM: There has to be a link to land-use planning: in other words, where economic activity will occur and where residential areas will be located – that and long-term planning of infrastructure. It’s not just transport infrastructure that’s affected by land-use planning, it’s also social infrastructure, including hospitals and schools. I don’t think Victoria has been doing that all that well. If you compare Melbourne and Sydney, Sydney is further advanced than Melbourne in terms of major hubs in the suburbs, in Chatswood and Parramatta; hubs that will be growing providers of jobs to people. In Melbourne, people might have to come from the western suburbs or the northern suburbs into the centre of the CBD to get a job in the services sector.

BL: You’ve seen promising signs in Sydney around how that’s coming together.

TM: I think that the New South Wales Government is right onto it. The Greater Sydney Commission is right onto it. I mentioned Lucy Turnbull’s recent speech, which touched on aspects of this. In Melbourne, there have been plans for probably 15 or 20 years for hubs in the suburbs, but they just haven’t received the support or the investment seen in New South Wales.

That’s because governments on both sides of politics believe that there are many hundreds of hectares in the centre of the city, and have said ‘Well, we’ll just go ahead with the development of those areas and will build more transport infrastructure to bring more and more people into the centre of the city’. But there are limits as to how far you can go with that approach.

Melbourne is approaching one million people per day travelling by all means for all purposes into the centre. With another two million people going into Melbourne over the next two or three decades, can we keep doing that? I don’t think so. We’ve got to follow Sydney’s example in that respect.

BL: Margaret?

MJ: I’d like to talk about the framework for where we’re going to grow, not only in the CBD, but Volume 7 Number 1

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L–R: Terry Moran AC, Margaret Jackson AC, David Gonski AC and Brendan Lyon

also the state. We seem to be having an explosion in population, and we just keep spreading and spreading, so that places that were rural are now becoming commutes to Melbourne. That’s having significant impact on social infrastructure and economic infrastructure in those regions in Melbourne. I’m not sure we’ve actually got the framework right. If we have got the framework, I don’t know whether it’s understood well enough.

Coming back to some of the points we were talking about regarding what the criteria is for evaluating projects and evaluating bidders, everyone on projects needs to know about what the grand plan is. If you want to be a participant, then you’ve got a certainty that at least you’re going to comply with whatever the requirements are.

BL: And may we go to Terry’s point around legitimacy of projects?

DG: I think it can also be in relation to funding; if you look at the consequential arrangements of what you’re doing, other forms of return are there and should be tapped. I don’t know whether it’s appropriate, but I know that infrastructure in New South Wales has been looking very carefully at this issue with WestConnex. Questions have been asked by them, like what has it done to some of the hubs, and who is benfiting from that? I remember listening to all of that and thinking, ‘Why didn’t I think of that?’

I mean, that’s something that should be built into the costs and the revenues that are coming from that, right from the start.

BL: If we think about funding for a moment, one of the challenges that we have in the immediate 16

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to medium term is really about rebalancing fiscal settings for state governments in particular. The large part of that is going to be about getting into the recurrent, rather than the capital side of what government is doing.

Margaret, you chair a major outsourcing company, and you’ve worked across some of the more heavily regulated sectors, like aviation. Do you get a sense that we’re at the start of another period of reform, perhaps focusing this time on the government sector, or are you still seeing glaciers?

MJ: I think that over the last few years, there has been an interest in reform, and there’s an interest in changing the mix of who provides the infrastructure, and who provides the ongoing maintenance of these assets. But there’s something not happening between the decision to look at the alternatives and implementation, so what we’ve observed is – and it’s occurring in almost every state – that there will be a decision, say to go to a model for hospital bids. They’ll go through the testing process, they’ll have a preferred bidder and then they’ll pause and it’s not the right time electorally to make an announcement, so a year goes by and then they permanently defer. There seems to be a lot of process, then pause and then inactivity.

Whereas when they actually do go ahead, the savings are really quite phenomenal. If you look at the costs of maintaining hospitals or schools, or other infrastructure, it’s really quite compelling when you outsource; but somehow or other there’s not a strong enough will, or governments become politically nervous. I don’t know if it is the unions

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or not, or where it comes from, but it’s unusual that we’re seeing quite a number of these project delays.

BL: Terry, you’ve seen some of these in Victoria and in Canberra.

TM: It’s possible to not have pauses in projects.

Sometimes, though, those pauses are due to the constipated regulatory overload of the planning systems, particularly in New South Wales and, to an extent, in Victoria. It’s okay to do what the Treasurer has said about standardised contracts and standardised documentation for getting Public Private Partnerships (PPPs) moving, and he’s absolutely right, but there’s also got to be something done about better planning systems both in Melbourne and in New South Wales, with fewer steps, fewer gates to get through, and less nonsense from statutory planners about what’s permitted and what’s not permitted.

Secondly, it would be best if government standardised its rules about how infrastructure projects are treated on the balance sheet. In fact, in some cases, they’re not treated on the balance sheet at all; the Commonwealth treats them as part of operational expenses. Happily, Prime Minister Malcolm Turnbull has said that he would like to see Commonwealth investments in infrastructure treated as equity injections into projects. This means that the Commonwealth’s balance sheet, which is still very healthy, can be used to budget, and I think that’s a huge breakthrough in the second form of obfuscation that’s been blocking infrastructure investment in this country, which is treasury economists trying to be accounting experts. Often, they’re not very good at it – not in all jurisdictions, so they’re not bad here in Victoria, and they’re pretty good in New South Wales, but they’re hopeless at the Commonwealth level and in some of the other states. I think that there are problems that can be fixed, and I think on the use of the Commonwealth balance sheet, the Prime Minister’s got it right. I’m just hoping for good speed on that reform, and all the states should come into line where they haven’t already done so.

BL: David, have you got a different view to that?

DG: No, actually. I’m wildly enthusiastic about what Terry has said.

TM: Oh that’s great, David. It’s probably the first time we’ve agreed.

DG: Can I just say, I read with enormous interest a wonderful op-ed that Frank Lowy wrote, suggesting along the lines of what you’re talking about. But one of the obfuscations would definitely be if we became

‘accounting heroes’ and spent the money now, which was his instinct, and basically didn’t take it as an expense and therefore found a way of dealing with it. To me, when you look at the interest rates and where they are at the moment, and when you look at the amount of infrastructure that is required and the multiplier that comes from infrastructure, we have to find a way of doing it. I loved what Terry said, that perhaps we’ve got to stop being obsessed with thinking that we are experts in accounting and basically that we’ve just got to do it, and find a way to do it. I strongly support what was said by Lowy in that regard. I’m not seeking to get more business for my bank – I’m talking as someone who believes that we should stop this, spend the money and not believe that this money that’s being spent is recurrent money.

It is much more about spending it well so that we are producing great benefits for the future from infrastructure.

BL: Margaret, are you worried about equity risk in dollars?

MJ: No, but what I was going to say was that if you go back in time and you look at all the infrastructure that we have around Australia, and the gains that then come to the economy as a consequence... if you go back to the time when they were all approved or started, not everybody saw the benefit of them – the disruption of it was going to occur in the first couple of years while something was being constructed, and there was always a million reasons why it shouldn’t happen. At the very beginning, the risk is enormous because you’re talking about something over a very long period of time.

But if you don’t make an investment, you’re not going to get the return, you’re not going to have a more efficient economy, you’re not going to create the employment in that entity and in other entities – and if I look at the time when I was in aviation and telecommunications, there was never a good time to spend. But if you didn’t spend, you were never going to have a company. There’s no airline if you have no planes, and there’s no telecommunication system if you don’t invest in infrastructure. Governments need to be brave and adventurous, but also prudent, and invest in the infrastructure that we will all benefit from economically.

BL: We’re almost out of time, but just a final question to each of you. The Senate has been described by one commentator as a full-blown wildlife sanctuary. I wanted to get your observations on how you think the next couple of years are going to play out on the national political stage, and what we can expect from incentives and drivers.

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The Senate’s going to be interesting, but the Senate is always interesting, and as David said, it’s been interesting for decades and probably will continue to always be interesting DG: Firstly, if I may make a statement to allow the others to actually work out what the answer is.

Everybody tells me that this is a different Senate; it’s terrible. In 1987, I had to deal with the Senate, and I was negotiating with it. And for those who were around, you’ll remember the anti-nuclear party, which actually had quite an able person in the Senate who was desperately trying to work out what nuclear had to do with what I was talking about. Not what 18

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they were in favour of, but whether, in fact, you could fit it into that. Anybody like myself who’s lived through that will know this is just Monday to Friday in the Senate. This is perfectly the same as what we’ve seen before, and so I would say rather than being obsessed with how many crossbenchers there are and what they may stand for and so on, I think that like in anything in management, the government must manage the situation. My instinct is that they will probably do it well, and obviously there will be ups and downs, but that’s the joy of democracy, and I think you accept it and move on.

MJ: If I think about infrastructure, the states have more to do with infrastructure than the Federal Government. The Senate’s going to be interesting, but the Senate is always interesting, and as David said, it’s been interesting for decades and probably will continue to always be interesting. In infrastructure, what we really want to look at is what’s happening in the states, and encourage the states to actually show. Yes, there are some issues with some of the upper houses in the states as well, but you’re always going to have vested interest parties, and you’re always going to have a process that you have to work within. For those of us in the private sector,

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you can’t not understand how the government sector works; you can’t not understand that there is vested interest and you just have to spend time understanding it, trying to influence it as best you can, or at least trying to get it into a more neutral state. It’s part of the process.

TM: I’m not terribly fussed about the Senate, and I’m not all that fussed about a government with a one-seat majority in the House of Representatives. I think that the problem lies elsewhere.

Business in Australia has sort of bowed out in the last one or two decades from debates going in favour of the narrower interests of sectors and individual businesses, and not the business community as a whole.

The real problem is that for 45 years, we’ve had a debate about, and an acceptance of, where the country should be going. For 15 years, up until the early 80s, we had a debate about what became Australia’s move into a globalised economy: what was called the end of certainty. Reforms to the size of government and what it did, reduction of industry protection, deregulation of the labour market, pulling back on many of the welfare benefits that were available and these macro-micro economic reforms all occurred.

For 20 years, from the early 1980s, Australian governments worked assiduously on that project and made world-leading progress, but we’ve found

that as in the United Kingdom and the United States, many people feel a bit left out by the result, and they’re grumpy. They’re not as grumpy here as they are in the United States, but they’re grumpy nonetheless, and politicians haven’t found a way to refresh the story and take the country in some new directions.

What we need in our community generally is a reignition of the debate that occurred in Australia up until the early 1980s, involving some parliamentarians and journalists, particularly those from The Australian Financial Review and The Australian. It involved academics, business people, unions and what is now called civil society.

We’ve had 25 wonderful years of growth, largely because of that. Where do we go from here? There are strands of how you would define the future directions that are available, but frankly, politicians are best when they’re acting upon an agreed position that we need to take. It’s up to different groups in our society to get into this debate and contribute to various statements of sectoral or business self-interest.

BL: Thank you. On your behalf, it’s a great pleasure to thank today’s panel. I really do want to thank David, Margaret and Terry, people well known to Infrastructure Partnerships Australia, and well known to all of us because they are distinguished leaders both in business and in public administration.

Brendan Lyon, Chief Executive, Infrastructure Partnerships Australia Brendan Lyon is the Chief Executive of Infrastructure Partnerships Australia (IPA), the peak infrastructure policy partnership between Australia’s Commonwealth and state governments, and the business sector.

Joining IPA on its formation a decade ago, Mr Lyon initially led the policy and research team, before being appointed CEO in early 2008.

Through strong, evidence-based public policy, good research and strong relationships across the business, media and government sectors, IPA has developed into a respected and trusted voice on economic and social infrastructure policy.

In his role, Mr Lyon also serves on a range of boards, committees and inquiries, currently serving on the Board of Transport for NSW and on the New South Wales Government’s Expert Advisory Panel on social housing reform. Mr Lyon has previously served on major national reviews, including COAG’s Infrastructure Finance Working Group and the Commonwealth Government’s study into high-speed rail.

Mr Lyon is a member of the Australian Institute of Company Directors and holds a Masters of Business Administration with Distinction. In 2013, he was appointed an Honorary Associate Professor at Sydney Business School.

With a strong interest in infrastructure and in economic policy, Mr Lyon has authored and contributed to a large number of research and policy papers considering different aspects of infrastructure market regulation.

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Margaret Jackson AC, Chairman, Spotless Group Holdings Limited Margaret Jackson is Chairman of Spotless Group Holdings Limited and Ansett Aviation Training Limited. She is also a Director of the Prince’s Charities Australia, The Melbourne Symphony Orchestra and a member of Monash University’s Industry Council of Advisors.

Ms Jackson has also served as Chairman of Qantas, FlexiGroup Ltd and the Victorian Transport Accident Commission, and as a Director of The Broken Hill Proprietary Company Limited, The Australian and New Zealand Banking Corporation, Pacific Dunlop Limited, John Fairfax Holdings Limited, Billabong International Ltd and Telecom Australia. She is also a former partner of KPMG Advisory and BDO Nelson Parkhill.

Ms Jackson was awarded Companion of the Order of Australia in the General Division (AC) in June 2003 for service to business in diverse and leading Australian corporations, and to the community in the area of support for medical research, the arts and education. She was also awarded the Centenary Medal in 2001 for service to Australian society in business.

Ms Jackson holds an Honorary Doctorate of Laws from Monash University, and is also former Chairman of the Salvation Army Australia Southern Territory Advisory Board, the Playbox Theatre Company and Methodist Ladies’ College.

David Gonski AC, Chairman, ANZ David Gonski is Chairman of the Australia and New Zealand Banking Group Ltd and Coca-Cola Amatil Limited.

Mr Gonski is also Chancellor of the University of New South Wales, President of the Art Gallery of New South Wales Trust, and Chairman of the UNSW Foundation Ltd. He is also a member of the ASIC External Advisory Panel and the board of the Lowy Institute for International Policy, a Patron of the Australian Indigenous Education Foundation and Raise Foundation, and a Founding Panel Member of Adara Partners.

He was previously a member of the Takeovers Panel, Director of Singapore Airlines Limited, the Westfield Group and Singapore Telecommunications Limited, and Chairman of the Australian Securities Exchange Ltd, the Guardians of the Future Fund, the Australia Council for the Arts, the Board of Trustees of Sydney Grammar School and Investec Bank (Australia) Ltd.

Terry Moran AC, Former Secretary of the Department of Prime Minister and Cabinet Terence Francis Moran AC was, as Secretary of the Department of the Prime Minister and Cabinet, Australia’s most senior public servant from 2008 to 2011. His current roles include: • Chair, Barangaroo Delivery Authority in New South Wales • Senior Adviser, Boston Consulting Group • CEDA Governor • Chair, Cranlana Program • Chair, Melbourne Theatre Company • Chair, Centre for Policy Development.

Mr Moran spent his early career as a public servant in the Australian (Commonwealth) and Victorian Public Services. Moran’s first position as a public sector CEO was as Chief Executive of the Office of the State Training Board in Victoria from late 1987 until May 1993. In May 1993, he was appointed as the first Chief Executive Officer of the Australian National Training Authority in Brisbane. In August 1998, he became Queensland’s Director-General of Education.

Mr Moran was appointed Secretary of the Department of Premier and Cabinet for the state of Victoria in July 2000, and held this position until his appointment as Secretary of the Department of the Prime Minister and Cabinet.

On 26 January 2012, Mr Moran was named a Companion of the Order of Australia (AC) for ‘eminent service to the community through public sector leadership, as a significant contributor to policy development, programme delivery and effective governance, and to the implementation of contemporary government administration’.

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COMPANY FOCUS

BROADSPECTRUM AT FOREFRONT OF GENDER DIVERSITY INITIATIVES Its infrastructure group is an exemplar of female leadership and development.

Sandra Dodds, Chief Executive, Urban Infrastructure, Broadspectrum

Sandra Dodds is passionate about the potential of women in infrastructure. As the leader of Broadspectrum’s infrastructure team, Sandra is helping to drive a genderdiversity program that benefits the company, its customers and the community.

She says the infrastructure sector needs to both attract more women and better support those with leadership aspirations.

This will help the sector to access a larger talent pool, benefit from a more diverse range of decision-makers and, ultimately, better serve its clients.

‘In my experience, women tend to think more about the social impact of infrastructure,’ says Sandra. ‘Different perspectives are needed in big projects; having greater gender diversity in infrastructure leadership teams enhances decision-making quality.’

Sandra says women often show a capacity to understand ‘shades of grey’ in infrastructure. ‘Decisions in infrastructure

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are often black or white. They’re either right or wrong. Women intuitively think about a range of possibilities, find a consensus and work towards the best decision.’

Sandra has seen many challenges for women in infrastructure during a distinguished career in contract engineering services.

‘I remember, early in my career, being the only woman in a room of male engineers and [being] expected to pour the tea. I never did, of course. I was brought up in a family where girls could be anything. I quickly got used to being the only woman in my immediate peer group and learnt to become very resilient and authentic at work.’

Sandra’s accounting background was another complication. ‘Here was a female accountant leading a bunch of male engineers who probably thought I knew nothing about the projects. But I was able to build a bridge between finance, operations and customers – and implement a stronger

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Large main laying

‘I remember, early in my career, being the only woman in a room of male engineers and [being] expected to pour the tea. I never did, of course. I was brought up in a family where girls could be anything’ culture of leadership and staff development in companies or divisions I ran.’

Today, Sandra is one of Australia’s most influential leaders in infrastructure and a champion of change for women in business.

She was appointed Chief Executive of Infrastructure, Australia and New Zealand, at Broadspectrum in May 2014, just as the company embarked on a change program that would put it at the forefront of diversity initiatives across gender and culture.

Led by Managing Director and CEO Graeme Hunt, and supported by its board, Broadspectrum launched a Diversity and Inclusion framework in 2015. This included setting diversity targets, pursuing pay equity, fostering workplace inclusiveness and

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promoting a high-performance culture.

The framework has ambitious targets, including for global female participation at Broadspectrum to increase from 24 per cent in 2015 to 30 per cent in 2016, and for females in management roles to increase by 50 people by the end of 2016.

The framework addresses pay gaps between women and men, and seeks to eliminate gender pay bias altogether.

Broadspectrum is also increasing flexible work options, and is extending diversity and inclusion training programs across the organisation.

Significant investment backed this initiative. Broadspectrum participates in the Chief Executive Women Leaders

Program to support high-potential women in the organisation, and a Global Inclusion Network was established as a forum for feedback on diversity initiatives.

Broadspectrum tasked senior staff members with leading this initiative. It developed baseline metrics and reporting systems to communicate the diversity program’s outcomes to management and staff.

A 50/50 shortlist policy, where roles up to four levels below the managing director must have equal representation of women and men, was implemented.

The company’s drive to become a gender diversity leader is not a surprise. Its former chairman, Diane Smith-Gander, is one of Australia’s most prominent female

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directors and president of Chief Executive Women. Diane is an important voice in Australia’s gender diversity debate.

CEO Graeme Hunt is another strong advocate for diversity. He signed a CEO Statement of Support for the United Nations Women’s Empowerment Principles program and has driven Broadspectrum’s diversity efforts from the front.

Sandra has seen early results from the company’s diversity agenda. ‘There has been a really visible change. We’re seeing more females in management positions and perhaps the start of a slightly different communication style; one with more empathy and respect for the benefits that come from true workplace diversity, where differences are valued.’

The diversity program is not just about women, says Sandra. ‘Some men in my team have taken up the workplace flexibility option and commented on what a difference it has made. They, too, benefit – professionally and personally – from greater flexilbity in their roles.’

Sandra believes that these initiatives will help Broadspectrum to attract more young women and develop the next generation of outstanding infrastructure leaders.

‘We need to get the message to schoolgirls that infrastructure is a fabulous career. There’s so many interesting roles in a sector that has good growth prospects and affects every Australian. It should be a sector where women can achieve fantastic leadership roles by merit, and still take time out to start a family, and combine work and family life.’

She says more women in infrastructure will help to solve increasingly complex problems. ‘When you look at what’s ahead, from driverless cars to climate change, it’s obvious the sector needs broader perspectives and thinking. And, dare I say, more emotional intelligence that comes with a higher percentage of female leaders.’

But gender change in infrastructure is still too slow, says Sandra. ‘When I go to industry functions, I don’t see enough women, and the industry is poorer for it. It’s something that Broadspectrum is determined to change.’

To learn more about Broadspectrum, visit www.broadspectrum.com.

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The consequence of ACB failure can be financially costly and potentially dangerous to personnel. To help address this issue, NHP provide retrofit solutions that allow end users to modernise their ACBs with minimal downtime. Retrofitting of ACBs offers increased cost savings compared with the replacement of an entire switchboard because the key components of the system can be quickly replaced, leaving the existing copper and steel work intact.

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Frederick Hilmer AO

Frederick G Hilmer AO Emeritus Professor, University of New South Wales Key points: • Reform relies on a compelling narrative that the public can support or accept.

• Regulation and other processes need to be simplified to encourage investment in infrastructure.

• Governments cannot solve infrastructure alone – they need to create incentives for private involvement and investment.

Competition policy and infrastructure: where next?

The institutions and arrangements for building, owning and operating infrastructure are quite different now than in 1992, when the National Competition Policy Review was carried out.

In 1992, almost all infrastructure was governmentowned and operated. Commercial principles were rarely applied, though corporatisation was beginning. The changes in names tell the story, with the Electricity Commission of New South Wales becoming TransGrid and Pacific Power, and the Water Board becoming Sydney Water, to name a few.

A key goal of the 1992 review was to explore and recommend how more competition might be introduced to these public infrastructure entities. The answer was a six-part package of reforms.

First, competition law was to be more widely applied. This was particularly the case with state government–owned utilities, where there was uncertainty as to whether the shield of the Crown protected them from application of the then Trade Practices Act 1974 (Cth).

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Second, the regulation review was established, with regulation that entrenched monopolies a clear target – for example, rules that reserved exclusive transport of some commodities to rail. The third component was to restructure public monopolies to separate the natural monopoly from potentially contestable areas and facilitate privatisation.

Markets could then be encouraged to form in the potentially contestable areas. Access, the fourth component, is critical where this separation cannot or will not be achieved, or where the natural monopoly has been separated but has the ability and incentive to overcharge or underdeliver. In these cases, price surveillance – the fifth policy component, which is closely linked to access – becomes important. The sixth and final policy component, competitive neutrality, applies where a government seeks to operate and compete in a market, such as electricity generation.

The package was largely implemented over a 10-year period. The overall direction with respect to infrastructure was re-examined in 2014/15 and endorsed by the Harper Review (Competition

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Policy Review, Final Report, March 2015) and the Productivity Commission (National Access Regime: Inquiry Report No. 66 2013). The two reports did recommend different tests for when access could be declared, with the government preferring the Productivity Commission’s approach focusing on efficiency.

The Infrastructure Australia Plan also endorsed the direction of reform. It found the most progress in energy and telecoms, and major challenges in roads and regional urban potable water.

In short, knowing what needs to be done in infrastructure development is not the problem, nor is there much debate about the benefits. A World Bank review examining the impact of infrastructure investment over 40 years found positive effects on growth, as well as a reduction in income inequality.

(C. Calderon, L. Seruen, World Bank Publications, January 2004).

Why, then, is taking action so difficult? Longterm interest rates that are available to government and major organisations are low. There is a national imperative to stimulate growth and employment.

Opportunities for productive investments seem plentiful and are vetted by an independent statutory body, Infrastructure Australia.

Processes for kickstarting investment via government borrowing, separating ‘good debt’ from ‘bad debt’, in the national accounts are widely supported.

Against this background, three actions are proposed: • first, develop and articulate a compelling narrative • second, reduce complexity in regulation and processes • third, pay more attention to incentives, particularly when setting prices.

The narrative Without a compelling narrative, reform is unlikely to win public and political support.

In 1992, there were two strong strands in the competition narrative. First, the economy was performing badly in terms of growth, productivity

and inflation. We were on a ‘burning platform’ and had to change. Second, competitive markets were seen as ‘a better way’ to deliver services and goods at lower prices, with more choice. Each strand was supported by credible stories that most of the community could relate to. An example of the ‘burning platform’ was that restrictions on farm sizes meant that our potatoes were uncompetitive with US products in Asia, and McDonald’s was not sourcing product from us. The job implications were obvious.

An example of the ‘better way’ that resonated well with homebuyers was the deregulation that allowed conveyancers to compete with lawyers for buying and selling property.

In 1992, support for the policy was strong, bipartisan and generally supported by the community.

Gains were tangible and visible – lower prices and more choice. Airlines, telecommunication, utilities and also agricultural commodities, such as eggs and potatoes, were all affected, and consumers enjoyed the benefits.

Looking at current dialogue on reform, the ‘burning platform’ argument isn’t working. The platform may be burning, but it is a slow burn coming after 25 good years. The language around ‘a better way’ also isn’t working. Many of the words used have become politicised, or have lost meaning.

The ‘better way’ also rings hollow, as reform has stalled or gone backwards over the last decade.

Price cuts, such as for energy, are disappearing.

Privatisations have often not occurred in a proconsumer fashion and are not supported by voters.

Markets are more often associated with job losses and rising income inequalities than with consumer benefit. Productivity has been static or falling.

An effective narrative meets three tests. First, it is credible in the current situation. Second, it resonates with the bulk of the community. And third, it can be supported by vivid and believable stories. A powerful narrative is not an advertising jingle, or an emotioncharged selling job. It is a believable aspiration founded on a realistic view of where we are and where we could be.

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Such a narrative, with special application to the benefits for consumers and employment from infrastructure development and efficient operation, would help to trigger action. Looking at Infrastructure Australia’s lists, there are many potential projects with tangible consumer benefits; for example, via reduced congestion, and opportunities for job creation in construction and operation. But ‘Bob the Builder’ stories are needed to bring the narrative to life.

Complexity Complexity drives uncertainty, which hinders investment. In contrast to today, developing and implementing the 1992 competition reforms were relatively straightforward. Applying the Trade Practices Act widely, getting rid of red tape, restructuring and better controlling public monopolies were steps that could be readily understood and appreciated.

Compare the Harper Review recommendations of applying competition principles to human services, such as health and education, and reforming road pricing. Both are worthy reforms, but are far more complex than restructuring public monopolies. Any reform in health is akin to navigating a minefield, with abundant second-order effects and ‘unintended consequences’. Road pricing reform, especially for light vehicles, requires a 10-year implementation period and new technologies, and it also raises concerns about ‘new taxes’.

Administration of existing reforms for access and pricing have also become far more complex than what was envisaged in 1992. In their forthcoming book, Access Regulation in Australia (Thomson Reuters 2016), authors Geoff Petersen, Morelle Bull and Catherine Dermody point out how complex regulation has become.

To quote, ‘The National Electricity Rules, which govern the operation of the National Electricity Market, are over 1400 pages long, and there have been some 70 versions published between 1 July 2005 and 30 June 2015’ (p.171).

‘There is no sector-specific access regime for either port or rail infrastructure. Rather, regulation is based on a combination of state-based regimes and the general National Access Regime’ (p.339).

Each sector has its own regulation (or regulators where state regulation continues), and each has its own process and principles.

Privatisations, too, are becoming more complex.

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South Wales with the earlier Victorian privatisations of generation assets.

Funding and financing infrastructure is another area of complexity, with reform often driven by tax considerations unless financing is 100 per cent from government, which is not the preferred option.

Incentives Since governments can’t address the infrastructure opportunities alone, there is a need to provide greater incentives for private sector involvement. Building confidence in the integrity of project business cases is a critical start, as private firms don’t want to end up with stranded assets. Adequate resources for highquality feasibility studies are needed.

Raising funds via ‘good debt’ also increases the incentive for firms to become involved with projects, as the funding uncertainties are diminished.

Perhaps most importantly, there are opportunities to improve the incentives to builders and operators of infrastructure in the price structure set by regulators.

Pricing, as mentioned earlier, is extremely complex and results are not necessarily consistent with good policy. Examples include overinvestment in electricity distribution, and poor service quality in urban water.

To this end, the research of Jean Tirole, 2014 Nobel Laureate in Economics, is worth briefly reviewing.

Tirole was awarded the Nobel prize for his work on market failures and public policy. A major strand of his work covers natural monopolies, such as telecommunications, electricity, railroads and ports. He sought an approach that provided an appropriate balance between the price to consumers and a fair return to the owner. This return becomes more attractive if the owner has, and is able to use, market power.

Market power can be earned via innovation, investment and effort, or via a competitive, welldesigned auction. Benefiting from earned market power is not prohibited by competition policy. But market power can also be acquired via a faulty auction or lucky cost and demand situations, or via political influence. In this case, the balance should shift to the consumer, and the utility owner should not benefit from the unearned market power.

To apply these ideas requires the application of the ‘rule of reason’ on a case-by-case basis, i.e., the application of rigorous economic analysis. But there are limits to what analysis can tell regulators because

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the regulator doesn’t know as much about the firm, its capabilities and its options as the firm’s managers do.

Tirole therefore puts forward two principles: 1. put real effort into reducing the information asymmetry via data collection and benchmarking, but recognise that the asymmetry can’t be entirely eliminated 2. let the regulated firm use its superior knowledge to pick a form of price control that recognises its opportunities and provides the incentive to go after these opportunities – for example, a firm that sees costs as high and difficult to control will pick a cost-plus contract offering a relatively low rate of return.

A firm that sees opportunities to cut costs will opt for a fixed-price formula or price cap, and will earn a higher return if it successfully cuts costs. A corollary, however, is to beware of incentives going the wrong way – for example, causing service levels to deteriorate in the pursuit of savings. Tirole also warned against ‘regulation capture’, especially when profits were high.

Tirole and his colleagues also looked at price structures. Again, mindful of the information asymmetry limiting regulators, they preferred that regulators set an average price.

The utility could then use ‘Ramsey pricing’ to encourage the most efficient use of its facilities – for example, via time-of-day charges, or different charges to different kinds of users.

What might these ideas mean for regulation of price and access in implementing the National Infrastructure Plan? First, they highlight how important, complex and error-prone price regulation can be. But second, these ideas offer approaches that recognise and deal with the information gap between the regulators and the regulated. It could very well be worthwhile for the Productivity Commission or a special review to examine best practice in price regulation, and to develop principles and guidelines for the Access and Pricing Regulator, and the state bodies also involved in pricing.

In conclusion, competition policy has made, and can make, a great contribution to Australia’s economic performance. To do so will require a contemporary compelling narrative, as well as a reduction in the complexity of regulation and processes. And there is scope for fresh thinking about the best way to provide price regulation and other incentives to attract private investment and cost-effective performance.

Frederick G Hilmer AO, Emeritus Professor Professor Hilmer has held a number of leadership roles in industry and academia, including heading McKinsey’s Australian practice, and serving as Chief Executive of Fairfax, Dean of Australian Graduate School of Management (AGSM), and, most recently, President and Vice Chancellor of the University of New South Wales. He has also served as Chair, Deputy Chair and Director of major public companies.

Professor Hilmer has written a number of books and articles on strategy, management and economic policy. Of most relevance to this summit, Professor Hilmer chaired the National Competition Policy Inquiry, which reported in 1993, and provided the framework and approach to competition policy in Australia, as well as in a number of other jurisdictions. Since that time, he has been an active writer and commentator on competition policy. His contributions in these fields were recognised by the award of Officer of the Order of Australia in 1998. Professor Hilmer is currently based at AGSM.

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TRILITY AT THE FOREFRONT OF WATER INFRASTRUCTURE INNOVATION The utilities services provider is driving economic and environmental benefits in the sector.

The Mundaring Water Treatment Plant, Western Australia

Australia’s leading private water utility, TRILITY, is helping the Australian agriculture industry to capitalise on its export potential in Asia through innovative water solutions.

Majority-owned by Japan’s Mitsubishi Corporation, TRILITY is working with statutory authorities and companies around Australia to upgrade and manage critical water assets, design and construct water infrastructure, and finance and own water assets and projects.

TRILITY is responsible for the operations and maintenance of more than 40 treatment plants, as well as hundreds of kilometres of irrigation pipeline networks.

Millions of Australians in urban and regional areas depend on these assets for water access.

Managing Director Francois Gouws says TRILITY is drawing on its scale and expertise to transform ageing water assets, and to lead water-recycling initiatives in

‘TRILITY is responsible for the operations and maintenance of more than 40 treatment plants, as well as hundreds of kilometres of irrigation pipeline networks’ 30X

Australia. The result: new opportunities for farmers and industry, job creation, and stronger regional economies.

‘Entire regions can be transformed by innovative water solutions,’ says Gouws.

‘More water means more opportunity for high-tech farming and higher-value crops, and greater capacity for Australian farms to capitalise on the rising Asian demand for Australian produce.’

Greater use of recycled water in farming also has environmental benefits through a reduced discharge to the environment, says Gouws. ‘TRILITY has strong expertise in treating wastewater for beneficial purposes such as agriculture.’

Gouws is passionate about water’s role in Australia’s economic and environmental future.

Operational efficiency in water infrastructure is a key issue, according to the State of the Water Sector Report 2015, jointly produced by the Australian Water Association and Deloitte. The survey identified asset maintenance, increasing

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‘Entire regions can be transformed by innovative water solutions. More water means more opportunity for high-tech farming and higher-value crops, and greater capacity for Australian farms to capitalise on the rising Asian demand for Australian produce’ water service efficiency and sustainable water management research as the top three water reform priorities.

The private sector is playing an increasingly important role in water reform.

Many water assets are ageing, and state governments and local councils are under growing budgetary pressures. By providing cost-effective water utility solutions, TRILITY is helping governments, industry and local communities to get the most out of water assets.

Strong operational momentum TRILITY delivers a full range of services in the operations and maintenance of water infrastructure, asset management, design and construction, and project finance.

As an Australian-run company with strong international backing, TRILITY has outstanding global expertise and a wealth of local knowledge developed over two decades.

TRILITY’s ownership consortium includes Mitsubishi (60 per cent), Innovation Network Corporation of Japan (INCJ) (30 per cent), and JGC Corporation (10 per cent).

Mitsubishi is a leading global provider of water infrastructure projects; INCJ is a public-private partnership that supports nextgeneration businesses; and JGC, a leading global engineering company, has completed more than 20,000 projects in 80 countries.

Gouws says TRILITY benefits from its shareholders’ long-term approach, and commitment to Australia and New Zealand.

‘TRILITY’s brief from its shareholders was twofold: to generate long-term, sustainable growth in the water utilities sector in Australia and New Zealand; and to be a trans-Tasman company that has a local identity, but taps into our shareholders’ global network.’

TRILITY’s industry reputation and expertise is reflected in its projects: 24 water treatment and desalination plants; 15 wastewater treatment and re-use plants/ schemes; two irrigation schemes; and Australia’s largest thermal biosolids facility at Geelong, in Victoria.

TRILITY has longstanding relationships with water authorities, government departments and industry bodies. Some of its contracts stretch back more than 20 years.

These strengths are underpinning significant operational momentum. In January 2015, Unitywater selected TRILITY to deliver the design, build, operate and maintain contract for the Redcliffe Sewage Treatment Plant upgrade in South East Queensland.

Further, in 2014, TRILITY was announced as the operator of four water treatment plants in regional Victoria, continuing a string of contract wins. TRILITY will operate the plants for the next 13 years in conjunction with the asset’s new owner, AMP Capital.

In Western Australia, TRILITY is part of the Helena Water consortium, which in 2014 delivered the $300-million Mundaring Water Treatment Plant – the first public water infrastructure asset in the state to be completed under a public-private partnership.

The consortium included ACCIONA Agua, TRILITY and a Lloyds Bank investment fund (Aberdeen Asset Management).

New Zealand acquisition expands trans-Tasman footprint Last year, TRILITY concluded its purchase agreement with Water Infrastructure Group, a subsidiary of United States company Pentair plc, to acquire the operations and maintenance contracts of its operations division. The agreement covers treatment

Francois Gouws, Managing Director, TRILITY

plants through five major contacts across New Zealand, Victoria and South Australia.

This followed TRILITY’s 2012 acquisition of Hydramet, an industry leader in engineered-to-order water treatment plants.

Hydramet operates across all Australian states and has a strong presence in Western Australia’s resources sector, as well as the public infrastructure and industrial sectors.

Gouws says TRILITY will continue investing in its leading asset-management capabilities – a key strategic focus in recent years – and will play a bigger role in water recycling initiatives. ‘Our strategy is working

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Water Reticulation Systems Virginia, also known as the Virginia Pipeline Scheme, South Australia

‘TRILITY has an incredible workforce that is very passionate about water. We have invested heavily in staff and systems, and a core part of my role is to maintain and enhance the exceptional culture that exists within TRILITY today’ – TRILITY has met every financial target set

Staff culture: unique model drives success

by its shareholders over the past five years,

Gouws attributes TRILITY’s success to three factors. The first is its 300 employees and organisational culture. ‘TRILITY has an incredible workforce that is very passionate about water. We have invested heavily in staff and systems, and a core part of my role is to maintain and enhance the exceptional culture that exists within TRILITY today.’

and continues to win new contracts and find efficiency gains.’

Gouws adds: ‘The business is set up for a stronger period of growth in the next five years, which may include expansion into parts of Asia’.

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Innovation is the second factor. The company has won several awards for design or operational excellence in the past three years, and is highly regarded for its innovative thinking and approach to water infrastructure.

TRILITY’s third strength is its business model, which is nimble and adaptable.

Much has been achieved since the Mitsubishi-led consortium acquired United Utilities Australia in 2010 and renamed it TRILITY. Under Gouws’s leadership, a thenstagnant business was transformed into a vibrant water utilities service provider.

TRILITY’s journey is only just beginning, says Gouws. ‘The water industry is constantly evolving due to changing community and industry needs, and climate change. TRILITY is at the forefront of this ever-changing environment, and [is] making an important contribution to the future of Australia’s precious water infrastructure.’

To learn more about TRILITY, visit trility.com.au.

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Water is our business Northern Peninsula Area Operations and Maintenance (QLD)

Australia

Townsville City Council Water Supply Upgrade Project (QLD)

Administration offices Asset Management and Operations and Maintenance Design and Construction Design and Construction and Operations and Maintenance Operations and Maintenance Services

Agnes Water and Seventeen Seventy Integrated Water Project (QLD)

Brisbane office

Mangawhai Water Reclamation Scheme (NTL) Macarthur Water Filtration Plant (NSW)

Perth office

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Yan Yean Water Treatment Plant ntt (VIC)

Mundaring Water Treatment Project (WA) Adelaide Desalination Plant (SA)

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Barwon Biosolids (VIC)

TRILITY operates plants across Australia and New Zealand treating over 1.8 GL/d and servicing millions of people every day. Our managers and field staff offer the qualifications and experience across disciplines such as engineering, project operations and financial management to ensure water infrastructure is managed in an optimum way, where the safety of employees and contractors is paramount and community engagement is ongoing. Our employees use advanced technology and systems across each operation to ensure plant availability for our clients and their customers.

For more information visit us at

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www.trility.com.au

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Key points:

Christopher Voyce Executive Director, Co-Head Infrastructure, Utilities & Renewables, ANZ, Macquarie Capital Macquarie is extremely optimistic about infrastructure. Today, I am going to cover three topics: the global economy, financial markets and recent infrastructure themes.

In the global economy, we’re seeing weakness in emerging economies being offset by slightly moderate recoveries in advanced economies. There are various economies in different states of transition, making it very difficult to forecast economic performance even on a short-term basis. Forecasts are reflecting that we are seeing a tail off in the United States, a tail off in Europe and also stronger growth coming through in Australia. That backdrop of uncertainty is against a very strong growth of profile across the world, where we’ve seen average growth in gross domestic product (GDP) per capita across the world of about 3.5 per cent per annum.

That gives us great confidence as we look to the future, and we’re actually seeing it come through now, with global indicators showing very positive signs. For the first time in quite a while, both the manufacturing sector and the services sector in all the major economies are in expansionary territory. That gives us some indication that the world is becoming a better place, and we’re likely to see more growth in future.

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• Australia’s urban infrastructure will need to grow because of population growth.

• Recurrent service costs will be forced to change because the public sector will need operating efficiencies to fund capital investment needs.

• The need for competition and innovation in service value will see major changes to the role of government in service sectors.

Turning now to the regions, and the big issue in Europe is Brexit. The impact of Brexit can be observed via Macquarie’s Composite Volatility Index – a measure of volatility across financial markets, whether it’s stocks, bonds, currencies or commodities – shows the performance through the global financial crisis, the United States losing its AAA rating, and a small dip for Brexit in the context of Europe.

It’s very important in the context of Britain, but in the context of the global economy, Brexit really hasn’t had much of an impact; it has been relatively contained. In the markets around Brexit, there was a very significant impact on the value of the pound, but that seems to have absorbed most of the damage from the fallout from Brexit, with the domestic sectors having rebounded strongly since the initial fall and global indices doing the same. In the longer term, the International Monetary Fund (IMF) is saying that the spillover to the rest of Europe will be limited.

Given the United Kingdom’s limited contribution to global growth over the last 20 or 30 years, it’s unlikely to be a big drag on global growth into the future. Similarly, as the United Kingdom’s share of Australian exports has fallen over time, and as economies like China and the United States have

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continued to grow, Brexit’s impact on Australia will be very limited, as well.

Looking at the United States, the key point is that there’s been a strong and sustained growth in US jobs. More people are now willing to change jobs in search of more opportunities, and the number of layoffs is reducing, so we’re seeing a lot of confidence in the labour market as more jobs are being put into the economy. That’s against the backdrop of limited inflationary pressures, so over time there’s been deferral and reductions in the forecasts of when and by how much the US Federal Bank raised interest rates, as we’ve seen a lack of inflationary pressures in the United States. But that confidence in the labour markets is not necessarily coming through into the US markets. There has been low US confidence, and we are not sure whether the recent drop-off is all about the US election cycle, as there were similar dips in 2008 and 2012. But that confidence in the labour market is not coming through necessarily into US stock markets.

China’s concerns remain, but recommitted to growth, albeit at lower levels. We’re likely to see increasing levels of leverage and potentially a lack of structural reform in that economy. China’s transition is well underway. The economy is diversifying strongly away from the manufacturing sector. The property market continues to recover in the tier-one and tier-two cities, and the Chinese economy is benefiting from the diversification away from a reliance on state-owned enterprises. So, in general, we’re relatively confident about where China is heading in the longer term.

Australia is also transitioning, and this is relatively well known. Mining investment continues to decline, but the mining production boom is really just starting, and you can see that the Australian economy continues to grow strongly, boosted by the reductions in the exchange rate over the last couple of years.

We’re seeing that spending is continuing to grow strongly, despite low income growth, and that’s really coming as a result of a reduction in the national savings rate. People are continuing to spend but are reducing their savings, and they’re prepared to reduce their savings as a result of the rising property prices and the wealth effect that they’re feeling from their property prices continually going up.

Stepping back now from the economies and just thinking about macro-economic policy, obviously since the global economic crisis we’ve seen an unprecedented monetary easing. We have seen more than 666 rate cuts around the world by central banks since Lehman Brothers went bankrupt, and it shows no sign of letting up. We’ve seen all of those interest rates cut, and it leaves less room for further cuts to give a boost to the economy.

There’s a very significant number of government bonds with negative yields: it’s approaching $12 trillion. If governments and central banks are going to keep economies growing given the weak recent performance, we believe that fiscal stimulus is really going to be where it’s coming from. The IMF agrees, and has even said for about a year now that we should be using debt with low interest rates to invest in productivity, generating infrastructure in our economies. You’ve got moderate growth prospects, very low interest rates and a large reliance on fiscal stimulus, with infrastructure being seen by most as the key area where governments can do more.

Moving now to the financial markets, and after a shaky start to 2016, we’ve seen equity markets rally quite strongly since January. Global commodities are also up, well into the double digits, with gold, crude oil, iron ore and coal also increasing strongly.

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growth prospects, they’re currently being driven by extremely low discount rates. There’s quite a degree of dispersion between the sectors and how they’re affected, with utilities and health care trading well above the average price-to-earnings multiples.

The other thing to note about the financial markets is that the investors are holding record levels of cash. One of the things driving the listed markets is that there’s a real bifurcation of the market. There are certainly companies that offer a combination of earnings, and sustainable dividends in a transparent growth profile are very attractive to investors. But those stocks are being pushed up to levels where most investors would consider them to be fully valued. There are also other investment opportunities – they’re seeing a risk of negative earning shocks, so rather than invest in the market, a number of those investors are staying on the sidelines.

People are interested in stocks represented by industries, such as real assets, real estate, transport and utilities. On equity capital markets, the difference between the price earnings multiples at the top quartile stocks and the price earnings multiples at the bottom quartile stocks is at its widest point since around about 2000, which was the first internet boom, when earnings really went out the window. A dispersion between the most favoured stocks and the least favoured stocks is the broadest it’s ever been. That means that stocks like infrastructure are very well favoured by investors, and you’re seeing great demand for infrastructure projects and infrastructure investments.

As we turn now to infrastructure, there are three key themes I want to touch on that we’re seeing in our discussions with governments and our clients.

The first is city building, which remains a nearterm priority, and there are a number of projects that are underway. The second is that in the medium term, we’re starting to see a focus on recurrent expenditure, and also changes to the clarification of the Renewable Energy Target (RET), which is driving renewable energy into the mainstream.

Everybody knows about city building and the response that governments are putting into investment in the cities to absorb population growth over time.

The amount of money that’s projected to be invested in infrastructure by governments and others over the next four years is around $100 billion. If you look at recurrent expenditure over the same period, it’s around $2.5 trillion. Recurrent expenditure represents an opportunity set somewhere north of 36

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25 times the opportunity of the capital investment.

Given the long-term pressures across all of the areas of expenditure, governments and future governments will have to seek to do more with less money. We also note that health care is expected to double over the next 20 or 30 years.

How we see that manifesting is that our government clients are really looking at how they can provide better service outcomes at lower costs for the people that they serve. They’re not as focused as they have been in the past, or potentially in the nearterm future, on just asset creation; they’re focused on how they can improve those services and how they can improve the lives of people so that they don’t demand the same degree of services into the future.

A significant element of opportunity coming up in the near future is around government outsourcing, and around providing services in response to that trend.

Some of the projects that have been undertaken recently are incorporating elements of the improved service outcome. Sydney Metro Northwest, and the Sydney CBD and South East light rail’s performance and payment regimes reward service, reliability and frequency, particularly during peak periods, linking up returns to performance. The Northern Beaches Hospital, which was closed a couple of years ago, has created efficiencies by colocating the public and private hospital, and it has driven incentives for continued efficiency for the operator by linking the price that they get paid for the services they provide in the public hospital as a discount to the state price.

In the corrections sector, in both New Zealand and Australia, we’re seeing the inclusion of custodial services that allow more efficiencies to be brought in through the provision of additional services provided by the private sector, and the payment regimes are beginning to reward high-quality operators undertaking programmes that reduce reoffending rates, and that will hopefully reduce the cost of the corrections system as a whole over the longer term.

The last kind of trend that we’re seeing is the confirmation of the Renewable Energy Target last year, which has really changed the playing field for renewables. That’s sending a very clear pricing signal to the market that new projects are required.

In the renewables sector, we’re seeing frenzies of new project development. There was the ARENA announcement of the solar programme, with 10 new projects receiving grants from ARENA. We’re

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seeing dozens and dozens of renewables projects working through the approvals process. It’s an interesting time, because first-generation renewables projects were financed on the back of long-term volume purchasing agreements for the full life of the project over the bulk of the output from these projects. Retailers are stepping back into the market and providing power purchase agreements, as are governments, but only until around 2030, when the current scheme of large-scale generation certificates expires, leaving quite a significant tail of merchant risk within those investments. That means that those renewables projects will be funded in a much more equity-heavy manner moving forward.

In the past, renewables investment may have been around 20 per cent equity, 80 per cent debt, while the ratios for projects that have been financed under this new scheme will be closer to 40/60. Out of the $15 billion that’s required to just meet the target at 2020,

roughly half of it will need to come from equity.

That’s the bottom of equity; it hasn’t necessarily been invested in the renewables sector to date, so there are great opportunities in the renewables sector.

Longer term, if current policies are extended beyond 2020 to 2035, there will need to be a very significant change in the mix of energy, with renewables potentially representing up to 50 per cent of the capacity, generating capacity within the national electricity market. This brings with it a whole load of very interesting issues around net metering behind the meter generation, peak saving and system reliability, and all of those issues will need to be dealt with by regulators in the industry over the next 10 or 15 years in order to make that a reality.

With low interest rates and a fair degree of reform going on in energy and government service markets, there’s never been a more exciting time to be an infrastructure professional in Australia.

Christopher Voyce, Executive Director, Co-Head Infrastructure, Utilities & Renewables, ANZ, Macquarie Capital Mr Voyce is the Co-Head Infrastructure, Utilities & Renewables, ANZ, for Macquarie Capital, and was previously a Senior Managing Director in the New York infrastructure team, heading the Transport and Public Private Partnerships (PPPs) practice for North America. Mr Voyce has more than 18 years of experience in infrastructure and PPPs. He has closed more than $50 billion in infrastructure financings, fundraisings and acquisitions for a range of clients in the utilities, airports, and road and rail transportation sectors in Australia, Asia, Europe and North America.

Mr Voyce has developed strong relationships with many prominent strategic and financial investors, contractors, engineering and legal firms, some of which are evidenced in the transaction experience.

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Scott Charlton Chief Executive Officer, Transurban

Key points: • Transurban’s landmark study shows that motorists will accept different pricing models if they understand it.

• The study showed that a usage-based charging model could generate sustainable funding to meet future transport needs.

• While stakeholder support is important, the community will need to understand the problem and the spectrum of solutions, to advance.

I am excited to present the first findings from the study on road usage that Transurban has been conducting over the past 18 months.

At Infrastructure Partnerships Australia’s 2015 Annual Infrastructure Oration, I announced that Transurban would undertake the first study in Australia to examine how drivers respond to userpays charging as an alternative to the current unfair system of opaque fees and taxes.

As an industry, we have been talking about this for at least a decade, so it has been enlightening to hear from actual drivers.

Our participants are everyday Australians who have given up their valuable time to be part of this study. While they were offered money to participate in the study, most agreed to participate because they saw it as a way to contribute to finding better transport solutions for their communities. I want to thank them all for their contribution. They are just real Australians wanting to make a contribution.

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Frank (participant): We are a community that’s used to paying for things, so yeah, this is something else that we have to pay for. It’s going to take a brave government to introduce it, but it will happen. Traffic is getting worse and worse, so if people know that their kilometre charge or their usage charge is a certain amount, then they might decide not to do this, or this, or this, find another means, or just not to do it.

Rob (participant): I think a user-pays system, depending on the rate at which it was struck, and that’s always going to be debatable by a lot of people… but that approach is going to modify people’s driving.

Linda (participant): At the end of the day, we all have to pay for the roads and their need to be maintained, so money has to come from somewhere.

It can’t just be from one source, so they have to look at alternatives.

Before I move on to the actual findings, I want to make clear what motivated Transurban to undertake the study.

Australia faces the demands of a growing, ageing and highly urbanised population. At the same time, our major road funding source, fuel excise, is being diminished by the uptake of more fuel-efficient, and electric vehicles.

And as we all know, congestion is an issue in our cities, particularly when you look at the population growth. It affects productivity but, more importantly, it affects our quality of life.

Our motorways and Transurban form part of the broader road networks of our cities. Congestion in the

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network affects the efficiency of our roads, which in turn impacts our customers and our value-for-money proposition. If our roads are not efficient, it impacts the community more broadly, and also impacts our returns to shareholders.

If our cities are going to continue to be the most liveable in the world, then we will need a sustainable funding source that keeps pace with our transport demand, and ensures that our roads are safe, efficient and reliable.

At the same time, we are on the brink of a revolution in transport technology that will redefine mobility as we know it, and will test our transport infrastructure like never before.

So, we are motivated to solve funding and congestion challenges because efficient networks benefit Transurban, and we believe this aligns with the needs of our customers and our cities that also want efficient networks.

In undertaking this study, we were not searching for a particular policy outcome. We believed it was time to test user-pays theories with actual people, as opposed to crunching numbers in a spreadsheet and talking about our community as outsiders to this conversation.

In doing so, the study would give us what no amount of theory could – a genuine picture of Australians’ views and behaviours when it comes to user-pays road charging, as well as tangible data that will help progress options for a sustainable and fair road funding model.

And lastly, we are a collection of technology, engineering and infrastructure geeks and we – myself included – just love this stuff.

Since last October, 1,635 drivers have travelled more than 12 million kilometres around Melbourne with GPS devices in their cars to put these alternative charging options to the test.

We have recorded 1.2 million trips and a billion data points, and have completed 4,500 surveys with our study participants.

We have also spoken to another 2,200 Australians across the country to find out what they know and think about transport infrastructure funding and their appetite for reform.

We set up the study in two stages to test two separate objectives.

The first stage was designed to measure the participants’ responses to user-pays charging options that would provide a more transparent, sustainable

and fairer funding source to replace the current system. So, the first stage looked at replacing the current funding system.

In the second stage – which we are still finalising [Editor’s note: the second stage of the study was released in October 2016] – we are testing how participants respond to varied price signals that are designed to manage demand for roads in highly congested geographies at certain times.

For the purposes of this study, our road-usage charges were designed to reflect replacement of Australia’s current road-related expenditure.

Now lower or higher charges could be applied to amplify particular driving behaviours, help to manage demand across the road network, or to address the needs of specific community groups. A user-pays system could offer that flexibility.

With these two models, it’s important that we learn from discussing with our participants that if you start mixing the funding model with the congestion model, it gets much, much harder for the community to understand. It’s very clear that they understand the current system when they’re educated, or when they have more information or awareness that the system is broken, unfair and needs to change.

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Our participants did recognise that changing the way Australians pay for their road usage would be a complex task, but they were open to talking about it, particularly when they understood what was at stake.

Angela (participant): I do actually think that Australia needs to change the way we use our roads, especially more around bigger cities like Melbourne, Sydney or Brisbane.

Louise (participant): Oh, there [are many] more people on the road. Much more congestion and waiting. Especially in the peak time – you shouldn’t even leave your home.

Tohu (participant): Yeah, I work right in the middle of town and it’s just havoc. Sometimes it can take me two hours to get home. If I catch the train or public transport, [it takes] an hour. It’s pretty draining.

If you try to bring congestion and funding in at the same time, it becomes a difficult conversation. But separately, they can certainly be discussed.

Last month marked the end of stage one, and these are the findings I’ll summarise now.

Our initial findings are something that I’m sure everyone in this room will be happy to hear.

After seeing how our participants behaved, and listening to what they have to say, a road-usage system based on user pays is an achievable goal.

Put simply, we believe that a user-pays roadcharging model could work in Australia.

Our study showed that participants were open to trying a new, fairer and more transparent way of paying for their road use.

A system based on user pays did not dramatically change the way that participants used their car, nor did it appear to impede their everyday activities.

On a practical level, the study shows that moving to a usage-based charging model would generate a sustainable funding source to meet our future transport demands.

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The study also shows that the two factors that many feared would hold up change – privacy and technology – are no longer substantial barriers. Most participants were comfortable with user-pays devices being installed in their cars. Of course, privacy and technology are both critical issues, but we believe they are manageable.

Our participants tested three user-pays charging options: a charge per trip, a charge per kilometre and a flat rate, similar to a capped plan for mobile phone.

We didn’t see significant change in the way that participants used their vehicles under those charging options at an aggregate level, suggesting that the road-usage charging model did not impede their regular driving behaviours and activities.

Looking deeper, however, we saw several major themes that provide insight into what impacts driver behaviours, and should therefore be considered in the design of a system based on road usage.

This will be important for policymakers in the future as they consider ways in which usage charges can address other objectives, including equity and congestion.

Transparency and awareness were the first of three prominent themes. Feedback from our participants showed that a system with a direct and transparent link to their actual road usage made them more aware of how they used the roads.

Anecdotally, this appeared to be more evident among participants on the per-kilometre or per-trip plans rather than the set-and-forget style of flat rate.

In the three months that they were testing the charging options, many participants indicated ways that they could change their road usage.

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Wayne (participant): In the past, I would have jumped in the car to go and buy the papers. Well, now I think, that’s going to be $2; I’ll walk down – it’s much healthier.

Linda (participant): So, depending on what I needed to do … if I needed to go to the bank, the supermarket and the newsagents, I’d say, ‘well, where’s the nearest location to do all three at once’, rather than have to stop three times.

So, in that sense, it made me more aware of my driving habits to try and plan my journey a little bit better. But having said that, I still need to use my car.

Bob (participant): Yeah, I mean, you can alter your driving habits and you think about what you do. You certainly can change your pattern of what you do or how you do it. Maybe you’ll do three things in one trip rather than do three separate trips.

Zac (participant): Well, I would drive less. I know that every time you start the car, that means a trip and it’s going to cost you $1, so I’d drive less if I could. I mean, I wouldn’t take public transport because I hate public transport. If it’s a walkable distance, I’d walk it; otherwise, if I wanted to get some food or something… [if] I wanted to drive down for food, I might raid the pantry and find something to eat in there instead.

David (participant): I’m the sort of person who if you’ve got to go out, you hop in the car and do it. I haven’t got the calculator out at this stage, [to work] out whether I can or can’t go.

Each of our participants had a travel account and the potential to receive up to $80 a month while they were testing the charging options.

For many, the incentive to change would be greater if they were actually having to pay for their road use rather than being presented with potential incentive dollars in their travel account.

This is classically known as loss aversion, and the theory is that people are twice as likely to change their behaviour if they are faced with a loss, rather than the incentive of a gain.

Cameron (participant): Yeah, it’s worked out in my favour. If anything – if I may add – it sort of has made me think... if I was paying, physically paying $1 per trip, it does make you think about your vehicle usage. It does stop you from being a little bit complacent or lazy.

Trish (participant): It’s hardly a princely sum of money, sorry. But the thing is, it’s just more about the exercise and how you’re thinking about using your car as opposed to the money.

Louise (participant): Yes, of course it has made me think. Because if I had to pay all of that money… I mean, yes, it would make me think again and again.

Rob (participant): Well, since then, the piggy bank’s growing. There’s $112-odd in there. It’s interesting, because the wife and I talked about this, and we’re giving this to a charity that we’re supporting at the moment, so they’re going to get a benefit out of it, which I think is terrific. That’s been one of the modifying factors for me in this whole exercise; [it] was really to become more conscious – not to maximise dollars but to really understand if we need to drive that much, and there is a bonus in it that somebody’s going to get a benefit out of, which will be really good.

Choice was another theme to emerge.

We gave participants a choice in their charging options, recognising that one size would not fit all.

The charge-per-kilometre distance plan, which was probably the most straightforward and transparent plan, was also the most popular.

The flat-capped rate was the second most preferred plan, and feedback showed it appealed to people who wanted predictability in their monthly budgets.

The charge-per-trip plan was the least preferred option, but it could appeal to people who have to travel longer distances per trip.

People are often locked into their travel patterns by the lack of alternatives available. They need genuine choice, which means that public transport alternatives are critical. As we all know, the availability of public transport differs considerably across geographies, so this will form an integral part of any solution design.

Our participants come from all parts of greater Melbourne. Zone 1 represents the inner-city suburbs with access to all modes of public transport. Zone 2 comprises middle and outer suburbs with access to some modes of transport, and Zone 3 represents outer regions with partial access.

Choice also extends to other factors, such as flexible working hours and opening hours of services – these all played a part in participants’ response. All of these considerations point to the importance of a holistic approach to future design.

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Simon (participant): If it was ‘pay every time you start your car and drive’, then I’d be in a bit of trouble, because I don’t have a lot of options.

Angela (participant): I’m lucky – I’ve got lots of trains, trams and buses. But outside of those areas, it does get tough.

David (participant): I think that if I made a conscious decision about it... it wouldn’t make any difference because I drive for a purpose, to achieve something in my working life. I’ll just keep doing the same thing, the same way, make the same decisions for the same reasons. In that sense, my – I guess you would call it ‘jargon’, I suppose – marginal propensity to drive is inflexible. I’m going 42

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to do it because that’s how I need to get to my customers. So, I would still look for the cheapest way. If it was going to be charged that way, I’d ultimately actually figure it out.

Meg (participant): It’s funny, because I have a bus stop that’s just a bit down the road, and I could jump on the bus and catch that to the station. Sometimes I think ‘Well, that could help’. But then it’s coming home.

It’s less frequent, and you know when you’re going to leave to go to work. You don’t quite know when you’re going to get home. So, sitting around and then having to go off and walk the dog, and make the kids’ dinner, and whatever. It’s more convenient to park at the station and drive that five-minute drive.

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And finally, the last major theme was fairness.

Many of our participants said that any change would need to have benefits that flowed across the whole community and transport network.

They talked about the need for the funding raised to be put towards transport projects and maintenance specifically. And here again, the difference between road and public transport wasn’t a big difference; they all saw it as they need transport and transport alternatives, and as long as it was towards transport, they thought that was very fair.

They spoke about the need to protect the most vulnerable in our community and those who have to drive long distances, particularly people living in regional areas or the fringes of cities.

But they could see why paying for what you actually use is fairer than a system that effectively taxes motorists with older vehicles more than those with newer, more fuel-efficient vehicles.

Cameron (participant): Maybe the user-pays system might be a little bit fairer so that people who don’t use their vehicles as often don’t pay – they’re not paying for those that use their vehicles a lot more.

Bob (participant): Well, if we had a user-pays system, they’d really need to reduce – or eliminate – the taxes they’ve got now on the petrol price, and bring petrol down so that they do raise their money out of user-pays fees.

Meg (participant): I have a strong view that if something like this came to fruition, those other taxes need to be withdrawn.

Lenore (participant): Well, if we introduced a user-pays system, it would have to be carefully graduated I would say, for maybe – for someone according to where they live, and how far they have to travel each week.

The specifics of our findings so far are available in the initial report, which we have released.

Our full report, which will include more detailed statistical analysis, will be released next month [Editor’s note: the full report was released in October 2016]. It will also include the results from the second stage, where we have tested a charge for peak-hour travel and a charge for entering Melbourne’s innercity zone.

While the results are still being analysed, some of our participants have recently completed this phase of the study, and here is what they have to say about driving under the congestion options:

Frank (participant): Congestion is the biggest thing we are facing in the city. Traffic congestion. If we produced a three or four per cent reduction, particularly in peak hour, it would have a fairly dramatic impact on how people manage to get to work.

Rob (participant): It does make you think, and you ask yourself, ‘Well, do I really need to travel between this hour and that hour?’ By travelling at certain times, if you don’t need to, you are just adding to the congestion.

Trish (participant): It certainly made you think a bit more if you were going to go into that area.

There was definitely an impact on my behaviour, or a potential for impact on my behaviour if I needed to go into that area.

Linda (participant): Knowing that it was going to cost me double to travel home in the morning after I dropped my child off at school, if I just socialised for 10 minutes, which doesn’t cost anything, I could then travel home in the off peak, so therefore I’m saving half the cost.

(Participant): $8 per day over a week, that’s $40 a week, $160 a month – that’s a lot of money on top of everything else you’ve got to buy and pay for. It would help with people and encourage people to use public transport and not use their vehicle, if they can avoid it, for non-essential travel.

Preliminary findings on the cordon-charging option suggest that participants tend to reduce their travel into the cordon area during chargeable periods, compared with the control group; however, we still have some work to do to confidently establish how much of the change that we are observing can be attributed to the cordon charge.

We also look forward to hearing more feedback from our participants about their experiences in the congestion phase.

As we all know, peak-hour traffic congestion not only adds time to a trip, but it also affects the predictability of the journey time. Outside peak period, road networks are commonly under-utilised.

Peak spreading doesn’t require a big change in travel patterns – just shifting a small percentage would make a considerable difference to the overall demand profile.

This is a subtle but important difference between the distinctive policy objectives of introducing a sustainable funding system versus managing peak demand, which is stage two of the study.

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Sydney Cahill Expressway

Our participants have provided some encouraging signs that with the appropriate pricing levels, travel alternatives, and flexibility in workplace and services, we may find solutions to manage congestion today and prepare our networks for the future.

We have called our report ‘Changed Conditions Ahead’ because that’s exactly what we are facing.

Not only do we have the challenges of finding a sustainable and fair funding solution to support our ongoing population growth and manage congestion on our transport networks, but we are also on the verge of the biggest revolution in the transportation sector since cars replaced horses – and we are still saddled with a funding system from that era.

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Fuel excise currently contributes 57 per cent of our total road-related revenue, and by some estimates, this figure could be halved by 2050.

The current system is unsustainable.

If we stick with these revenue sources (fuel excise and revenue from registration, licence fees and stamp duty), by 2050 we will be looking at a funding gap of up to $35 billion per year between what we are raising, and what we are likely to need in order to fund infrastructure to meet demand.

We see a different story if we look at a funding model based on a user-pays systems that grows with the number of kilometres being driven.

This is a sobering picture, and will only become more challenging as cars become more fuel efficient,

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and as we see the arrival and mass adoption of affordable electric vehicles, which are about 70 per cent cheaper to run than petrol cars.

Major car manufacturers and tech companies including Tesla, Nissan, Google, Apple, BMW and Ford are investing billions of dollars in electric vehicles, and dozens of models are due out by 2020.

So, with electric vehicles contributing very little to nothing in the way of fuel-excise revenue for road funding, and offering no incentive to cut down driving – in fact, electric vehicles make it cheaper to do more kilometres – how will we fund the infrastructure we need? Registration and stamp duty? Not unless we expect drivers to be paying thousands of dollars a year, which increases unfairness and entrenches a set-and-forget mentality that drives even more inefficient behaviours.

Along with electric cars, transport technologies are advancing at a rate that even we, in the industry, struggle to keep up with.

Autonomous cars, ride-share and car-share schemes, and integrated transport service offerings

will give us greater access to transport than ever before, and will create some great opportunities.

And as Telstra’s chief scientist, Hugh Bradlow, recently pointed out, if we continue to build and operate roads the way that we do now, we are likely to need about two and a half times more road capacity in 2050 than we have today in order to cater for population growth.

We have the opportunity now to design and implement the kind of road-charging mechanisms and systems that will support our changing demographics, and to take advantage of the opportunities that technology offers.

Jurisdictions across the world have been working on ways to address declining fuel tax revenue for some time. Now, technology has given us the chance to consider the entire transport landscape.

In Tennessee, for example, a new law will attach a mileage-based tax to autonomous vehicles. It is planning now for the transition that is coming.

We believe that a gradual implementation of reform as new technologies are introduced would

To strengthen communities through transport As Australia’s leading toll road owner and operator, our vision is ‘to strengthen communities through transport’. That’s because we recognise that what we do—and how we do it—has a real impact on the daily lives and productivity of our cities and communities.

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Scott Charlton

be the easiest way for the public to accept change, rather than implementing an entirely new system in one go.

If we can have a system in transition and we start in the early 2020s as these efficient vehicles come on line, then we will be able to move through as the fleets transition. If we wait until 2030 or beyond, there’ll be a large part of the market that already has these vehicles, and it will then become a regressive tax for people who own this capital investment. It will be a much harder system to implement.

Minister for Urban Infrastructure the Hon Paul Fletcher MP recently acknowledged the significant challenges that Australia faces with its current road funding system, and warned that the issue must be addressed if we are to meet our future transportation needs.

I couldn’t agree more. We believe that road-user charging is inevitable – in some form or other.

After nearly 18 months working with the Australian community, we have a far greater understanding about what would be required to implement a new system.

As an industry, we have all done some great work over the past few years, and have seen headlines change from inflammatory reactions over the mere mention of ‘user pays’ to an understanding of the complexities and the need for change.

But the occasional news article or conference is not enough to properly inform the community.

We have learnt from our study that the conversation will require an awareness campaign so that drivers understand how they pay for roads now.

One place to start may be at the petrol pump, and ensuring that drivers can see where their petrol dollar is going, just like a supermarket docket shows the GST. It was something that Australian Automobile

Association

Chief

Executive

Michael

Bradley

suggested recently. We agree that more transparency is needed to create a greater level of understanding.

On our part, we are looking for ways to inform our customers – and that’s about three million Australians – about the current situation and its inherent challenges.

Secondly, reform of this magnitude would need a national framework that balances national and state objectives.

Thirdly,

as

our

study

participants

have

highlighted, there are a number of areas that will require further investigation to ensure fairness and equity, which reinforces Minister Fletcher’s comments that we need to understand the impacts of change on all Australians.

And finally, we have a window of opportunity now with new technology advances to lay the foundations for the kind of system that will support our new transport landscape.

We have started the process by proving up the GPS technology; however, scaling up to a broader system will be a challenge that industry and government will need to collaborate together to solve.

We believe that we have provided insights into what should be considered in the design of any new usage system through this study.

Ultimately, governments will determine how we move forward, but they will only be able to do so effectively with the support of industry in this room and, more importantly, our communities.

Frank (participant): We live in a changing world. This is a window to the future of the way we drive. The way we drive, really, has to be addressed, because our roads are getting busier and busier.

Our infrastructure is not keeping up with it.

Scott Charlton, Chief Executive Officer, Transurban Scott Charlton joined Transurban Group as Chief Executive Officer in 2012. Mr Charlton has more than 25 years’ experience in developing, funding, constructing and operating infrastructure assets, working with some of the sector’s leading corporations, including Lendlease, where he was Chief Operating Officer for global operations (2010 to 2012).

Prior to this, he was Chief Financial Officer at Leighton Holdings and a Managing Director of Deutsche Bank. Mr Charlton is an engineer by training. He is Deputy Chairman of Infrastructure Partnerships Australia, a board member of Roads Australia, and a member of Monash Industry Council of Advisers and the Business Council of Australia.

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COMPANY FOCUS

AVIONICS: ILLUMINATING AVIATION INDUSTRY WITH INNOVATION AND SAFETY FOCUS An outstanding provider of runway lighting systems is delivering on major projects.

Australia’s leading provider of airport runway and ground lighting systems, Avionics, is helping airports and defence bases to upgrade their runways, deliver timecritical lighting installation and maintenance projects, and ensure world-class safety.

Avionics specialises in the design, supply, installation, maintenance and commissioning of airfield ground lighting systems in the Asia-Pacific region. It is the largest provider of airport lighting installations in Australia, and has worked at every major airport.

Avionics has completed more than 65 airport lighting projects since it began operating in 2007. Clients include Sydney Airport, Melbourne Airport, Adelaide Airport, Brisbane Airport, Darwin International Airport and the Australian Government Department of Defence.

Avionics also works with several of Australia’s largest engineering and construction companies on airport lighting systems.

‘Avionics brings a tremendous amount of experience to airfield lighting systems,’ says Avionics Founder and Managing Director Nick Brumley. ‘We know what airports need with lighting and have built a deep level of trust in the industry over many years.’

Brumley says Avionics’ specialisation in airport lighting is critical. ‘International airports around Australia rely on Avionics to deliver high-quality installations on time and achieve “right first time” outcomes using innovative installation techniques.’

Avionics works on complex lighting projects that have to fit between busy airport schedules. At Brisbane Airport, 50 Avionics staff members are working six days a week, in 4–5 hour windows, to upgrade its existing airfield lighting infrastructure. Fulton Hogan is heading the project.

Avionics is also working with Melbourne Airport to replace its existing high-intensity approach on Runway 16 with a CAT III

capable system – the highest-level approach lighting system available.

‘More airports worldwide are moving towards CAT III lighting systems that enhance aircraft safety, particularly in conditions of reduced visibility,’ says

Nick Brumley

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COMPANY FOCUS

Brumley. ‘Busy airports and airlines cannot afford to have planes grounded for hours because of fog.’

In South Australia, the Adelaide Airport’s apron and taxiway resurfacing is another recent project. Fulton Hogan engaged Avionics to remove and replace apron and taxiway lighting that was affected by the runway’s new asphalt overlay. Avionics also worked on the removal and replacement of runway lighting affected by the new asphalt overlay at Gold Coast Airport this year.

Installation of LED apron lighting is a key focus. Avionics supplied new ewo LED lighting at a Melbourne Airport apron in 2013, and has since installed ewo LED apron lighting at Sydney Airport and Mackay Airport.

In the defence sector, Avionics has been engaged by CPB Contractors to complete new taxiway lighting at the new hot refuelling point at the redevelopment of HMAS Albatross in New South Wales, and the AGL upgrade at RAAF Base Curtin is well underway.

Avionics also worked on RAAF Darwin and RAAF Townsville AGL upgrade projects, supplying more than 200 kilometres of cabling and 730 light fittings.

‘The defence industry is a very important Avionics customer,’ says Brumley. ‘We’ve been privileged to work on several defence base runway upgrades since 2008.’

Strong foundations for growth Avionics has come a long way from humble beginnings. It has grown from a Sydney office with a handful of staff to a leading AsiaPacific airport lighting systems provider with a staff of 80 and offices in Sydney, Melbourne, Hong Kong and, most recently, Brisbane.

The Australian-owned and -operated company secured its first major project soon after opening in 2007. John Holland engaged it to complete new airfield lighting infrastructure at Melbourne Airport’s Taxiway Victor Project – a major installation that has led to several other lighting projects at Melbourne Airport over the past nine years.

Avionics now employs civil and electrical engineers, industrial designers, electricians, builders, plumbers and heavy-equipment operators. It owns and operates $2 million worth of civil plant and equipment, and has duplicates of key equipment used in every project. ‘This ensures that Avionics offers maximum reliability and productivity on every shift, without exception,’ says Brumley.

Avionics is the only local provider that controls the entire process of airport lighting supply and installation. ‘We do everything,

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from survey work to asphalt hotmix application (Flocon trucks) and paint marking in-house,’ says Brumley.

‘That makes us the leader in installation and major technical modifications for airports in Australia.’

Brumley credits Avionics’ success to its management depth, capacity for innovation and safety focus. An ability to work flexibly and responsively with airports, contractors and the federal government is another strength. Avionics is not tied to any supplier.

‘Avionics’ senior management have each worked on operational airports in the airfield lighting space for more than 20 years,’ says Brumley. ‘They are world-class experts in their field, and are able to apply the latest lighting systems and thinking to Australian airports.’

He says Avionics is trying to reinvent airport lighting systems by leading innovation in its industry. ‘We are very focused on continuous improvement in equipment and processes that lead to greater efficiencies when working on projects with limited time.

Our goal is to develop superior installation and maintenance techniques for customers.’

Safety is ingrained in Avionics’ organisational culture. The company’s integrated management structure incorporates operations in safety, quality and the environment. Avionics is compliant with the AS4801 standards for safety management, and is accredited by the Office of the Federal Safety Commissioner.

Maintenance a key part of strategy In early 2015, Avionics established a new maintenance division – separate to its construction arm – after partnering with Sydney Airport and completing the preventative and corrective maintenance of its Airfield Ground Lighting (AGL) and High Mast Lighting systems.

In December 2015, Sydney Airport chose the Avionics Maintenance Division as its AGL maintenance provider for two years (with an option for a further three years). Avionics is the first contractor to be engaged by a major federal airport to complete preventative and corrective maintenance on key lighting assets to this scale.

‘We were honoured that Sydney Airport chose Avionics for AGL maintenance,’ says Brumley, adding that Australian airports have

always relied on internal staff to maintain their AGL. ‘Avionics knows airport lighting systems back to front, having supplied and installed so many of them. It makes sense for airports to access our expertise in this area.’

Avionics is currently rolling out Airfield Lighting Maintenance Engineering Solutions for Sydney Airport, to track and ensure compliance to MOS139 and ICAO requirements. ‘This will result in increased safety to all Australians and visitors to our shores,’ says Brumley.

Avionics is also consulting with the aviation industry on the development of an Airfield Lighting Competent Person Accreditation Scheme. ‘We want to create a more comprehensive method to test and measure competency in airfield lighting personnel,’ says Brumley. ‘Everybody who works on airport lighting systems must have specialist skills in this area. There is too much at stake to rely on electricians or other technicians who may not specialise in this area or have up-to-date skills in airport lighting.’

Acquiring a civil construction company that specialises in airfields – in order to complete asphalt overlays, spray seals and concrete pavement replacements – is a long-term growth option for Avionics, as is continued expansion in Asia as more Asian airports begin to upgrade runways and lighting systems.

‘Avionics will always focus on airfield runway systems,’ says Brumley. ‘We are passionate about contributing to Australia’s aviation industry and ensuring that it has the world’s most modern, safe runway lighting systems that benefit airports, airlines and passengers.’

To learn more about Avionics, visit www.avionicslimited.com.

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Avionics Airfield Lighting, are specialists in the installation, commissioning & maintenance of aeronautical ground lighting (AGL) & related systems.

We set the highest benchmarks for installation and safety throughout Australia.

We also take the most complex integrated AGL system installations and make them simple Our reputation is built on guaranteeing to reduce risk to all stakeholders in Airport Operations.

SYDNEY

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Contact us info@avionicslimited.com

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Visit us avionicslimited.com

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COMPANY FOCUS

LAING O’ROURKE DRIVING INNOVATION IN CONSTRUCTION A commitment to a unique research and collaboration model is paying off for clients.

Global engineering leader Laing O’Rourke is at the forefront of innovation in the construction sector through its Engineering Excellence Group (EnEx.G).

Established in 2011, EnEx.G has a multidisciplinary, multinational approach to innovation. The group brings together worldclass experts across industry and academia to challenge and change traditional thinking in engineering construction.

‘The construction sector is ripe for disruption,’ says Professor Andrew Harris, Head of EnEx.G in Australia, and a noted researcher at The University of Sydney.

‘Construction traditionally has been more risk-averse and slower to move than other heavy industries. That will change as 3D printing, advanced materials and digital technology redefine how buildings are made and perform.’

Laing O’Rourke established EnEx.G to strengthen its innovation capability, create outstanding client partnerships and solutions, and to champion the engineering profession. The privately owned company saw an opportunity to adapt step-change technologies from other engineering sectors, such as oil and gas, and aerospace, to construction.

‘Our clients appreciate that EnEx.G is pushing the boundaries in engineering construction,’ says Dr Harris, ‘and that EnEx.G has become this amazing platform for collaboration between Laing O’Rourke, its clients and the best discipline-based engineering people from around the world.’

The group has more than 100 fulltime staff and external subject experts in Sydney and London. EnEx.G acts as an internal innovation lab for Laing O’Rourke, an external consultancy for its partners, a research and development arm,

and a contributor to the firm’s in-house education programs.

Laing O’Rourke’s foresight with EnEx.G is paying off: the group is commercialising several of its discoveries and has promising projects in its research pipeline.

EnEx.G is about to commercialise the world’s largest 3D printer: a 30-metre-long, six-metre-wide, eight-metre-high device.

Four years in the making, the 3D printer builds up layers in three dimensions using wax, concrete or plastic to create a solid structure or mould.

3D construction printing allows for one-off designs at a fraction of the price for typical construction projects that use uniform, mass-produced, prefabricated products. ‘In time, the 3D printer will be an absolute game changer in construction by bringing down costs and giving architects new levels of design flexibility,’ says Dr Harris.

James Gardiner, Head of Design Innovation with EnEx.G in Sydney, is leading the FreeFAB Wax project, which starts commercial production on a construction project in the United Kingdom in late 2016.

Laing O’Rourke has also commercialised redeployable solar-farm technology developed through EnEx.G. The hybrid power plant addresses the need for cheaper off-grid electricity, particularly in remote communities that rely on diesel generators.

‘EnEx.G is doing fantastic work in sustainability,’ says Dr Harris. ‘We are finding ways to better harness renewable energy, and make construction products smarter and more energy efficient using sensors and other technologies.’

Another EnEx.G innovation, a hard hat that measures an employee’s brain and heart activity, as well as fatigue levels, will also be

‘EnEx.G is about to commercialise the world’s largest 3D printer: a 30-metre-long, six-metre-wide, eight-metre-high device’ 50X

Professor Andrew Harris, Head of EnEx.G

commercialised. ‘By taking an internet-ofthings approach, we can better understand worker safety in real time and help reduce fatalities,’ says Dr Harris.

EnEx.G is also developing digital and virtual reality technology for construction.

‘We’ve done a lot of work on augmented technology that overlays new information on a design and allows users to walk through the project in a digital setting,’ says Dr Harris.

Advanced materials are another EnEx.G focus. ‘We have teams working on a new paradigm of advanced materials that are lighter, stronger and more energy efficient, capable of changing colour according to the season, self-healing and more tactile,’ says Dr Harris.

He believes that these and other technologies will drive a wave of construction innovation that could come from outside the sector. ‘The disrupters might be global information technology companies that apply knowledge to construction. That’s why EnEx.G is not bound by traditional focus on sectors or projects. We can look across industry to take the best emerging technologies and find new uses for them in construction. It’s an exciting space for Laing O’Rourke and its clients.’

To learn more about Laing O’Rourke, visit www.laingorourke.com.

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Perth Stadium Station Perth WA

ENGINEERING THE FUTURE

e na d lli gra Ba p to U a ay lg hw oo ig W lg H NS oo c n W acifi her P ort N

nd ta en es pm iti lo cil ve Fa de ra Re ar ah aw ey on ak o rr S C NT La MA in H arw D

The business has delivered some of the country’s largest, most technically-complex projects within the transport, oil and gas, building construction, defence, airports, mining, marine, civil and social infrastructure sectors and has twice been named as one of Australia’s Top 10 most innovative businesses, by BRW Magazine, and is the 2016 Winner of the Australian Construction Achievement Award.

et re SW St N nt ey ou n M yd 0 hS 10 ort N

LAING O’ROURKE IS A $7 BILLION INTERNATIONAL OPERATION WITH 50 YEARS OF INVOLVEMENT IN AUSTRALIAN CONSTRUCTION AND INFRASTRUCTURE INCLUDING A DECADE UNDER THE LAING O’ROURKE BANNER.

Moorebank Units Relocation Project Holsworthy

Laing O’Rourke is committed to the continual pursuit of innovation that will challenge and change the way the construction industry goes to work and deliver certainty for our clients.

LAINGOROURKE.COM

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COMPANY FOCUS

BUILDING BETTER AND SAFER ROADS

BY DARREN CHESTER, MINISTER FOR INFRASTRUCTURE AND TRANSPORT I would like to thank Infrastructure Partnerships Australia for this opportunity to introduce myself to Future Building readers.

I am privileged and honoured to have been appointed as Minister for Infrastructure and Transport as part of the Coalition Government’s front bench. This is a big job, an important job – and I don’t say that lightly.

Safe and efficient transport infrastructure is the backbone of a competitive, productive and growing economy. Well-planned, welltimed and well-positioned infrastructure is key to reducing costly, frustrating and counterproductive urban congestion. It is vital in keeping the supply chain flowing from our mines and our farm gates to markets, ports and supermarket shelves; and it is crucial in ensuring that we maintain a competitive edge in the global market.

We are rolling out a $50-billion infrastructure investment program – the largest infrastructure investment by any Commonwealth Government in Australia’s history. We are investing in more than 1000 projects across the country, including the upgrade of major transport corridors like the Pacific and Bruce highways, and key regional roads. In fact, in 2016–17, the Commonwealth Government’s infrastructure investments will total $8.9 billion – a record for a single year.

But that is not where it ends. When you build good infrastructure, you can change lives – and you can save lives. It’s important to think about that aspect of the infrastructure equation.

Our record investment is building better and safer roads right around Australia. It is upgrading and building better bridges, it’s improving accident black spots, it’s installing new rest areas for the heavy vehicle sector around the country, it’s saving lives, and it’s reducing the capacity for serious injuries to occur on our roads.

I’m very passionate about road safety; it’s one of the things that’s driven me to get involved in politics. That’s why I helped form the Parliamentary Friends of Road Safety, a bipartisan friendship group that comes together to see how we can work to reduce the road toll. I am determined to continue to work hard and seek out every avenue available to promote a holistic system of safer drivers, safer vehicles and safer roads, to drive down the road toll in the future.

Developing Australia’s infrastructure and improving road safety, however, is not just the province of governments – it

requires a concerted national effort that engages the widest possible range of skills, expertise, resources, ideas and innovative funding models, including greater privatesector investment.

But it’s not all about roads. We’re investing in freight growth, including rail and intermodal hubs, we’re investing in coastal shipping, in the aviation sector, and in a host of regional projects.

Over the coming months, I look forward to engaging with industry, local and state governments, and communities across the country to ensure that our infrastructure investments and regional initiatives will strengthen Australia’s ability to compete and excel on the global stage.

Darren Chester Minister for Infrastructure and Transport

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Progressing road user charging – panel discussion

Progressing road user charging Chair: Brendan Lyon, Chief Executive Officer, Infrastructure Partnerships Australia Panellists: • Scott Charlton, Chief Executive Officer, Transurban • Philip Davies, Chief Executive Officer, Infrastructure Australia • Brian Negus, General Manager Public Policy, RACV • Peter Regan, Deputy Secretary and CFO, Transport for NSW

Key points: • Changing road pricing models will be practically and politically complex.

• The support of motoring clubs and other user groups makes the discussion possible.

• A well-resourced and well-led national study is needed to increase community understanding of the problem, and to develop and refine alternative models.

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Brendan Lyon (BL): Could each of you reflect on what Scott Charlton has shown [in the earlier presentation, see page 38] on first findings from Transurban’s Road Usage Study? Perhaps give us a bit of a sense of what your view is, either as the operator, or as the user groups.

Brian Negus (BN): Certainly, a lot of what Scott said is what the RACV, the AAA and many of the other motoring organisations across Australia have been saying for some time. The current taxation system is complex; it’s broken. People don’t understand what they’re actually paying now, although interestingly, some of the users of Scott’s trial know about the situation.

The current system doesn’t reflect the way people use their vehicles; when, where and for how long. Revenue streams are reducing, and as Scott said, and as all of the graphs we’ve seen from government departments show, fuel efficiency will increase that decline as we go forward. Users of fuel-efficient vehicles are paying less fuel tax for pretty obvious reasons.

Importantly, there is no direct link between the revenue raised from road use and the investment

into transport, so we’re seeing a huge transport backlog. The system isn’t coping, and the revenue is decreasing. Certainly, there is no hypothecation, even of the current taxes, to try to fix that problem.

The AAA did some research just a year ago and found that 85 per cent of respondents said the majority or all of fuel excise should fund road and public transport projects. That indication comes from properly structured research across about 2,500 people.

From a principled point of view, we really want to see a new system based on mass, distance, time and location. Mass and distance are about kilometres.

Trucks are currently charged on a system based on ‘pay as you go’, which is not really working. It’s not equitable, whereas time-based and location-based charging are about congestion. We think that’s an important inclusion, because if you’re going to get demand management and make mode choice decisions, then you need congestion as part of the game plan.

Importantly, you need hypothecation of the revenue that comes from those new charges, and

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Progressing road user charging – panel discussion

underlining all of that is the removal of fuel excise.

You also need to remove most of the fixed federal and state taxes. There is a plethora of them, and that’s why people don’t understand what they’re actually paying now.

We are in favour of a separate, independent inquiry into this issue, and Infrastructure Partnerships Australia (IPA) is on the same page, given that we’ve worked with them for some years on this. The inquiry could be done by the Productivity Commission or Infrastructure Australia so that it’s independent. It also has to engage the community in plotting the pathway forward.

We’ve held that view for many years. The ACCC, the consumer advocate organisation, Infrastructure Australia, and now Infrastructure Victoria and Infrastructure New South Wales have been in the same boat; so we’re seeing a collection of groups coming forward with that same proposition.

Importantly, we’ve seen the Federal Minister for Urban Infrastructure, the Hon Paul Fletcher, on the front foot, having discussions in New South Wales and in Victoria about these issues. That’s good news.

BL: That is an incredibly strong call for reform from the user group. It really does show that there are legs on this kind of discussion. Peter, would you like to give us a reflection on this issue from a transport agency point of view?

Peter Regan (PR): There is a very significant challenge, and it’s not just in a New South Wales Government context. This is a challenge for governments around Australia to meet the long-term funding means for transport generally. That’s not just public transport, but all forms of transport. When we look into the future, we see an increasing burden falling on the general taxpayer, rather than specific transport-based funding. In the absence of specific funding, the public is still looking for services; it’s still looking for road capabilities and public transport capabilities, so if there isn’t another source of funding, that just falls to the general taxpayer.

There is clear agreement on the challenge across the board. Road pricing itself is not a new concept in that we’ve had at least 40 years of roadways being tolled across Sydney, Melbourne and Brisbane. But that has not been around congestion pricing as a way of paying for the construction of infrastructure. To date, that has been what tolling has been for: to fund the construction of new roads and motorways, in particular.

BL: But we do already price the road systems through taxes and charges; it’s just less visible.

PR: That’s right. I’ll make that point – there is some acceptance of user pays, but it is only on one type of road. I would agree that there isn’t a good understanding of the rest of the funding model, and how much money you are paying to use roads.

When you look further forward, you can see that where specific road pricing has already been in place – the toll road sector in particular – it has been evolving. In Sydney, we are moving towards distance-based tolling, which has a further element of user-pays charges embedded into them. But it’s still a very small subset of the market.

If you had asked me, from a transport agency perspective, what needs to be done going forward, there will need to be changes to the funding model.

Whatever that model is, road pricing will play a role in that in some form. It is going to need to be flexible enough to allow both new projects to be developed and, very importantly, existing roads to be maintained, and for capacity improvements to be made on arterial roads. Investment cannot just focus on a high-end motorway product.

Secondly, there will need to be very strong buyin from stakeholders, and from the community in particular. We’re at the starting debate in this kind of survey, and this kind of discussion is what we need.

Because this is a complex problem, it will take a while for people to understand and to accept change, so it will take time to implement.

I’ll finish by saying that, ideally, the system should be transparent to the extent that it can be, and it should deliver in a way that people can understand. Then it will allow us to plan with more certainty as to how the future transport system works. The road system is integral to that.

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BL: Phil, you’ve published on road pricing in The Australian Financial Review. Is this an inevitable change, or is it something in which Infrastructure Australia has a role to really steer this through?

Philip Davies (PD): What’s inevitable is that we need a new way of paying for roads.

BL: But is it just funding we need to fix?

PD: No. I think that’s a complexity of the challenge here. We’ve got a growing population, which will lead to increased congestion. If we don’t take action, this could cost us as much as $53 billion by 2031. It’s about making better use of what we’ve already got.

Simply put, what we’ve got is unfair, unsustainable and inefficient. The principal challenge of considering different ways of funding roads is to actually dial in with the community. That’s where Transurban should be congratulated on taking a good first step with its road-usage study.

The bill for every vehicle on the road today is around $1,300 per annum, and that roughly breaks down to 46 per cent for fuel excise, 22 per cent across vehicle registration and licensing fees, and 10 per cent stamp duty. Most people won’t know that this figure is then topped up another 22 per cent through tax. That’s a starting point for the conversation. The community needs to be engaged in the fact that we have a problem to solve here, but the problem is a good problem to have. The problem is a result of population growth and a growing economy, but one of the consequences is congestion.

We need a more efficient way of managing our own network. Pricing, in a sense, is one of the ways of dealing with that through sending the right signals to users. That’s why we’ve highlighted this as part of the 15-year infrastructure plan. The way that Infrastructure Australia suggests we move this forward is through an independent inquiry, which we will be very well placed to lead. It needs to be arm’s length from the government. It needs to be an independent body that leads it. It needs to be well considered, and really go at a pace where we can take people on the journey.

We need a flexible, pragmatic approach and to actually explain the problem before we start talking about what the solutions are. Brian outlined the common view of what the solution is, but there are other complexities, as Scott said earlier, such as people living in the regions, and so on. It’s a complex topic. Let’s take the first step and engage the community.

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BL: Scott, you clearly see this as a very important option in terms of fixing some of our transport challenges. Is it inevitable that we head down the path of road user pricing? Or does it need to be led?

SC: It has to be led. The disruption of technology can really be the help or the push – the shove – that we didn’t have before. I hear the complex issues, and there is the issue of congestion pricing; but if you can use technology in the new generation of cars coming in, a very simple fairness test will show that electric cars pay one-third of all funds that a normal car pays.

You just say to the community, ‘That’s unfair; we’re going to charge them’, and they’re going to charge these people the most. All the people that adopt the new technology will understand the issue better because they’re early adopters for everything.

In using technology, the problem is sometimes that you set out to design the perfect system. We just need to start getting some of the population used to a system, and then they can evolve to the perfect system.

BL: Is this one of the things that is the best study process, if we can call it that? It’s not going to be a leather-bound process if you’re trying to engage in the community; it’s going to be much more about getting out there and starting to trial bits and pieces.

Do you want to tell us a little bit about how you would approach it, Brian? What you think would be useful in terms of engaging your seven million members around the country that drive?

BN: Certainly, we would rather a properly structured inquiry or study. It really is about engagement. What Transurban’s done, and what Scott has described to us, for example, gives a good methodology in terms of engaging people. Trials are a great way to do that. In terms of engaging in this work, as Phil has already said, having them understand what they’re paying now, what the complexity is in the current motoring taxes and then what happens to the revenue, needs really strong engagement.

BL: People pay about 11 cents per kilometre now, is that right?

BN: Yes, that’s right. And they probably don’t understand that right now. That engagement needs to be done properly. It needs to be done with online survey material. The motoring clubs across Australia can help to get that engagement going. We certainly know a lot about online surveys. That sort of online survey material, properly structured research, but also engagement across various parts of the country – both urban and rural areas, because they are always going to be different.

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There’s been talk about the issue of community service obligations applying to rural roads, because otherwise they’ll miss out due to low traffic volumes.

That needs to be on the table, as well, especially in rural communities. Those complexities need to be handled in a really very structured way to make sure that people understand it and feel engaged, and are able to contribute to the discussion.

PD: Just to add to what Brian said, the other component of a trial, or an inquiry study, would be looking at what the strategic priority of different types of roads in regional areas is, and roads in our cities.

Importantly, what service levels do we need to deliver on those roads? That needs to be an important part of the conversation. That brings back the levels to which you maintain roads, as well as operate them. This is a good opportunity to step back from how we’ve done well to get to this point, and say, actually, there’s a real opportunity here to do a much better job of planning our transport networks to meet demands of a growing population.

BL: Transurban’s video shows the concept of ‘give people the information and they will understand the problem’. What’s the thing that we need to really start breaking through on regarding the need for reform?

PR: I agree that better community understanding is important, but to ultimately change a system that involves tax at different levels of the government, it needs the involvement of different levels of government.

There has been good progress in the national heavy-vehicle sector, and there has been a lot of work done that looks at different options there, particularly around how interstate traffic can potentially contribute in a fairer way. It has to be something that involves different jurisdictions. Probably because of that and because of the significance of the fuel excise, the conversation needs to be led by the Federal Government. From a New South Wales context, we’d very much welcome working with the other jurisdictions and the Federal Government to try and take forward different funding models.

BL: We’d almost be beyond any individual state.

PR: This issue is, and it ultimately needs, broad buy-in. At the moment, it would be difficult to see how you could run two models simultaneously.

There is going to be some work to do, but that kind of thing has been achieved before. Doing more work on our end to get the facts out is important. Having buy-in broadly across jurisdictions is important. We then need to look not just at what the funding model

is, but also at how those funds are deployed. How does it come in, how does it get allocated, how is it managed, and what’s the efficient and effective way to make sure that, ultimately, the funding is getting to the end purpose, which is providing road construction and maintenance, and contributing to transport generally?

SC: The biggest ‘changing thing’ for our participants was getting a monthly statement. ‘I had no idea I was driving that much. I had no idea why that happened a million times. Why did I do that? I don’t know why I went to the store three times when I could have just gone once.’

Then they see the amount that they drive and they see how much it’s costing them under the new system, and how much it’s costing them under the old system.

Well, that’s not fair. The monthly statement was just an unbelievably powerful tool getting imbedded in their psyche. The participants started using terms like ‘marginal propensity to drive’ after they looked at their statement for a few months.

BL: Brian, how often does this come up in the free form section in your surveys?

BN: Quite a lot, actually. People actually don’t discuss the fact that the current motoring taxation systems are broken, because they talk mostly about congestion on the roads, but also about public transport, more and more. They are already saying to us, ‘There has to be a better way to fix this’.

Safety and congestion are the top issues.

Congestion is always number one, on both the roads and public transport. On the back of what Scott mentioned about communicating the amount of motoring tax we pay to the community, an idea that the AAA put out on our collective behalf a while ago is ‘let’s actually show on all our petrol bills the amount of excise and GST we pay on the fuel we buy now’. That’s one of the ways that people would understand it. ‘I didn’t realise that tax, in those two forms, is what I’m paying now.’ That’s a good way to start the process.

PD: I think greater transparency around what we’re currently paying [is needed]. Actually, I think extending what we need to pay to maintain what we’ve already got [is needed]. The tendency is always to build new roads; actually, now it’s probably not much of the road infrastructure we need, it’s more about how we use it effectively and efficiently.

BL: Thinking about taking this forward from a national government perspective. There were a lot of Volume 7 Number 1

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L–R: Peter Regan, Philip Davies, Brian Negus, Scott Charlton and Brendan Lyon

pullouts in Transurban’s videos around the things that switched the community on, and switched them off. To all of you, what do you think the main consideration is going to need to be around progressing the process, and there’s nothing to implement if you don’t know what road pricing looks like? We just know some broad theories. We know some user acceptance surveys that are underway around behaviour. What are the traits that we need to really nail, in terms of getting this conversation going in a way where it’s going to move forward?

BN: I think the principles that we’ve talked about among the clubs around Australia would set the scene. There was strong support for independent inquiry of the sort we’ve all talked about. My favourite would probably be Infrastructure Australia.

Fairness needs to be number one in this system, in terms of a principle, to make sure that people aren’t discriminated against [because] of the vehicle that they drive. The fairness issue also relates to the issue around hypothecation. We’re not getting enough back, so we want more of the taxes we’re paying now coming back into funding road and public transport projects.

Transparency was the second major principle that we have been discussing for some time now. A sustainable system needs to make sure that we’ve got enough increase in revenue to address the issues that we’ve talked about, and efficiency in terms of the way it’s applied.

It’s a game changer. Ten years ago, we started this journey. The technology was basically unknown and there were huge privacy issues, and there was just no sort of game plan. It was about self-reporting of kilometres, whereas now the technology is proven and people don’t have the privacy concerns I thought they might have.

BL: Peter, you mentioned the allocation of revenue. That’s going to be one of the really sticky issues around this. Do you want to share some 58

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thoughts on those intergovernmental network complexities that sit around there?

PR: The key is that people will be more accepting of change if they are seeing that there is progress to provide them alternatives where possible.

BL: Alternatives will be important.

PR: Alternatives are important, and you can’t put too fine a point on that. Where possible, having a public transport option or other alternatives is a key thing for people to feel like they have a choice, especially if they don’t feel impressed in the first place that they’re already having to pay a considerable amount.

That does tend to have the same issue of intergovernmental responsibilities, because where you’ve got one government raising the money, and you’ve got another responsible for delivering the service, you have to have a way to equitably allocate funding. For the states – or whether it be local governments who are responsible for delivering the works – to have a sense of sufficient confidence into the future regarding funding streams, that will be forthcoming.

Whether it is direct hypothecation, or whether it is some form of allocation based on formulas or needs, or independent assessment, there has to be a degree of transparency in how it’s allocated, and a degree of certainty that it won’t be heavily politicised.

That then allows state governments more planning around alternatives, be it public transport or roads, with some degree of certainty. These projects often take more than a term of government. You need longterm thinking. You need 20-year or 30-year thinking to implement the kind of network that people are looking for. So, it’s a combination of those factors.

PD: Building on what Peter and Brian have said on transparency around how the money is spent, we’ve got to win the trust of the community in terms of how to collect this money, and this is how it’s going to be spent on infrastructure.

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SC: People are happy that the money goes to all forms of transport. They’re happy that it goes to maintenance, but they just want to see where the money goes.

People will believe it if it’s a New Zealand–type system, in which they see where the money goes and how it gets allocated. The other issue is about alternatives and choice. People would also like to see a choice in things like flexible work hours or different operating hours for services. People would say, ‘Look, I understand in the broad scheme of things that there can’t be a tram that goes to everyone’s front door. If you allow me to be flexible at work, then I can work around a system’.

But coming back to what you think we need to take it forward – what we need is leadership in state government or Federal Government, and some level of bipartisan support to take it forward.

We are in an unusual position where we have the operators, the bureaucracy, the users and the builders... every one of them here is in massive agreement that we have to do it. When we educate and talk to the community, they accept it, as well. We just now need government leadership somewhere to take that forward.

BL: Phil, in the Infrastructure Australia Plan, you put a very ambitious timeline on the reform of the road market. You put zero to five years to reprice the heavy-vehicle fleet, and you put five to 10 years to do a similar across the entire fleet. Give us a sense about how that’s going to roll out, and how important the heavy-vehicle study is going to be in terms of road user pricing trials.

PD: In terms of heavy vehicles, that’s already well advanced, and we just need to complete the rollout. It’s a natural, relatively easy step in terms of user pays. The discussion we’ve been having here has been more around light vehicles, and that’s a much harder, broader discussion. We’ve touched on the complexity of that. Whether it’s 10 years or 15 years, I’m not sure, but we’ve got to start the journey. What we’ve got is broken, and it isn’t going to support what we need in the future. Let’s at least start the journey, and think through what the appropriate time frame is.

SC: Use the technology and run the systems in parallel. I think that sometimes as economists or engineers, we try to create perfect systems and they become complex.

You have to get the people to adopt it. There is a change coming; use the change to change the base

system, and then you can adjust the system over time, and bring it in parallel. Say on 1 July 2025, everyone’s going to go from petrol tax to a user-pays system. I can imagine that day; that’s not a very pretty day. But as each new car gets imported – which is a brandnew car that has a level of electricity or efficiency – it starts moving to a system.

BL: I want each of you on the panel to imagine just for a minute that the Federal Minister for Infrastructure and Transport is sitting in the front row.

If you were giving this theoretical minister, who’s sitting in the front row and is about to speak, some advice about steps forward around requirements and so forth, what would it be?

PR: What’s just been discussed is probably a good snapshot of the issues. We have relatively converging views about the need to do something. This change is complicated and it won’t happen overnight, but we do need to be moving towards more sustainable funding models. Certainly, I think there would be a lot of engagement from other levels of government to talk this through and try to find ways of doing that.

Funding is the challenge that all governments face, and when you project that challenge forward, there is a big gap opening up, and it is a problem for people today that needs to be dealt with.

It’s understanding the problem and getting a debate going more broadly, and not jumping to a single answer, that is really important. The focus on broader road-usage analysis before having a discussion around congestion is a good start.

PD: So, in terms of the problems that we’re trying to solve, what we’ve got is unsustainable. In terms Volume 7 Number 1

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of funding, that’s probably the burning platform right now that we need to address. But then, as we’ve said, what we’ve got is inefficient. So, there’s a hierarchy in terms of the problems that we’re trying to solve.

That is a fairly complex narrative to put together for the community. There is something to be said for just focusing on one of those to start off with ... we have a funding problem here that we need to address, so let’s come up with a strategy to address that once we’ve communicated what the problem is.

Then we can get more sophisticated in terms of the inefficiency and the fact that it’s unfair, because we’re going to have to make sure that it’s fair. There’s a hierarchy to this conversation.

BN: Basically, people understand that the system, as it is now, is broken. But also, we need to convey to them the issues about congestion, and that we also have a backlog of projects and maintenance.

They’re the key issues, the congestion that we’re facing on roads and public transport, and the funding backlog, and the fact that the current system isn’t working in that sense.

BL: It’s all of the user groups you would have to study. I mean, having the motoring clubs on board is a big thing.

BN: Well, I think probably for the first time, Brendan, we’re seeing confluence in a lot of the players: the Productivity Commission, the ACCC, the Competition Policy Review, Infrastructure Australia, Infrastructure Victoria, and Federal Minister Paul Fletcher, who have been talking about the whole issue of road pricing and road user charging.

That confluence hasn’t been seen in the past. Our suggestion, and that of the AAA, is to put the fuel excise and the GST on the petrol bill so that people 60

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actually understand what they’re paying now, and can actually relate that to the fact that there’s a gap in the funding for projects.

But then the bottom line is that the Federal Government, in combination with the states, needs to actually launch an independent inquiry. We would be happy if Infrastructure Australia were to do it, but strong community engagement is required.

While we all really get what we’re talking about, until the community is informed, the average player will not really understand the situation. Community engagement is vital.

SC: If the minister was here, the first thing I’d say would be ‘Thank you for your contribution on NorthConnex’. The second thing I would say is, ‘Minister, with the data that we’ve received, there is a very clear and simple message on the funding side, and on the fairness side. I think that there is a message that resonates with the community. You’ve got the support of seven million people in the AAA. We can do what we can with three million of our customers. We hope that you are as brave as you can be with an inquiry, another pilot study, or offering an incentive for one of the states to trial something to advance the agenda’.

Once we have a very succinct and open conversation with the community, it’s incredible.

Actually, a lot of those people have become advocates now for reform. They ask, ‘okay, what do we do next?’, and we’re like, ‘Well, that’s over – you can’t get any more money from us, but the study is over’. But they become advocates and are really interested in where this leads, so hopefully it will lead to something.

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Brendan Lyon, Chief Executive, Infrastructure Partnerships Australia Brendan Lyon is the Chief Executive of Infrastructure Partnerships Australia (IPA), the peak infrastructure policy partnership between Australia’s Commonwealth and state governments, and the business sector.

Joining IPA on its formation a decade ago, Lyon initially led the policy and research team, before being appointed CEO in early 2008.

Through strong, evidence-based public policy, good research and strong relationships across the business, media and government sectors, IPA has developed into a respected and trusted voice on economic and social infrastructure policy.

In his role, Mr Lyon also serves on a range of boards, committees and inquiries, and is currently serving on the Board of Transport for NSW and on the New South Wales Government’s Expert Advisory Panel on social housing reform. Mr Lyon has previously served on major national reviews, including COAG’s Infrastructure Finance Working Group and the Commonwealth Government’s study into highspeed rail.

Mr Lyon is a member of the Australian Institute of Company Directors and holds a Masters of Business Administration with Distinction. In 2013, he was appointed an Honorary Associate Professor at Sydney Business School.

With a strong interest in infrastructure and in economic policy, Mr Lyon has authored and contributed to a large number of research and policy papers considering different aspects of infrastructure market regulation.

Above L–R: Peter Regan, Philip Davies, Brian Negus, Scott Charlton and Brendan Lyon

Scott Charlton, Chief Executive Officer, Transurban Scott Charlton joined Transurban Group as Chief Executive Officer in 2012. Mr Charlton has more than 25 years’ experience in developing, funding, constructing and operating infrastructure assets, working with some of the sector’s leading corporations, including Lendlease, where he was Chief Operating Officer for global operations (2010 to 2012).

Prior to this, he was Chief Financial Officer at Leighton Holdings and a Managing Director of Deutsche Bank. Mr Charlton is an engineer by training. He is Deputy Chairman of Infrastructure Partnerships Australia, a board member of Roads Australia, and a member of Monash Industry Council of Advisers, and the Business Council of Australia.

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Philip Davies, Chief Executive Officer, Infrastructure Australia Philip Davies is the Chief Executive Officer of Infrastructure Australia, with a mandate to provide independent expert advice to all levels of government on infrastructure policy and planning. Infrastructure Australia publicly advocates for reforms on key issues, including means of funding, financing, delivering and operating infrastructure, and how to better plan and utilise infrastructure networks.

Infrastructure Australia released the Australian Infrastructure Audit in May 2015, which is a comprehensive independent review of Australia’s infrastructure and our future needs across transport, water, energy and telecommunications.

Infrastructure Australia has recently finalised a 15-year Australian Infrastructure Plan – a strategic framework for addressing Australia’s future infrastructure needs.

Mr Davies is an experienced infrastructure executive who has spent more than 25 years shaping policy, delivering nationally significant infrastructure projects, and leading reform within the infrastructure sector.

Before joining Infrastructure Australia, Mr Davies led AECOM’s Infrastructure Advisory business in the Asia-Pacific, providing government and private sector clients with infrastructure advisory services.

He is a Chartered Engineer and a Fellow of Engineers Australia.

Brian Negus, General Manager Public Policy, RACV Brian Negus is General Manager Public Policy for RACV, where he is accountable for market and technical research to formulate policies and initiatives addressing a broad range of safety, mobility and community needs across the transport sector. The Department advocates for, and is the public face of, these issues on behalf of RACV’s two million members.

Mr Negus was formerly the Deputy Director of Public Transport with the Victorian Department of Transport, Planning and Local Infrastructure for three years, and previously held the position of Metropolitan Regional Director with VicRoads, Victoria’s state road authority, for eight years. Prior to this, Mr Negus worked across many areas of the transport sector, including ITS implementation, transport project delivery and policy formulation.

Mr Negus is the President of Intelligent Transport Systems Australia and represents ITSA on the ITS World Congress Board.

Peter Regan, Chief Financial Officer and Deputy Secretary, Finance and Investment, Transport for NSW Mr Regan is the Chief Financial Officer and Deputy Secretary, Finance and Investment at Transport for NSW. He is responsible for ensuring strong financial management across the cluster of New South Wales government agencies involved in the provision of road and public transport assets and services, as well as identifying and acting on commercial and financing opportunities to support the significant investment in transport infrastructure currently underway in New South Wales.

Mr Regan has more than 20 years of experience in infrastructure and project financing in both Australia and the United Kingdom, with a particular focus on the transport industry. He has a strong track record of delivering innovative outcomes through efficient use of public and private sector capital and expertise, and in the effective delivery of strategic priorities.

Prior to joining Transport for NSW, Mr Regan performed senior roles at NSW Treasury, Sydney Motorway Corporation, Transport for London and Deutsche Bank.

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COMPANY FOCUS

QUEENSLAND RAISES THE BAR ON INFRASTRUCTURE DEVELOPMENT A new plan spells out how the state will work across government, and with the private sector and councils, to accelerate growth.

The Palaszczuk Government’s bold new approach to infrastructure planning is designed to drive innovation and collaboration in the sector, and to create better community outcomes.

The landmark State Infrastructure Plan (SIP), released in March 2016, is transforming how Queensland plans, prioritises and funds vital projects. It is also setting new benchmarks in how states can work with the private sector and local councils on infrastructure.

The SIP sets out Queensland’s infrastructure needs and links them to a clear vision to grow the state. In doing so, it creates more opportunities for the private sector to put forward project proposals and greater certainty about the state’s infrastructure priorities.

‘The new framework for planning and prioritisation of infrastructure projects provides a solid foundation for making informed investment decisions,’ says Jackie Trad, Queensland Deputy Premier and Minister for Infrastructure, Local Government

‘Queensland is open for business on infrastructure. We are encouraging private operators who have a good idea on infrastructure to talk to us, and together, [we will] find ways to get things done’ 64X

and Planning, in the introduction to the SIP strategy document. ‘It will help identify the best, most cost-effective way to address the service needs and infrastructure challenges facing Queensland.

‘We have also established a $2-billion State Infrastructure Fund (SIF), which is already funding the delivery of new infrastructure projects across Queensland.’

Trad says that the private sector has an important role in helping the state meet its infrastructure needs. ‘Leveraging opportunities for the private sector to put forward value-for-money proposals that respond to Queensland’s infrastructure priorities, while protecting ownership of public assets, will play a critical role.

‘Queensland is open for business on infrastructure. We are encouraging private operators who have a good idea on infrastructure to talk to us, and together, [we will] find ways to get things done.’

Darren Crombie, Deputy DirectorGeneral, Infrastructure Policy and Planning at the Department of Infrastructure, Local Government and Planning (DILGP), says that the SIP has embraced a different approach to previous infrastructure plans. ‘In the past,

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infrastructure plans have often contained aspirational and unfunded lists of projects, and the community and private sector have had to work with that. The SIP wants to change that and encourage a greater focus on defining problems and challenges, and allowing a more market-led approach to bringing forward solutions to address the state’s mid- to longerterm infrastructure challenges.’

The SIP has received an encouraging response, says Trad. ‘The SIP’s framework is about being open-minded and less prescriptive about infrastructure within the state’s current funding constraints.’

Significant infrastructure challenges and opportunities Innovation is vital if Queensland is to deliver an infrastructure strategy and program that capitalises on its economic potential, supports growth and creates long-term prosperity for all Queenslanders.

Continued strong population growth is driving infrastructure demand. The state’s population is forecast to increase from 4.7 million to 7 million by 2036, and up to 10 million by 2061. With this comes greater demand for essential services such as transport, education, health, water and energy.

A dramatic change in Queensland’s social profile over the past decade is adding to the infrastructure challenge. An older population is increasing demand for health services; different household formations (such as more people living alone) are affecting housing demand; and more people are expected to live in South East Queensland and some coastal areas.

There is also greater demand for digital infrastructure and education services – vital assets if Queensland is to develop new industries, invigorate existing ones and continue to prosper in the global knowledge economy.

‘Having the right infrastructure at the right time is complex given Queensland’s expected population growth,’ says Trad.

‘Addressing congestion in South East Queensland is a significant challenge, as is ensuring communities throughout the state receive the necessary level of infrastructure investment to remain connected, productive and livable.

‘That’s why we have established Building Queensland as an independent infrastructure advisor to government, so we can have confidence that we are investing in the right projects, when they are needed,’ Trad says.

She also says that the rise of the digital economy is another challenge. ‘Planning a new hospital today, for example, means thinking about how technology will change the provision of healthcare services over a decade. We must also consider how technology can extend the life of existing

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assets and reduce pressure to build new ones.’ Crombie adds: ‘At its core, the SIP is about getting the right infrastructure projects for people who need them now, getting infrastructure that gets our products to market, and doing it while thinking about the big picture and planning for it’.

Significant infrastructure opportunities The SIP is built on three core components: directions, responses and programs. Part A of the SIP (strategy) sets out the state’s infrastructure challenges and objectives (directions) and its infrastructure planning and prioritisation (responses).

These are designed to guide infrastructure investment in Queensland, and to provide a cohesive model for planning and delivery within government agencies that integrates with land use and economic planning. The strategy will be updated every five years.

Part B (programs) outlines how infrastructure projects will be implemented, as well as each region’s opportunities and priorities. It identifies the Queensland Government’s policies and initiatives to support SIP implementation.

Projects fall into two categories. The first includes those in a 1–4 year program, which have firm funding commitments through the state budget. Those in the second category are future opportunities that cover the SIP’s indicative 15-year framework.

Although the program outlines what needs to be achieved, it is not prescriptive on delivery. Where possible, future infrastructure opportunities will be addressed in a way that encourages innovative, cost-effective solutions.

‘During industry consultation on the development of the SIP, private operators said they wanted at least three to four years of certainty in infrastructure projects to plan their resources,’ says Trad. ‘They also wanted a better indication of longer-term opportunities and greater scope to come back to government on how these might be funded and delivered.’

A newly created Infrastructure Portfolio Office is monitoring SIP implementation and providing a cross-government perspective on

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infrastructure expenditure, time frames and resourcing. And a high-level Infrastructure Cabinet Committee has been established to drive the state’s infrastructure program and ensure whole-of-government integration with infrastructure planning and delivery.

SIP off to a strong start Trad says that the SIP is adding to Queensland’s infrastructure momentum.

‘DILGP is driving implementation of the SIP, and continues to have a very open dialogue with industry about what matters.’

The Queensland Government is close to finalising the South East Queensland Regional Plan, and in August, it announced the agreement of five councils to kickstart work on the first North Queensland Regional Plan, which aims to supercharge development in that region.

In June, a $1.5-billion boost for the SIF was announced in the state budget, bringing its value to $2 billion over five years. The additional contribution has allowed for an $850-million commitment to Cross River Rail, including $50 million to establish the new Cross River Rail Delivery Authority.

The SIF is funding a $300-million Priority Economic Works and Productivity Program, to help deliver targeted, productivity-lifting transport infrastructure across the state, as well as $180 million to bring forward social and economic projects in regional communities. The SIF is supporting the rollout of the SIP. To learn more about the Queensland Government’s State Infrastructure Plan, visit www.dilgp.qld.gov.au.

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Darren Chester MP

The Hon Darren Chester MP Minister for Infrastructure and Transport

On behalf of the Australian Government, I thank Infrastructure Partnerships Australia (IPA) for its ongoing work in the infrastructure space, particularly in promoting genuine, cohesive partnerships between governments and industry.

Today, I’ll outline the Australian Government’s position on infrastructure investment in the transport sector.

You may have heard the Prime Minister say that this will be a term of delivery. The bottom line is that we are building for the future.

Our record $50 billion infrastructure investment is changing and saving lives. We are investing in our cities, getting a fair share for our regions and working across all modes of transport.

We are also on board with the many advances in technology that we know will change the way we plan, deliver and use transport services now and into the future.

In building for the future, we are addressing three major areas. The first is safety, which is paramount. It must be integral to everything we do, and while Australia has made some great gains in road safety since the early 1970s, in the past two years the trend has gone in the wrong direction. In the past 12 months, 1292 Australians have died on our roads. We’re seeing 30,000 serious injuries per year, at an annual cost of $30 million. We should not accept the road toll as an inevitable cost of roads, and I challenge you to work with the Government in relation to road safety.

The second major area is that as Australia grows, our choices about the transport infrastructure we build must be informed by each project’s capacity for economic growth and productivity at local, regional and national levels.

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Key points: • Australia’s growing and ageing population provides a ‘burning platform’ for infrastructure and broader policy reform.

• A rationalised user-pays model for road transport would deliver transparency, equity and fairness, while also providing a sustainable funding model for road transport.

• In advance of major structure changes to road transport, robust project selection is the most important factor to ensure high-quality, economically beneficial projects.

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Thirdly, this term of government is about delivery; not just writing and reading reports, but delivering on actions.

By effectively establishing a long-term project pipeline, as well as delivering ongoing reforms to project planning, prioritisation and funding, we are enabling a strong national investment programme.

There are some great projects on the go – but don’t worry, I won’t bring out the list that makes up our $50 billion Infrastructure Investment Programme.

We’re working with the Victorian Government to address congestion in the nation’s fastest-growing city, as well as investing in the regions. We’re setting up western Sydney to achieve its growth potential with an airport, improving road connections and looking into rail. And almost 70 per cent of the Pacific Highway is now a four-lane divided road, and fatal crashes have almost halved, down from the mid40s annually to now in the 20s. It’s good that the trip from Sydney to Brisbane will be two hours quicker, but it will also be safer.

We will also change the face of our eastern seaboard with the Melbourne to Brisbane Inland Rail project. It is truly game changing and will transform how we move goods around the country.

Inland Rail is the smart solution. It is in the nation’s best long-term economic interests, and also features on Infrastructure Australia’s priority list.

Industry can plan on Inland Rail happening. My challenge in this term of government will be to make this project inevitable. One of my first achievements as Minister was to secure an additional $594 million in the 2016–17 Budget to advance pre-construction, acquire necessary land and engage with stakeholders along the route.

The benefits will start accruing from day one.

Inland Rail will create around 800 jobs per year during construction, and 600 operational jobs per year thereafter, mostly in regional centres along the corridor.

It will get 200,000 truck movements off our roads each year, improve market access, lower supply chain costs and enhance commercial opportunities for producers.

We are actively market-testing to get private sector expertise and financing ideas on board in partnership with the Australian Rail Track Corporation.

In short, we are looking at whole-of-project strategies to better manage risks, lower costs and drive new business prospects.

Australia has an infrastructure funding problem, which is a significant challenge for the Government. The current approach to infrastructure funding is unsustainable.

The cost of building and maintaining roads is growing at a faster rate than the income we receive from road-related revenue because revenue models are based on an old-world order.

Advances in vehicle technology, such as improved fuel efficiency and driverless cars, point to a long-term decline in road-related revenue at all levels of government.

A growing and ageing population, and competing budgetary pressures on all levels of government, make it hard to fund the required infrastructure, especially as the demand for road services increases.

Long-term sustainability, efficiency and value-formoney must now form the basis of any infrastructure investment decision by governments.

Paying the right price for infrastructure, and being more accountable to the public for the revenue that is collected, is important.

Part of this is about getting the best use out of our existing infrastructure. We should leverage and improve the capacities of our current systems, such as hot lanes, variable speed limits and traffic management systems. This will lead to better value for money and increased efficiencies.

But faced with increasing budgetary pressures, we also need to factor in the long-term maintenance costs of infrastructure so that we are not left worse off.

If we know what the issues are, what are we doing about it?

In addition to investigating road pricing as a longterm reform option, we are increasingly looking to the private sector for funding partners.

The Turnbull Government is actively investigating road pricing. Our responses to the Competition Policy Review and the 2014 Productivity Commission Public Infrastructure Inquiry are on the public record.

The progression of the Heavy Vehicle Road Reform means that the time is right to start having conversations with states and territories around road pricing.

In December 2015, COAG agreed that governments would work together to investigate the high-level costs, benefits and options of extending direct user charging to all vehicles.

In August 2016, transport ministers had a very useful conversation about how to progress this work.

A reform of this type is substantial. This is longterm micro-economic reform.

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Given that the Commonwealth is not a primary road owner – that is a role for the states and territories – to be successful, we require a strategic, wholeof-government approach involving all levels of government and partners in the community.

We need to bring the public with us and have an informed debate. The last thing that any of us needs is a front-page headline about a new ‘road tax’ that will erode any chance of getting this done.

We will need to have broad agreement across industry, and across the political spectrum, to ensure that this reform is not hijacked by simplistic arguments and scare campaigns. We will need strong, rational industry advocates to help governments to make the case. We’re going to need many more voices than Members of Parliament.

The benefits of reform measures, such as revenue, access and equity, need to be explored in further detail in an Australian context, and then explained to the broader public.

The first response in my regional community when you start talking about road user charges is going to be, ‘I’m going to pay more than those people in the city’.

In regional areas, for example, we have identified that $1,700 per capita is spent on roads from funds specifically raised by local governments, compared to $200 per capita raised by local governments in urban areas. For regional areas, this means that there is less money to spend on other services.

This isn’t something that will be fixed with a simple grants programme: it is structural market failure. Market reform requires proper price and service management – it needs to be transparent.

For governments, understanding how that impacts with the tax transfer system is going to be a challenge, and how we could address issues like equity is of absolute importance.

In summary, an explanation to people that it’s going to be fair, and it must pass the ‘pub test’, is necessary.

Market reform is usually accompanied by innovation, and innovation facilitates the growth of new technologies, enhances competition and provides greater benefits to consumers.

This has been the case with the reform of the aviation and telecommunication sectors, which led to high levels of innovation – for example, integrated ticketing systems and logistics for airports, private sector investment, competitive pricing, user choice and a renewed focus on service delivery.

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The best technology solutions are not necessarily the best fit for purpose. Governments still need to be clear about what they want to achieve through technology and weigh this up against other considerations, such as the potential costs to users.

Work still needs to be done to understand the impacts of reform on all users of the road system, with particular regard to community service obligations, service level standards and how best to structure charges across road networks.

Governments will not be in a position to make credible decisions on this reform without targeted analysis.

Transurban’s work in this regard should be acknowledged.

This is the work that is underway in the Department of Infrastructure and Regional Development, hand in hand with the Federal Treasury. There is a lot of work to be done and room for many voices on these issues. Transurban’s Road Usage Study is a welcome contribution to this debate.

Ultimately, we must be satisfied that the benefits of a broader use of road pricing would exceed the costs.

This is a reform journey that started many years ago and, given its complexity, we’re not going to reach the destination tomorrow. I appreciate the desire for urgency, but we’re talking in the 10-year time frame rather than the five-year one.

We will, however, get there as long as we work together, collectively realise that communication is crucial and bring the community with us.

Earlier this year, Infrastructure Australia released its 15-year Australian Infrastructure Plan. This plan sets out a priority list of 93 potential projects around the country at different stages of development, and it offers an extensive set of recommendations about reforms to improve the delivery of infrastructure nationwide.

It is a key tool to inform decisions by the Commonwealth Government, and state and territory governments, about which projects to progress and, over time, which ones will be funded.

The Federal Government has also released Principles for Innovative Financing. These principles make it very clear that our priority is to fund projects that are capable of delivering on national priorities, and of maximising the benefits to the Australian economy and communities.

These principles also set out our commitment to drive greater use of innovative funding and financing mechanisms to assist in delivering our infrastructure agenda, including how value capture can fairly provide an alternative funding stream.

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The Government also announced the establishment of an Infrastructure Financing Unit, which is to work closely with the private sector in order to develop funding and financing solutions.

On this basis, there is a distinct preference for proposals that have looked into and, where appropriate, applied innovative funding and financing solutions beyond capital grants.

The concessional loan for WestConnex, the equity injection for the Moorebank Intermodal Terminal, and the Asset Recycling Initiative are all good examples of alternative funding arrangements currently in use.

The core message remains: robust project selection, rather than selection of the financing mechanism, is the most important factor in ensuring that governments make high-quality, economically beneficial investment decisions.

Infrastructure has a long life. It’ll be there for our kids and grandkids, and we want them to know that we had the foresight to think and plan not just for today, but for future generations.

What we are doing today – in terms of safety, growth and delivery – is how we will get to that future.

Darren Chester MP, Minister for Infrastructure and Transport Darren Chester was elected to Federal Parliament as the Member for Gippsland on 26 June 2008 in a byelection following the retirement of the Hon Peter McGauran.

He was re-elected in 2010 and served as the Opposition’s Shadow Parliamentary Secretary for Roads and Regional Transport, and was an active member of various Parliamentary Committees until the most recent federal election.

Following a successful campaign in 2013 and the introduction of the Abbott-Truss Government, he was appointed the Parliamentary Secretary to the Minister for Defence.

Mr Chester continued as the Assistant Minister for Defence under the new Turnbull Government, and in February 2016, he was appointed to Cabinet as the Federal Minister for Infrastructure and Transport.

Prior to entering Federal Parliament, he worked as a newspaper and television journalist throughout Gippsland, and then became Chief of Staff to the Leader of The Nationals in Victoria, Peter Ryan.

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COMPANY FOCUS

OPEN SPATIAL’S GROUNDBREAKING TECHNOLOGY LEADS THE PACK Geospatial engineering software improves return on infrastructure assets.

they are also beginning to appreciate the role of GIS in big-data analytics in infrastructure.

A water utility, for example, will use Open Spatial’s software to record and manage information on every pipe in its network. Data on the pipe’s location, length, diameter, material, gradient, install date and contract/job number, for example, provide key inputs to the utility’s big-data analysis technology, which determines when the pipe should be replaced.

Almost half of Victorian water utilities use Open Spatial technology. ‘They recognise the value of high-quality geospatial data, and use our products as a bridge between their GIS and CAD (computer-aided design) systems,’ says Skerrett. ‘In doing so, they optimise network maintenance, achieve better reporting outcomes and provide greater transparency.’

The benefits of geospatial data

Wanda Skerrett, CEO, Open Spatial

Global leader in geospatial engineering software Open Spatial is helping infrastructure companies to harness the power of big data in order to better manage assets and serve customers.

More than 100 organisations worldwide use Open Spatial’s state-of-the-art technology to capture and maintain infrastructure data.

These organisations manage critical assets in utilities, transportation, government, mining and education.

By enhancing and safeguarding data integrity, Open Spatial helps infrastructure companies to make better decisions about their assets. Clients report a strong return on investment from its solutions – from cost savings, efficiency gains and fewer outages, to better customer service.

‘We offer best-of-breed geospatial software,’ says CEO Wanda Skerrett.

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‘Geospatial data is a key foundation of bigdata analysis in the infrastructure sector.

Consistently reliable geospatial data drives better infrastructure outcomes.’

Some infrastructure companies, however, still underestimate the value of geospatial technology, says Skerrett.

‘They use generic systems, or those that combine several packages, or are not compatible with other systems.

Open Spatial is the premier provider of geospatial technology specifically designed for infrastructure assets.’

These solutions are timely. Geospatial data, which refers to an item’s location and its spatial data attributes, is attracting more attention. Infrastructure companies are recognising the value of geographic information systems (GIS), which share information in real time with stakeholders, and

Geospatial software has a critical role in network maintenance, says Skerrett. ‘Utilities can better schedule preventative maintenance and optimise asset performance when they are basing decisions on up-to-date network information. When things go wrong, such as water leaks, they know exactly where the problem is, and can track the locations for future planning and recording of customer water outages.’

Reliable infrastructure data also supports capex programs. ‘It’s easier to know which parts of the network require maintenance in the next budgeting cycle when data is captured and maintained properly,’ says Skerrett.

Improved financial reporting is another benefit. ‘Infrastructure companies have a better understanding of their network’s value, and greater insights into maintenance spending and asset depreciation for financial-reporting purposes.’

Skerrett says Open Spatial technology facilitates better stakeholder communication and transparency. ‘Our software helps infrastructure managers with planned and unplanned outages, and shut-off reporting.

The technology has unrivalled network trace functionality: utilities managers know every valve that has to be shut off, every

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land parcel affected and for how long, and an automatic notification service alerts customers to any shutdown.’

A pioneer in its field Open Spatial’s core technology was developed in the mid 1990s and began as a utilities management system for South African municipalities. The flagship product, the Munsys Asset Intelligence Suite, was written to capture data using open standards

and engineering best practices – an approach that has stood the product and its continuous refinements in good stead for two decades.

Munsys is a rapidly deployable spatial application technology that ensures data integrity, and provides multi-user accessibly to infrastructure asset information throughout the organisation.

It contains all of the technology necessary to administer an asset-mapping and management system, capture all

‘Munsys’s compatibility is a huge advantage when infrastructure companies are putting data from various sources into a central repository and using big-data software to analyse it’

spatial data, distribute the data to necessary personnel and integrate the information with other departments for optimum efficiency.

Unlike proprietary systems, Munsys seamlessly integrates with other technology through open data access and open standards. Using the proven technology of AutoCAD and Oracle, Munsys solves the problem of information captured in design drawings being lost when transferred to GIS. ‘Munsys’s compatibility is a huge advantage when infrastructure companies are putting data from various sources into a central repository and using big-data software to analyse it,’ says Skerrett. ‘The more bespoke or closed the geospatial software, the less chance the organisation has of optimising output from the data.’

Open Spatial’s enlighten technology brings Munsys data to life through powerful web-based visualisation capabilities.

Enlighten, a map-centric visualisation portal, incorporates aerial imagery, mapping data, picture, CCTV and video into a single viewpoint.

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‘Enlighten’s cloud-based technology enables users to access information on infrastructure assets from hand-held devices, such as iPads and smart phones, and better understand the data through maps, charts and other illustrations’ ‘Enlighten’s cloud-based technology enables users to access information on infrastructure assets from hand-held devices, such as iPads and smart phones, and better understand the data through maps, charts and other illustrations,’ says Skerrett.

Open Spatial’s as-constructed design certification software, ACDC, enables validation of design submittals and asconstructed drawings prior to submission to local government authorities on infrastructure developments. ACDC then automates the extraction and loading of data from valid CAD drawings into GIS. The software’s processes ensure that valuable engineering data is not lost or diminished in value, clarifies data requirements and improves communication between infrastructure stakeholders.

‘Ensuring that assets are correctly recorded and scheduled for maintenance reduces public risk and improves the organisation’s ability to better manage valuable infrastructure,’ says Skerrett.

on the use and benefits of geospatial information for location-aware technology for infrastructure management.

Skerrett’s industry standing is also befitting from Open Spatial’s reputation for excellence. ‘Right from the start, our technology has been ahead of the pack,’

she says. ‘By specialising in infrastructure asset data, Open Spatial developed a niche expertise that we continue to build upon to benefit clients in Australia and overseas.’

To learn more about Open Spatial, visit www.openspatial.com.

Open Spatial’s strong validation From humble beginnings, Open Spatial has expanded to the Asia-Pacific region and North America. Headquartered in Sydney, it has offices in Melbourne and Brisbane, and all research and development is conducted in Australia.

Australian-owned and -operated, the company has grown to 30 staff and has a blue-chip client base ranging from Australian local governments and water utilities, to United States airports and African telecommunication companies.

Skerrett is President of the Geospatial Information & Technology Association (GITA) in Australia and New Zealand. GITA is a worldwide not-for-profit organisation that provides education and information

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Wanda Skerrett, CEO, Open Spatial

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Chris Eccles

Chris Eccles Key points: • Better infrastructure outcomes are achieved when government departments coordinate and share experiences, rather than operate in silos.

• Central oversight of project delivery allows benefits and lessons to be shared across the whole of government’s project delivery.

• Together, Victoria’s longer-term infrastructure strategy and robust near-term project pipeline give the market new visibility of Victorian projects.

Secretary, Department of Premier and Cabinet, Victoria

To deliver an infrastructure project takes planning, a lot of coordination and, hidden from public gaze, some good fortune. As projects get delivered, all those involved move along the learning curve. This industry stands among the best at learning from experience, and at constantly developing new ways to improve, speed up and cut costs.

The challenge to get better, move faster and take on more is now as intense as ever. As you would have heard in the opening address from the Treasurer, the Victorian Government has an ambitious infrastructure agenda, with the State Budget funding more than $7 billion in new capital works each year across the Budget year and forward estimates.

A similar story exists in New South Wales, and anyone who has been listening would know that appetites to take on even more are growing.

The challenge to deliver is, I’m sure, being felt by all in this room. The engineers feel it, as do the planners, the financial wizards and the lawyers. There is one other profession that is sharing this challenge and excitement: my profession.

Government works best when it is operating in partnership with other sectors. This is true in responding to the Royal Commission into Family Violence, pursuing economic transformation and 76

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jobs growth, driving an equality agenda and, indeed, delivering infrastructure.

True partnership can only be achieved with mutual understanding. So, today I thought that it might be useful to give you an insight into how we, the Victorian Public Service, are supporting the infrastructure agenda; a glimpse beneath the doona of government enterprise, if you like. In addition, I thought that I’d discuss how we’re preparing for the release of Infrastructure Victoria’s 30-year plan, and what it means to move into a longer-term infrastructure planning horizon.

Delivering the infrastructure agenda As you all know, the Government came into office with a significant transport infrastructure agenda: build the Melbourne Metro Tunnel, remove 50 level crossings, extend the train line to Mernda, upgrade the Cranbourne to Pakenham line, procure new trains and trams – the list goes on. As I’m sure you’re also aware, a number of these city-shaping projects are under construction or in planning stages already.

Each of these projects has substantial standalone merit. But when considered together, the whole is greater than the sum of its parts. The interconnectedness of these projects means that

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each individual project unlocks new benefits in other completed and subsequent projects.

Projects like the Metro Tunnel, Western Distributor, the Cranbourne–Pakenham Line Upgrade and the Level Crossing Removal Project all work together to reshape the economic geography of Melbourne. For example, urban renewal initiatives at the Arden Station precinct are made possible by the construction of the Melbourne Metro Tunnel, which, in turn, increases the number of users of the Melbourne Metro Tunnel, improves access to jobs and facilitates business-to-business interaction.

By 2031, when taken together, these projects will have generated thousands of jobs, increased private and public income, and lifted the gross domestic product (GDP) of the state by billions of dollars.

The Victorian Public Service’s experience with this agenda has been like the engineering of a level crossing removal: the second is easier than the first; the third easier than the second. In working on the first tranche of project decisions relating to the infrastructure agenda, we made the mistake of viewing them as projects that should neatly fit into our existing processes. We beefed up our infrastructure delivery crew, and it’s a great crew, but we expected the rest of government to either keep up or get out of the way. We failed to appreciate just how much value could be gained through accessing and applying the collective intelligence of all of government.

Not surprisingly, this failure initially meant that issues continued to pop up for last-minute resolution, with all of the attendant risks in rushed decisionmaking. It also meant that related issues not obvious to the core infrastructure agenda weren’t given the focus that they required.

Here are two examples: • One: From day one, Corey Hannett, CoordinatorGeneral, Major Transport Infrastructure Program, and his team was resourced, and off and racing.

Hannett staffed up, installed himself in the big corner office and appropriated the grand title, Coordinator-General. Meanwhile, our planners – who were dealing with all of the new challenges thrown up by the infrastructure agenda, but without any extra resources – were asked to simply keep up. We needed them to adapt and, thanks to the great relationship between Hannett and Christine Wyatt, Victoria’s Deputy Secretary

– Planning, this resource imbalance has now been addressed, and a true partnership based on mutual authority and accountability has been achieved.

• Two: We didn’t expose the emerging thinking to all parts of government. Why would we?

Why would the social policy or economic development departments and agencies need to be at the table? Well, because government has ambitious project apprentice targets, is making decisions that require the careful navigation of free trade agreements, and has an ever-increasing expectation that projects both create and capture public value. Projects are confronting difficult issues of native title and affordable housing.

Projects are evolving alongside planning rules like the central city-planning controls.

Within these two examples lie areas of interest and responsibility across the length and breadth of the Victorian Public Service.

So, what did we do? In short, we came to recognise that a bespoke arrangement integrated into standing structures could only help. I’m happy to report that it has.

We have created the Infrastructure Coordinating Committee. Chaired by me and serviced by my department, it brings together, on a monthly basis, public service leaders, including departmental secretaries, the Coordinator-General and project CEOs, to provide direct line of sight into projects and early ventilation of issues. By identifying the upcoming key government decision points, the committee can act as a clearing house before Cabinet Committee consideration – through discussion, crystallising the public service’s advice, and commissioning additional, cross-cutting advice where necessary – essentially ironing out issues as far as possible before they are considered by government.

The representation on this committee is constantly evolving. For example, realising the impact that the infrastructure projects we were discussing had on the urban design of Melbourne, Jill Garner, our Victorian Government Architect, was added as a member. This ensures that design outcomes, such as livability and accessibility, are front of mind in discussions about the scope and interface of projects.

To give you a flavour of the Committee’s work, in addition to the routine updates on the Metro Tunnel and Level Crossing Removal Project, a recent Volume 7 Number 1

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agenda included discussion of issues such as the Plan Melbourne Refresh Project and its impact on transport network planning, industry capacity and capability with the anticipated procurement schedule, and a report into the economic and tax impacts of major projects.

Taking one typical issue considered by the Committee, I can explain our working model a little further. The Committee was asked to review the skills attainment opportunities identified through the delivery of the Metro Tunnel and the Level Crossing Removal projects.

The Committee discussed and endorsed further investigation of skills attainment opportunities beyond those identified through these projects.

These included considering partnerships with tertiary institutions and including targets for disadvantaged workers. The discussion also focused on how the infrastructure agenda could facilitate jobs for transitioning workforces and industries, such as the automotive manufacturing sector.

On the advice of the Infrastructure Coordination Committee, Government has adopted workforce targets and skills attainment measures into procurement for all major projects, contributing to the creation of 150,000 jobs under this Government, including jobs for disadvantaged workers.

This adaptation of the public service decisionmaking processes has been mirrored by changes to the Cabinet decision-making process. Cabinet initially considered infrastructure project issues either in the policy subcommittee, which examines all major matters across the full policy landscape in their early development, or the expenditure review subcommittee, which concentrates on funding and finances. This arrangement proved not to be sufficiently focused and streamlined to enable all the project decisions required by the Government’s infrastructure agenda to be considered in a manner that supported the aggressive delivery timetable.

In September 2015, the Premier determined that Cabinet should have a dedicated committee for priority infrastructure projects to supplement the roles of the existing committees. Bringing together a small number of key ministers with input to project decision-making and chaired by the Premier, the Priority Infrastructure Sub-Committee makes the key decisions on all of the major projects underway, including the interfaces between these projects, and minimises any delays for project rollouts.

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Having a dedicated subcommittee with senior ministers considering infrastructure projects also invites a broader consideration of issues affecting those key projects, while ultimately delivering a faster conclusion. It’s our version of measure twice, cut once.

An example of how these new, adaptable processes of government improve the outcomes for Victoria in the delivery of the infrastructure agenda is the management of disruption caused by transport construction and occupation periods.

Government has set the vision of what it wants to achieve, and it’s an exciting vision for Victoria; however, the road to get there is literally paved with rail occupations, road closures and construction zones.

Our infrastructure experts, together with their policy colleagues, are considering how sequencing and coordination between projects can be optimised to ensure that this is as painless and efficient as possible.

We recently hit our stride in achieving great outcomes through the management of the Kororoit Creek Road level crossing removal. This election commitment was coordinated to include other works required in the same location, such as the partial duplication of the Altona Loop, and resulted in the minimisation of disruption in the area. It is a great outcome in terms of public transport services, safety improvements and increased productivity of the freight network, and it demonstrates how thinking pragmatically about communities – and how our work impacts them – can be minimised when we put our minds to it.

Efficiencies can also be achieved when procurement is coordinated. With a programme of 50 level crossings to be removed, it is vital that we use innovative approaches to procurement that maintain flexibility for the market while achieving value for money.

Through well-considered procurement methods developed in consultation across government, such as the innovative programme alliances, we are able to reduce the resources, costs and time impacts – both stateside and for the market.

Once that is achieved, we are also ensuring that the outcomes sought from infrastructure projects include creating social, environmental and economic value for the community – a legacy not just of the project successfully being delivered, but also of providing support to local industries through local content targets, jobs for apprentices and great design outcomes for local communities.

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It is by having the fora at both the bureaucratic and ministerial levels to consider these issues, and the appetite to try something new, that we can capitalise on these efficiencies and benefits.

Further, by having experts spread across government, and by having agile processes in place to bring them together, the public service is primed for responding to the private sector. Government can respond quickly to new opportunities. For example, projects like the Western Distributor demonstrate how government can respond with speed and precision to market-led proposals to supplement the agenda set by the government.

One way that your ability to deliver solutions for government is enhanced is by knowing what it is that the government requires as far in advance as possible – and that is where the work of Infrastructure Victoria comes in.

Infrastructure Victoria To get expert advice on future infrastructure planning, the Victorian Government has established Infrastructure Victoria so that, in addition to delivering the current infrastructure agenda, an independent body is considering the next generation of strategic opportunities.

Led by Chief Executive Michel Masson and Chaired by IPA Deputy Chair Jim Miller, Infrastructure Victoria has been established to provide independent advice on the infrastructure priorities of the state.

This advice will assist Government in planning for the growth that we know is going to happen over the next 30 years.

Infrastructure Victoria’s key priority this year is preparing a 30-year strategy for Victoria’s infrastructure. This document will outline short-, medium- and long-term infrastructure needs and priorities, including a pipeline of projects.

Infrastructure Victoria has consulted with the community, including seeking the expertise of the people in this room, to ensure that the strategy is informed by the best possible evidence and advice.

Underpinned by Infrastructure Victoria’s core objectives to improve social, economic and environmental outcomes for the state, the strategy will respond to emerging needs and pressures facing Victoria.

The strategy won’t be a static document. As outlined in the legislation, it will be reviewed and updated by Infrastructure Victoria every three to five years. These updates will be self-initiated by Infrastructure Victoria, and not directed by Government.

The strategy will cover all sectors, including transport, health, culture, sport, education, water, justice, information and communications technology, agriculture, and energy.

Now, Government already has a number of strategies in place and in development for considering how the state will look in the future. We have Plan Melbourne, which is currently being refreshed, that outlines the planning and land use directions for the state over the next 30 years. There are Public Transport Victoria’s Network Development Plans that outline how the public transport network will be developed to connect Melbourne and Victoria. There is a plan for schools, a plan for health and human services, a plan for justice, and a plan for water.

Government also has strategies in place by geographic area. We know that we need to identify and plan for strategic locations across Melbourne and Victoria that can accommodate future growth.

Urban renewal initiatives, such as the Arden precinct or Fishermans Bend, cannot be undertaken without also considering the infrastructure that supports development, and also what will be required over the longer term. Developing these urban renewal areas are key to supporting population growth and building our reputation as a knowledge-intensive service economy over the next 30 years.

Infrastructure Victoria’s strategy will take all the work that Government has underway and provide advice on the ways that the work can be enhanced through better use of existing infrastructure, or new projects that will lead to greater economic, social and environmental benefits for the state. And we know that when considered holistically, and delivered in a coordinated and integrated way, the cumulative value is greater than any single project alone.

In response to Infrastructure Victoria’s independent strategy, the Government will prepare a response, including its five-year infrastructure plan. Preparing this plan requires the public service to again evolve its operating model to ensure that we can deliver a product that is able to match and respond to the breadth of Infrastructure Victoria’s work.

What the response to Infrastructure Victoria’s 30-year strategy will require is a cross-cutting plan to consider infrastructure needs and solutions. For instance, are there innovative ways that the plans for housing and land use can be achieved in conjunction with transport priorities? Can the way we deliver education infrastructure be coordinated with active Volume 7 Number 1

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transport routes to help achieve health and lifestyle improvements? More and more, we are looking at ways of collaborating, of innovating, of addressing multiple hard problems with one solution.

To prepare Government’s response, a dedicated team will be brought together in my department, with experts from across the public service to ensure that a unified strategy incorporating all of these areas can be provided. The team will take the plans and strategies already in place, and bring these together with the advice of Infrastructure Victoria to ensure that Victoria is well placed to achieve the outcomes sought: a livable, prosperous Victoria, for both the short and long term.

One part of Government’s response will be a five-year plan to guide infrastructure priorities for government investment. Our aspiration is that this work can be updated annually and applied to complement the state’s Budget-related work.

So, how is this any different to Government’s approach to infrastructure investment as part of the annual Budget?

Well, the five-year plans will be pegged against the 30-year strategy and its future iterations. For you, our friends in the private sector, by clearly setting out Government’s priorities, reaching beyond the forward estimate cycle, there is the opportunity for you to access and assess our key priorities, locate these priorities within the 30-year strategy narrative, and engage with us on how they might be delivered. Not

only can this start a general conversation between government and the private sector about innovative ways that the priorities can be delivered, but it will also allow you to plan more confidently to support your investment decisions.

I know from experience that many of the best solutions will come from the engineering, planning or commercial experts in the private sector. By having a longer-term strategy as reference and the five-year plan as a specific guide, the settings are right for those ideas to flourish.

Conclusion I hope that from this brief exposure to my world – this glimpse beneath the Government doona – you have a picture of a public service and a government able to adapt its operating model and decision-making processes to keep pace with, and indeed get ahead of, the complexity and multidimensional nature of Victoria’s infrastructure agenda.

I also hope that you see, like me, the unique opportunity offered by the Infrastructure Victoria 30year strategy, and how Government intends to respond to the strategy for an even stronger partnership between the private sector and Government.

In the same way, the benefits of a well-conceived and executed infrastructure agenda are greater than the sum of individual projects, and that partnership can drive innovative solutions that are greater than the sum of our individual imaginations.

Chris Eccles, Secretary, Department of Premier and Cabinet, Victoria Chris Eccles was appointed Secretary of the Victorian Department of Premier and Cabinet (DPC) in December 2014. As Secretary, Mr Eccles leads the department and the Victorian Public Service in advising the Premier and the Government of Victoria.

Mr Eccles was previously Director-General of the New South Wales Department of Premier and Cabinet from 2011 to 2014, and Chief Executive of the South Australian Department of the Premier and Cabinet from 2009 to 2011. Mr Eccles also has previous experience in Victoria’s DPC, having held the positions of Deputy Secretary, Sector Improvement Group and, later, Deputy Secretary, National Reform and Climate Change Group from 2007 to 2009.

Prior to joining Victoria’s DPC, Mr Eccles worked in a variety of government and private sector senior management positions. He has held leadership roles with the Australian Capital Territory Chief Minister’s Department and with the Australian National Training Authority. As an Associate Director with KPMG, Mr Eccles headed the national education consulting practice. He subsequently became a foundation Director of the consulting firm Phillips KPA, which works across all education and training sectors.

Mr Eccles is a Male Champion of Change. He is dedicated to leading the public service by example and practicing principles of open government, inclusion and diversity.

Mr Eccles holds a Bachelor of Arts and a Bachelor of Laws from the Australian National University.

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LIGHT RAIL A GAME CHANGER FOR CANBERRA A new light rail investment spurs jobs and development, benefiting the community and the environment.

The Australian Capital Territory’s investment in light rail will transform Canberra’s transport network, further energise its economy and reinforce its reputation as a leader in sustainability.

The ACT Government signed contracts in May 2016 for the first stage of Canberra’s world-class light rail network. Construction will begin this year and operations will start in early 2019. Light rail is a game changer for Canberra. By 2021, the network will host more than 15,000 daily journeys and integrate with the city’s other transport systems. The ACT Government estimates that the Capital Metro project will deliver almost $1 billion in community benefits.

The state-of-the-art network will reduce road congestion, help Canberra manage expected strong population growth and safeguard the city’s environment and livability.

It will, quite simply, change how Canberra moves and grows.

The ACT’s economy will also benefit.

The Transport Canberra light rail will support around 3500 jobs during construction and will subsequently support 50,000 jobs until 2047, according to an Ernst & Young study.

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Light rail will also be a catalyst for property development and urban renewal along the transport corridor. Canberra’s night-time economy and its shift workers will also benefit – light rail will run until one am on Friday and Saturday nights.

‘Successful light rail networks make cities more livable,’ says Capital Metro Project Director Emma Thomas. ‘They encourage people to visit the city and cities become more active and vibrant. Everybody benefits.’ Canberra, Sydney and the Gold Coast are leading important light rail projects in Australia.

Social, health and environmental benefits are other key outcomes of light rail, says Thomas. ‘Light rail will make it easier for people to connect with each other and will add to Canberra’s sense of community. It will encourage people to walk or ride to the light rail stops and be more active. The long-term benefit is fewer cars on Canberra roads and fewer carbon emissions.’

Thomas adds: ‘By integrating with other forms of public transport, light rail in Canberra will free up resources across the city. There will be more buses to deploy to other parts of

the city.’ Light rail is estimated to deliver $222 million in transport time savings.

In the longer term, light rail will help Canberra capitalise on its potential in the knowledge economy. ‘Outstanding transport networks are a feature of the world’s great cities,’ says Thomas. ‘They help attract and retain top talent and add to a city’s creativity, innovation and capacity to develop thriving communities of start-up enterprises. Light rail will enhance Canberra strengths in schools and universities, technology and its leadership position in renewable energy.’

Light rail key part of strategic plan The light rail project has a critical role in the ACT Government’s strategic city plan. Running from Gungahlin (in Canberra’s north) to the city, it will ensure that Canberra remains an exemplar in sustainable urban development and densification.

Gungahlin’s population is expected to grow from around 50,000 to 85,000 by 2031, and Canberra will have 600,000 residents by the middle of this century. Travel times from Gungahlin to the city would increase to around 57 minutes without light rail investment.

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areas. ‘By supporting urban renewal, light rail provides a range of economic and social development options,’ says Thomas.

Canberra’s light rail to cost less, start sooner The social costs of traffic congestion could rise to $200 million annually by 2020, according to the Capital Metro Agency’s business case.

The light rail project will encourage redevelopment of the Northbourne Avenue corridor, the gateway to Canberra and an area identified for significant growth. Better transportation supports high-density land use in the corridor, which in turn will increase light rail patronage.

The project is expected to encourage property development and, in doing so, benefit Canberra’s tourism industry. About 40 per cent of its hotels are on the route. Thomas says: ‘The overseas experience shows light rail encourages more people to live in an area, which stimulates property development and new businesses. We have had lots of enquiries about potential business developments since the light rail project began.’

Greater demand for new properties in the corridor could create more options for the ACT Government in social housing. Public housing in need of renewal could be sold to developers and enable the ACT Government to build additional public housing in other

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Canberra Metro, the successful bid consortium, includes Pacific Partnerships, CPB Contractors, John Holland, Mitsubishi Corporation, Aberdeen Infrastructure Investments, Deutsche Bahn International and the Bank of Tokyo.

Collectively, the consortium has a strong record of transport construction and operations in Australia and overseas. The partners are responsible for more than 2.2 billion passenger journeys per year across 14 countries, and have hundreds of years of combined experience in light rail networks, systems engineering and operations.

The project attracted two high-quality bids. Canberra Metro’s ability to understand the essence of Canberra and its environment were important features of its bid. The light rail project will begin sooner than previous estimates, meaning less traffic disruption during construction and less visual impact through tree removal and replacement.

When complete, Canberra will have 12 kilometres of light rail track, 13 stops and 14 light rail vehicles that will operate from six am to one am, with services every six minutes. The contract includes operations and maintenance for 20 years.

Delivered as a public-private partnership,

the project’s capital cost of approximately $710 million is less than originally envisaged.

The ACT Government will contribute $375 million in 2018–19, funded from the sale of public assets and partly through a 15-per cent allocation from the Commonwealth through its Asset Recycling Initiative. Over 20 years, the light rail contract will account for less than one per cent of ACT Government expenditure.

‘Capital Metro is an example of how governments can work with the private sector to renew assets and deliver economic and social benefits that exceed the project’s cost,’ says Thomas. ‘This project will deliver a strong return on investment for Canberra for years to come.’

ACT’s transport revolution Canberra’s light rail project will be part of the city’s new transport agency, Transport Canberra, which began operating on 1 July 2016. Thomas, a former South Australian deputy chief executive of public transport and rail commissioner, will be Transport Canberra’s founding director-general.

The light rail project will work closely with Canberra’s ACTION bus system to coordinate planning, timetables and fares, which will include a single ticket for use on buses and light rail. The ACT Government has announced that it will decide on a second stage of light rail in Canberra in the coming months.

To learn more about the project, visit www.transport.act.gov.au.

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Transport Canberra A new era of public transport in the ACT has arrived: get on board!

Transport Canberra provides integrated transport for Canberra – now and into the future.

One ticket. One fare. One network.

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Benjamin Wyatt MLA

Benjamin Wyatt MLA Shadow Treasurer of Western Australia Key points: • With high levels of public debt and a number of credit rating downgrades, Western Australia needs to consider new ways of funding major infrastructure projects.

• A Labor Government would establish Infrastructure WA, which would have a similar role to independent infrastructure agencies around the country.

Looking at the speakers that you’ve had at what has been an extraordinary conference, I am a little bit unique because I’m from the west, which makes my comments somewhat different: perhaps a little bit of a curiosity. I also have the title – a very humbling title – of Shadow in mine. In Western Australia, we are moving towards a state election next year, so my comments today will be general in nature because there will be policy announcements as we move towards the election.

Regardless of who is elected in Western Australia in 2017, the demands for infrastructure will not change.

Our economy is changing from a period of extraordinary investment to a period of operation, especially in the mining sector. It is having a dramatic impact on employment, and we’ve gone from an unemployment rate of just over two per cent to comfortably over six per cent.

The economy is changing, subject to the inevitable boom/bust consequences of commodity prices, like the changes we’ve seen in the iron ore sector. Iron ore makes up just over 90 per cent of total royalty revenue received by the Western Australia’s Treasury.

There has also been a significant shift in the share of gross state product by the mining and petroleum sector.

Over the last decade, there has been such significant investment in that side of our economy that it has had a market shift.

This shift can [be seen] in services. While services are still the larger employer by a long shot – more than half of us Australians are still employed in that services sector – a significant share of our gross state product comes off the back of what has been a huge investment in services by mining and the mining sector.

This is the reflection of what has happened to the state’s finances, and has fed to the broader conversation around GST, and the percentage of GST that is distributed to the various states.

In a very short period of time, iron ore sales, mainly from Rio Tinto and BHP Billiton, went from just over five 84

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per cent to over 20 per cent of general government revenue. This made our balance sheet vulnerable to the inevitable end of what was record iron ore prices, and that has resulted in the significant operating deficits that we are now seeing in Western Australia.

We haven’t had operating deficits in Western Australia since the late 1990s, because we have had almost a decade of very healthy revenue growth. As revenue per capita, there has only been one year where we haven’t had the highest revenue per capita of all the states in the nation since 2001.

During the first half to mid-2000s, we had large and sensible operating surpluses, which were effectively paying for our capital works programmes.

Over the last five to seven years, the increase in revenue has gone into very large increases in wages among our public servants, and the asset investment programme funded by increases in borrowings.

Public debt in Western Australia has been the focus of credit rating agencies that have downgraded our credit rating a couple of times over the last few years. The growth in debt being held in our general government sector has gone from a position of $3.5 billion in financial assets in 2007/08, to the general government sector now holding well over 50 per cent of the total debt of the state.

Business investment is off, driven primarily by the wind-down in the investment side of the cycle of the mining sector. Historically, though, it’s still quite high, and the Western Australia Government expects it to remain so.

Certainly, that is feeding into a rapid decline. State final demand is a little bit deceptive in an economy like Western Australia that is so dependent on exports.

If you strip that out, you’d see no domestic economy in the state since the last quarter of 2013. We’ve been effectively shrinking.

This is a little bit deceptive for Western Australia, because if you look back to September 2011, the economy was boosted off the back of one large contract awarded out of the Gorgon Project on Barrow Island by Chevron. It can be distortionary when linear projects are being built in Western Australia.

We are now coming to our asset investment programme. Our asset investment spend by the Government as a percentage of total public sector expenses, and also of net worth, peaked back in 2008/2009, and has been declining ever since.

The Government was effectively competing with the private sector during a period of significant

economic growth in Western Australia, and this had inevitable cost impacts on projects. We were also unable to get people to work on them.

Going into the election, the Labor Party has announced that we will be establishing Infrastructure Western Australia. This has been the subject of some political controversy, because moving to an independent infrastructure plan with short-, mediumand long-term infrastructure priorities will be new for Western Australia. Because Western Australia now has a balance sheet, it needs advice on how some of these projects might be funded.

Western Australia has, by and large, avoided the conversation of infrastructure planning because of our revenue growth over the last 10 to 12 years.

Most other states have been through a process that the next government of Western Australia, regardless of its colour, will have to have with the people.

Because of its size, Western Australia has some unique challenges, we have to have a discussion on how we go about funding the demands for further infrastructure.

The purpose of Infrastructure Western Australia will be to ensure that we don’t see the public spending billions of dollars without paying, without a business case, without costings, and without knowing what a project actually is.

We also have an immature unsolicited bid proposal policy in Western Australia. There will be some announcements with Labor between now and the election around making it more attractive for firms to make unsolicited bids in Western Australia. At the moment, it’s not attractive to people to go through the cost of preparing bids in the event that Government doesn’t go down that path.

My colleague, Shadow Transport, Planning and Finance Minister Rita Saffioti, and I have been doing a lot of work around value capture – in particular, our public transport and urban renewal policies.

METRONET, which we took to the last election in 2013, is a significant public rail commitment from Labor to increase rail capacity across the metropolitan region. Those who know Perth know that you can go north and south. You can’t, however, travel with great efficiency east and west, and that is what METRONET, in part, is being designed to do.

But significantly, METRONET will also invest in the removal of level crossings, and to this end, we have looked to Victoria and the Andrews Government.

We are looking to remove level crossings on what Volume 7 Number 1

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we call the ‘heritage lines’. Only 10 per cent of the current public transport usage comes from three main heritage lines because they are old, they are often unsafe, and they are still in the old style. They are surrounded by acres of empty space, and do not capture value from that land.

The opportunities for METRONET include using some public land investment, and private skills and ideas, to go about replacing not just level crossings, but also train stations, and ensuring that we create train stations that are genuinely transport-oriented developments. The Public Transport Authority of Western Australia is very good at delivering and operating rail, and very bad at ensuring that it’s done in a way that captures value. In Western Australia, we still insist on a model that builds a train station and surrounds it by acres of car parks, and then we wonder why we can’t capture value as a result.

METRONET will be a big part of the next election for Labor, and a big part of what we intend to deliver in the event that we are elected.

There has also been a significant debate in Western Australia over the future of Fremantle Port.

The Labor Party is committed to Kwinana outer harbour. This has, by and large in Western Australia, been a bipartisan position for the last 30 years.

Fremantle is probably close to capacity. There have been various debates about what the capacity is, but the capacity is driven more by the fact that it is now surrounded by residential development, more than the capacity or containers through the port.

The Liberal Government is keen on increasing the long-term capacity of Fremantle, whereas Labor is keen on a new – and will be pursing a new – outer harbour at Kwinana, south of the current Fremantle Port. We have announced that it will require, in due course, a cap on Fremantle Port once Kwinana is built, and then a transition of container freight through Kwinana.

This represents two significant – admittedly medium- to long-term in respect of Kwinana, but also some short-term in respect of METRONET –

infrastructure demands for the new government in Western Australia.

One of the purposes of Infrastructure Western Australia will be to lead submissions to Infrastructure Australia. Western Australia has been very bad at making its case to Infrastructure Australia. We have presented one project to Infrastructure Australia of any detail to try and get some Federal Government support for our projects in Western Australia.

Historically, government in Western Australia has preferred the model of a dialogue between the Premier and the Prime Minister of the day.

That is not sustainable, because we are effectively in competition with other states. In fact, Federal Minister for Infrastructure and Transport the Hon Darren Chester MP also noted earlier today that continuing to rely on ad-hoc capital grants from the Commonwealth Government is not a sustainable model. We need to make our case in Western Australia in a much more sophisticated way, and that comes from the sort of infrastructure structures that we will be pursuing in the event that we form government next year.

Western Australia has a problematic balance sheet; we’re all familiar with it. We’re also going through a period of reasonable economic growth, driven primarily by the volume of iron ore exports leaving our ports. But that is having an impact on unemployment, and the demands on Government continue. Whoever is elected in 2017 will have the demands of government, including health and education, but also the demand to deliver infrastructure across a very large state.

That means that the Western Australian Government and Western Australians need to be more sophisticated in how we go about funding and delivering infrastructure, and that means having a conversation that many of the states of Australia had almost a decade ago. There hasn’t been that demand in Western Australia, but our balance sheet and our transition out of an investment phase means that it needs to happen.

Benjamin Wyatt MLA, Shadow Treasurer of Western Australia Ben Wyatt was elected to the Legislative Assembly in a by-election held in March 2006 to fill the vacancy created when the Hon Dr Geoff Gallop resigned.

Mr Wyatt is currently the Shadow Treasurer, and also the Shadow Minister for Indigenous Affairs, Native Title and Cost of Living.

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BMD DELIVERS NATIONALLY WITH A LOCAL PRESENCE Wholly Australian-owned and operated company BMD has enjoyed strong and consistent growth over the past 37 years of operation. This year presented an opportunity to redefine capabilities and establish new geographical benchmarks.

Tiger Brennan Drive Duplication, Northern Territory

BMD is a national group of companies that is engaged in engineering design, construction and land development for clients and partners in the sectors of urban development, transport infrastructure, and resources and energy.

Since 1979, BMD has employed a relationship-based business model by valuing its people, collaborating with its partners and delivering exceptional projects with sustainable outcomes. With more than 1700 employees throughout Australia, BMD has the resources and experience to deliver projects ranging in size, from $1 million to more than $1 billion.

BMD’s expansion into new capabilities and a broad geographic footprint has positioned the company as a major player in the national construction and property industry. Due to repeat business with a number of clients and a diversification

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strategy, BMD continues to grow a portfolio of assorted projects.

As part of the Transcity joint venture, BMD Constructions, along with Acciona Infrastructure and Ghella, completed the $1.5-billion Legacy Way tunnel for Brisbane City Council, and this experience took BMD on a journey into the complexities of an internationally significant project. The successful delivery of the project can be attributed to BMD’s ability to deliver unique and innovative design and construction solutions for both surface and underground activities, as well as the seamless logistical operations required in the precast facility, underground excavation, tunnel fit-out and commissioning.

BMD Constructions recently delivered Wyndham Harbour, an iconic destination involving an integrated waterfront residential

estate and marina development on Port Phillip Bay, Werribee South, in Victoria.

Throughout the five-year construction period, BMD remained committed to providing a high-quality product to meet the client’s expectations, delivering more than $59 million in construction works over numerous stages. BMD Constructions worked in close collaboration with the client to progressively develop on the initial scope and create cost-saving opportunities by challenging the original designs. The project team successfully developed the design to reduce dredge depths, extend the foreshore, optimise breakwater design and offset the cost of additional scope elements, while incorporating protection of both endangered vegetation and an underground aquifer.

BMD’s longevity in business has allowed the company to take calculated risks to not only sustain growth given the market

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Wyndham Harbour, Victoria

conditions, but to also broaden its scope at a manageable pace. The private ownership of the group facilitates a speed of decisionmaking that, when coupled with financial strength and capability, provides outcomes of the highest possible mutual benefit for clients.

BMD’s success remains underpinned by the philosophy of ‘we see things differently’, and this is what sets the company apart.

It is BMD’s commitment to this approach to business that enables the company to work collaboratively with clients, ultimately delivering projects with capacity and certainty, focusing on people, clients and the local community.

Exemplifying this commitment, BMD capped off almost two decades in the Northern Territory this year, with the delivery of its first managing contractor role.

With Tiger Brennan Drive’s project vision being ‘Driving growth in the Territory’, a significant focus was placed on enhancing local capacity, encouraging Indigenous engagement and engaging the community’s support, while ensuring minimal traffic disruption and value for money. The project has demonstrated the strength of systems along with the commercial capabilities of the business. Collaboration with the client and local contractors has not only expanded Darwin’s skill base (with an extremely high 92 per cent of work delivered by local Territory-based companies), but has also provided employment opportunities for Indigenous Australians – something that BMD is very much committed to.

The success of this Darwin project enabled BMD to draw on its strengths and learnings, and the company has been further awarded a construction manager role with

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Townsville City Council for the Townsville CBD Utilities Upgrade. In line with BMD’s approach to support the local communities in which it operates, this way of contracting management provides an ideal opportunity to contribute to the community, including aiding in the development of the local industry.

With the engagement of local subcontractors, BMD is working collaboratively to successfully deliver this large-scale project, while at the same time upskilling the local workforce and providing an overall residual

benefit and growth to the region. This way of business not only results in excellent relationships with the local community, but it also provides an enhanced skills legacy after the project is complete.

BMD’s strong relationship-based business model is founded on certainty, collaboration and performance. This approach was instilled through many successes in the early years of the business, and has stood the test of time in a highly competitive market. It remains BMD’s strongest competitive advantage.

Tiger Brennan Drive Duplication, Northern Territory

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ROADS AND HIGHWAYS AIRPORTS RESOURCES AND ENERGY RAIL LAND DEVELOPMENT PORT AND MARINE DEFENCE OIL AND GAS URBAN DEVELOPMENT WATER AND WASTEWATER INDUSTRIAL LANDSCAPING BMD is a national group of companies engaged in engineering design, construction and land development for clients and partners in the urban development, transport infrastructure and resources and energy sectors.

Darwin

Cairns Townsville Mackay Emerald Gladstone Brisbane Gold Coast

Toowoomba

Perth Adelaide Sydney Canberra Geelong

Melbourne

Since 1979, BMD has employed a relationship based business model founded on certainty, collaboration and performance. With more than 1,700 staff throughout Australia, BMD has the resources and experience to deliver projects ranging in size from $1 million to over $1 billion.

Seaford

www.bmd.com.au

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Craig Michaels Director, Sovereign and Public Finance, Standard & Poor’s Ratings Services

Key points: • The Federal Government was placed on a negative AAA outlook by Standard & Poor’s in July 2016, which means that there is about a one in three chance of a ratings downgrade over the next year or two.

• Commodity prices, wages and inflation, and the political process of budget repair are downside risks for the Commonwealth Budget.

• Despite risks, Australia has strong and consistent institutions that help to foster investor confidence.

I plan to give an overview of the economic landscape and, from a ratings agency perspective, how we see the Government’s fiscal environment. If I was to summarise that in one sentence, it would be that the economic environment is pretty good. The fiscal environment facing the Federal Government, in particular, is pretty weak and pretty tough.

If you’re listening to the media, you probably have a fairly downbeat view about the Australian economy, but it is actually going pretty well. Economic activity, or what economists know as GDP, is growing at quite a robust rate of 3.3 per cent over the past 12 months.

Now, when you think about the potential growth of the Australian economy, which most economists think is about 2.75 per cent, about 3.25 per cent is actually a pretty good outcome and all the more remarkable, I think, when you realise that we are still in the midst of the tremendous downturn in mining investment, which was the positive story of the economy a few years ago. Interestingly, the latest data is now starting to show very much the positive 90

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impacts on growth of the infrastructure spending that governments, particularly at state level, now have underway.

Overall, I would say that the economic transition from mining investment­–led growth years ago, to nonmining growth is happening pretty well. Yes, there are some soft patches, particularly in non-mining business investment, but you would have to say that, overall, it’s happening in a pretty good fashion. And it’s further evidence to us of Australia’s resilient and flexible economy, which we think is a big plus.

The labour market, which people out in the street care more about, is also in reasonable shape. The unemployment rate is at 5.7 per cent. If you think about what’s realistically achievable, the lowest sustainable unemployment rate might be close to five per cent. There is some slack in the economy – there are some unemployed people who could be working and there are people who could be, or would like to be, working more than they are.

But the unemployment rate has clearly peaked from its high mid last year of about 6.25 per cent. Based on the current set of data and a range of indicators, it will probably edge down a little bit further from where it is now over the next six months or so. Australia has a reasonably good, if not fantastic, labour market.

But GDP is a concept, and it’s really a concept that only economists get excited about. Normal people care about incomes, I imagine. I think that’s true of individuals, it’s true of businesses, and it’s also true of governments. Despite the good economic growth that

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I’ve just been describing, growth in incomes across the economy has been quite weak for quite some time. So, why the disconnect between economic growth, which is pretty robust, and income growth, which is pretty dismal, really?

Fundamentally – most of you will be very familiar with the story – it’s because the prices of the stuff we are selling to the rest of the world – mainly the iron ore that we heard about from Ben Wyatt before, and coal – the prices of those commodities have been falling very quickly since they peaked in 2011. Why is that? Largely, it’s because we’ve been producing more of the stuff.

We have been doing that, and countries like Brazil and Canada have also been doing that. So, in terms of simple supply and demand, a big boost is putting real pressure on prices.

More recently, it’s also because China’s economic growth is starting to slow down a bit, and that’s probably, more recently, what’s been putting more downward pressure on prices. That slowdown in economic growth in China has been more focused on the commodity-intensive parts of its growth story, as well as property and industrial development and infrastructure.

We’re producing stuff, but we’re selling it at much lower prices than we were yesterday. You don’t have to be a genius, or even an economist, to realise that that’s going to put downward pressure on your incomes compared to what they were before, and that’s the state of affairs that we’re in now.

Mining company profits have tanked since the heady days of 2011, and that has taken a direct hit on government revenues, as you know. It has also permeated through the economy more broadly in terms of much lower growth in wages and much weaker inflation. Both of those things also have a significant effect on government revenues because it is incomes and nominal spending – not GDP, which only economists really care about – that governments collect taxes from.

So, that gets me to the credit rating of Australia.

As Brendan mentioned, we put Australia on negative outlook in July, which means that we see about a onein-three chance that we could downgrade the rating over the next year or two.

Why did we do this? The reason we did it is because we see rising risk that the Government won’t be able to achieve its current strategy of getting the Budget back to surplus, or at least balance, over the next few years.

And it’s in the context of very significant slippage in the Government meeting all of its targets.

You’ll remember that, originally, the previous Labor Government predicted a surplus budget by 2013, which is now ancient history. And the current Budget projections have the Government getting back to a balanced budget by 2021. That’s eight years of fiscal slippage, and well over a decade since the global financial crisis initially pushed the Government Budget into deficit.

So, there’s a question of fiscal policy credibility here. It’s not that deficits are large or debt is high, but the question is whether the Government still has a credible fiscal path back to balance.

If you compare Australia’s government sector net debt to that of pretty much any other country, Australia does stack up very well. In absolute terms – in our view, anyway – net debt is quite low and, as I said, when you compare it to that of other countries, including AAA countries, Australia’s net debt looks pretty good. Net debt is not our ultimate concern.

Our key concern is that, while the public sector balance sheet is in quite strong shape, the economy’s overall balance sheet, with regard to the rest of the world, is actually very vulnerable. Australia’s level of external debt – debt owed to foreign investors – is extremely high and among the highest when you look at countries globally, and particularly when you compare it to other AAA countries.

Why is there such a high level of foreign debt?

Basically, Australia has been borrowing from offshore since European settlement about 200 years ago. We have persistently run account deficits, and that doesn’t seem to be something that’s going to change. And that has led to a very large debt owed to offshore investors; and particularly in the 1990s and 2000s, when we had – at least on the eastern seaboard – a huge boom in house prices that was largely funded by the banks borrowing from those investors and then on-lending to households, which basically went into an unproductive boom in house prices.

So, while there has been a lot of productive investment from that offshore capital, quite a bit of it has gone into unproductive purposes, and it leaves us in a situation where the economy, and particularly the banks, have a high level of debt, a high level of exposure to foreign investors, and, still, a structural current account deficient of around three to five per cent of GDP. And so we are currently, and will possibly always be, going to be reliant on the goodwill and the Volume 7 Number 1

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confidence of foreign investors to continue to fund our current account deficits to fund economic growth.

If that changed for some reason – and we’ve seen over the past 10 years instances where foreign investors do become very jittery about the global environment – and if, at some stage, foreigners are no longer willing to roll over our debt and fund our ongoing borrowing, then the economy will be in for a rude shock. Credit in the economy would dry up, business investment would tank, employment would slump and the Government’s Budget would be hit hard, not just by a collapse in government revenues, but also by the need to spend much more on unemployment benefits and the like.

We could also think of a really nasty scenario where banks’ asset quality collapses and the Australian Government is forced to support the banking system, on top of all of that. Now, I’m talking about what we think is a very low-probability scenario, let me make that very clear. But this is the vulnerability that we do see, given the high level of debt and ongoing reliance on foreign funding.

So, what does that mean? The bottom line for us is that we see very strong and credible public finances as being very important to help offset that external vulnerability, and to help reassure investors in the credit worthiness of Australia as an economy more broadly.

Now, if we look at the Government’s capacity to meet its own Budget targets at this point in time, and get the Budget back to balance by about 2021... if they did that, we’d be pretty comfortable, from a ratings perspective. But we do see at least three areas of risk to the Government achieving its Budget forecasts, hence the negative outlook upon the rating.

The first one is commodity prices and the impact that’s having on Western Australia’s Budget. It’s having a broadly similar effect on the Commonwealth Budget. We’re more pessimistic about the outlook for the commodity prices, particularly iron ore, than the Commonwealth was in its own Budget back in May. Now, the commodity market is actually doing not too badly as we speak here today, but these things can change very quickly. We have upgraded our commodity prices a little bit over the past couple of weeks compared to where we had them in January.

But it’s still about 10 to 15 per cent below the Government’s Budget assumption.

Why is the commodity price market improving a bit at the moment? It’s mainly because China is propping up its economy as only China can through its stimulus measures, to help keep its economic 92

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growth broadly in line with the target it has. We think the impact of that on commodity prices is only going to be temporary, and we expect commodity prices to come back down a fair bit by the end of this year and remain reasonably subdued over the next couple of years. That is clearly an important source of downward pressure on government revenues, compared to the latest set of Budget forecasts.

The second area is inflation and wages growth, which I did touch on earlier. It has been very subdued, and when you see the numbers come out each quarter both on wages and inflation, they constantly surprise on the downward side. Wages growth, which is about two per cent per annum, is the lowest it’s been. And both of those things for last financial year are a little bit weaker than what the Government assumed in its Budget projections, and we still think that there is downside risk to both of these things over the next few years. Again, that feeds directly into government revenues.

It’s not just that commodity prices have fallen and that’s feeding through to subdued wage and price pressures in the broader economy. That is true, but it’s also a global phenomenon, and I don’t think anyone’s really got a handle on what is driving this, but it is clear that inflation is very low. In fact, in central banks in many of the major economies around the world – Japan in particular – they are grappling with how to sustain positive price growth. They’re desperately trying to boost growth to ward off the destructive economic forces of outright deflation, which is something that the Japanese are very familiar with now. Even in the United States, where the economy and the labour market are much healthier than they were a few years ago, low wages and low inflation are still problematic.

The third area is the political process of budget repair. This is something that probably gets most of the headlines. Now, given the revenue issues that I just mentioned, we think that if Australia is to retain its AAA rating, the Government and Parliament would need to implement more revenue or more spending measures to improve the outlook for the budget.

Over the past couple of years, in particular, passing legislation to enact savings and revenue policies has proven very challenging, and that’s something that I don’t need to tell this audience. Even now, the Budget assumes savings that have not been passed by the Senate, that have been stuck in the Parliament, if you like, for the last couple of years. They are already baked into the assessment for the Budget, but may or

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may not ever occur. This is a significant risk, from our perspective – can and will the Parliament pass more savings measures? This is something that we’ll be watching very closely over the next six to 12 months, in particular, to see what they plan and how that pans out.

I want to make the point that we are agnostic about where the ratings should be. We’re not advocating to the Government, or to anyone, that Australia should have a AAA credit rating. We’re not advocating policy measures that the Government or the Parliament should take. We are trying to simply articulate what factors we believe are consistent with Australia having a AAA credit rating.

So, that’s the doom and gloom side, but I want to end on a positive note, because we do see Australia as being very resilient. Even if we do downgrade Australia at some point – and we’re signalling that that is a significant risk – even if we do, Australia would still have a very, very high credit rating. Not the RollsRoyce credit rating, but still very high. We think that the many factors that have helped Australia to adapt to economic shocks over the past few decades will still be there to serve the economy well.

The first is strong and predictable institutions, which help to foster confidence among local and foreign investors to invest in the economy, and that’s been very important to Australia’s economic success and leading to Australia being one of the richest economies globally. Paradoxically, it is probably a large reason why we do have such a high level of external debt, because we are seen from offshore as an attractive place to invest, in a large part, because of the strength of the institutions that we have here.

We also see the economy as having relatively flexible labour and product markets, which helps the economy to respond to economic shocks. The economy didn’t experience a blowout in inflation during the

commodity boom that we have and it hasn’t – so far, at least – experienced a collapse in the economy on the downside of the investment boom. As I said at the start, economic growth is actually quite strong, really.

Australia also benefits from a free-floating currency, and has a deep liquid currency market, which also has typically acted as an economic shock absorber, and we think it will continue to do so. In fact, this was a crucial part of the reason Australia could navigate the positive economic, or incomes, boost to the terms of trade without putting undue pressure on other parts of the economy, because the high currency helped that transition. And right now, we think that it’s helping, too, with a big rise in tourism and education exports playing a significant role in filling the growth gap left by mining investment.

And finally, it’s the central bank, the Reserve Bank of Australia (RBA), that we see as having a high degree of credibility and independence. No doubt we’ll see a smooth transition to the new Governor. Even though interest rates are now down to a record low of 1.5 per cent, there is, unlike in many major economies, still some room to cut interest rates if that became necessary, even before we start to talk about what at least used to be known as unconventional monetary policy tools.

As I alluded to before, there are a lot of central banks around the world now that would look at the RBA with some envy because of its positive interest rates and room to cut them if necessary, instead of being in the midst of massive bond-buying programmes and even – I still struggle to get my head around this, to be frank – negative interest rates.

To finish, Australia is in a robust position in terms of its medium- and long-term prospects. The economy is, we think, very resilient to shocks. But in the meantime, government revenues and spending will remain in a very challenging position, at least for the next few years.

Craig Michaels, Director, Sovereign and Public Finance Ratings, Standard & Poor’s Ratings Services Craig Michaels is a Director in the Sovereign and Public Finance Ratings group at Standard & Poor’s Ratings Services. Based in Melbourne, Mr Michaels is the lead analyst for sovereign credit ratings on Australia, New Zealand and other Pacific countries, as well as ratings on a number of Australian and New Zealand sub-sovereign governments.

Prior to joining Standard & Poor’s, Mr Michaels was a senior economist at ANZ Banking Group, with a focus on the Australian economy and financial markets. Before this, he was a senior economist at the Victorian Treasury in Melbourne, responsible for economic and revenue forecasting, economic modelling, and providing micro-economic policy advice.

Mr Michaels holds an honours degree in chemical engineering, a Bachelor of Commerce and a Postgraduate Diploma in Economics from the University of Melbourne.

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COMPANY FOCUS

ALSTOM BRINGS GLOBAL EXPERTISE TO AUSTRALIAN RAIL EXPANSION A strong customer focus and long-term commitment are central to its strategy.

Alstom Australia’s world-class expertise in rail systems is helping to drive this country’s rail renaissance, and is creating jobs for local communities.

The Australian operation is part of Alstom SA, a global pioneer in integrated rail solutions, and an acknowledged leader in its field. The French group operates in more than 60 countries, employs 31,000 people and had the equivalent of $15.5 billion worth of orders in 2015–16.

Alstom’s sole focus is now rail – having sold its energy business to General Electric in November 2015 – and it is best known for a comprehensive portfolio that includes record-breaking TGV high-speed trains, tilting Pendolino trains, modern Citadis trams, high-tech Metropolis metro trains and world-leading signalling technologies.

Alstom Australia’s Managing Director, Mark Coxon, says the business adapts the company’s rail expertise to this market. ‘Alstom prides itself on listening to customers, taking a local focus, and making a long-term commitment to its markets. We strive to offer the best of both worlds to customers: access to Alstom’s leadership in rail systems, with a very strong Australian focus,’ says Coxon.

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Alstom’s proud Australian history dates back more than 100 years. It manufactured diesel/electric locomotives in Brisbane in the 1940s and 1950s, and acquired the Ballarat workshop in the 1990s from the Victorian Government.

Alstom has since supplied more than 500 X’trapolis rail cars to Public Transport Victoria (PTV). Its Ballarat operation has helped Victoria to develop its skills in rolling stock manufacturing, renovation and maintenance – and it has secured an important industry for the community.

Alstom was awarded a contract to supply 22 six-car Metropolis trains and communication-based train control (CBTC) signalling for Sydney Metro Northwest.

This project includes Australia’s first fully automated, driverless train.

In February 2015, Alstom, as part of the ALTRAC Light Rail consortium, was awarded the contract for the Sydney CBD and South East Light Rail project.

It is responsible for the integrated light rail system, which includes the design, delivery and commissioning of 60 coupled Citadis X05 trams, power supply equipment, signalling systems and 15 years of maintenance. In another Australian first,

the project includes 1.2 kilometres of wirefree operations.

Alstom’s signalling capabilities were reflected in its successful supply, installation and testing of Australia’s first European Train Control System (ETCS) Level 2 signalling in New South Wales in June 2016.

Alstom is also successfully suppling, testing and commissioning its SmartLock 400 interlocking signalling system for the Melbourne and Brisbane suburban networks, and is supplying additional X’trapolis train sets for Melbourne’s suburban rail network.

National expansion is a priority. ‘Alstom is working hard to build a larger presence beyond Sydney and Melbourne as other capital cities upgrade their rail networks in coming years,’ says Coxon. ‘Australia has outstanding potential to transform its urban and regional transportation networks through rail.’

Coxon says that Alstom’s capability to deliver integrated rail systems – from high-speed trains to metros, tramways, maintenance, rail modernisation, and infrastructure and signalling solutions – is an asset. ‘Our ability to design, implement and maintain rail assets provides a wholeof-system solution. Project risk is reduced because customers are not dealing with multiple suppliers, or suppliers who outsource work. Alstom does everything inhouse and brings in specialists from its global network for projects as needed.’

Alstom’s leadership in rail technology is another key capability. ‘Clients know [that] when they use Alstom products they are accessing state-of-the-art rail technology that is being successfully implemented worldwide,’ says Coxon.

Alstom’s proven ability to transfer rail knowledge and help governments to develop local rail industries is another strength. An Alstom joint venture company in South Africa developed a new manufacturing operation there to supply 600 trains, sourced from 65 per cent local content. Similar investments have been undertaken in India and Brazil.

Alstom’s deep experience in large public-private partnerships (PPPs) also benefits customers, says Coxon.

To learn more about Alstom Australia, visit www.alstom.com.au/australia.

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COMPANY FOCUS

TOP GUNS ON TRACK IN RAIL Nova Systems, a cutting-edge Australia-based technical consultancy company founded in the aviation, space and defence sectors, is now building an impressive track record in rail.

All industries are unique, but each share a common desire to embrace new approaches that will make us more competitive and successful. Existing technologies that have been proven in other sectors can really deliver improvements. Nova Systems has built its 16-year engineering brand around integrating and tailoring these technologies into existing businesses and operations.

By drawing upon its extensive experience of autonomous systems, big data analytics, communications, test and evaluation, complex systems integration, and systems and safety assurance, Nova Systems is ideally placed to provide innovative solutions for the challenges facing the rail sector as it advances towards fully connected, intelligent transportation systems (C-ITS) that interface with increasingly complex and autonomous rail vehicles.

With constantly growing populations, the global rail market is under increasing pressure to reduce congestion and cost of rail, while also improving the safety and efficiency of the transportation of passengers and cargo.

Simultaneously, governments, rail manufacturers, operators and maintainers are constantly searching for innovative ways to reduce costs or simply use the data that they already have to make real improvements.

Formed in 2000, Nova Systems has become the country’s largest independent provider of systems engineering and test consultancy services to the Australian defence and aerospace industries. Today, Nova Systems’ innovative skills and expertise are being used by the rail sector as it advances in the complex world of interconnectivity and intelligent automation.

The need to reduce costs and improve safety, ease of use and efficiency of transportation systems also drives the demand for improved automation, communication and interoperability between

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‘With constantly growing populations, the global rail market is under increasing pressure to reduce congestion and cost of rail, while also improving the safety and efficiency of the transportation of passengers and cargo’ vehicles and infrastructure, which, in turn, leads to the introduction of innovative and disruptive technologies into already complex operating environments.

Through whole-of-systems thinking, independent technical integration and systemised innovation, Nova Systems is leading the design, engineering and delivery of complex, safety-critical systems that are vital to future rail networks and next-generation rail transportation.

The challenges facing businesses in the rail industry today are similar to those in the oil, gas and aviation sectors. It is possible and necessary to learn from one another and tailor our approaches to each industry.

The big advantages of collaboration are significant, but it takes courage to take the initial steps into unfamiliar areas. Nova Systems has the experience and strong partnering relationships to successfully deliver on the potential of new technological advantages and collaborative approaches.

‘Today, Nova Systems’ innovative skills and expertise are being used by the rail sector as it advances in the complex world of interconnectivity and intelligent automation’

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THANKS TO OUR SYSTEMS ENGINEERING EXPERTISE IN DEFENCE WE’RE BUILDING AN IMPRESSIVE NEW TRACK RECORD Formed in 2000, Nova Systems has become the country’s largest independent provider of specialist engineering and test consultancy services to the Australian aerospace industry. Today, our world-class skills and expertise are being utilised by the rail sector. Through systems thinking and inNovation, we are leading the design, engineering and delivery of complex, safety-critical systems vital to future rail networks.

If you need a partner that delivers solutions to your complex problems – put us to the test.

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Major projects – panel discussion

L–R: Peter Regan, Dan Marshall, Emma Thomas, Kevin Devlin and Robert Montgomery

Major projects Robert Montgomery, Chief Economist and Head of Policy, Infrastructure Partnerships Australia Panellists: • Kevin Devlin, Chief Executive Officer, Level Crossing Removal Authority • Dan Marshall, Head of PPP Programme, New Zealand Treasury • Peter Regan, Deputy Secretary, Finance and Investment, Transport for NSW • Emma Thomas, Director-General, Transport Canberra and City Services

• Looking beyond benefit-cost ratios, project effectiveness and impact could be evaluated with a holistic view of the networks they operate within.

• The availability of public information is changing the face of community engagement, and social media amplifies the views of vocal minorities.

• Resourcing major projects in an active trans-Tasman market is challenging, but also provides opportunities for interjurisdictional learning.

Robert Montgomery (RM): Can you each give us an overview of the projects that you’re working on, and where they are up to?

Kevin Devlin (KD): The Level Crossing Removal Project is removing 50 level crossings. We are aiming to remove the first level crossings by 2018, and the full 50 by 2022. We have made a pretty good start; we’ve got four complete, 15 under construction, six in active procurement and 25 in design development.

We feel we’re on track thanks to the industry partners’ ability to deliver on that. At the moment, we’re also procuring the Mernda rail extension and the Hurstbridge rail extension, and constructing the Pakenham–Cranbourne line upgrade project. In total, we have in excess of $7 billion worth of projects under management, so it’s exciting to be part of that.

RM: Certainly a big task. How about you, Emma?

Emma Thomas (ET): The Canberra Light Rail project Stage One is a 12-kilometre light rail project north of Canberra, and through the city.

Interestingly enough, Infrastructure Australia’s most recent audit of infrastructure around the country found this was the corridor that was the most congested in the Australian Capital Territory. We signed the Public Private Partnership (PPP) contract in May 2016 during financial close – Pacific Partnerships with John Holland, and a number of other partners involved in the venture – we’re

looking forward to having light rail operational by mid 2018, and construction has commenced.

RM: From your perspective, Dan, can you update us on some of the bigger projects that are happening in New Zealand, or that you’ve worked on?

Daniel Marshall (DM): Sure. Keeping with the transport theme, our pivotal highway project that we announced early last month is in the negotiation stage, and anticipating financial close in November 2016. There are some school projects happening, and we’re also looking at a major prison project.

RM: Finally, Peter, if you’d like to give us an update on the Sydney Metro Project?

Peter Regan (PR): Sydney Metro is being delivered in two parts: the Metro Northwest is well under construction at the moment, and the tunnel was completed, with a PPP running all the systems. That’s all under construction, and due to open in 2019.

We’re proceeding well. Certainly, if you go out to the north-west of Sydney, it is an enormous undertaking up there that is well underway. That’s the first part of the Metro.

The second phase is the City and Southwest, and many of you will be aware that that goes from Chatswood in the north under the harbour, through the city with three new stations via Central Station, and then connects to the tunnel with one of the existing suburban rail lines. It is in relatively early stages of

Chair:

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procurement, being procured over a series of contract packages. The shortlist for targeted contractors for main contracts was recently announced, and there’s a series of stations and systems packages to come.

Over the next 12 to 18 months, there will be a progressive release of those processes. One of the next phases is looking at Central Station itself, and the broader opportunities around the station for developing another precinct.

RM: Thanks for that, Peter. One of the things that we’re trying to get our heads around in the policy world at Infrastructure Partnerships Australia (IPA) is how we can talk about the delivery of major projects in a way that emphasises the service reforms and overall system improvements that can be delivered by major projects – particularly through focusing on outcomes that are achieved, rather than inputs as a measure of success, as how we measure whether a project is successful or not.

I might start with you, Dan, on this one because New Zealand does some quite cutting-edge stuff in terms of outcomes-based procurement.

DM: I’ve enjoyed the discussion today, and the way that politicians on both sides can talk about utilising finance and approaching procurement on a ‘best for project’ basis. This isn’t necessarily the case in all jurisdictions. The challenge that this brings is that it puts the focus on the political side of the procurement method, rather than on the merits of the project itself.

The Auckland South Corrections Facility (Wiri Prison) Project is still very much our flagship in terms of an outcomes focus. It’s very much about the planning phase, and driving a different way for the agency to be thinking about the project and then promoting that.

Trying to reduce the political nature of the discussion around the project, or the way that it’s being procured, and trying to reshape that is another challenge, and it’s a challenge that we still face very much; but I think being able to bring it away from the project in dollars, and how it’s going to impact the lives of the people it affects, is what we need to discuss.

RM: Kevin, I might throw to you on this one, as well. Obviously, the Level Crossing Removal Project is largely about system-wide improvements and system-wide outcomes.

KD: We’ve certainly tried to look at the 50 as one project. While there are still very much 50 individual sites, we look at it as a system. I

think that what’s getting harder in infrastructure – projects move beyond building a new bit of road in a paddock to overlaying and retrofitting within greenfield environments, and within the operating road and rail networks.

How you measure the benefit of a single project separated from everything else that’s going on is very difficult, and to really come back and assess how your project has contributed to outcomes with everything else that happens, and when all the other supporting projects have been mentioned. They’re all integrated – they’re a portfolio now, and they’re a system. I think we do need new ways of assessing the benefits of single projects. I think that our old benefitcost ratio counting methodologies are archaic in that sense, in terms of being able to adapt to a system’s approach with a network and portfolio assessment. I don’t know exactly what it looks like, but it’s certainly something that I think we need to move beyond in the single project focus.

RM: It’s certainly not clear yet anywhere you look. Emma, do you have anything you’d like to add on that?

ET: I agree completely with Kevin. We look at delivering a project; that project alone won’t deliver all of the benefits that we encounter, so the overall cost-benefit analysis is updated. We have to recognise that with completely delivering a project, there’s a whole bunch of other conditions, such as land use and how we allow land use to happen; how pricing of parking, public transport and ticketing feeds into the complex system that delivers the benefits; and if people lose sight of all the other things that need to happen and get distracted, and go on to something else, then you won’t actually deliver those outcomes for the project.

RM: Peter, there are a lot of projects throughout Australia that are facing some degree of opposition, whether that be from the media or the community.

Do you think it’s gotten generally more complex than it used to be to deliver big projects?

PR: I think that there are different media channels, social media in particular, that perhaps might give a broader voice to what people might describe as vocal minorities. But does it actually make it any more complex to deliver a project? I think it means that there needs to be a lot of focus up front on community and stakeholder issues through the delivery of the project. In my understanding, they’ve always been complex issues, and while the forums Volume 7 Number 1

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might change, it’s always been something that needs to be managed, whether it be environmental issues or issues of disruption to the community. These are issues that are one of the complexities and difficulties of building infrastructure that do have to be managed.

On the one hand, you do hear about some projects in the media, but there are other projects in the Sydney context that are very significant infrastructure projects underway, which you hear very little about.

Notwithstanding the fact that they have a very similar level of disruption as some of the bigger projects, I think that there is certainly a group of people who do have themselves quite organised and get themselves heard. As a government, we need to be ensuring that we are engaging, we are consulting up front, that we are listening, and that we are dealing with people with respect.

RM: That’s a good summary of the state of play. Dan, are you seeing a similar sort of community opposition to projects that hold political risk or sovereign risk, and those types of issues in New Zealand?

DM: In terms of the project context, it really is about taking communities with you. I think we’ve still got a lot to learn in terms of getting communities on board so that they are advocating for those projects. Most of these large projects that we’re contemplating have a clear purpose because they make a difference for communities. That’s what underlies the project. If we can’t extract that support from the community, then I think we’re not doing our job right.

I would use the City Rail Link project in Auckland as a good example of where local council got the community behind it. There were some arguably very unscientific and crude measures used where people were getting off trains and walking through certain gates to indicate whether they wanted a new train system or the old one that didn’t work very well. It’s all about building a profile, and ultimately [doing this futurebuilding

as a] central government. We were almost painted into a corner where we had to support the project during those funding conversations, and all will happen on account of the public support. So, my view is that where you can mobilise the community, that’s the key.

RM: Emma, your project has attracted significant media and political attention in recent months. Does this make your job any harder?

ET: I think that our projects are more complex.

We heard a lot about narrative telling, and I think we are constantly looking for better ways to engage with people. Gone are the days when you could just show up to a town hall with your map of the project and have a few casual questions. That approach engages such a small amount of people. What I loved about the Transurban presentation today was that people need to engage, touch and feel, and really live in something to understand it fully, as much as we do, and I think that it just sets the bar a bit higher for us to try to find better ways to engage with people.

RM: Kevin, on your project, level crossing removal plans have been altered more than once over the course of the project. How do you manage community expectations around those changes and the project more broadly?

KD: I think that it’s getting more difficult. Maybe I’m just scarred from coming from the East West Link to the Sky Rail to the Frankston Line – but it’s getting very difficult. We talk about getting the community on board with the benefits; these big projects by their nature have broad benefits. I think that in the last decade, there has been a growing self-interest that permeates, more so than it once did. It’s getting harder. Unless I’m seeing a playground being built around the corner [from] where I live, the benefits are not as tangible, and as the new era of digital communication and information rises, people have access to so much more information, and they

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demand more information. But giving it to them in a way that they can then understand through multiple channels is hard.

In the world we’re living in at the moment, there is a list of demands that the community wants addressed – congestion, removal of a level crossing, safer roads, a station rebuild, a new car park – and the project doesn’t affect their streets or way of life in any way. The list goes on, and I’m not saying they’re impossible challenges, but the nut of all that is what we’re trying to do, which is share our difficulty, share and change the equation for the community to try and now understand the trade-offs. There’s never been a project that I’ve been involved in that’s been a perfect solution that meets all those needs.

I think the community has to start having a conversation about self-interest versus the public good. I know it’s a very difficult thing to go and say to someone, while having to acquire their property, that we’re doing that because of the greater good. But we have that broader conversation to say that there are trade-offs, and that there are no perfect solutions to building infrastructure. We’re trying to give more information and use other influence groups because the public service now is seen as just as cynically as the political world, so we’re not a trusted voice. The next problem is, how do you find trusted voices?

RM: I guess one of the other big challenges we have, particularly in New South Wales, the Australian Capital Territory, Victoria and on the whole east coast – and I’m sure this is the case in New Zealand, as well – is that there are a lot of projects going on at once. I was wondering if you see any constraints in the market with similar projects on similar timelines, and how that will affect the project.

ET: It actually works for and against us. It is a challenging time and everyone’s desperate for resources, but at the same time we’re growing people at a rate that we’ve never grown them before. We’re getting a much better experience based across the whole of Australia. I know from a light rail perspective that the light rail projects, by no fault of anyone, had actually lined up pretty well in their phasing across the country. All the project directors, including the project directors from Auckland, have actually talked to each other quite often and shared their learning.

So, as we deliver each light rail project, we’re sharing our values across the board, and we’re also sharing our advisers and where we’ve had difficulties, so I think that we’re actually in a better state because of

having so much infrastructure being delivered than the alternative.

RM: Have any of you had difficulty finding people or paying higher prices... things like that, as a result of the huge number of projects?

DM: Broadly, the clash – particularly with the east coast of Australia – is a big one. Whenever we’re looking at a project with an agency, as much as we can, we’re trying to shape their expectation around when we think it can be delivered. A good example is that we thought we found a sweet spot to bring a prison to market. Unfortunately, New South Wales – as easy as projects may be to bring to market there – has a prison pipeline that goes forever. It’s not just a case of tacking on the back of Grafton, but it is certainly something that we see. For us, there’s a unique situation of trying to attract contractors to the New Zealand market. Trying to find these spots is huge, and it applies to resources, it applies to people, it applies across the board.

RM: Peter, any comments on that?

PR: If you look back five or six years, in a similar forum to Partnerships, the discussion would’ve been about the need for a pipeline. The need for some certainty with what was going on in projects so that people could prepare. In a way, we have moved to a very different world in a number of jurisdictions, where there is a lot going on. There’s a lot of tunnelling and there’s a lot of rail, and that does place stress on parts of the industry. It also encourages additional resources to come into the industry and encourages new entrants.

So, I think we have to be sort of conscious, and all the governments are conscious that there are a lot of things going on. I don’t think we’ll ever get to the point where governments are deliberately Volume 7 Number 1

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agreeing to delay projects. That is not how it works between jurisdictions.

The real difficulty is getting the quality into the public sector to manage those projects. Especially as things go really hot, the kind of people you might be able to get are more likely to be offered a lot more money in the private sector.

RM: Kevin, with a lot of projects happening simultaneously in Victoria, how do you coordinate with the other major projects that are happening, and does it impact your timelines at all?

KD: It does. I think Chris Eccles touched on it in his talk about the efforts; we’re going to try to coordinate projects. We’ve had a free run of it, for the moment, and have gone out there and got some projects done, but with everything coming on board, there will be a squeeze. We’re doing lots of things with the rail operator, with PTV and transport for Victoria, through the Coordinator-General’s office to coordinate all of the projects, and there will have to be some decisions made about prioritisation.

With that opportunity, we’re trying to do some things under the same occupations, and demand will be coming up in the next couple of weeks. We are doing $48 million work on the Bendigo lines, while taking out other lines, so it’s [about] trying to work together to minimise those disruptions for the community and maximising outcomes.

RM: Excellent. I think this leads nicely into the next question, which is really about the fact that with such a hot market on the east coast of Australia, and also in New Zealand, industry has certainly seen the entry of a number of international players. I was wondering, Peter, if you’d like to start here. What are some of the opportunities and challenges that you’re seeing with these new players, and the skills that are coming from overseas that are also very new to the market?

PR: One of the key things is that, notwithstanding the efforts of most of the procuring bodies in treasuries across different jurisdictions to simplify processes around bidding, the anecdotal evidence that I hear is that some new entrants really just don’t know what level of detail is required, or how to go about the Expression of Interest phase, or how to approach some of the frontend of the deal phase. Certainly, a greater degree of dialogue helps for new entrants to be partnering with people who have already been here, or use consultants who’ve already been here.

In no way am I saying [that in order] to participate in the market, you need to keep it local.

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I think there’s other ways to get that knowledge around how the process works, and through your advisers and the like. Clearly, for new entrants that come into the market and set up shop, and who really take their time to understand the perceptions, join IPA and come along to functions where it might be useful to get that sense of how the marketplace works.

There isn’t the depth of the Australian market to do everything, and there will always be different players, and I think that’s pretty well facilitated.

RM: And Daniel, what’s your experience like in New Zealand?

DM: We’ve been very fortunate that most of the international contractors look at opportunities in Australia, and consider New Zealand. It has been really beneficial with us, both for contractors and with equity providers. We’ve seen a lot of equity providers servicing New Zealand out of Sydney. We certainly encourage that, and it has been very beneficial for us. I guess that for us it’s about shopfront and how we get those opportunities in front of those people. The ability for people to come to Australasia and see that overall picture is really valuable for us. Obviously, there are a lot of people in Australia who sell our market to them, such as the likes of IPA. That’s a big thing, but for us we need the internationals to be creating that competition.

RM: Excellent. How has that impacted your project, Emma?

ET: We’ve only seen a benefit from having a good international playing field for our project. I think it is important to allow the diversity of thought and interaction. I think the feedback we’re certainly getting is that Australia is still quite a complex PPP bidding market, and our processes are complex. I think we need to continue to work on these; if you look at the value that’s created in other countries, it’s still quite expensive in Australia to deliver these projects. Maybe we could be doing something differently there.

RM: And Kevin, what sort of experiences have you had on your project? What feedback have you been receiving from the international players who are entering the market?

KD: I suppose we’ve been somewhat struggling to get the international players to come and play with level crossings and the operating rail network.

The operating rail network creates some additional complexity that, if you’re not familiar with it – particularly in Victoria – presents a lot of risk.

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We haven’t maintained a broad field; what we are doing is targeting some of the smaller international companies to bid on some smaller jobs to, if you like, cut their teeth on, and learn when there’s less at stake. We’re getting some success there; we’ve been focusing on that, but the broader area where the internationals are struggling in – particularly some of the sophistication in the solutions and the design responses, where that the Australian market is very effective, whether it be the banks or the big design houses crowding out the internationals – is in accessing some of that local knowledge, particularly on the design side.

RM: Thanks Kevin. I’d like to run through all the panel members one last time and get any final thoughts on your outlook, not only for your own project, but for major projects in general, starting with you Kevin, if you’re willing?

KD: We think we’ve got a huge amount to be excited about. We’ve adopted a mantra within the organisation of delivering great change in everything we do. We think that we have to show the community, because again, there hasn’t been a project – whether you look at Southern Cross Station or Federation Square – that once the project is built and functioning, and people are experiencing the tangible benefits, the controversy is long forgotten. With elevated rail, we’re really looking forward to making sure that it’s a really successful outcome so that it can pave the way for the community to be able to understand that we need new and modern solutions in transit-oriented developments, and stations that development of change is not a bad thing. We’re truly trying to manage that, and to stop the temptation for them to move to outrage about new projects so quickly. We want to get some runs on the board, and hopefully that will take precedence. Something tangible is the best way to show people that there are those benefits.

RM: Emma, I’m sure you can echo those statements, and are looking forward to the time when the controversies are over?

ET: I think we’re just in the most exciting time for infrastructure. Everyone’s talking about it and everybody knows we need it, it’s just that everyone’s debating too much about which infrastructure we need. I think there’s such a long planning tail or planning lead in to actually building and getting on to the stage where everyone’s happy with it.

We’ve got to get past that stage really quickly, so if we can work with Infrastructure Australia and the

various infrastructure bodies to make the decisions, and build, then we’ll be in a much better place.

RM: And how about New Zealand?

DM: We’d love to see bipartisan support. That’s a big one. I think one of the things that struck me was the comment Terry made this morning; it was a challenge to the people in the room not to be looking at these projects from a self-interest perspective, and sell the benefits of the projects. I think that is certainly something that has really resonated for me. Obviously, Kevin’s challenge is that we can get communities to do the same. I think collectively, that’s where we can move the conversation when we start to take that political piece out of it, and that’s positive.

RM: And Peter, you have numerous projects underway with Transport for NSW at the moment.

PR: We do have pretty cool things coming down the pipeline and under construction. We had a number of further rail, light rail, motorway and other road projects to be procured over the next couple of years. That will involve potential pilot financing.

We’re very interested in moving ourselves into a slightly different space around the transport-oriented developments, and the related property aspects that are around infrastructure. We are looking to continue in a horses-for-courses approach, and use the right kind of models for the right kind of projects. I think that’s where the industry can really help us, and try and do the thinking. We certainly benefit from discussions like this one.

I think that we do need to collectively work with government, the private sector and different jurisdictions to solve some of these longer-term problems and not jump to answers, but rather come up with a range of solutions that people can debate.

That’s going to be very important.

For us in New South Wales, it is a balancing act between ensuring that the delivery gets done, and continuously thinking for the future. I think we’ve learnt a lot more about having to manage the disruption while you’re doing a lot of things at once, and you find that true in Canberra. Even with the light rail, once it’s up and running, people forget about the disruption, whether it be trees, whether it be property or something more controversial.

RM: Thanks for taking part in the Major Projects Panel at Partnerships this year. Thank you, Peter, Daniel, Emma and Kevin. I’m sure we’ll all be very interested to see the outcomes of all of the various projects you’re working on.

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Robert Montgomery, Chief Economist and Head of Policy, Infrastructure Partnerships Australia Robert Montgomery leads a team of economists and infrastructure policy experts, working across the transport, energy, water and social infrastructure sectors.

IPA’s policy team produces numerous policy reports each year, and provides IPA’s members with regular research notes on the state of the Australian infrastructure market. Mr Montgomery has extensive experience in the utilities sector, having previously been an economist for the Northern Territory Power and Water Corporation.

Prior to joining IPA, Mr Montgomery worked in strategy consulting, where he completed projects across the construction, finance, media and technology sectors.

Mr Montgomery holds a Master of Economics and Bachelor of International Studies from The University of Sydney.

Kevin Devlin (BE (Hons), BCom, PDM, Chief Executive Officer, Level Crossing Removal Authority Kevin Devlin is responsible for overseeing the planning and delivery of Victoria’s Level Crossing Removal Project, the Mernda Rail Extension and the Hurstbridge Rail upgrade.

Mr Devlin has extensive experience in delivering engineering projects in both the public and private sectors, working on a broad range of contractual models and across the full life cycle of projects.

Prior to his current role, Mr Devlin held a number of senior positions, including Executive Project Director for the East West Link, and Project Director for the Middleborough Road Rail Grade Separation and the Westgate Bridge Strengthening projects, which received Victoria Engineering Excellence Awards in 2007 and 2011 respectively. The Westgate Bridge Strengthening project was also awarded the profession’s highest accolade, the Engineers Australia 2011 Australian Engineering Excellence Award.

Dan Marshall, Head of PPP Programme, The New Zealand Treasury Dan Marshall leads the New Zealand Treasury’s Public Private Partnership (PPP) team, which is responsibile for the implementation of PPP procurement in New Zealand – both at a practical and a policy level.

The PPP team’s role includes advising agencies on specific PPP transactions through both the development of a business case and the procurement process, as well as the ongoing progression of the PPP market in New Zealand.

Mr Marshall has played a key role in the development of the New Zealand PPP programme over the last five years, cementing its reputation internationally as an innovative and dynamic programme bringing wellformulated opportunities to market.

Prior to joining the New Zealand Treasury, Mr Marshall spent a number of years in advisory roles with PwC.

Peter Regan, Chief Financial Officer and Deputy Secretary, Finance and Investment, Transport for NSW Peter Regan is responsible for ensuring strong financial management across the cluster of New South Wales Government agencies involved in the provision of road and public transport assets and services, as well as identifying and acting on commercial and financing opportunities to support the significant investment in transport infrastructure currently underway in New South Wales.

Mr Regan has more than 20 years of experience in infrastructure and project financing in both Australia and the United Kingdom, with a particular focus on the transport industry. He has a strong track record of delivering innovative outcomes through efficient use of public and private sector capital and expertise, and in the effective delivery of strategic priorities.

Prior to joining Transport for NSW, Mr Regan has performed senior roles at NSW Treasury, Sydney Motorway Corporation, Transport for London and Deutsche Bank.

Emma Thomas, Director-General, Transport Canberra and City Services Emma Thomas brings extensive experience in both the commercial and public sectors, including on major infrastructure projects that span most forms of transport, including planes, trains and automobiles.

Prior to leading TCCS, Ms Thomas was the Director-General of the Capital Metro Agency, delivering Canberra’s first stage of light rail. Prior to this, she was the State Rail Commissioner for South Australia and Deputy Chief Executive of Public Transport.

Previous experience also includes senior executive roles at the Department of Transport and Main Roads Queensland, and Boeing. She commenced her career as an aeronautical engineer in the Royal Australian Air Force.

Ms Thomas is passionate about creating a simple and responsive customer experience, and is excited, with the formation of TCCS, to proudly deliver services to the people of Canberra.

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