Future Building 2019

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futurebuilding The Australian Infrastructure Review

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futurebuilding The Australian Infrastructure Review


Contents 2 Chairman’s foreword | Sir Rod Eddington AO, Chairman, Infrastructure Partnerships Australia


Treasurers in conversation

20 Respected leaders | panel discussion 32 Keynote interview | Romilly Madew AO, Chief Executive Officer, Infrastructure Australia


Infrastructure end users | panel discussion

64 Infrastructure insights | Adrian Hart, Associate Director, BIS Oxford Economics

72 Fireside chat | Ticky Fullerton and Sir Rod Eddington AO

80 The future of social infrastructure | panel discussion

90 Keynote address | The future of electricity in Australia | Matthew Warren, Author, Blackout

52 Cybersecurity | panel discussion

Managing Editor: Brendan Pearce Future Building is published by: Executive Media Pty Ltd ABN 30 007 224 204 430 William Street

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Chairman’s foreword It is my pleasure to present the 2019 edition of Future Building. This publication provides a journal of proceedings from Australia’s most prestigious gathering of infrastructure leaders – Partnerships. Infrastructure Partnerships Australia’s program this year covered the future of infrastructure and how, as a sector, we must prepare for the challenges and opportunities that lie ahead.

I thoroughly enjoyed my conversation with broadcaster and journalist Ticky Fullerton on the evolving business environment and how the current political upheaval abroad is shaping investment decisions. I was also pleased that author Matthew Warren could join us to provide a keynote address on his book Blackout. Matthew provided a compelling account of the changing energy

State Treasurers’ Dominic Perrottet and Tim Pallas discussed their experiences at the forefront of reform and whether state-led reform is the prime avenue for future progress.

landscape and the policy missteps that have undermined

The Respected Leaders’ panel comprising the Productivity Commission’s Michael Brennan, the Hon. Mark Birrell, and Bechtel’s Ailie MacAdam considered the need for long-term planning and the importance of maintaining a visible pipeline of evidence-based projects.

is critical if we are to confront the challenges and opportunities

Australia’s energy security. Providing an open forum for these honest policy discussions before us. I hope that the proceedings of Partnerships 2019 offer new insights for policymakers and regulators to better navigate an uncertain future.

Chief Executive Officer of Infrastructure Australia Romilly Madew AO shared her perspective about the direction of the independent advisory body and the scale of infrastructure investment underway across the nation. The program also included panel sessions on the evolution of end-user engagement in infrastructure, the increasingly influential role of behavioural science in decision-making, how we safeguard critical assets from cybersecurity threats, and the future of social infrastructure.


Sir Rod Eddington AO Chairman Infrastructure Partnerships Australia


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Past performance is no indicator of future performance. This information has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person or entity. IFM Investors Pty Ltd recommends that before making any investment decision, each prospective investor should consider whether any investments are appropriate in light of their particular circumstances and refer to the appropriate information memorandum for further information. IFM Investors Pty Ltd ABN 67 107 247 727, AFS Licence No. 284404, CRD No. 162754, SEC File No. 801-78649.

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Sustainable finance By John Hirjee, Executive Director, ANZ

This year is set to be another record year for sustainable debt, as investors continue to focus on incorporating environmental, social and governance (ESG) into their investment processes, and as broader global sustainable finance developments encourage further market growth.

Green bonds continue to dominate sustainable debt issuance. Global year-to-date (YTD) issuance of green bonds now totals ~US$120.6 billion (as at 30 June). Sustainability-linked loans (SLLs) are the fastest-growing sustainable finance product. By the end of September, YTD issuance (~US$34 billion) has already almost surpassed total 2018 issuance (~US$37 billion). Transition bonds could be the next major market development. AXA Investment Managers published suggested guidelines for transition bonds, particularly for carbon-intensive companies that want to become greener. Sustainability bonds are expected to feature more prominently, as investors and issuers increasingly use the United Nations Sustainable Development Goals (UN SDGs) as a basis for reporting impact. Both issuers and investors are adopting policies and strategies linked to the UN SDGs, and this trend is expected to continue. Social bonds continue to feature in the market, though to a lesser extent. In

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March of this year, the National Housing Finance and Investment Corporation (NHFIC) issued its first A$315-million social bond for social and affordable housing. The transaction was heavily oversubscribed, with the final order book reaching more than A$1.3 billion. Regulators across the globe continue to reinforce the need to disclose climate change risks, including the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Comission (ASIC), and the Reserve Bank of Australia (RBA). The Task Force on Climate-related Financial Disclosures (TCFD) Recommendations have gained significant momentum and attention, and continue to be referenced as the preferred reporting framework for climate change risks. Various jurisdictions focus on the development of the sustainable finance market through government and/ or industry-led initiatives. The Australian Sustainable Finance Initiative (ASFI) has established working groups, which will guide the development of the Australian Sustainable Finance

Roadmap. ANZ is proudly part of the ASFI Steering Committee and is cochairing the Technical Working Group on Mobilising Capital. Results from a poll conducted by ANZ and FinanceAsia in June 2019 show that environmental, social and corporate governance (ESG) investing is becoming more mainstream, and that the sustainable finance market is accelerating in the Asia-Pacific region. Of the investors surveyed: ► 74 per cent either already have ESG/socially responsible investing (SRI) investment policy or are expecting to develop one in the short term ► 48 per cent say that an ESG format bond offering would favourably change their view of a company, and 15 per cent say they would pay for it.

The emergence of sustainabilitylinked loans Under an SLL structure, a company’s cost of capital is explicitly tied to its third party–verified sustainability

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USD bn Totalsustainable sustainabledebt debton onissue issue Total USD bn performance – i.e. the margin on a loan is directly linked to the borrower’s 300 1000 performance against pre-agreed 900 250 sustainability target(s). Proceeds can 800 be used for general corporate purposes 700 200 (i.e. not tied to a specific green or social 600 asset), so the SLL may be suitable for 500 150 companies that would not traditionally 400 have access to the green bond/loan 100 300 market due to lack of ownership of green 200 assets. SLLs are relevant for companies 50 100 with a determination to improve their 0 0 sustainability performance and align their 2012 2013 2014 2015 2016 2017 2018 2019 cost of capital with that performance. Green Social Sustainability SustainabilityGreen Loan SustainabilityTotal Issuance Bond Bond Bond Linked Bond Linked Loan (RHS) It is important that the parties agree on sustainability target/s that Source: BloombergNEF as at 30 September 2019 are ambitious in order to incentivise material improvement in sustainability facility provided to Adelaide Airport by New Zealand dollars (NZD), US dollars performance. Pre-agreed targets must ANZ in December 2018, and the first (USD), Chinese renminbi yuan (CNH) be meaningful and carefully aligned syndicated SLL to launch in Australia and euros (EUR) for a broad range of with the borrower’s sustainability was by Sydney Airport in May 2019, corporate and frequent issuers. ANZ strategy. Where companies have where ANZ and BNP Paribas were the also has strong experience as an very broad sustainability ambitions, sustainability coordinators. issuer of both green and sustainability a material improvement in their ESG ANZ has committed to fund and bonds. In FY2019 to date, ANZ has rating, provided by an independent facilitate at least A$15 billion in lowsuccessfully arranged ~A$3.8 billion third-party rating agency, may be an carbon and sustainable solutions by (equivalent) of green, social and appropriate target. October 2020, with A$14.5 billion sustainability bonds. The Asia Pacific Loan Market already committed as at 31 March At the same time, the loan market Association has recently released the 2019. ANZ has played a key role has gained momentum, and ANZ has SLL Principles as guidance for lenders in developing the green, social and arranged ~A$3.3 billion (equivalent) and borrowers. These principles underpin sustainability bond and loan markets of green loans and SLLs. Highlights market integrity and consistency. across Australia, New Zealand include four Australian firsts: The majority of SLL transactions and Asia. ► Investa’s bilateral green loan completed to date have been in Europe, ANZ has arranged more than ($170 million) with a handful completed more recently ~A$16 billion (equivalent) of green, ► Frasers Property syndicated in Asia and the United States. social and sustainability bonds and green loan (A$600 million) SLLs are new to the Australian loans across Australia, New Zealand ► Adelaide Airport’s bilateral SLL market. The first SLL was a bilateral Asia in Australian dollars (AUD), (A$50 million) 2019 MONTHLYand ISSUANCE ► Sydney Airport’s syndicated SLL (A$1.4 billion). USD bn USD bn 2019 Monthly issuance 2019 Monthly issuance In 2018, ANZ was awarded Finance 200 45 Asia’s Best Sustainable Finance House 180 40 at the Australian Achievement Awards 160 2018, reflecting its position as a clear 35 140 leader in the sustainable finance sector 30 120 in Australia. It is a Green Bond Principles 25 member and a Climate Bonds Initiative 100 20 partner. ANZ also participates in the Asia 80 15 Pacific Loan Market Association’s Green 60 and Sustainable Loans Committee. ♦ 10 40 Green Bon d

Social Bond

Su stai nabil ity Bond

Su stai nabil ity-Linked B ond

Green Loan

Su stai nabil ity-Linked Loan

Total Issuance (R HS)

Source: BloombergNEF as at 30 September 2019


20 0

0 Jan

2018 (LHS)


2019 (LHS)

201 8 ( LHS )



2018 Annual Cumulative Issuance (RHS) 201 9 ( LHS )

Source: BloombergNEF as at 30 June 2019

201 8 A nnual Cumul ative Issuance (RHS )



2019 Annual Cumulative Issuance (RHS) 201 9 A nnual Cumul ative Issuance (RHS )

For further details, please contact John Hirjee, ANZ Executive Director – Resources, Energy and Infrastructure. Email John.Hirjee@anz.com or call 0466 716 298.

Source: BloombergNEF as at 30 June 2019

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Treasurers in conversation – panel discussion

L–R: Adrian Dwyer, Dominic Perrottet and Tim Pallas

Treasurers in conversation Key points: • • •

The states require more autonomy in infrastructure funding. Reformist states should be rewarded for their efforts. Further targeted reforms and continued investment in infrastructure are required.

Panellists: ► The Hon Dominic Perrottet MP, Treasurer of New South Wales ► The Hon Tim Pallas MP, Treasurer of Victoria

Moderator: ► Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia


Adrian Dwyer (AD): New South Wales and Victoria have been the key drivers of 28 years of uninterrupted economic growth – the longest run in the developed world. From each of your perspectives, what’s underpinning that success, and how optimistic are you that we can continue that to three decades and beyond? Tim Pallas (TP): One of the things that’s underpinned the economic growth of the nation has been the sort of reforms cemented in the 1980s and 1990s, and we’ve been the proud beneficiaries of those. Whether it’s floating the dollar, regulating our banking networks, or the movement towards enterprise bargaining. Increasingly, the challenge for us is where we go next in terms of reform, because we will get ever-diminishing returns and productivity out of past generations of political intervention. We must recognise that with growing populations in New South Wales and Victoria, particularly in our capital cities, we’re going to have to make further and better provision for


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infrastructure. And that becomes quite testing, because industry is under considerable stress given the level of work that we’re attempting to dish out.

we’re complementing each other’s efforts, and that we find a way to work positively with the Commonwealth.

And on top of that, we need to think of better and more efficient ways of delivering services. In practical terms, we need to accept that people’s expectations from politicians can be assuaged by simply saying, ‘Well, you know, times are tough’. We’ve got limited budgets. But we need to find better ways to deliver services and infrastructure in a timely way.

Dom Perrottet (DP): I’m more optimistic than Tim, and obviously I have cause to be, being in New South Wales. There’s no doubt that there are challenges globally and nationally with the softening economy. A lot of those factors are outside of our control.

AD: And your optimism for getting to three decades and beyond of uninterrupted growth? TP: I am a professional pessimist. I see that as part of being a Treasurer. I am quite concerned about the emerging international headwinds and problems associated with world trade.

AD: Dom, let’s come to you for full-bore optimism.

From a state’s perspective, what can we do? One of the biggest areas that we can drive is investment in infrastructure – that’s what New South Wales and Victoria have both been doing. When we took the leasing of the poles and wires to the 2015 election, there were views that this wouldn’t drive economic growth, but unlocking that capital has.

I often say that Australia’s an island, but we’re not an economic island – we are going to be affected by this. Any efforts that can be made to encourage all the principal participants to work together would do a great service to the world economy and here in Australia.

Governments can be responsive. It’s got to be ahead of the curve. And when you now see a softening in national economy and state economies, it’s infrastructure investment that’s holding us up. We’re building more than $90 billion of infrastructure over the next four years, which is adding about 0.5 per cent to New South Wales’s economic growth.

Despite that, both New South Wales and Victoria are in a very strong position, largely because of the effort that we put into making what now appears to be countercyclical investment. The key for us is to see if we can ensure that

If we hadn’t gone down the path of asset recycling, which has been a substantial focus of the New South Wales and Victorian governments, we would not have been able to unlock that capital to invest in productive infrastructure.

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Treasurers in conversation – panel discussion

L–R: Adrian Dwyer, Dominic Perrottet and Tim Pallas

It’s the major projects in the cities that are really holding up our economy. There’s no doubt that there are challenges coming our way, but the number one thing we can be focused on that’s really helping our economies is infrastructure investment. I’m very confident about where we sit in New South Wales. What is key is maintaining that asset-recycling philosophy and borrowing to build – that is going to ensure that our economy continues to grow into the future. AD: Tim, you mentioned what the states can do and what the Commonwealth can do. You’ve both been reasonably vocal about the failures of the current federal financial relations system. What’s broken, and how can it be fixed?

for money for its investment, nor do I have a problem with it expecting to be fully apprised of all the options and choices that are being made in the delivery of infrastructure.

TP: The first and most important thing is that we must start dealing with each other with respect. I often make the joke that as soon as the wheels of the plane hit the tarmac in Canberra, you turn into an instant genius.

Where I get a little disconcerted is when the Commonwealth thinks that it’s driving the bus – it’s just not. When the Federal Treasurer said that he was spending $100 billion over the next 10 years on infrastructure, I was underwhelmed given the amount of effort that New South Wales and Victoria are putting in. That’s not to say just give us an obscenely large amount more; it’s more about recognising the effort being put in by the big states in comparison to the Commonwealth.

States are in the business of delivery, whether it’s infrastructure or services – we’re closer on the ground to people’s lived experience and satisfaction. This means that states have great value to add. We’ve got to move away from this mentality that the Commonwealth calls the tunes and the states are basically nothing more than service delivery entities. We are so much more than that.

We have been pushing the envelope in terms of trying to make sure that we’ve got better contracting arrangements to make it clearer and easier to enter into negotiations. We’re varying the idea of Public Private Partnerships and how we leverage value for money, both for the state and for participating companies. But we’re on the ground, we know the problems and we have to deal with them daily.

Every time there has been a dispute between the Commonwealth and the states around particular pieces of infrastructure, it’s always the states that win because we control the planning and the environment where infrastructure is being built. Being closer to the communities affected also means that we have a crucial role.

From my perspective, it would be much better if we started the conversation from a point of view of mutual respect. My view is that the Commonwealth needs to start thinking about some countercyclical investment, not necessarily in big infrastructure, but in maintenance. I think that there’s an opportunity to get into those third- and fourth-tier constructors and get some activity going.

I’m not being belligerent, but we do need to have some measure of recognition that it’s a state responsibility to deliver infrastructure. I don’t have any problem whatsoever with the Commonwealth seeking to identify what constitutes value


I t’s the major projects in the cities that are really holding up our economy. There’s no doubt that there are challenges coming our way, but the number one thing we can be focused on that’s really helping our economies is infrastructure investment

As we’re starting to see, consumer confidence in spending is starting to erode; you’ll see that the state’s revenue base is starting to deteriorate. The GST pie will drop because of the


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Treasurers in conversation – panel discussion

Tim Pallas

lesser activity around consumption, and payroll tax will drop as a result of hours worked dropping. As states, we often find ourselves increasingly constrained, but now is not the time to become timid. What the community needs and what state governments need to provide is some confidence that there’s a way through this. And the Commonwealth can play a pretty substantial role in recognising that what it needs to do is work in partnership with states to find those sections of industry where appropriate and quick investment can stimulate more economic activity. AD: Do you share the view that if there’s stimulus required, things like maintenance could be an area of focus? DP: Certainly; look at maintenance. But I also agree with Tim in that the Commonwealth relationship can be improved. There have been successful initiatives from the Federal Government, and it can play a role in incentivising states to reform. We currently have a system where the more that states reform and the more they stand on their own two feet, the less support they get from the Federal Government. So, why would you be incentivised to go down the path of asset recycling or taking reform options that might be politically challenging if you’re going to get less revenue off the back of it? The Asset Recycling Initiative was one of the more successful schemes that the Federal Government ran. The Commonwealth can play a role and say, ‘We’re not forcing you to do this, but if you want to participate then there’s

some financial benefit for you off the back of it’. Tim makes a point about states having our own autonomy when it comes to these relationships. I mean, we are closer to the problem, we are closer to what the infrastructure needs of the community are. I understand that the Federal Government wants to make sure that it’s getting value for money, and that its projects are not for political purposes but are driving economic growth. But at the same time, you want states making decisions on their priority and major infrastructure. You don’t want the Federal Government determining that for us. During the most recent federal election, we had Minister Tudge coming out and saying we need to fund roundabouts and commuter car parks. I mean, that’s the role of the councils, not the Federal Government. So, when it comes to infrastructure decisions and investments, the Federal Government should be involved in major areas like airports, ports and interstate infrastructure. States should be able to determine what major projects should be invested in, and then negotiate on the funding arrangements with the Commonwealth. When I first became Treasurer, Tim and I worked to establish the state Board of Treasurers, separate from the Council of Australian Governments (COAG). I don’t think Scott Morrison appreciated the idea, but I think he does now. States can’t just sit back and criticise the Commonwealth, even though it’s pretty easy to do.

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Treasurers in conversation – panel discussion

But COAG functions in a way where the Federal Treasurer will sit there but there’s no real engagement at the table on issues of the day. By states working together – both Labor and Liberal states – we can come up with ideas for reform and infrastructure investment. We can work those out together and then put those in a constructive way to the Commonwealth to get better outcomes.

That’s nonsense and it has been for quite some time. We know that building in an urban environment often requires tunnelling. We don’t have this Sydney sandstone that you people dig through in New South Wales; Victoria’s is mud and rocks – a nightmare for tunnellers. So, the cost of construction in a built urban environment is always going to be higher. I call it the tyranny of proximity, not the tyranny of distance.

This leads to more productive outcomes as you don’t have a situation where you’d go to Canberra twice a year, have a crack at government, it has a crack at you and you go home. We’ve got to be participating more in the process and having a bottom-up Federation, rather than a top-down one.

And we do need greater transparency. For example, we often see the Commonwealth come in and form a one-size-fitsall approach towards service delivery. It’ll say to states, ‘Well, you should all meet a standard student resource package level for education’. This approach is dangerous.

AD: I’ll just write down the oxymoron ‘COAG functions’. Tim, I just wanted to give you a chance to opine on whether you’ve got your fair share of the Asset Recycling Initiative money? TP: Victoria doesn’t get its fair share of anything. The interesting thing with regards to the Commonwealth is just a lack of transparency around the choices that are made for funding allocation. We reached the dizzying lows of about seven per cent of infrastructure allocations. If the Commonwealth meets its commitments going forward, Victoria will get something like 17 per cent, despite being 26 per cent of the national economy and having one of the largest population bases. So, we feel a little aggrieved about what has been an embedded and long-term disparity. Often the argument that comes back to us from Canberra – it’s a dated one – is, ‘Well, you’re a small state in terms of land mass’. They say it’s much harder to build in a large state with a lot of area to cover.

But yes, I would like for Victoria to get its fair share, whether it’s in infrastructure or any other area. But I’m not at all interested in a situation where states lose their funding autonomy as a consequence. DP: In terms of fair share, New South Wales and Victoria, as a percentage of population, get the least infrastructure investment from the Commonwealth. You also have two strong states that are reforming and making better use of their assets getting penalised for standing on their own two feet. Tim’s point is 100 per cent right in terms of the way that the Commonwealth looks at funding arrangements. When we’re going through things like the Gonski reforms, Victoria could be sitting there saying it’s putting X amount of dollars into its education system, but it may actually be getting the best outcomes. But under that model, it’s actually worse off because it’s seen to be putting less in. Whereas you could flip that around and quite easily say, well actually, we’re putting less money in but we’re getting better outcomes. That should be supported, not penalised. L–R: Adrian Dwyer, Dominic Perrottet and Tim Pallas



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Treasurers in conversation – panel discussion

I n terms of fair share, New South Wales and Victoria, as a percentage of population, get the least infrastructure investment from the Commonwealth. You also have two strong states that are reforming and making better use of their assets getting penalised for standing on their own two feet

AD: Can New South Wales and Victoria be leaders in driving national-scale reforms in the absence of Commonwealth leadership? DP: This is what the motivation was in establishing the Board of Treasurers. As a Liberal, I was in a better position to set it up. If Tim had established it, it would have just been seen as a state Labor Government attacking a federal Liberal Government. AD: So, it’s his idea, your implementation? TP: No, it was a mutually formed idea. But I can tell you, it was my idea that Dominic tell the Federal Treasurer that it’s being set up! DP: Telling them didn’t go so well, but we stuck to it. The main point here is that I have more in common in terms of the constituency I represent with Tim than I have with Josh Frydenberg. My role is not to represent the Liberal Party; my role is to represent the people of New South Wales. Being in the situation we are, having had a federal election, a Victorian election and a New South Wales election, which won’t line up the same way again for another 60 years, the opportunity for reform is right now. Part of the incentive in setting up the Board of Treasurers was that if you have Labor and Liberal states working together, you can take a lot of the politics out of reform – you can have both sides of politics working together for better outcomes. It’s

been very successful so far in negotiating on the education reforms and negotiating on GST. It ensures that states aren’t getting picked off by the Commonwealth. The next wave of opportunity for this body is to be proactive in driving reform opportunities to the Commonwealth. TP: Dom and I are doing a good double act in the circumstances. There are a lot of things that we can have arguments about, but the things that we differ on are so marginal to the practical and material benefits of our respective constituencies. When we bring the Board of Treasurers together, it’s so rare that we have issues of political difference because of what we are in the business of: efficient service delivery, efficient infrastructure delivery, and sharing ideas about how we can get that all done together. I like to call this the ‘Lennon and McCartney’ of reform. I’ll take the title of Lennon and Dom can be McCartney. I’m not sure Dom would sit comfortably with the surname Lennon. DP: Very true. TP: The Commonwealth can play the role of Ringo Starr – it beats the drum. From my perspective, the challenges that confront us are really about recognising that states must work positively with the Commonwealth. I really enjoy banging on about how limited the Commonwealth’s role is in people’s lives. The Commonwealth is good at raising taxes, defending the realm, looking after welfare, and lecturing the states about them not doing enough. But for all that, it’s a gratuitous swipe. The Commonwealth feels a little better saying it, but we’ve got to try and find ways that we can work together. The Board of Treasurers says, ‘Let’s talk about how we can put together our agenda, get our act together, stop complaining about the Commonwealth doing one egregious act after another’. The Board of Treasurers allows states to think about what we can do better, and then think about how we can come together as states of varying political views and go to the Commonwealth and say, ‘We’d like to partner with you on these things’. That’s how you get real reforms. AD: Is the idea that you will take a package of reforms to the Commonwealth? Or are there things that you can do at the state level without needing the Commonwealth? DP: It’s a combination of both. There are opportunities for the Board of Treasurers to put reform opportunities and ideas up. In that context, not all states agreed on GST changes – Western Australia was never going to agree with us on that. But what underpinned the discussion was mutual respect and agreement that we would drive these opportunities. The other thing we are doing in New South Wales is a review of federal financial relations. I’m assuming that there’ll be several lessons, ideas and opportunities for reform that

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Treasurers in conversation – panel discussion

will come out of that – some of which I may take to the Board of Treasurers for the other states to have buy-in on.

Commonwealth generally takes the view that states are very easy to divide and conquer.

If there are areas where there’s mutual interest, then we’d work together to put that up. It’s very easy to attack the Commonwealth, but we have an obligation to not just participate in, but to drive a better Federation. At the end of the day, though, states are closer to the infrastructure investments and service delivery than those in Canberra. We’re building $90 billion in infrastructure, providing significant services right across the state.

Just think about some of the big reforms that have gone on in this country, such as case-mix management in hospital service delivery or the National Reform Agenda – a document put together by the Bracks Labor Government and the Howard Federal Government. States were key to that.

States are at the coalface; we see the daily challenges facing our constituents and we have an obligation to look at reforms. Reforms differ across the nation. The reality is that there are issues in Queensland and the Northern Territory that we just don’t face, but there are areas that Victoria and New South Wales see every day that need reform. If the Commonwealth can help states like ours drive reform and not lose political skin over it, it should. AD: What are some of the areas of reform that you can tackle together? TP: We are obviously doing a lot of work together and that’s important. We’re trying to bring along the other states. The real value of the work we are doing is that we all accept that we’ve got to get our act together if we’re ever going to be dealt any measure of respect from the Commonwealth. The

The Hon Dominic Perrottet MP – Treasurer of New South Wales Dominic Perrottet is the New South Wales Treasurer and Deputy Leader of the New South Wales Liberal Party. He was reappointed Treasurer in March 2019 in the newly re-elected Liberals and Nationals Government, having been first appointed to the role in January 2017. Mr Perrottet previously served as the Minister for Finance, Services and Property under Premier Mike Baird. As Treasurer, Mr Perrottet is driven by the belief that responsible fiscal management is the key to delivering better services and infrastructure. His budgets have been characterised by strong surpluses, record investment in new productive infrastructure, and tax cuts of around $2.4 billion, all while maintaining New South Wales’s coveted triple-A credit rating. He is a firm believer in governments making better use of public assets, and oversaw the final stages of the New South Wales Government’s highly successful Rebuilding NSW asset recycling program, which generated almost A$30 billion in proceeds for investment into new productive infrastructure across New South Wales. Mr Perrottet is an outspoken advocate for reform, leading the rollout of Service NSW and the establishment of icare, instituting the state’s first-ever Productivity Commission and Chief Economist to drive a new economic agenda for New South Wales, and launching a landmark Federal Financial Relations Review to increase the autonomy and self-reliance of the states. Mindful of the pressing intergenerational challenges that New South Wales faces, Mr Perrottet established the NSW Generations Fund in 2018 to offset future public debt and secure New South Wales’s financial strength for generations to come.


Reform is about understanding that we have a job to do. While the push and shove of politics might be attractive to us, we’re going to be judged, when we pass from this job, on what effect we’ve had upon the communities in which we live. From my perspective, states are getting their act together, understanding and sharing good ideas, and, importantly, working in partnership with the Commonwealth, which is critical. DP: If you look at the Productivity Commission’s ‘Shifting the Dial’ report, many of the next wave of productivityenhancing reforms are located within the states. It’s really a state’s obligation to drive these reforms. Now, a lot of them are politically challenging, but there is great opportunity for states to work together. But if the Commonwealth is the one saying, ‘Well, here is the next wave of productivity changes that should be happening’, and it’s the state’s responsibility to drive them, then the Commonwealth has an obligation to assist the states with those reforms.

The Hon Tim Pallas MP – Treasurer, Minister for Economic Development, Industrial relations Tim Pallas was elected to the Victorian Parliament in 2006, where he serves as the state member for Werribee and as Treasurer of Victoria – a role he has held since 2014. He is also the Minister for Economic Development and Minister for Industrial Relations. Mr Pallas previously served as a Minister in the Brumby and Bracks governments, holding portfolios including roads, ports, and major projects. As Minister for Roads, he delivered EastLink; oversaw the M1 Upgrade, 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 projects including the development of AAMI Stadium, the Melbourne Convention and Exhibition Centre, the Melbourne Recital Centre, and Melbourne Theatre Company’s auditorium. Prior to entering Parliament, Mr Pallas served in roles with the Federal Firefighters Union, Storemen and Packers Union, and later as Assistant Secretary of the ACTU, and as Chief of Staff to former Premier Steve Bracks. Adrian Dwyer – Chief Executive Officer, Infrastructure Partnerships Australia Adrian Dwyer is the Chief Executive Officer of Infrastructure Partnerships Australia – the nation’s leading public and private sector infrastructure think tank. He was appointed to the role in March 2018. Mr Dwyer served as Infrastructure Partnerships Australia’s Head of Policy from 2011 until 2015, where he led major studies on road pricing reform and contracting and financing models, among others. From 2015 to 2018, Mr Dwyer served as Executive Director of Policy and Research at Infrastructure Australia – the Commonwealth Government’s statutory infrastructure body.


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Our name has changed

We are on a mission to inspire and drive nation-building infrastructure and the construction of Australia’s tomorrow using local resources, sustainable solutions, new technology and big thinking.

InfraBuild. Building Possibilities.


a company of

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InfraBuild setting new foundations for Australia’s infrastructure future Leading steel manufacturer and supplier in vanguard of construction boom. InfraBuild is poised for a new era of growth as its innovation in steel manufacturing inspires nationbuilding projects, helping customers, communities and the environment. Formerly known as LIBERTY OneSteel, InfraBuild is Australia’s largest integrated manufacturer and supplier of steel long products to the infrastructure, construction, engineering, mining, manufacturing and agriculture sectors, and is a leading metals recycler. The company has a rich history, having operated in Australia for more than 100 years and contributed to many of the nation’s largest projects. More than 5000 InfraBuild employees across 100 locations deliver steel products and solutions. InfraBuild is a company of LIBERTY. InfraBuild’s new name, adopted this year, reflects its commitment to ‘build possibilities’ for the Australian industry. The company’s mission is to inspire and drive infrastructure and construction using local resources, sustainable solutions, new technology and big thinking.

Key strengths

InfraBuild has three divisions: manufacturing, steel processing and distribution, and recycling. Its operations include InfraBuild Steel, InfraBuild Wire, InfraBuild Construction Solutions, InfraBuild Steel Centre and InfraBuild Recycling. InfraBuild Steel operates two electric arc furnaces with a production capability of more than 1.5 million tonnes annually, and four rod and bar rolling mills.

Perth Stadium

InfraBuild Wire is Australia’s largest manufacturer of wire for construction, manufacturing and rural applications. Both businesses were formerly LIBERTY OneSteel. In major projects, InfraBuild Construction Solutions (formerly LIBERTY OneSteel Reinforcing) is Australia’s leading reinforcing supplier, which provides high-quality, prefabricated, customised solutions to tier-one builders and mega infrastructure projects. InfraBuild Steel Centre (formerly LIBERTY OneSteel Metalcentre) is Australia’s premier supplier of metal and building products, supporting more than 10,000 customers. The business is known for its expertise in engineering and design optimisation to minimise cost, risk and waste. As a major metals recycler, InfraBuild Recycling is an important contributor to the raw metals requirement of the

steel industry, and offers a sustainable alternative to landfill. The business collects, handles and processes more than 1.4 million tonnes of scrap metal annually, distributing it to InfraBuild Steel’s Australian steel mills and international customers. InfraBuild Recycling forms part of InfraBuild’s broader commitment to sustainability. The company promotes steel’s role in the circular economy by aiding in the recovery, re-use and recycling of steel and other products. InfraBuild has four Environmental Product Declarations (EPDs), each independently verified and central to its sustainability focus.

InfraBuild and infrastructure

InfraBuild is playing a key role in Australia’s infrastructure and construction booms and is strongly positioned to contribute to future growth in major projects. The country has

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West Gate Tunnel. Image © West Gate Tunnel

$200 billion in committed infrastructure projects, and will require more than $600 billion of investment over 15 years, according to the Australian Infrastructure Audit 2019 report.1 InfraBuild is participating in several of the country’s largest transport infrastructure projects. It was awarded the contract to supply 92,200 tonnes of steel for the West Gate Tunnel project in Melbourne, which will be used to reinforce the lining of the project’s twin tunnels, bridge segments, noise walls and retaining walls. InfraBuild has employed an extra 150 staff for the project. Also in Melbourne, InfraBuild Construction Solutions is supplying up to 150 tonnes of prefabricated cages daily to the Metro Tunnel, a transformative nine-kilometre city rail project. InfraBuild’s innovative Glass Fibre Reinforced Polymer cages are inserted within the tunnel’s diaphragm walls, allowing for easy breakthrough of the tunnel boring machines. In Sydney, InfraBuild has been extensively involved in WestConnex, a 33-kilometre, predominantly underground motorway that will transform the city’s road network. InfraBuild Steel Centre’s state-ofthe-art coping machine facilitated the supply of several thousand tonnes of universal and welded columns to the St Peters Interchange for WestConnex. Also supplied was high-quality steel

bar, used in 150,000 bolts that reinforce the project’s twin tunnels, and structural steel to the award-winning Concord Road to M4 west on ramp. Across Sydney, InfraBuild Construction Solutions manufactured, processed and delivered complex and adaptable steel-reinforcing lattice girders for the nine-kilometre NorthConnex project – Australia’s deepest road tunnel when complete. The girders were integral to primary passive ground support, providing a safe work area to continue tunnel excavation.

Construction focus

In property, InfraBuild played a major role in Lendlease’s award-winning Barangaroo development. InfraBuild Construction Solutions supplied more than 77 million different steel products, including 45,000 tonnes of reinforcing steel. Processes were implemented to ensure that a 20 per cent reduction in embodied carbon was achieved for reinforced steel, contributing to the project’s 6 Star Green Star Rating and exemplifying InfraBuild’s sustainability innovation. In Brisbane, most of the steel used in the prominent 300 George Street building was manufactured in Australia and supplied locally by InfraBuild Steel Centre. The supply involved 2500 tonnes of structural steel. Precambered beams were used in the structure to make them lighter than

conventional beams and reduce the thickness of concrete slabs. In Melbourne, InfraBuild Steel Centre is contributing to 80 Collins Street, due for completion in 2020. The building features a unique cantilevering design and a large floor area that projects over heritage street levels, before rising a further 31 levels. Processing of steel product by InfraBuild Steel Centre, prior to fabrication, was an important part of its service offering, and has helped the project meet its project time lines. To the west, InfraBuild Steel Centre collaborated with Civmec to supply 16,000 tonnes of structural steel to the iconic five-level Perth Optus Stadium superstructure, and 9000 tonnes of seamless pipe for construction of the stadium’s Matagarup footbridge. These – and other projects – reinforce the breadth of InfraBuild’s work across industry – and its contribution to projects that are making cities more livable and sustainable. It’s a contribution that continues to grow as InfraBuild supplies the foundations for Australia’s infrastructure boom, enabling governments, industry and communities to embrace new building possibilities. ♦ To learn more about InfraBuild, visit www.infrabuild.com. 1 Infrastructure Australia, ‘Australian Infrastructure Audit 2019’, August 2019.

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What drives successful knowledge networks? For more than 20 years, organisations have championed knowledge networks – also called communities of practice – as a way of improving skills to innovate, and to be more productive and satisfied at work. Until now, the mechanisms behind these networks have not been well understood. How do these knowledge networks operate to create, manage and transfer knowledge? Now, a research project run by Monash Business School and sponsored by the Project Management Institute sheds new light on what makes knowledge networks successful, and the effective practices needed to develop project management skills. ‘Communities of practice work best when they’re formed with a clear plan of intention, operational structure and feedback mechanisms,’ says Associate Professor Chivonne Algeo, the project’s principal investigator. ‘This is the case even when networks are volunteer-led and improvisational.’ An organisational model specifically built to generate knowledge and member-inspired action, knowledge networks can spread innovative project management practices by expanding the toolkits of members. Knowledge networks also act to provide a safe space for project managers to reflect on, and enhance, their own skills. Along with colleagues Associate Professor Henry Linger and Dr Zaheer Asif, as well as Columbia University’s Katrina Pugh, Algeo examined two knowledge networks: a bilateral government-funded research centre in Australia organised in an informal, cluster structure; and a global life sciences company based in the United States, which is a formal network supporting multiple departments. The researchers found that psychological safety and trust played a key role in how well the members of the

two different networks interacted and produced results. The hub structure of the research centre focused on productivity and solutions-driven collaboration; however, wider information sharing was at times a challenge, leading to isolation, frustration and ultimately limited benefits. The life sciences network downplayed the creation of things, and played up mutual support and problemsolving. ‘Members felt safe about taking risks, laughing at themselves, conducting bold experiments, and playing games as a way of learning,’ the report says. The main findings? Ensure that there are clear aims around inspiring members to discover and share new practices and ensure that frameworks are developed for improved management capabilities and outcomes.

Yet, an important finding was also that in both networks, members were often motivated by social aims or a belief in the greater good. ‘There needs to be something that motivates members to stay together despite their differences and time constraints,’ Algeo says. Algeo plans to incorporate this research into Monash Business School’s Master of Project Management, and further extend the research to identify the impact of networks in economic, demographic and technological contexts. ‘Being able to build project management capability through knowledge networks can be a vital skill for project managers,’ she says. ‘It can really transform the network into an engine for collaborative innovation.’ ♦

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As the rise of artificial intelligence transforms our jobs and challenges the very nature of organisations, Monash Business School leads the way with the latest research and teaching. With demand for skilled project managers at an all-time high, Monash Business School is driving the industry forward with our Master of Project Management. Gaining advanced knowledge in project leadership principles and practices will help you and your staff tackle the unique challenges of the future. As the economy goes digital, we’re helping to shape the future of business.


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Bendigo Hospital

delivering progress Celebrating 10 years Capella Capital is excited to enter the next decade with our signature passion, determination and fresh thinking for infrastructure development and management. Our unrivalled commitment and end-to-end capability allows us to proudly focus on the ongoing success of every project and to deliver for the communities we work in.

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Bendigo Hospital

Sunshine Coast University Hospital

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Respected leaders – panel discussion

L–R: Sir Rod Eddington AO, Mark Birrell, Ailie MacAdam and Michael Brennan

Respected leaders Key points • • •

Long-term thinking in infrastructure is needed despite a difficult political environment. A pipeline of evidence-based projects is critical to the long-term planning of infrastructure. It’s important to get the balance of risk allocation right.

Panellists: ► Michael Brennan, Chair, Productivity Commission ► The Hon Mark Birrell, Patron, Infrastructure Partnerships Australia; and Independent Director and Chairman, PostSuper ► Ailie MacAdam, Senior Vice President, Bechtel Corporation; and Acting President, Bechtel Infrastructure

Moderator: ► Sir Rod Eddington AO, Chairman, Infrastructure Partnerships Australia


Sir Rod Eddington AO (RE): Michael, perhaps we might start with you. Long-term reform and longer-term thinking are two crucial issues at the moment, and they are things that the Productivity Commission – not only under you, but also under Peter Harris and Gary Banks – has championed for a long time. Are we losing our appetite for long-term reform? If we are, what are some things we could focus on now to kickstart our desire to see long-term reform come back onto the global, national and state agenda? Michael Brennan (MBr): I’m not sure that there is any innate loss of appetite or zeal for long-term reform. I think there is a lot in what Tim Pallas says in that we had a very full and coherent agenda around economic reform in the 1980s and


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Respected leaders – panel discussion

Sir Rod Eddington AO

1990s across a broad range of policy levers and sectors. To some extent, that has run its course, and there has been an effort to identify what the next wave of reform is. That’s where the work of the Productivity Commission came in through the ‘Shifting the Dial’ report. The report was an attempt to try and ascertain and identify what a modern-day reform agenda looks like. Some of it looks a lot like the past, but some of it is reaching into new areas like health, education and infrastructure. Some of the process is about furnishing government with long-term ideas – setting the beacon out there on the horizon. It isn’t necessarily about us berating politicians for their lack of reform appetite, because they have a lot to deal with in the short term. But it is incumbent on us as policymakers and policy advisers to get out there and argue the case in public. Currently, there is a long-term reform agenda there. I’m optimistic about it, but I think we need to manage the dual role of long-term advocacy with the public and provide government with short-term actionable items that can build towards that.

RE: In that regard, business has some obligations in encouraging the process, not only in supporting the work you do, but also in encouraging politicians to take a longerterm view. MBr: I agree, and it’s about taking a broad view rather than a narrow one. RE: Ailie, you sit at both ends of this as a Senior Vice President at Bechtel. You sit here in Australia, dealing with the day-to-day reality of delivering big projects balanced against your other role as President of Bechtel Infrastructure. You are involved in looking at what’s happening globally around the long-term thinking; the project pipelines. How do you marry the short term – the tyranny of the urgent, such as ensuring that you have enough skilled tradespeople – against keeping a 15-year view of the pipeline? Ailie MacAdam (AM): We rely on visibility of the pipeline, which is fundamentally important to decisions on where we’re going to invest. As a global company, we make decisions on which region we’re going to invest in and where we’re going to place our best talent, and that is driven by visibility of pipeline

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Respected leaders – panel discussion

and how robust we think their pipeline is, and the historical track record of governments around the world.

Michael Brennan

We ask questions like, ‘Do they deliver what they say they’re going to deliver as far as procurement time lines are concerned?’ That’s really important, because when you’ve got that foundation, you can invest in positioning your talent around the world, in training, and in forging strategic partnerships with the supply chain. And depending on the different challenges and capacity issues in various regions, you can think about innovating around different procurement models. Here in Australia, across New South Wales and Victoria, we talk about the capacity challenges. Both Dominic Perrottet and Tim Pallas have talked about encouraging the tier-twos and tier-threes to be more involved in the supply chain. My take is that there is a different model where we can unleash the innovation that is present in the tier-twos and tierthrees, which is stifled by current procurement models. It’s the tier-twos and -threes that need to be bold enough to say that, and come up with real ideas to unleash this innovation. At the end of the day, they’re the ones with feet on the ground. RE: Ailie, you have a global perspective. Putting Australia to one side, what country or regions do you think get this closest to right? AM: If I’m frank with you, infrastructure around the world is challenging. It’s challenging in North America, it’s challenging in the United Kingdom, it’s challenging in the Asia Pacific, and it’s challenging here in Australia. In infrastructure, we’ve slipped into a procurement model and risk allocation that just doesn’t work – it’s just not sustainable, and different parts of the world are in different parts of the cycle. Here in Australia, we are seeing businesses really struggle, and some are going out of business. This happened in the United Kingdom a couple of years ago. We’re starting to see the supply chain not bidding, but customers are still needing to build the infrastructure – so we need to be thinking about different approaches. Here in Australia, we’re slightly behind coming to the reality, but we’re talking about it. For example, we have the New South Wales Government’s ‘Ten Point Commitment to the Construction Sector’, but this is yet to flow through to procurement. North America is even further behind Australia in coming to the realisation that things have to be different. That’s infrastructure. Compare the infrastructure market with our oil and gas, and mining and metals markets. It forces you to stand back and think. What’s different about the delivery for those privatesector customers compared to public-sector customers in New South Wales and Victoria, and federally? If we talk to international oil or mining and metals companies,


they make their business cases with a solid understanding of their baseline really early on, when they’re only two per cent complete in some cases. This means early on that they’ve made investment decisions, they understand the scope, have a really detailed cost estimate, and understand the program, the risks and their execution strategy. This provides them with a baseline they make decisions on, and it gives them certainty of delivery from start to end. This kind of robust baseline is rare to see in the infrastructure market, which places cost and schedule challenges on projects historically. We need to change this thinking in the infrastructure market. We need to be looking at how to add value right at the beginning, and be really outcome-focused in terms of what we need to deliver and how are we going to deliver it. We’ve had the opportunity to do this on Western Sydney Airport (WSA) – it’s fantastic. With WSA, we were brought on as a Delivery Partner early in the program. This has meant that we were able to establish a baseline early on that the customer can use to inform investment decisions. This helps to manage outcomes and expectations, and puts them in control right from the beginning.


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Respected leaders – panel discussion

RE: Mark, you’ve probably seen this journey more closely than any other as Minister for Major Projects during the reformist government under Jeff Kennett. You have also brought your considerable intellect to the infrastructure table over a long period in many ways. Given where we are, perhaps you can give us your insights into the current federal versus state debate – I know you’ve given it a lot of thought and have been an active participant in it. But there’s also never been a period in Australia’s history where the quantity of major infrastructure projects underway is as numerous as it is today. What do you make of the current state of play, whether it’s federal, state or the infrastructure pipeline and the delivery thereof?

perceived rewards for doing something long term are a lot lower than they should be. When I was a Cabinet Minister in the Kennett Government, we went out with ideas that we knew were not immediately popular, and we were proven right on that! But when you just got on with important projects or reforms, people said, ‘Oh, you know what you did back then? They’re good projects’. They forget the negative commentary at the time, but it’s a lot harder to do that now. As an industry, we should get behind the thinking that says, ‘I am not going to live in the world of social media. I’m not going to just listen to the knockers or the interest groups that don’t

Mark Birrell (MB): Context is important here. There has been considerable progress on the federal–state infrastructure dialogue, but this is all now happening in a social media storm, which is harsh in terms of governments canvassing ideas about next year or the year after, rather than today.

represent long-term interests. I’m going to just try and get on

So, we need to ask how we can get great government action in an environment where Twitter rules, where short-term social commentary is so cynical and negative, and where the steps for taking action are more difficult.

outcomes must be worked out well in advance, so the public

I think if we’re looking at the root of the problem with public policy and the lack of bravery or activism, it’s because the

We can be thankful for that, after the last 10 years and the

with a whole range of issues that are important’. This is of direct importance, because everyone here knows that infrastructure should always be planned for the long term – it has to be if it’s going to work. Before you start, the desired gets what it wants out of the project. Another point of context here is the political environment, and Canberra is now remarkably normal, calm and stable. massive changes in Prime Ministers. In Scott Morrison and

L–R: Sir Rod Eddington AO, and Mark Birrell

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Respected leaders – panel discussion

Ailie MacAdam

Josh Frydenberg, we’ve got people with the ability to get policy outcomes achieved. They get it. There’s a distinct opportunity now for a good dialogue, as they’re both keen for ideas and for a middle-ground approach to running government. On that basis, I am optimistic about the future of infrastructure planning and delivery, particularly if we back in leaders who say, ‘I’ve got a long-term vision, let’s work to it’. People are actually hungry for that. It would lift them up. To do that, we also need the type of bipartisanship that we see between Tim Pallas and Dominic Perrottet. RE: If you go back to a young Mark Birrell as a Minister in a successful reformist government – does the avalanche of social media commentary make it harder for a young Cabinet Minister today to focus on the long term? Are some people better at blocking that clutter out? MB: Yeah. When I was a Minister, I used to get up in the morning and think, ‘What’s the idea we’re trying to put out? How can I get the media to cover it? How am I going to define myself by what we want to do?’ Today, a Minister wakes up and says, ‘How can I define myself by how I disagree with my opponent?’ And the media rewards it, because it’s got conflict and it is more dramatic. But we can replace that, there is an answer. Let us all – planners, architects, financiers, constructors, agencies – always try to inform the public about how infrastructure will improve their lives and their community. Make it clear that different projects will improve their quality of life and deliver just that! And let us do what I see engineers doing all the time: explaining the purpose of each project and having a public discussion about a project over time. They talk about the difficulties and challenges of it, and the barriers they have to deal with. They often take people on a very purposeful journey


of how hard it is to build this project. It’s inclusive – and it is the type of positive message often missing today. RE: Ailie, you’ve touched on risk already, and how it gets allocated and who manages it. One of the challenges is determining who’s best able to manage risk and at what point risk gets transferred. It’s something that all of us in the sector think about a lot. As you look across a wide range of projects, what’s your take on that? AM: In Bechtel’s operations, about 75 per cent of our work is as a contractor and 25 per cent is on the customer side. People often ask me in Australia, ‘Why aren’t you bidding on the contractor side?’ Given the risk allocation, I just won’t bid it. It’s currently a race to the bottom, and contractors are taking on risk that they can’t manage. Now, I’ll take risk on when I know I can manage, and I’ll back my team to handle it. But when I’m asked to take on risk that I can’t manage due to unforeseen ground conditions, for example, I’ll price it in a way that means our bid will be uncompetitive. I won’t win it; therefore, I’m not going to bid it. Until that changes, we won’t be in that market. That’s the same in North America, so where this is the case globally, we won’t bid it. This impacts competition in the market as there are other companies like mine. I’m not saying there needs to be no risk; it just needs to be allocated correctly. Risk carries commercial impacts, health and safety impacts, cultural impacts, relationship impacts, trust impacts – to me, that’s fundamental risk allocation. Getting that right can reduce those impacts. RE: Mark, you’ve been involved with a lot of projects. Some projects run more smoothly than others. What’s your sense on this risk piece?


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Respected leaders – panel discussion

MB: If you get advice from a respected participant like Ailie that it’s difficult, then you’ve got to have a dialogue. I hope there are government procurement agencies and treasuries who are saying, ‘Let’s work through exactly what Bechtel is telling us!’ When you’re procuring projects, you always want active bids from people who’ve done the type of work before, who can tell you about the risk. These are the people who can tell you if you’ve identified the risk incorrectly or not at all – this allows you to get quality assurance and price competitiveness, too. Part of that debate in the past was about whether we allowed other entrants into the market. I think Australia’s been good at allowing in other entrants. But I sometimes think that we procure projects with a schedule or scale that means people won’t bid for them. For instance, there’s a huge opportunity for us to tender $50 million or $100 million maintenance projects – smaller ones. This will help builders who are not getting the type of work they expect, who are not seeing the pipeline in the future. Ultimately, the way you tender affects risk tremendously. This varies between states – Victoria is doing it well now, and South Australia is punching above its weight. This is the type of discussion you need to have, otherwise we’re going to be disappointed when we open the proverbial tender box. RE: Michael, we spend quite a bit of time thinking about infrastructure in the context of what I would call hard infrastructure – roads, rail, ports, airports and the like. But the Productivity Commission thinks about infrastructure in its broadest sense, including social infrastructure. Can you please share your thoughts on what initiatives you’re looking at in the social infrastructure space? MBr: Sure – we cover all of infrastructure, as you know. It’s topical right now because we’ve handed our final report to the government on airports. So, we still look at hard infrastructure, but there is a very important agenda around newly emerging infrastructure in a digital world. The creation of databases and investment in intangibles – which is a growing share of overall investment and a growing share of overall capital stock – over time is going to be a significant driver of productivity. When we’ve seen disappointing physical infrastructure or physical investment figures, part of it is due to the rise of services in the Australian economy. These are inherently less capital-intensive sectors, and they’re investing in different ways. Some different issues emerge on the back of this. It is still very important to ensure that we have the right incentives for business to invest and to innovate, but it’s a very different form of capital asset. The other thing that we’re very interested in, sitting alongside the creation of the physical infrastructure, is usage. Now, Australia has well-developed infrastructure markets in

I nfrastructure usage is also quite interesting in terms of roads and public transport. When you step right back, there’s an oddity at the moment around the way we use our road infrastructure

areas like telecommunications, non-urban water (to an extent), and even urban water. The latter may not be markets, but pricing does a good job of guiding investment decisions in those sectors. There are other sectors, such as road and rail, where decisions are taken in the complete absence of markets and pricing. Full-blown markets in these sectors may be a bit of a pipedream, but you can certainly get more market-like disciplines in those areas. For example, this is why I’ve been a long-term advocate of road-user charging. It would inject greater discipline around the benefits of potential competing infrastructure investments. Infrastructure usage is also quite interesting in terms of roads and public transport. When you step right back, there’s an oddity at the moment around the way we use our road infrastructure – we have digital-era ride-sharing services available via an app, and industrial-era bus services with centrally planned timetables and contracts that involve driving the bus on a fixed route. So, I think infrastructure usage is going to be increasingly important alongside the augmentation of capital stock. RE: And often the best economic benefits come from better use of existing infrastructure as opposed to building new stock. If you were able to give the Prime Minister one piece of advice in infrastructure, what you would want him to focus on in the next two or three years? MB: Everyone benefits from having an identifiable national priority list of desirable projects. The work done by Infrastructure Australia has given a real base for it. So, focus on a well-discussed list and support those who have welldeveloped ideas. Let’s encourage a process where you do a feasibility study, do a business case, publish it, and it goes on a list. The likelihood is that at elections, politicians will choose from that list. We’re all better off with it. It’s not rocket science,

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Respected leaders – panel discussion

but it’s still hard to do. We’ve got to encourage those who do the work that gives a real sense of the costings and the deliverability of projects. RE: Ailie? AM: I come back to risk allocation. I think risk allocation is the key that drives so much of the culture of the infrastructure sector. When you compare it to other sectors, it’s quite harsh and not as inclusive, diverse, or safe as it could be. When you compare health and safety stats in infrastructure to other sectors, it’s not as innovative. We don’t think about big data the same way, and we don’t necessarily develop our leaders. I think if we waved the magic wand and got that risk allocation right, we could have better alignment from the customer all the way through the supply chain. MBr: This goes to soft infrastructure. The workings of the Federation are fundamental – I’m a big believer in the

Michael Brennan – Chair, Productivity Commission Prior to his role at the Productivity Commission, Michael Brennan was Deputy Secretary, Fiscal Group, in the Federal Treasury, with responsibility for budget policy, retirement incomes, Commonwealth–state relations, social policy and infrastructure financing. Before that, he was Deputy Secretary, Economic, at the Victorian Department of Treasury and Finance. Mr Brennan has worked as an Associate Director in the economics and policy practice at PricewaterhouseCoopers, and as a Senior Adviser to Treasurers and Ministers for Finance at the state and federal level. Mr Brennan holds a Bachelor of Economics (Hons) from the Australian National University. The Hon Mark Birrell – Patron, Infrastructure Partnerships Australia; and Independent Director and Chairman, PostSuper Mark Birrell was the founding Chair of Infrastructure Partnerships Australia, and is a full-time, Non-Executive Director. With an extensive background on public and private boards, he is currently Chairman of PostSuper, and an Independent Non-Executive Director of Transurban. He is the immediate past President of the Victorian Chamber of Commerce and Industry. Mr Birrell has served in leadership roles across the transport and logistics sectors, including as Chairman of the Port of Melbourne Corporation and of Infrastructure Australia, Deputy Chairman of Australia Post, and Leader of the Infrastructure Group at MinterEllison Lawyers. Mr Birrell has a strong public policy background through his earlier service as a Victorian Cabinet Minister. He is a Fellow of the Australian Institute of Company Directors and a Companion of Engineers Australia.

Our Federation is much more robust than people give it credit for. It isn’t necessarily the source of inefficiency that people claim it is. We need to use the Federation as a laboratory for experimentation. The best way to do that is to ensure that we’ve all got a thorough appreciation of what’s working well. For instance, there are very interesting things going on in New South Wales with on-demand bus services, and commercial zoning in Victoria. These are some good experiments that could be shared, and it would pay quite a big dividend across the country. RE: And it’d be good if we published more of that best practice. That’s a great place to finish.

Australia (AO) for service to business and commerce; and in 2015, he was honoured by the Japanese Government with the Grand Cordon of the Order of the Rising Sun for his contribution to strengthening the economic relations between Australia and Japan. Sir Rod serves as a member of the APEC Business Advisory Council and is President of the Australia Japan Business Cooperation Committee. He also sits as a Non-Executive Director on the Board of China Light and Power Holdings and John Swire and Sons Pty Ltd (Australia). Ailie MacAdam – Senior Vice President, Bechtel Corporation; and Acting President, Bechtel Infrastructure Ailie MacAdam is a Senior Vice President of Bechtel Corporation and General Manager of Bechtel Infrastructure Asia Pacific, based in Sydney. Being responsible for profit and loss, Ms MacAdam leads the the Asia-Pacific business with deployed leadership in various Asia-Pacific markets, and is committed to the growth of Bechtel’s Australian business development and project delivery in the transport infrastructure market. She is strategically focused on the rail, aviation, power, roads and tunnelling sectors. During the 30 years she has worked for Bechtel, Ms MacAdam has led major UK, US and Australian infrastructure projects, in addition to oil, gas and chemicals projects in Europe and Africa. She brings an extensive background in rail mega-project delivery, having been previously assigned as Bechtel’s Global Rail Sector Lead. Ms MacAdam is Bechtel’s client relationship manager and the executive sponsor for Bechtel’s Delivery Partner role on the Sydney Metro City, and Southwest and Western Sydney Airport projects – both being infrastructure projects of global scale.

Rod Eddington is Chairman of Infrastructure Partnerships Australia, Chairman of J.P. Morgan’s Asia Pacific Advisory Council, and Non-Executive Chairman of Lion. Sir Rod previously served as the inaugural Chair of Infrastructure Australia from 2008–2014. Educated as an engineer at the University of Western Australia and then Oxford University as Western Australia’s 1974 Rhodes Scholar, Sir Rod’s career began in transport and aviation, and he went on to become CEO of Cathay Pacific, Ansett Airlines and British Airways, before retiring in late 2005 and returning to Australia.

Prior to her current appointment, Ms MacAdam served in various leadership roles. Aside from previously being Bechtel’s Global Rail Sector Lead, Ms MacAdam has been Managing Director for Australia, and Managing Director for Europe and Africa, with profit and loss accountability for rail, airport and heavy civil projects, including London City and Gatwick airports. Previous project roles have included Project Director for Crossrail – the largest civil infrastructure project in Europe – and Project Director for High Speed 1 (HS1, originally the Channel Tunnel Rail Link), the United Kingdom’s first high-speed rail line. Ms MacAdam also held key leadership roles on the Boston Central Artery/Tunnel project – the most complex urban transportation project in US history.

In 2005, Sir Rod was awarded a Knighthood by the British Government for service to civil aviation; in 2012, he was made an Officer of the Order of

Ms MacAdam holds a Bachelor of Chemical Engineering and is a Fellow of the Institute of Civil Engineers.

Sir Rod Eddington AO – Chairman, Infrastructure Partnerships Australia


Federation. There are lessons to be learnt at the state level. One of the things that we don’t do well is having a useful clearing house of lessons learnt – the successes and failures at the state level. This is where we can share knowledge.


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Enhancing the value of

AUSTRALIA’S INVESTMENT IN INFRASTRUCTURE Creating shared value through: Strategy and transformation

Project investment and finance

Data analytics and insights


Social advisory and research

Commercial due diligence

Communications, engagement and creative

Commercial, technical and transaction advisory

Understanding that the decisions we make about cities today will shape the lives of millions tomorrow, we’ve united the consulting industry’s leading minds around a common purpose – to shape transformational projects that enhance the productivity, liveability and sustainability of urban Australia.

Discover our work and meet our team at rpsgroup.com

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RPS at the forefront of infrastructure advice New advisory practice harnesses company’s vast expertise to help clients and communities. As Australian infrastructure projects become more complex, the need for independent, integrated advice across a project’s life cycle has never been greater. That is the view of Ross Thompson, CEO – Australia Asia Pacific, RPS, a leading global professional services firm and an in-demand adviser to infrastructure proponents and developers all over the country. It is also the thinking behind RPS’ launch, in August 2019, of a uniquely infrastructure-focused Australian advisory practice that combines the firm’s local and global expertise in major project definition, design and management – and takes its infrastructure work to a new level. ‘Our advisory practice is made up of consultants who have experience in delivering and operating projects of all types and scales,’ says Thompson. ‘Infrastructure is not a theoretical discussion for us. We offer independent advice that incorporates lessons learnt from Australia’s most successful initiatives, and helps clients to deliver projects that generate real value for the community, economy and environment. ‘Our new advisory practice brings people with complementary skills and experience together around a common goal – to enhance the value of Australia’s investment in infrastructure.’ RPS’ advisory practice has three core services. In Strategy and Investment, RPS experts define strategy, lead and develop projects, and model outcomes; in Insights, Communications and Creative, RPS engages with stakeholders and communicates change using data, engagement and research; and in Commercial and Delivery, RPS provides

Sydney Metro

technical, commercial and transaction advice to maximise project value. ‘We help clients listen to the community’s views on infrastructure, respond to them through planning, and make sure the commitments made to end users are embedded into approval conditions and delivery contracts,’ says

Thompson. ‘When you understand key issues up-front and integrate them into strategy, you minimise project risk and maximise value.’ Thompson believes that too many infrastructure projects suffer from poor integration of advice. ‘Various parts are subcontracted to different firms at

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different stages, risking the consistency and quality of advice over multi-year projects. We work with clients from start to finish across a range of areas, meaning we deeply understand projects and can help clients respond quickly and effectively to challenges as they progress through the project life cycle.’

Strong foundations for growth

A series of acquisitions in Australia has given RPS the scale to assemble a market-leading team of integrated infrastructure planning and delivery advisers. In February 2019, RPS announced the $32-million acquisition of Corview, a 45-strong team of strategic, commercial advisory and management consulting specialists that has since been integrated into the new practice. That followed the acquisition of community engagement adviser Straight Talk in 2018, and niche consultancies Everything Infrastructure Group (2015) and Manidis Roberts (2012). The acquisitions are part of RPS’ $95-million investment in infrastructure advisory in the Asia Pacific. Thompson says the acquisitions have expanded RPS’ local capability at a critical time for the infrastructure sector. ‘Australia’s population growth is putting pressure on existing infrastructure, and increasing demand for new assets and optimisation initiatives. The volume and scale of investment is making projects evermore complex to plan, fund and deliver efficiently. Our new advisory practice is a response to that challenge.’

RPS’ success in this country is two decades in the making. Founded in 1970, the UK firm commenced Australian operations in 2003, with an initial focus expanding from energy to property and infrastructure. RPS is one the world’s great project advisers, with around 5200 consultants across 125 countries and six continents. Its consultants have shaped many of the world’s largest infrastructure projects across transport, water, property, defence and government services, energy, and resources. The firm has almost 1000 staff members in 22 offices in capital cities and regional towns across Australia and New Zealand. Offices in Indonesia, Malaysia and Papua New Guinea are part of the firm’s Asia-Pacific network and a focus of long-term expansion.

Advising a transport revolution

RPS has built a reputation as Australia’s leading independent adviser on major projects. The firm is working on many of the country’s largest transport projects, including Brisbane’s Cross River Rail, Sydney’s Western Harbour Tunnel and Beaches Link, Parramatta Light Rail, Westconnex and Western Sydney Airport, as well as Melbourne’s Metro Tunnel Project, Level Crossing Removal Program and Airport Rail Link. With rail enhancements a priority for so many cities, RPS is engaged on more than $150 billion in rail projects alone. The firm’s work on Sydney Metro – Australia’s largest public transport infrastructure project – typifies its work.

Improving Queensland through projects like Brisbane Metro

Ross Thompson, CEO – Australia Asia Pacific, RPS

RPS has provided advisory and management consulting services to support the development of Sydney Metro’s business cases, and technical and delivery advice to help Transport for NSW and its partners to engage the community, secure complex approvals and procure with confidence. ‘From business cases to transaction support, engagement with government agencies and contributions to the project’s City & Southwest Environmental Impact Statement (EIS), RPS is honoured to work on Sydney Metro,’ says Thompson. ‘It’s a world-class transport project that will benefit Sydney for decades to come, and an example of the benefits of independent, integrated advice throughout complex projects.’ Thompson is proud of RPS’ work in Australia and is excited about its future. He expects that the infrastructure practice will expand the firm’s contributions to transport and utilities projects, as well as social infrastructure. ‘Australia will need more hospitals and schools as the population expands,’ says Thompson. ‘RPS has a key role to play in helping the country become more sustainable and livable through new or upgraded social infrastructure.’ He says RPS will export its Australian advisory expertise in coming years. ‘Australia is a world leader in infrastructure projects, and RPS is a leader in infrastructure advice. We want to take our capability to more projects and countries, and help communities to invest wisely and generate shared value from their infrastructure investments.’ ♦ To learn more about RPS, visit www.rpsgroup.com.

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Transport: a catalyst for place making Keolis Downer is Australia’s leading multimodal transport operator with global experience. The company’s customer-driven culture encourages it to constantly innovate and provide public transport services that are adapted to people’s needs. A paradigm shift in public transport is happening as we are going through a major technological revolution that is changing the way we travel, modifying the mobility ecosystem, and encouraging us to be agile and to re-invent the way we do transport from a policy, regulation, infrastructure, transport offering and skills standpoint. Keeping the customer top of mind has never been more important, due to evolving expectations driven by digitisation, the younger generations, the entry of new disruptive players, evergrowing and congested cities, and the increasing focus on our environmental impact and sustainable energies. How do we embrace this change and turn this disruption into opportunities to deliver a better transport service and encourage the use of shared mobility? What do local communities need, and how can transport contribute to creating new places where people want to live, study and work?

Newcastle is all about place creation

The NSW Government’s $650-million Revitalising Newcastle program delivered a new city where the CBD was reconnected to the waterfront. It created an environment that is more livable, sustainable and competitive. Sitting at the heart of all this is the Newcastle Light Rail. Once the NSW Government had delivered the market certainty of new public transport infrastructure, and even before a length of track had been laid, the private sector began fuelling an investment pipeline, which has

Newcastle Light Rail

now delivered more than $3 billion worth of economic development. This development runs alongside the light rail line and clusters around the transport change. Announced in 2013, approved in 2015, with construction completed in 2018, it was in February 2019, on a perfect summer’s day, that Newcastle Light Rail opened to the public and carried its first passengers – 20,000 of them, in fact. Patronage has exceeded all expectations since day one. Since then, overall patronage on the public transport network has constantly increased and, in partnership with the City of Newcastle and Transport for NSW, Keolis Downer has been adding more mobility options for local communities. The real-time, on demand transport service area was expanded in June 2019, doubling

the number of customer trips; in fact, 38 per cent of customer trips would not have been possible with a regular route service. Overall, on the transport network month on month, we see an increase in patronage of 23 per cent across all modes. New Park and Ride services have also been added, and from the end of 2019, an autonomous shuttle will enable the local community to test first-hand a sustainable and innovative mobility option firsthand. Newcastle is an attractive city, where people are gradually changing their mobility habits. It represents a stepping stone, demonstrating how a transport project can contribute to the transformation of a city, and the opportunities this provides for place creation in the future. ♦

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Keolis Downer is the leading multimodal transport operator in Australia. We are proud to partner with Governments and Transport Authorities to design, operate and maintain public transport and mobility services that are integrated and adapted to local needs. With more than 4,000 employees and a presence in five states, Keolis Downer enables 250 million passenger journeys per year. We operate and maintain the largest tram network in the world in Melbourne (Yarra Trams), the light rail network on the Gold Coast (G:link), and more than 1,200 buses in NSW, Western Australia, South Australia and Queensland. Since 2017 we have also been operating the integrated transport network in Newcastle that includes regular bus services, On Demand transport, ferries and from 2019 the new light rail.


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Keynote interview

L–R: Romilly Madew AO and Adrian Dwyer

Keynote interview Romilly Madew AO Key points: • •

There is more of a political focus on infrastructure than ever before. Maintaining credibility, independence and authority at Infrastructure Australia is a ‘continual tap dance’. Infrastructure Australia needs to evolve how it assesses project business cases.

Interviewee: ► Romilly Madew AO, Chief Executive Officer, Infrastructure Australia

Interviewer: ► Adrian Dwyer, Chief Executive Officer, Infrastructure Partnerships Australia

Adrian Dwyer (AD): You came into the role at Infrastructure Australia (IA) when the Australian Infrastructure Audit was towards the point of development and publication. There’s now an opportunity for you to set the vision for what the future of Infrastructure Australia is. So, rather than just the future of infrastructure, what’s the future of Infrastructure Australia? Romilly Madew (RM): Before I start, I think it’s important to recognise a couple of people in the room. Infrastructure Australia is 11 years old, and two of its former chairs are here – Sir Rod


Eddington and Mark Birrell. Philip Davies is also here, the former CEO, and Mike Mrdak, the secretary who oversaw the creation of Infrastructure Australia. And if you think about Infrastructure Australia, it’s been on a journey. When it was created, there was no Infrastructure Australia or equivalent globally. So, these leaders created an organisation, and developed its governance and its work plan. But infrastructure is now in the hot seat and we, as an organisation, need to evolve. There needs to be closer collaboration between the states and territories, especially in the way Infrastructure Australia works. The Audit just came out, and we had 150 contributors, but we’re now working on the Infrastructure Priority List. For this pipeline, Infrastructure Australia is working collaboratively with all of the states. In fact, one unintended consequence is that we’ve had a 40 per cent increase in the number of projects that are coming to us from jurisdictions for the pipeline because we’re working so collaboratively. We’ve kind of opened the floodgates. But I think that’s a good thing, because visibility of the pipeline is really important. We are also trying to be more pragmatic and practical in our engagement with the states and territories, and call out where there needs to be reform and further investment. AD: One of the challenges with being more collaborative and working more with the states is that, as an adviser to government, you have to balance independence and influence. Accepting that it’s a spectrum between those two, how does Infrastructure Australia best find that balance between independence and influence? RM: Currently, I’d say we’re more focused on independence. But if we’re going to build credibility, I think


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Keynote interview

we need to move into the middle range. We will not diminish the importance of the business cases and we will ensure that they’re robust, and we need to maintain our independence through that process. But with the scale of investment that is occurring, and that is likely to become the new norm, we also need to be really influential on behalf of the states in the sector. The Audit is a great example of where we have been independent, and where we haven’t shied away from the big issues, but it’s also an influential document. It really is an interesting balance. My experience from the Green Building Council of Australia showed that we had to be independent when it came to Green Star ratings, but we also had to be influential in transforming the industry. So, I have experience in finding that balance, and I think it can best be described as a continual tap dance. AD: So, if you’re trying to be more influential over government, that means being more attuned to what government wants. How do you avoid just being a ‘yes’ organisation? RM: Well, it means not shying away from ‘I’m saying no’, but also being relevant. States will come to us with business cases, or they may even have feedback on the Audit, and recommendations for inclusion in the Australian Infrastructure Plan. We can say respectfully that we don’t agree, and this is why. Being clear on our evidence base is really important, and if we do say no, we do so respectfully, and we move on with a respectful engagement. We need to move beyond the argybargy between the Federal Government and the states that has occurred in the past, but it requires them to agree with our point of view and to move forward. AD: I’m sure everybody read all 642 pages of the Audit as I did. One thing buried in there is some fairly pointed criticism of cost-benefit analysis (CBA) and how it’s used. Does that imply that CBA will now have a diminished degree of influence over Infrastructure Australia’s view of the world? RM: Legislatively, we need to use CBA when it comes to business cases, but our commentary in the Audit was a sign that we are not afraid to also criticise ourselves. So, it’s not all on the sector to change, or on the states and territories. We, as an organisation, also need to evolve. We’re doing a number of things at the moment when it comes to the Assessment Framework, which is what business cases need to be developed in accordance with. It really does need to evolve. Infrastructure investment in Australia has evolved and changed in terms of improvements in transparency and accountability from the states, as well as the sophistication of business cases. The feedback we get from the jurisdictions is that we need to look at intangible benefits. We need to consider social issues. We need to consider strategic merit. The New South Wales Treasurer could talk from a New South Wales lens, but he can’t

talk from a Northern Territory lens, and their challenges are eyewateringly different. In remote, regional and rural Australia, their challenges are so different. And they don’t have the population density that we have in Brisbane, Sydney, Melbourne and Perth. So they would probably struggle to get a benefit-cost ratio above one if it was just pure CBA. So, it’s appropriate that we consider looking at that, including a review that we’ve commissioned from EY into the experience of jurisdictions as our ‘customers’. We’re doing our two-yearly review of the Assessment Framework, and we’re also creating a Remote Areas Working Group as part of this. So, just as some states and territories need to improve their business cases, we are also looking at how we can evolve our assessment of their business cases. AD: So, if CBA is marginalised to just one of a number of assessment tools for business cases, how do you retain the robustness that CBA provides? How can the taxpayer that you work on behalf of know that Infrastructure Australia is still giving the most pointed advice to governments? RM: The next iteration of the assessment framework needs to ensure that that robustness is maintained, and that the benefits outweigh the costs. But in some instances, you have to consider that the benefits might not be economic. They might be a strategic or a social benefit. We need to ensure that we can quantify those benefits in a way that’s really transparent for the public. AD: Economists can quantify it in a CBA; they can put a price on anything. RM: I’m sure that there are great examples around the world where this has been done, and it has been done in Australia. We just need to work with the sector to find out how we can do that better. In some ways, we do it in the Assessment Framework already. We pick up the impacts of climate change, among other things. We just need to evolve the Assessment Framework. AD: You’re now looking at the Australian Infrastructure Plan that comes out in 2021. What have you learnt in the last month, having published the Audit’s evidence base, and how’s that shaping your thinking on the Plan? RM: The timing of the Audit couldn’t have been better. And the most interesting thing about the feedback we’ve received is how welcomed it was, even with respect to the issues we didn’t shy away from. So, we haven’t had lots of people telling us that parts of it were wrong. Our inclusion of social infrastructure has been welcomed, as well as the geographic lens that we took, not a jurisdictional lens. We looked at fast-growing cities, smaller cities, remote and rural, then small towns and regional, and then Northern Australia. We’ve also received very positive feedback on the community-centred approach we took, which was around the

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user outcomes of cost, access and quality. The Audit identified 180 challenges and opportunities. It’s the start of a process. It’s the start of a conversation. What’s important now is to listen to feedback from the sector and capture that in the Plan. The Plan will be the list going forward of recommendations to all governments about what needs to change. One piece of feedback that we received was about the crowding and congestion report and modelling. When we put the Audit out, some of our Federal Ministers suggested that we didn’t pick up some projects that had been mentioned in the Budget. On that front, they’re right, we didn’t, because the modelling finished in September last year. But what this feedback highlights is that modelling is only as good as its inputs. And modelling has challenges at the moment – it doesn’t pick up changes in employment or densification. These are lessons for the Plan and future audits; we really need to look at modelling and its limitations. AD: There are 180 challenges and opportunities in the Audit. That’s a big list. The problem with a list of 180 is that it’s everything and nothing. Are there some key ones? Are there three or five that stand out for you as the biggest challenges or opportunities over the next 10 or 15 years? RM: One is about improving collaboration between state and territory, and at federal level, as well as better collaboration in the sector. This includes sharing experiences; for example, through post-completion reviews, which are only sometimes done and very rarely shared. Australia is in this huge infrastructure boom. We have to learn from each other and continue to improve for the next project. Another one of the things we call out is for infrastructure to meet community needs, and infrastructure for all Australians. We’re just not focusing on the four largest cities. We are all better when infrastructure across Australia works efficiently. And I think one of the special things about the Audit is that it calls out the importance of infrastructure as a joined-up whole.

Adrian Dwyer – Chief Executive Officer, Infrastructure Partnerships Australia Adrian Dwyer is the Chief Executive Officer of Infrastructure Partnerships Australia – the nation’s leading public and private sector infrastructure think tank. He was appointed to the role in March 2018. Mr Dwyer served as Infrastructure Partnerships Australia’s Head of Policy from 2011 until 2015, where he led major studies on road pricing reform and contracting and financing models, among others. From 2015 to 2018, Mr Dwyer served as Executive Director of Policy and Research at Infrastructure Australia – the Commonwealth Government’s statutory infrastructure body. Romilly Madew AO – CEO, Infrastructure Australia Romilly Madew AO commenced as Chief Executive of Infrastructure Australia in April 2019. Recently awarded an Order of Australia in acknowledgment


Romilly Madew AO

All forms of infrastructure need to work for the benefit and livability of our communities. It’s great to build a road or railway if it’s what’s needed, but what about the community at the end? And are we ensuring that the social infrastructure we’re putting in place is improving community outcomes in terms of economic productivity and quality of life? AD: I’m going to come back to my first question about your vision for Infrastructure Australia. If you look three years down the line, what does Infrastructure Australia look like, and how is it different to now? RM: The first thing is making our processes more pragmatic. I hope that the Assessment Framework is considered relevant, pragmatic and practical. I hope that it’s still robust and it doesn’t look like a tick-a-box exercise; that it’s a much more pragmatic process. The second thing is that we are relevant and helping to bring about reforms and investments that have been talked about today. I hope that reform is happening around Australia, and that it’s done in a collaborative fashion, in partnership with the sector and the jurisdictions.

of her contribution to Australia’s sustainable building movement, Ms Madew is recognised around the world as a leader and advocate for change in the property and construction sector. Prior to Infrastructure Australia, she led the Green Building Council of Australia for 13 years. Ms Madew holds Board positions with Sydney Olympic Park Authority and Chief Executive Women, and has sat on numerous ministerial panels. Her achievements have previously been recognised with national and international awards, including the 2017 World Green Building Council Chairman’s Award and 2015 International Leadership Award from the US Green Building Council. An Honorary Life Fellow of the Australian Sustainable Built Environment Council, Life Fellow of the Green Building Council of Australia and honorary fellow of the Planning Institute of Australia, Ms Madew has been named one of the ‘100 Women of Influence’ by the Australian Financial Review and Westpac, and is a National and New South Wales winner of the Telstra Business Women’s Award.


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Helping Australians for generations to come. We know that sustainability is about helping to make a positive impact. That’s why we’ve been recognised by Climate Bonds for innovation in green finance for Westpac’s Green Tailored Deposits1, and are the largest financier to greenfield renewable energy projects in Australia2.

Westpac Sustainability

Climate Bonds 4th Annual “Green Bond Pioneer Awards” 2 Westpac Sustainability Performance Report 2019 © 2019 Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714. WBDIGIDR_02802


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Westpac at forefront of sustainability thinking in infrastructure finance The private sector has a key role in combating effects of climate change and other threats to the environment.

Westpac Executive Director David Scrivener believes that Australia’s infrastructure boom can do more than build assets for the community – it can also quicken the country’s transition to a net zero emissions economy and elevate our global sustainability credentials. As Global Head of Energy, Infrastructure and Resources at Westpac Institutional Bank, Scrivener is passionate about the role of capital markets in driving sustainability outcomes in infrastructure, and encouraging greener projects that help the environment and community. ‘Australia has a once-in-ageneration opportunity to build infrastructure that will improve sustainability for decades to come,’ says Scrivener. ‘With innovative thinking in finance, we can help major

projects better address climate change and other environmental threats.’ Scrivener’s colleague, Roddy Adams, says sustainability can go further in infrastructure. ‘The biggest impact banks can have in this area is encouraging behaviours that make sustainability integral to projects. That is, using capital to incentivise sustainability at the project-planning stage, measuring environmental outcomes and reflecting that in a project’s cost of capital.’ Adams, NSW Head of Energy, Infrastructure and Resources at Westpac, believes the onus is on the private sector to drive environmental outcomes. ‘Strong growth in renewableenergy assets is a result of a privatesector response to developing market solutions for sustainable infrastructure.

The private sector found ways to reward projects that had better sustainability outcomes.’ Westpac’s sustainability leadership – and innovation in financing solutions for infrastructure projects – is timely given the current and growing pipeline. More than $123 billion of work has commenced since 2015, and more than $200 billion has been committed to future projects, according to Infrastructure Australia. It estimates that $600 billion of infrastructure investment is needed over 15 years to keep up with population growth.1 Infrastructure is the most significant contributor to greenhouse gas emissions, but progress to reduce them is inconsistent, says Infrastructure Australia. Transport emissions have increased by almost nine per cent

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since 2015, offsetting a three per cent decrease in energy-sector emissions. Long-term social, economic and environmental independence will add to infrastructure challenges and opportunities. For example, 40 per cent of vehicles in Australia are likely to be electric by 2040, creating implications for energy infrastructure. 2 Westpac has a key role in this transformation. The bank lifted its exposure to financial climate change solutions to more than $10 billion at 31 March 2019 – a year ahead of schedule – mostly in transport and renewable energy projects. Its target is $25 billion by 2030. ‘We urgently need cost-effective, low-carbon solutions across the economy, particularly in transport and energy, that address the imminent threat of climate change, and banks with ambitious targets to finance these solutions,’ says Scrivener.

Market-leading sustainability credentials

Scrivener says Westpac is ideally positioned to help Australia’s infrastructure sector capitalise on its potential to become a global leader in green projects. ‘Sustainability is part of Westpac’s DNA. We were an early mover in sustainability, and that focus is embedded throughout the bank as we help our clients transition to a net zero emissions economy.’ Westpac is the leading financier of greenfield energy projects in Australia, providing funding in FY18 for 14 new wind and solar farms that will power more than 1.5 million homes. It also facilitated and issued climate bonds and other green debt instruments in FY18, achieving strong progress of $1.3 billion towards its $3-billion target in 2020. They include Westpac’s launch last year of the world’s first Green

Tailored Deposit to be certified by the internationally recognised Climate Bonds Initiative. With a minimum transaction of $1 million, the Green Tailored Deposit is designed for medium- to long-term investors seeking investments that genuinely address climate change. Sustainability-linked loans – designed to incentivise and reward a borrower for meeting predetermined sustainability targets – are another focus. Westpac in July 2019 provided funding to Queensland Airports for its Gold Coast Airport Redevelopment. The $100-million loan is tied to achieving its carbon reduction targets as accredited by the Airports Council International program, and is the first of its kind taken by an Australian airport. These innovations add to Westpac’s infrastructure momentum. The bank supported more than $13 billion of transport projects in FY18, including the Melbourne Metro, Western Roads upgrade, High Capacity Metro Trains and Westgate Tunnel. ‘We expect this to grow substantially given the federal government’s commitment to $100 billion in infrastructure projects over the next 10 years, and similarly large plans in New South Wales, Victoria and other states,’ says Scrivener. Westpac was also an early funder of the WestConnex motorway project in Sydney and remains a key lender. Adams says Westpac’s sustainability focus was a reason he joined the bank in 2018, having held senior infrastructure positions over two decades. ‘If we want to build this country and leave assets that can serve our grandchildren, we must make our infrastructure more sustainable.’ ♦ To learn more about Westpac’s work in infrastructure, email David Scrivener at dscrivener@westpac.com.au. 1 Infrastructure Australia, ‘An Assessment of Australia’s Future Infrastructure Needs: the Australian Infrastructure Audit 2019,’ June 2019. p7 2 Ibid. p7

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Partnering to develop next-gen on-demand services Providing public transport customers with personalised on-demand solutions for their travels is fast becoming a reality in Australia. Take up of on-demand services continues to grow, as customers seek more personal, adaptive and technology-driven transport options. It is estimated that one in five Australians have used on-demand rideshare services in the last three months (Roy Morgan, 2019). Global mobility leader Transdev has recently announced a new partnership with Newcastle-based mobility tech start-up, Liftango, to develop on-demand transport solutions. In Australasia, Transdev delivers more than 145 million customer journeys a year and is recognised globally as a leader in delivering on-demand transport from first-mile and last-mile connections, through to point-to-point services for the public transport market. Transdev Australasia CEO Luke Agati says the partnership with Liftango reflects shared ambitions to improve connectivity and promote greater adoption of public transport services across Australia and New Zealand. ‘The partnership is an exciting opportunity to combine our shared strengths of innovation and mobility in order to provide a more personal and seamless experience for customers,’ he says. ‘The success of our business is built on strong local partnerships, and we are proud to be partnering with one of Australia’s most exciting local mobility start-ups in Liftango.’ Kevin Orr, CEO at Liftango, believes that the partnership will help Liftango take the next leap forward towards making public transport a convenient and flexible option. ‘Cities around the globe are combating congestion and commuter

issues, as our populations and urban density continues to grow. Further exacerbating the problem is the increasing demand for recent ride-hail solutions. We are still yet to understand the full impact of these services both on congestion and the public transport network,’ says Orr. ‘However, the convenience these services offer is quickly becoming the norm for commuters. ‘Our partnership with Transdev is already creating new opportunities to integrate on-demand and shared mobility solutions into existing public transport networks, which will, in turn, help improve the commute, keep costs down, reduce our overall carbon footprint and start creating the transportation the cities of tomorrow will require.’ The new partnership follows Transdev’s launch of an Australian-first, the On Demand ferry in Sydney, on behalf of the NSW Government. The On Demand ferry – a smaller, purpose-built harbour ferry that

connects Barangaroo to the Bays precinct – lets customers book a ferry for a pick-up time that suits them best via a mobile app. It aims to provide a fast, regular, on-demand connection as an alternative transport option for commuters and tourists linking to existing public transport services and destinations, such as the Sydney Fish Market and harbourside parks. This on-demand solution was delivered through a local partnership with technology provider Tranzer, who developed the mobile app to book the On Demand ferry. Through its global expertise, Transdev has identified that accessibility is key to aiding the adoption of on-demand solutions. Giving customers the choice and control of how to book their service has been critical to uptake. By partnering with a technology provider and leveraging its global expertise, Transdev is helping to make on-demand travel a reality for public transport and consumers. ♦

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you We are proud to transport 11 million people around the world everyday thanks to efficient, easy to use and environmentally-friendly services that connect people and communities. Our approach is rooted in long-term partnerships with businesses and public authorities, and in the relentless pursuit of the safest and most innovative mobility solutions. We are a team of people serving people, and mobility is what we do.

If you are interested in becoming a Journey Maker with Transdev visit: www.transdev.com.au/join-our-teams

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Infrastructure end users – panel discussion

L–R: Brian Morris, Marco Assorati, Amy Brown, Natalie Malligan and Rosemary Sinclair AM

Infrastructure end users Key points: • • •

End users should be a constant focus in decision-making. Consumer expectations and levels of participation are changing rapidly. Cross-sector collaboration through shared data is critical moving forward.

Panellists: ► ► ► ►

Marco Assorati, Executive Director Asia Pacific, Salini Impregilo Amy Brown, Deputy Secretary, Strategy & Delivery, New South Wales Department of Premier and Cabinet Natalie Malligan, Head of Uber Elevate, Australia, Rosemary Sinclair AM, Chief Executive Officer, Energy Consumers Australia

Moderator: ► Brian Morris, Division Director, Macquarie Capital



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Brian Morris (BM): Infrastructure end users are critically important. At the end of the day, they’re the people using and paying for the infrastructure we build. In my role at Macquarie Capital, I work with many large energy users, and Chair the Energy Users Association. I always remind participants that the end users are really the reason we’re in business. Infrastructure assets have very long incubation periods and delivery time lines. We’re often making decisions and investments that our end users will have to live with and pay for over a long period of time. So, we need to make sure we get it right. A major question in this space is always how we maintain a consistent focus on the end user. To start, can each panellist provide a brief comment on how expectations of consumers are changing across the sectors that they represent – transport, utilities and social infrastructure? Rosemary Sinclair (RS): It’s not only the expectations of consumers that are changing in the energy sector, but it’s also their participation in the sector. Australia has one of the highest uptakes of solar on rooftops, and that is driving enormous change in our energy market. Consumers have jumped into this market for a range of reasons. One reason is that the energy price outcomes over a decade have become unacceptable compared to income growth and the consumer price index. The energy sector has a long and proud history of engineering, to which we added economics about 25 years ago. Now we’re in the middle of what is reasonably described as a revolution, where we’re adding consumer expectations to the mix. When we think about energy infrastructure, we now must look at the hot water service, the air conditioner, the pool pump, the electric vehicle, the solar panels on the roof, and the battery in the garage. Our conception of infrastructure in the energy sector is changing dramatically. BM: Natalie, you come from a very customer-centric organisation. How do you see the landscape changing? Natalie Malligan (NM): Consumer expectations in the transport sector are changing in three key ways. The first is the desire for on-demand services. Uber was one of the first to offer the on-demand app experience. It’s now moving into the public transport sector, evidenced by the New South Wales Government’s trials for on-demand bus services, for example. The second is the seamlessness of transport. Mobility as a service is becoming more prevalent, and it’s something that consumers are focused on. This means modes of transport being integrated so commuters don’t have to think about each individual part of their journey. For example, ‘I’m going to get an Uber to the train station, then I’m going to have to

itizens or customers C are expecting more and more of government and of infrastructure than ever before

check the train timetable and work out what train I’m catching and how to pay for it’. Consumers expect that information to be available on one platform, creating a seamless transport experience across all modes and providers. The third change is transparency. Consumers are no longer happy to stand at a bus stop and hope that a bus is going to turn up. With Uber, you can track where your ride is, how far away it is, and the route the driver’s taking. Consumers are now expecting this across all modes of transport. If you look on Google Maps in Sydney, for example, you can often see where your bus is or how full it is. People want their journey to be as seamless as possible. BM: Amy, your customers are the people of New South Wales – how are their expectations changing? Amy Brown (AB): Yes, I have a lot of customers. Citizens or customers are expecting more and more of government and of infrastructure than ever before. We’ve moved beyond the functional, where a school is there to keep the sun and rain off the kids as they learn their fractions, or where transport is just to get from A to B, to thinking about the role of infrastructure in our culture, behaviours and experiences. Schools are now expected to be the beating heart of the community. A metro ride is supposed to be ‘wonderful and magical’, and integrated station development is meant to have high amenity and even night-life. I’m in charge of coordinating the New South Wales Government’s response to the parliamentary inquiry into the night-time economy. The principle behind that is moving from the dangers of a drinking culture into something more positive and productive, focusing on the economic benefits that come from Sydney having a night-time economy. This places pressure on the role of infrastructure. It involves transport, including Uber and the light rail to move people around and get them home safely. It involves public space, retail space, art spaces, museums or art galleries being available during the day, and by night transforming into small bars and other licensed premises. One issue for us is when we don’t engage with our users or our customers properly; for example, the ‘lockout laws’. When we get it wrong, government certainly pays for that.

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BM: What is your perspective on changing customer expectations in the construction space? Marco Assorati (MA): Constructors have always been far away from the end users. It’s not like that anymore. There is a lot of participation and integration in the process of thinking, developing, designing and delivering infrastructure – so it is critical for us to understand the needs of end users. The real challenge is in delivering infrastructure that is futureproof and adaptable to the needs of the current generation, and the generations to come. For example, for me it is important to have parking spaces, but my son may need drone paths, and my grandson may need something completely different. We need to be able to deliver infrastructure that can be transformed and adapted to suit the needs of generations that aren’t alive yet.


think because they’re homeless, kids, or one of 13,700 people sitting in our prisons. These customers have more touchpoints with government than anyone, but we don’t ask them how we can improve our services. You’ve got to think outside the box when it comes to customers. I’m also coordinating an inquiry into the ice epidemic. The biggest issue with drug and alcohol treatment isn’t those customers in metro areas within 10 kilometres of services; it’s those in regional and remote communities. The question becomes, how do we reinvent infrastructure to get services to them? Is it online? Is it digital? If they’re travelling through our prison system, how do we make sure that our services travel with them? That’s some of the ‘out of the box’ thinking I do in my role. If we don’t do that, we’ll just keep surveying people who are already well-represented.

BM: Amy, you work in a customer segment that has a different customer relationship and a diverse customer base. What do your customers look like?

BM: And you’ve got many touchpoints with your customers – one person could be dealing with multiple departments. How do you manage that, and who’s ultimately responsible for them?

AB: The word ‘customer’ in and of itself implies that we care what they think. The New South Wales Government has made significant inroads in terms of gathering information and listening to our customers who are well-informed, engaged users with high levels of advocacy. But who are we not surveying, and who are we not listening to? How do we engage with customers who don’t have advocates? Those people with complex needs and vulnerabilities who can’t tell us what they

AB: I think when people have particularly complex needs, then they’re individuals who need bespoke service solutions. We really need to stop and think through what it is they need, and work with them. They’re usually not people who are likely to reach out for access to services. BM: Natalie, Uber has very close proximity to its customers and understands them well. Is that what’s behind Uber’s ability to innovate and stay ahead of changing expectations?


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Infrastructure end users – panel discussion

NM: There’s a few different aspects to that. We have data coming out of our ears, and so many channels through which we obtain feedback from riders and our driver partners. The challenge is, how do you turn that into something meaningful? How do you inspire your staff to do something about it? There are numerous things we’ve done that have really driven change in this space. The first is one of the metrics that we call a ‘magic trip’. So, we can pull out the relevant metrics and ask, what does a ‘magic trip’ look like for our customers? It means your car showing up in a short amount of time and when we said it would show up. It means not having to walk a long way to find your car. It means that you rated your driver partner highly and there were no complaints. We’re feeding different data points into a bigger metric that means something to our staff. What are the biggest reasons people are not having ‘magic trips’? How do we fix that? If you look at it in aggregate, you can start to see the patterns. The second is inspiring staff to be customer-obsessed. There are many ways to do this; one is to use the technology. All our staff are users of Uber. Everyone gets credits every month to use Uber so they can experience what our customers

experience and provide feedback. When a staff member uses the Uber app, they can report any issues directly to the engineering team. Instead of just forgetting about it, we’re making it easy for staff by having a direct line. We’re also making sure they’re close to the front line – getting staff into our driver service centres to understand the experience so they’re not just looking at numbers on a screen. We also have an employee driver program to help employees to understand what our drivers experience. These are important ways that we maintain proximity to our customer to keep our finger on the pulse. BM: Rosemary, what does a ‘magic experience’ for an electricity consumer look like? RS: I’ve been thinking of all the opportunities in the energy sector for consumer-focused experiences around interaction. This is an important trajectory of change in the energy sector. Historically, the energy sector has been one-way traffic with consumers treated as passive elements at the end of it. Consumers come to the energy sector often with experience from Uber and Airbnb, where they are used to trading their assets into a market to generate income. For example, the front seat of their car for 20 minutes – that’s what Uber offers L–R: Amy Brown and Natalie Malligan

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L–R: Natalie Malligan and Rosemary Sinclair AM

consumers. It gives them that platform as a car owner or driver. Then, consumers come to the energy sector with these expectations of creating value in their own assets, and they meet a sector that’s not ready. That’s where a lot of work needs to be done in terms of information and communications to allow consumers to participate. BM: Marco, how are you connecting with your customers and understanding their preferences? What’s your model for doing that? MA: The construction sector is not as close to the customer as other services are. But the way that infrastructure is delivered now has reduced the gap, and there is much more collaboration. We also receive data from customers through front-end services. For example, data from Uber can be used by constructors to understand how to better develop infrastructure. Salini Impregilo is currently building a bridge and planning to use sensors that will not only give us information about the traffic, but also help us to understand how the structure is behaving so we are able to repair it or rectify it as we go. It also gives us some insights when building future bridges. Data is central to the way we build and deliver infrastructure, and it helps us to be closer to our customers. BM: We’re in this digital world where consumers who have access to real-time information now have a lot of power, and it’s easier for consumers to share their preferences on what they


like and what they don’t like. What are the consequences of that in each of your industries? MA: We can’t ignore end users. Infrastructure that does not consider the needs of the end user is failing. Consumers are central to what all of us in this industry do. BM: How does this new power that consumers have change the government’s view? AB: I’m wondering how much power and influence our average farmer feels that they have right now. Not all infrastructure users have power and influence. For example, there are some school canteens, mostly in lower socio-economic areas, that do not have the facility standards to get a licence to serve fresh food. So, what are the users of the canteens, mostly kids who are at risk of poor health outcomes, going to be able to do about that? Or consider prisons. Currently, there are 300 children in detention in New South Wales correctional facilities – half of whom are on remand. That means they haven’t been convicted of anything. But we put them there because we believe that there’s nowhere safe for them to go. It’s a strange way to solve that problem. The outcome of this is that they assert their power and influence by climbing up on the roof of correctional facilities. When I speak to the correctional officers, all the barbed wire, curved roofs and infrastructure solutions aren’t as effective as


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what the correctional officers usually end up doing – having a sausage sizzle. It makes them climb down from the roof a lot earlier, right? Did we think to ask that question, or did we just deploy some over-the-top infrastructure solution? I don’t know the answer to that. What I’m saying is that we assume we know the answers, but often we’re not actually asking the right questions of the right people. BM: Natalie, your perspective? NM: Obviously as a commercial operation, the customer has all the power. That’s something that Uber has always been focused on. But Uber is a two-sided marketplace, so we can’t just focus on our riders; we have to focus on our driver partners, as well. That’s a lesson that Uber has learnt along the way. But we know now that you must keep your customer front of mind on both sides in the marketplace, or your commercial operation will suffer. BM: Rosemary, from an energy perspective, how are you seeing it play out? What are the pitfalls if we start to ignore the power of the consumer? RS: In the energy sector, there’s no going back. There is now huge political risk that’s been created in not meeting consumer expectations. The result of this, unfortunately, is this playing out in a series of relatively uncoordinated interventions in the market, which create further uncertainty and difficulty.

e can’t ignore end W users. Infrastructure that does not consider the needs of the end user is failing. Consumers are central to what all of us in this industry do

The challenge is in transitioning away from a very small number of large things, mostly in remote places, to a very large number of small things much closer to the customer. So, the customer is exercising power by buying technology, and by making their views known politically in terms of prices – and that’s not going to change. We’re about to see the introduction of the consumer data right in energy, which will give further power to the consumer regarding choice. We’re starting to see a response from industry to those consumer pressures. The sector got together and established an extremely interesting initiative called the

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L–R: Brian Morris, Marco Assorati, Amy Brown, Natalie Malligan and Rosemary Sinclair AM

Energy Charter. The early signs are promising, as we’re getting indications that it is refocusing the whole sector on outcomes for consumers, and that’s a very good thing. BM: We all know that the rooftop solar revolution is taking place at rapid pace – we’re roughly installing the size of a Liddell Power Station every year in terms of capacity across the nation. What do you think are the experiences in energy that other infrastructure sectors could learn from? RS: There are two main lessons. The first is in how we got here, which was through a very difficult and disconnected policy context. Energy is a reserved power for state governments under the Constitution, but the international treaties power, the interstate commerce power and the corporations power are constitutionally federal powers. This leads to a messy policy context resulting in there being no long-term coordinated vision for a sector that enables important outcomes, like comfortable homes and competitive businesses. This messiness occurred at the same time technology changed profoundly. This has meant that costs have come down, and barriers to access and installation have been reduced, which has enabled an opportunity for consumers. Secondly, what we’ve learnt is that consumers see value where others might not, and that’s a key lesson for other infrastructure sectors. There’s significant change in terms of consumer and community attitudes to infrastructure. For the last 40 years in energy, we’ve used economic models that are terrific in many senses, but they’ve taken people in the direction of user preferences and individual utility


user-pays, but along the way we’ve lost the notion of the value of shared assets. For example, the value of electricity networks is a big discussion topic for the community. The network is not close enough to me as a consumer to be getting any value, and if I put solar panels on my roof and I’m generating my own electricity, then why should I be paying for that great big grid over there? There are some lessons out of that in terms of creating value for individual consumers. BM: We do need to talk about data – we’re all flooded with data. I know this is something you’re passionate about, Amy. AB: I have at my disposal the New South Wales Their Futures Matter (TFM) Human Services Data Set, which draws together service usage of 2.3 million children and young people born after 1990. It includes every government service that they’ve used, including welfare at the state and Commonwealth level. The data shows some interesting things – seven per cent of that cohort uses 50 per cent of the services. The most vulnerable cohort will cost us about $2.3 million over the course of their lives. We can use this data powerfully. It enables us to do things like detect vulnerability at birth using an algorithm. We do this by using indicators that are associative and that correlate to risk at birth. This includes things such as whether the mother smoked while she was pregnant, whether she was Indigenous, whether the family’s in public housing, whether the timing of the first antenatal appointment was after 16 weeks of being pregnant, and whether a parent had to access drug and alcohol services or mental health services. We can predict the likelihood, based


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Infrastructure end users – panel discussion

on certain indicators, that a kid will end up at risk of significant harm or worse.

NM: We obviously must be very cautious. Everything we analyse we try to do anonymously. We have strict protections

The question then becomes, what do we do with that? Sit in the ethical discomfort of that. It is critical that we have an open conversation with the community about what we can and should do with their data.

around who can access what and how data is stored.

For instance, you and I are comfortable signing up to Facebook or a credit card, knowing that things might happen to our data and we accept that. But what about facial recognition of kids as they walk into school so we know they got there safely? What about facial recognition of everyone in the CBD to try and mitigate terrorist activity? What about linking the fact that a mum must go to a healthcare appointment as a result of domestic violence to her child, so it’s on their record forever? These are the types of uncomfortable questions that we need to work through as we get more and more powerful data sets.

modes of transport, we need to be linking private and public

BM: You’ve touched on an interesting topic there – the trade-off between using data for good, while protecting the consumer rights. That must be something Uber comes up against every day.

The biggest challenge the transport sector is facing going forward as we move more and more to mobility as a service is how we share data while protecting privacy. If we’re linking data. Governments are already heading down that path. For instance, Transport for NSW has an open-data policy, which is helpful for integration, but there are challenges. It’s going to take strong partnerships between government and the private sector to work out how to do this in a way that protects privacy while the data is still useful. BM: How comfortable are energy consumers with having their data shared? RS: There’s been a big focus on this through regarding consumer data rights in energy, and people are becoming aware of the issues with energy data, but the value of it is very significant.

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The data being collected needs to be sifted and analysed, because there are very significant uses in informing system-level decisions. In the energy sector, we’re just beginning to understand the nexus between the data that we need and the data that we have. The energy sector has a history of resolving whatever the problem is by building a lot more capacity that consumers just pay for. Right now, consumers are saying, ‘We’ve had enough of that approach, we want you to analyse and think about that data, and be much more careful about where those dollars are spent’.

NM: If we think about end users being more involved, where people are becoming the providers themselves, we need to double down on how we create new regulatory environments to enable that. For instance, the future of work – how do we allow for that flexibility of people being able to work when they want and be an independent contractor, but at the same time have the protections that they need? The future of work will be a very important focus over the next few years.

BM: How do you see the future trends in your industry developing?

AB: For us, it’s working out for citizens their touchpoints with government, and how we can get as many positive interagency services at that touchpoint to improve their lives.

RS: I think there are three vectors, if you like. The energy sector is going from a mass approach to consumers to an individual approach. We’re moving from large passive technologies to more modular and consumer-based technologies, and we’re going from a command and control mindset to more competition and more choice for consumers.

Marco Assorati – Executive Director Asia Pacific, Salini Impreglio Marco Assorati is Operations Regional Director, South East Asia and Oceania, and is in charge of projects and development in the region, residing in Sydney, Australia, since June 2015. With over 20 years’ experience, and as a qualified civil engineer, Mr Assorati has undertaken roles varying from Company Director and General Operations Manager, managing concurrent multimillion-dollar projects in Nigeria and Ethiopia, to Delivery, Business Development and Tendering activities in Australia, New Zealand, Malaysia, Thailand, Papua New Guinea, Vietnam, Laos, Singapore, Indonesia and, most recently, D&C metro train line, bridging, tunnelling and stations across Australia. Amy Brown – Deputy Secretary, Strategy and Delivery, New South Wales Department of Premier and Cabinet Amy Brown is Deputy Secretary and head of the Strategy and Delivery group at the New South Wales Department of Premier and Cabinet – a group formed to provide expert commercial, strategic and economic advice to the Premier on major and complex whole-of-government policies, programs and projects. Ms Brown is passionate about delivering real outcomes that improve quality of life, provide access to opportunities for individuals and deliver value for taxpayers. Prior to joining the Department, Ms Brown was a Partner in the Sydney office of PwC’s Infrastructure and Urban Renewal Business, with a practice that focused on social infrastructure and housing. She’s also worked in infrastructure finance at the New South Wales Treasury, and as an infrastructure lawyer in a number of top-tier law firms. Natalie Malligan – Head of Uber Elevate, Australia Natalie Malligan was recently appointed as the Head of Uber Elevate for Australia, where she is responsible for making Uber’s ambitious urban aviation plans a reality. She previously worked in Uber’s ridesharing business as the Head of Cities for Australia and New Zealand. Prior to joining Uber, Ms Malligan was a Manager in Bain and Company’s Private Equity practice in San Francisco and Sydney. She holds a combined Bachelor of Commerce and Laws from the University of Sydney, and a Master of Business Administration from Columbia University in New York. Brian Morris – Division Director, Macquarie Capital Brian Morris is part of Macquarie Capital’s Australian Infrastructure and Energy Team, based in Melbourne. Mr Morris has 30 years’ experience


MA: From a constructor’s perspective, historically we have not used enough available data. This is something that is changing. We need to consider how we can shape the future in a flexible and futureproof way by utilising that data.

within the energy sector, and has extensive energy market origination and energy trading experience, including renewable Power Purchase Agreements (PPA). Mr Morris has a deep understanding of energy financial markets, and has worked with large energy users on financial and physical grid connections and behind-the-meter energy management solutions. Prior to joining Macquarie, Mr Morris worked at Schneider for seven years, where he led the Energy and Sustainability Services business in Australia, a diverse and profitable team of 75 staff focused on improving the sustainability and energy productivity of commercial and industrial sector clients. Mr Morris was a Founder and Director of Creative Energy Solutions from 2003 to 2010, the first specialist energy adviser to be awarded an Australian Financial Services License. Mr Morris currently sits on the Board and is Chairman for the Energy Users Association of Australia. Rosemary Sinclair AM – Chief Executive Officer, Energy Consumers Australia Rosemary Sinclair is the CEO of Energy Consumers Australia, a company established in 2015 by the Council of Australian Governments (COAG) Energy Council of Ministers to strengthen independent consumer advocacy on national energy market matters of strategic importance and material consequence for energy consumers, in particular household and small business consumers. Energy Consumers Australia focuses on the long-term interests of consumers of energy with respect to the price, quality, safety, reliability and security of supply of energy services. Ms Sinclair is a Director of CPA Australia and a recent past Member (part-time) of the Australian Communications and Media Authority. Ms Sinclair has many years of senior large-scale operations, communications and strategy experience in business and government across telecommunications, media and education. Ms Sinclair has held a number of Directorships on unlisted company and notfor-profit Boards, both in Australia and internationally. Ms Sinclair received the Order of Australia Award in the 2018 Queen’s Birthday Honours List. Ms Sinclair has degrees in Arts, Law and Business, and holds a Master of Commerce from the University of New South Wales. Ms Sinclair is a qualified CPA and Fellow of the Australian Institute of Company Directors.


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WaterNSW planning for the future By Andrew George, Executive Manager Water Solutions and Market Strategy, WaterNSW

With regional New South Wales facing one of the worst droughts on record, public attention has turned to infrastructure solutions to improve water security. Whether it’s new dams, more pipelines, or resurrecting the 1930s Bradfield Scheme, there has been no shortage of ‘silver bullet’ ideas to drought-proof inland communities. While this debate is welcome, every good water supply planner knows that it’s better to plan before, rather than during, a crisis. When WaterNSW was created four years ago as the state’s new bulk water provider and infrastructure authority, one of its key tasks was to develop a strategic framework to guide infrastructure investment – something that had been missing in New South Wales since the 1970s. After two years of work and customer consultation, WaterNSW released the 20 Year Infrastructure Options Study (rural valleys) last year. This filled the void in long-term strategic planning, and provided exciting opportunities to identify and address customer needs in rural areas and across town water supply, agriculture, and environmental sectors. WaterNSW assessed hundreds of potential options in the regulated river catchments across rural New South

Blowering spillway

Wales, incorporating agricultural trends, population changes, climate variability and demand fluctuations. It then identified the gaps in meeting the future state expected by its customers and their communities. Preferred options were identified to address these future gaps, which invariably focused on improving water availability, drought resilience, flexibility in river operations, and community and environmental outcomes. Options included new and augmented dams, regulators (gated weirs), pipeline networks, and more innovative solutions, such as managed aquifer recharge projects and underground dams. We all know that the Murray– Darling Basin has a cap on extraction. Our thinking is focused on making the available water last longer and on finding ways to ‘add more taps’ to the basin. That may include inter-basin transfers to better manage flooding and to bring new water into the basin – without impacting coastal environments. Although many of the larger infrastructure projects have long lead times and may not provide shortterm benefits during this drought, it is important to continue this work so they’re in place for the next drought. We also need to have a more meaningful conversation about how we value and use water in our regional and urban environments. Greater leadership and focus are required to reduce our demand and move away from a ‘single use of water’ mindset.

Andrew George, Executive Manager Water Solutions and Market Strategy, WaterNSW

Addressing our supply gaps must be balanced with doing more on water conservation and efficiency. Water policy and planning is complex, particularly in the Murray– Darling Basin. There is a proliferation of agencies and organisations, both public and private, that have a role to play in setting policy and planning solutions. In that crowded landscape, there’s a lot of competition to promote good ideas, obtain government support and then secure what’s available of limited funding to undertake the studies required to prove project feasibility, and then, separately, construction. The solutions and investment required to make the step change improvement in our water security and livability requires political and bureaucratic courage. As an industry, we have the solutions. There is no doubt that some are costly. But when governments are pouring billions of dollars into road and rail projects, one has to ask what value and priority we really place on our precious water resources and regional communities. ♦

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Improving the availability of water resources that are essential to the people of NSW. We are a state-owned corporation with our own enabling legislation and board of directors. Our responsibilities include: •

Source water protection

Bulk water supply

System operations

Infrastructure planning, delivery and operation

Customer water transaction and information services

Our assets include 42 dams, hundreds of weirs, regulators, pipelines, and the largest surface and groundwater monitoring network in Australia.

As Australia’s largest water supplier, we oversee infrastructure projects, innovation and investments that improve the availability of water for the people of NSW. Some of our recent and planned works include: •

Wentworth to Broken Hill pipeline: We recently completed a 270 km pipeline with a $500 million investment strategy, to provide long-term water security for Broken Hill. Keepit Dam post tensioning: one of the largest post tensioning anchor projects in Australia to improve dam safety compliance. Warragamba Dam raising: a project to complete the detailed concept design and Environmental Impact Statement to raise the dam by about 14 metres for flood mitigation capability.

WaterNSW has developed a 20 Year Infrastructure Options Study (rural valleys),which provides a strategic assessment of potential infrastructure options to meet level of service issues in our regulated valleys. The study provides planning context for our long-term operation and future development of regulated bulk water supply infrastructure. It continues to be developed with customer input, technical assessment and cost-benefit analysis. Find out more and access the study at waternsw.com.au/20YIOS.

WaterNSW is playing a vital role in extending the supply of water for critical human needs during the worst drought on record in parts of NSW. Building upon our ground-breaking long term 20 year IOS, our preparation for intensified drought impacts in the coming summer season includes dedicating increasing resources to deliver on a range of emergency infrastructure projects. These projects aim to extend water supplies for as long as possible for communities and land-holders in the worst-affected regions of NSW, whilst building resilience for those communities in future droughts.



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L–R: Richard Watson, Lisa Tobin, Rachel Noble PSM, Mike Mrdak AO and Berin Lautenbach

Cybersecurity Key points: • • •

As the use of technology grows and interconnectivity increases, cybersecurity risks are emerging for the infrastructure sector. Cybersecurity involves the confidentiality, availability and integrity of an organisation’s data. Cybersecurity should be considered when building new assets and services, as retrofitting is complex and costly.

Panellists: ► Berin Lautenbach, Chief Information Security Officer Asia Pacific, Telstra ► Mike Mrdak AO, Secretary of the Department of Communications and Arts ► Rachel Noble PSM, Head of the Australian Cyber Security Centre, Australian Signals Directorate ► Lisa Tobin, Group Executive Technology, Transurban

Moderator: ► Richard Watson, Lead Partner APAC Cybersecurity Risk Advisory, EY


Richard Watson (RW): Welcome, panellists. I’m sure all of you would agree that, at both a personal and organisational level, we’ve got a strong interest in cybersecurity. As new technologies and greater connectivity begin to change the way that infrastructure assets and services are managed, it creates great opportunity, but also great risk. We hear frequently about the endless data coming out of our ears, and while that is an opportunity, there are concerns around privacy. As the line between information technology and operational technology begins to blur, major infrastructure is increasingly connected to, and controlled by, the internet. One could argue that we have a little bit of catching up to do on the topic of cybersecurity. So, let’s discuss this now, and perhaps I’ll start by asking each of you to spend one minute


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talking about what cybersecurity means to you and to your organisation. Lisa, let’s start with you. Lisa Tobin (LT): Essentially, cybersecurity is an intrinsic part of how we operate our business now, and it is increasingly becoming the mode of operation for all companies. It’s no longer something that just the tech guys worry about in the backroom. It’s how we go to market. It’s how we plan our services. It’s how we make sure that our roads are safe every day. It’s how we make sure that the private data of eight million customers is kept protected. And it’s how we make sure that the people taking the one-and-a-half million trips on our roads every day can rely on the information that’s given to them so they can arrive safely at their destination. It really is blended across every part of the operations across our business. RW: Rachel, what’s your perspective? Rachel Noble (RN): I head up the Australian Cyber Security Centre, which is part of the Federal Government. My organisation sits within the Australian Signals Directorate, which is charged with generating foreign signals intelligence. This means that we collect intelligence against other countries. The Cyber Security Centre has the mission to understand how to defend Australia, our private sector, government and individuals alike from people like us. Essentially, we are both the poacher and the gamekeeper in that regard. So, cybersecurity is a huge part of our lives within the Federal Government. I think

I’ll have some opportunity a bit later to tell you about the scale of the issue. But to give you a teaser about just how serious this issue is: we opened a new portal for people to report cyber incidents on 1 July 2019. The portal has only been open for a few months, and we now get one report every 10 minutes. RW: Interesting. We’ll look forward to hearing more about that. Mike, perhaps you could share your perspective? Mike Mrdak AO (MM): It is crucial to understand just how much digital connectivity now underpins our activities, both personally and, importantly, as a business. You’ve got to remember that less than 20 years ago, about 15 to 18 per cent of Australian businesses were on the internet. Today, 96 per cent of Australian businesses are on the internet, and a large portion of our transactions are now taking place in a digital environment. About half of our gross domestic product is now underpinned by digital technology; however, what the internet also brings, as both Lisa and Rachel pointed out, are vulnerabilities, and that’s taken us some time to understand. There are three crucial things that we’re going to have to think about for all of our businesses. Firstly, how do you protect the integrity of your data? Secondly, how do you protect the availability of your infrastructure in an environment where you depend on digital connectivity and the vulnerabilities that come with it? And thirdly, how do you ensure that your data is accurate and is not being manipulated by others? So, confidentiality,

Rachel Noble PSM

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L–R: Richard Watson, Lisa Tobin, Rachel Noble PSM, Mike Mrdak AO and Berin Lautenbach

availability and integrity are the three key elements that are going to be critical drivers if business is going to survive in a digital environment. RW: I couldn’t agree more. Berin, perhaps you’ve got a point of view from Telstra? Berin Lautenbach (BL): I’m not sure I can add much to what’s already been said. The other panellists have given us a nice definition. For me, it’s really simple. We have – to Mike’s point – this huge reliance on technology, systems and data, and there are all sorts of bad things that can be done to businesses and people through the technology and data that those people rely on. My job is to try and make sure that those bad things don’t happen. It’s nice and simple for me. RW: Rachel, that’s your job, too, but with a national mindset. Perhaps you can share with us where threats are coming from. Is it other countries? Criminals? Activists? What are the risks that are out there? RN: It’s all of those, and that’s the challenge. I think that for critical infrastructure, probably the greatest threat is from foreign governments. They are well-resourced, highly motivated, and very persistent and patient about getting access to the information that you have. They’re motivated by political gain, economic gain and competitive gain, and, during a time


of conflict, they can also pre-position themselves to be able to seriously disrupt the proper functioning of our country and our infrastructure in a way that might create chaos and challenges for us. So, foreign governments are very much at the high end. Unfortunately, though, there are other actors – there’s a lot to be gained for criminals in getting access to data and information, and we see them do it at all levels. [It ranges from] criminals [who] may work to steal credit card numbers to sell on the dark web, all the way through to more sophisticated sorts of operations. Cybercriminals are primarily motivated to make money – just like regular criminals usually are – and they will snatch and grab, just like in real life. The thief will grab your handbag of data, take that handbag away, and then sift through it later and work out if there’s anything useful in there that they can sell or make money out of. There are, of course, also issues of motivated groups, extremists, and even terrorists who will be trying to create disruptions in a way that draws attention to their issue or the message they want to sell, as well as just doing damage and harm. There is a lot you can do to deal with these threats, and our job is to give folks a lot of advice about different risks and strategies.


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The best strategy is to heighten the barriers to entry for these actors to make it harder for them to get into your networks. Also, be thoughtful about the data and information that you most need to protect. In the same way that companies would think about their businesses from a risk-management point of view, they should also make sure that they have the proper controls and investment to protect the crown jewels. RW: Lisa, it might be useful to turn to you now, with your commercial hat on. It seems to me that the threat in the critical national infrastructure space is ever-increasing. We’re also starting to see regulation introduced, which would suggest the same. How real are the risks, from your perspective, in the critical national infrastructure sector? LT: It was a great set-up by Rachel. The threats are very real. It is technically and definitively an operational risk for our business. It sits high on our risk register, which means that it is monitored 24/7. It means that it’s reported to our board frequently. All of this also means that we take a normal risk framework. It’s something that needs to be monitored constantly, because the environment is changing. It’s something that we need to look to mitigate with tools, people and process. It’s something that we need to practise and prepare for, because most companies take the view that it’s about when, not if, an intrusion will happen. So, we spend a lot of time focusing on desk exercises, planning run sheets, and working out how we will respond and adapt when an intrusion happens. That includes working with state governments and doing joint exercises. So, it’s really about making sure that we have a network or a mesh of protections, not just within our own company, but beyond. We’re monitoring, we’re preparing and we’re also putting a significant amount of our technology investment into making sure that we’re constantly updating our tools – everything from the boring things about patching, to our new tools, new partners and new filtering systems – to make sure that we are aware of what’s going on in the environment. So, to explain a little bit about what cybersecurity means practically. Firstly, I think Rachel did a great job in explaining why it’s so real for us, because there’s enormous financial advantage and enormous informational power to be gained. Our company’s a little bit of a hybrid, not just pure infrastructure, but as I mentioned before, we have eight million customers. We discussed earlier the merger between corporate IT and operational technology, and we’ve had to face up to that, and we’ve been working on that merge for a number of years. We run what’s called a CSOC – that’s a cybersecurity operations centre. So, we have a group of people and tools to make sure we’re monitoring our cybersecurity. We also partner with a global security player and leverage its 24/7 global CSOC to make sure that we understand threats that might be emerging but may not have hit us yet, and that we

verything that you can E do in cyber has come from the real world. Crime, espionage, damage – all of those kinds of things

understand what’s going on in the broader market. We’ve seen a rising incidence of attempted and successful intrusions into the infrastructure space. To give you an idea of what that means, in the last year, we flagged more than 180 billion events as issues that we needed to understand. Our intrusion monitoring systems, as well as our filtering and alerting systems, cut that 180 billion down to 11,000. Those 11,000 potential events went to an analyst who then worked with our security partners to work out what happened, or what the potential risk was. One thousand of those ended up as incidents where we needed to take some action, whether that was more patching, a different solution, engagement with our upstream/downstream partners, advice to our customers or protection of our staff. Those activities are going on all the time. And why do we do that? We do that because we have 30 kilometres of tunnels, 110 kilometres of open managed motorway, and more than 100,000 pieces of technology on those assets. We also have 18 safety systems, control systems, and systems to make sure we know where someone is and how we can keep them safe on the roads. So, from my point of view, every one of those pieces of technology is a potential intrusion point. It’s a full-time, 24/7 effort to make that work. RW: You did a really nice job there of explaining how this concept of big data and data analytics can be applied to turning 180 billion events into 1000 actionable items. And that’s a trend in cybersecurity these days. Berin, thinking about the different groups of people we have in this room, in the infrastructure ecosystem, including government and systems operators, what are the possible consequences facing us if we don’t get cybersecurity right? BL: Well, where to start? The first thing I’ll say is, my predecessor, Mike Burgess, who now runs the Australian Signals Directorate, used to say, ‘There’s nothing new under the sun when it comes to cyber’. Everything that you can do in cyber has come from the real world. Crime, espionage, damage – all of those kinds of things. And it’s actually quite simple in terms of what damage can be done. Just look at history, at the things people have done to each other. And there’s probably

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hen you’ve got W half of the economy underpinned by digital technology and a system goes down, it doesn’t take long before a business and its customers start suffering real costs of downtime

a way to do that in the cyber world now. The problem is that people haven’t realised just how possible it is. If I look at my industry not just as the telco industry but more broadly as cyber, we, as an industry, very much focus on data and whether we have secured the data properly. We look at whether there is any risk of data leakage, and all those kinds of things. And don’t get me wrong, that’s terribly important, but the world is moving very fast into physical, real-world impacts from cyber going wrong. The infrastructure sector sees it possibly more than most. There are all those nightmare scenarios we all talk about; for example, imagine if the power grid got hacked. Not that long ago, that was something we thought you might read about only in a science fiction novel, and now you look at it and think, I can see how that could happen. And what’s the potential impact of that? Use your imagination. But it’s then very easy to wrap yourself around the axle of, ‘Oh my God, this is so complicated. There are all these things I have to do. There are all these things I have to worry about. What am I going to do? What do I start thinking about?’ Actually, you just reverse it and you ask exactly that question. What are the things I’m most worried about, and what am I going to do about them? If I’m very worried about the availability of data, then I back it up. If I’m really worried about the integrity of my data, I can put in mechanisms to do ongoing integrity checks. These strategies aren’t too hard, as long as you think about it at that top level and you don’t get yourself all wrapped up around the absolute complexity underneath. But the world’s your oyster in terms of the potential damage that could be done; and the more we interconnect, and the more we build technology around the things we do, the more reliant we become on technology, and the worse the damage can become. So, it’s really important that people start thinking about this in their businesses. RW: Mike, maybe it’s an opportunity for you to comment on how the government sees the risks, and what its response


would be? How do we evolve in the face of this changing landscape? MM: Well, there are a number of issues relevant to those scenarios. One of the first is the importance of the customer, and giving them greater access to services through the digital world. Giving consumers greater access to the digital world carries risks and, just as we’re giving consumers much more power, we’re also creating a larger number of intrusion points for those who have less-than-honourable intentions. Often in government, we’ve had a long view of saying, ‘Well, we want to provide more services and more access to data, and we’re requiring a business to do that much more’, and often we haven’t thought through the implications of how you put in place appropriate protections. There are three areas that are at the forefront for government. One is that we are looking hard at the physical environment. How do you harden the people supplying and involved in the physical environment? Cybersecurity risks are often a shock. I remember the shock when we all discovered that, as we put a lot of our information on the net, criminals and foreign governments could find the plans to a large number of our establishments. I remember when the U.S. Department of Defense suddenly discovered that Google Earth enabled people to watch military bases. And these sorts of revelations took some time to work through in government. So, it’s important to harden attitudes about what matters, what’s important and who you allow into your system. It’s also crucial to recognise that the next stage of the digital age is seeing much more mobile technology, which is pushing processing out much further. This, in turn, means that it’s harder to know what’s happening in your system, which creates data integrity issues. The second area is having systems implemented to detect intrusions, so initiatives like the reporting system described by Rachel are very important for us to learn the lessons of who’s trying to get in, and how. The third area is around the issue of recovery, which is something Transurban or Telstra and others have to plan. When you’ve got half of the economy underpinned by digital technology and a system goes down, it doesn’t take long before a business and its customers start suffering real costs of downtime. There is no tolerance anymore for the services not being available, whether it’s government or the private sector. Many of us in the room, who are probably of my generation, would remember when there were brownouts in the electricity system, and we took that as a matter of fact. The tolerance of the system going down today is almost negligible, and the cost is much higher than ever before. These are real issues for government, boards and management teams. Reporting of what’s happening inside the system has to be a core part of your business management,


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L–R: Richard Watson, Lisa Tobin, Rachel Noble PSM, Mike Mrdak AO and Berin Lautenbach

and is essential for critical infrastructure and the economy to continue to operate.

RW: So, don’t leave the cybersecurity considerations until the end; think about them the whole way through.

RW: Yes. It doesn’t go too far to say that a lot of cybersecurity has historically been focused on the confidentiality piece. But now, availability is becoming more of a focus because of the high degrees of connectivity – particularly in this sector.

Rachel, there are different parts of government that are involved in cybersecurity, such as the Critical Infrastructure Centre and the Foreign Investment Review Board. Perhaps not everyone is familiar with the roles that these organisations play. Would you be able to share with us the scope of these organisations, and the importance they play with national security?

Now, Lisa, you’re the Group Executive of Technology at Transurban, and technology has a lot of benefits to bring – but how do you balance the benefits of technology with the risks that it brings? LT: Carefully and from the initial design. When we start to consider a new technology solution – and we are constantly changing our technology solutions – part of our thinking, our planning, is on how we build security. It’s about how you can build security principles into whatever code you’re developing. If we’re engaging with partners, we have a very forensic approach and process to understand what their controls are, and how they work. And to Berin’s point, we have a look at what could happen. What are the scenarios? How do we prepare, test and plan for someone wanting to misuse our service? What could go wrong? It’s about all those practical things that we do when taking any new product or service to market. BL: One of the things that’s nice about the approach that Lisa described is that when you consider security as a part of building a system or an application, or whatever it is you’re building, and you think about it before you start the build and you bake all of that stuff in, it’s not hard. When you’ve built it all, and it’s all sitting there, and you go, ‘Ooh. Ooh, this could be broken into and this could cause all sorts of damage if that happens’, that is really hard to retrofit things into. LT: And very expensive. BL: And very expensive. That’s where Lisa is coming from when she describes considering cybersecurity as a part of the build.

RN: The main message to this audience is that if you’re thinking about selling an asset to a foreign buyer, the Department of Treasury is probably your first port of call. Those transactions take place under the Foreign Acquisitions and Takeover Act. The Foreign Investment Review Board, or the FIRB as people know it, is a group of government and non-government members who will ultimately provide advice to the Treasurer, who is responsible for making decisions about foreign investment in this country. That Board will reach out to a range of security agencies like my own, as well as many other stakeholders. Their job is to weigh up advice for the Treasurer about a proposed foreign investment, where they’ll look at the security risks in considering that investment and try to weigh them against economic interest for Australia. So, it’s an incredibly imperfect science, and it is carefully done on a case-by-case basis. My organisation will provide cybersecurity advice into that process, and we all look at the questions of the capability, intent and access, most likely of a foreign government, to disrupt or create a concern for us in respect of whatever’s being proposed. The Department of Home Affairs separately runs the Critical Infrastructure Centre, which operates under the Security of Critical Infrastructure Act. The Centre looks at both proposed investments and current critical infrastructure that is operating. Critical infrastructure is plainly defined as a list set out by the Department of Home Affairs. They are the two main parts of government that have a role here.

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RW: Mike, on the topic of cybersecurity, how do you think government and industry can best collaborate to make everything work better? MM: Well, the first thing is that government has to do exactly what Rachel and others are now doing, and what Mike Burgess has been doing for some time, which is talking about the risks openly. Government is certainly across the state actor risk, which has risen across the globe, but increasingly also the criminal risk. We’ve seen everyone – from the Federal Police Commissioner, right through to Burgess and others – talking openly about some of those risks. And that’s been important to both business and the community as they can understand why some of these measures are necessary.


of what’s called the Telecommunications Sector Security Reforms (TSSR) Act, which came into effect last September. This legislation places an obligation on telecommunications companies to ensure that every investment they make into the system meets security requirements. So, that’s the reality of what we’re dealing with; the regulatory regimes are now requiring a greater degree of focus in these areas driven by what we’re now seeing as the threat assessments.

Secondly, there is a role for mechanisms, like those provided by Rachel’s Cyber Security Centre, to offer the ability to report incidents and then get advice. And, increasingly, government is providing support services to businesses at various levels about what intrusions have been seen and the ability to do the analysis on what the intrusion pattern looks like. This is what the Cyber Security Centre is doing, so that information can be provided back to industry honestly. Then industry can start to plan and build cybersecurity into their system design.

When considering open conversations about threats, some of those conversations have to take place with people who have security clearances because of the intelligence issues involved; however, having much more open conversations, understanding the risks involved to people, and then making it clear what the obligations are going to be on business to meet those is where government and industry are going to need to be working much more closely. The days when the chief information officer (CIO) or chief security officer (CSO) was buried in the organisation are gone. You can see now that most Boards are doing what Transurban is doing, in that reporting is in real time and it’s going straight to senior management, and then to the Boards, because cybersecurity is a core part of good governance. You wouldn’t have seen that even a few years ago in the way that the security function, or the CIO function, worked.

The third element that government is increasingly focused on is the safety of the overall system. If you look at some of our telecommunications legislation that telco companies are now subject to, you’ll notice that there are new provisions

LT: Mike’s point goes to that idea of sharing across forums. So, within Rachel’s area, I know that we’re party to a number of the forums, the joint cybersecurity centres – certainly in Victoria and Queensland – but what’s really important to us are the


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conversations that are going on about operational technology and the infrastructure threats, which I know Telstra is also involved in. There are some great examples of conversations we’re all having in that space, and for us it’s a very important partnership that helps to keep us safe, and helps to keep our customers safe. BL: Those conversations also lead to one other thing that is becoming increasingly important: the realisation that we’re so interconnected across the various parts of industry that we need

Berin Lautenbach – CISO Asia Pacific, Telstra Berin Lautenbach is the Chief Information Security Officer Asia Pacific at Telstra, and has an extensive and diverse background in cybersecurity, spanning 25 years. Mr Lautenbach loves the big cybersecurity challenges and bringing together a team of great minds to protect customer and corporate data, and the Telstra network. His more recent roles have included leading the Information Security team in GE Capital Australia, followed by setting up and leading the Security Architecture team for GE Capital globally. Mr Lautenbach has been involved in projects covering a wide range of security technologies, such as intrusion detection, application security and malware control, to name just a few. He has worked for a number of organisations, including the Department of Defence Australia, Dimension Data, National Australia Bank and GE, before joining Telstra in 2015.

the government to bridge some of the gaps and make sure that those conversations are happening. For example, if something goes wrong in the core network of Telstra, there’s a flow-on impact into health and, well, actually, you name it! So, making sure that there’s that connection between the various parts of critical infrastructure is incredibly important. We need to make sure that there’s a shared dialogue, a shared conversation, so when something bad happens, we have an ability to coordinate across industry.

promotion followed the merger of DIBP with the Australian Customs and Border Protection Service (ACBPS), which Ms Noble joined in 2013 as the National Director of Intelligence and Chief Information Officer. Ms Noble has also held senior positions in the Department of Defence, including as Assistant Secretary Americas, North and South Asia, Europe in the International Policy Division, and as Deputy Chief of Facility at the Joint Defence Facility Pine Gap. Ms Noble also held the position of National Security Chief Information Officer and Cyber Policy Coordinator in the Department of Prime Minister and Cabinet, and was responsible for improving information-sharing among the national security community, and coordinating whole-of-government policy on cyber issues. Ms Noble received a Public Service Medal for this work. Ms Noble has a Master of Business Administration in Technology Management and a Bachelor of Science with Honours.

Mike Mrdak AO – Secretary, Department of Communications and the Arts

Lisa Tobin – Group Executive Technology, Transurban

Mike Mrdak is Secretary, Department of Communications and the Arts, a position he has held since 18 September 2017.

Lisa Tobin joined Transurban in February 2013 as Group General Manager Technology, and has overall responsibility for the technology strategy, deployment and operation of all technology platforms. Transurban owns, develops and operates urban toll road networks in Australia and the United States. Technology plays a critical role, spanning all aspects of the business from back-office systems and customer services, to roadside and tunnel infrastructure. The team brings world-class solutions to ensure the long-term safe and efficient operations of the critical infrastructure that operates our roads and tunnels. Technology at Transurban has a unique agenda to bridge the specialised infrastructure world of operational technology with broader information technology trends, such as the rise of cloud-based platforms, Internet of Things, data analytics and machine learning. Previously, Ms Tobin held a number of senior technology roles across the financial services industry, focused on setting strategy and delivering technology capability to bring new business models to market.

The portfolio has responsibility for broadband and the National Broadband Network (NBN); communications infrastructure; spectrum; communication, broadcasting and media regulation; and fostering Australian arts and culture. Mr Mrdak began his Australian public service career in 1988 as a graduate with the then Department of Transport and Communications. Since then, he has held a number of senior positions across the Australian public service. Between June 2009 and September 2017, Mr Mrdak was Secretary of the Department of Infrastructure and Regional Development. His work with the infrastructure and regional development portfolio includes management of infrastructure investment; policy initiatives to increase productivity; security, safety and regulation in road, rail, aviation and maritime transport; regional development; local government; and services to Australia’s territories. Mr Mrdak was appointed an Officer of the Order of Australia (AO) in the Queen’s Birthday 2016 Honours List for his distinguished service to public administration through executive roles in the infrastructure, transport and logistics sector, and through the development of policy reform initiatives. Rachel Noble PSM – Head, Australian Cyber Security Centre Rachel Noble is the Head of the Australian Cyber Security Centre in the Australian Signals Directorate. Prior to taking up this appointment, Ms Noble was the Deputy Secretary Executive Group in the Department of Home Affairs overseeing the delivery of the Department’s executive functions, including media, Ministerial and Parliamentary services, integrity, security, risk and assurance, as well as intelligence and countering violent extremism. She previously led the Home Affairs Implementation Team to stand up the Home Affairs Portfolio. In 2014, Ms Noble was promoted to Deputy Secretary Policy Group in the Department of Immigration and Border Protection (DIBP), which included responsibility for trade, customs, immigration and international policy. This

Richard Watson – Lead Partner APAC Cybersecurity Risk Advisory, EY Richard Watson is the lead Partner in EY’s APAC Cybersecurity Risk Advisory. He has spent the majority of his 25-year career in the professional services and IT sectors focused on cyber risk and cybersecurity. Mr Watson specialises in helping clients understand and protect themselves from the risk of cyber incidents. His areas of expertise include cyber risk assessment, technologies for monitoring and protecting against cyber attack, privacy regulations and managing cyber incident response. Mr Watson has worked in a number of industries, focusing on those that have significant intellectual property to protect or a significant risk of brand damage from a cyber incident, or whose core operations see them dependent on the digital ecosystem. Mr Watson is a recognised cybersecurity leader, advising senior executives and boards on cyber risk management, and is frequently cited in the media. He also has expertise in digital transformation, analytics, large-scale technology and program delivery. Originally from the United Kingdom, Mr Watson is based in Sydney but operates throughout the Asia-Pacific region.

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Our gender agenda As we strive to achieve our mission to become the recognised leader for innovation and excellence in the construction industry, Laing O’Rourke is committed to developing and nurturing a more diverse workforce that reflects the society and communities it serves. In August 2019, Laing O’Rourke Australia launched its Gender Diversity Action Plan, setting a number of deliberate and bold targets and initiatives that will help to attract more women into the business, and see more women be promoted into leadership positions. Laing O’Rourke has a proud record of advancing gender equality across the organisation, and equipping all employees to reach their potential within the construction industry – but there is still a lot to be done. The construction industry is best when there is diversity across all business and project roles, including having more women represented at senior levels. The industry must change the way it designs and delivers work to attract a broader demographic of people to the industry, and provide them with meaningful, long-term careers. That’s why Laing O’Rourke is committing to its Action Plan that sets targets for increasing the number of women in leadership roles across the business, tripling its internal referral bonus scheme for female candidates, and delivering construction projects with flexible working as a requirement. The company must take tangible action and hold its leaders accountable for driving this change. As a business that is engaged in some of Australia’s largest and most complex infrastructure projects, Laing O’Rourke has a responsibility to demonstrate that meaningful

and rewarding career paths are available in this industry, regardless of a person’s gender. Other initiatives introduced at Laing O’Rourke include: ► Inspiring STEM+ – a school engagement program designed to encourage more girls into science, technology, engineering and mathematics

‘The construction industry is best when there is diversity across all business and project roles’

(STEM) courses at university, and ultimately careers into construction and engineering Keep in Touch and Return to Work – a coaching program for all staff on parental leave Connecting Women network – a program of events designed to build engagement and greater visibility of the company’s female leaders, and to provide a forum for connecting our women, role modelling careers, and building new networks for support and advice Flexible work programs. ♦

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Laing O’Rourke Engineering the future As we strive to achieve our mission to become the recognised leader for innovation and excellence in the construction industry, we are committed to developing and nurturing a more diverse workforce that reflects the society and communities we serve.

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Managing a transport revolution – electric vehicles in the built environment 2019 has been a record year for electric vehicles globally, with these vehicles making up around three per cent of total new passenger car sales in the world. Australia has been relatively slow in taking up electric vehicles to date, but this revolution is coming. Forecasting from the Australian Energy Market Operator (AEMO) indicates that within 10 years, electric vehicles are likely to make up a substantial proportion of new vehicles supplied into the Australian market, and that within 20 years they will make up approximately half of all cars on the roads. The key benefits of shifting to electric vehicles are clear: they are cheaper to run and maintain, they don’t contribute to air pollution, they help to reduce dependence on oil imports, and they provide a pathway to reduction in carbon emissions. On the other hand, the existing electricity grid wasn’t built to support them, so we need to manage how, where and when they recharge in order to avoid costly electrical upgrades. In residential complexes, workplaces and commercial buildings, what’s needed is some smart scheduling. Rather than letting everyone start charging at the same time – which would require a much bigger switchboard and network connection – a control system can manage the charging to ensure that everyone starts the next day with a full car battery, without putting any undue strain on the electrical supply. NHP recently undertook development and demonstration of a solution for this at our Laverton National Manufacturing and Distribution

Centre. This enables our customers in the electrical contracting community to easily roll out load managed electric vehicle charging solutions to apartment complexes, workplaces and commercial buildings. This development was done in conjunction with car makers, vehicle owners associations and electricity networks. Securing good outcomes at scale as electric vehicles roll out will be a big challenge and will require lots of collaboration. Leveraging a 50year history and expertise in power distribution and industrial automation, NHP is proud to support the multi-

decade transition to electric vehicles that’s coming our way, and welcomes enquiries as to how it can support electric vehicle charging applications in the built environment. NHP offers a complete range of electric vehicle chargers to suit every need, from low-cost home solutions to large direct current (DC) fast charging. NHP also makes installation easy by offering everything you will need upstream, enabling quick and simple implementation of the chargers. ♦ For more information, visit https://www.nhp.com. au/Power-Distribution/Electric-Vehicle-Chargers.

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4/12/19 4:49 12/09/2019 12:35:21 PMpm

Adrian Hart

Infrastructure insights Adrian Hart, Associate Director, BIS Oxford Economics Key points: • • •


Infrastructure investment cycles are impacting on capacity and capability within the industry. Cost pressures and skills shortages are emerging as we move towards a large pipeline of work. Stronger partnerships are needed to help manage investment cycles.


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Adrian Hart

Today I want to talk to you about capacity and capability. It’s not just the capacity and capability to deliver infrastructure that we’re going to need in the future, but also the ability to operate and maintain that infrastructure. Why is this an issue? It’s because, despite increasing recognition of the problem, investment comes in cycles; and it’s not just public infrastructure, but all types of investment. Whether you’re looking at housing – where we’ve seen some pretty big cycles – mining, or business investment, these cycles in investment drive economies. It’s no wonder that New South Wales and Victoria have been very strong performing economies; it’s because of their healthy investment cycles. Unfortunately, some of the most recent quarterly data from New South Wales and Victoria hasn’t been so strong. Partially, that’s because we’re seeing a bit of a pause in the current investment cycle. Where does it go from here? At BIS Oxford Economics, we’re very concerned about investment and its manifestation – particularly in construction work – as it drives a lot of our economic forecasting. As economists, we see cycles everywhere. I see cycles in my football team’s performance. You know, I support Paramatta. Yes, last year we came last. We won a game recently, but we’ll lose the next game. That’s our cycle. The construction industry has some pretty big cycles still to come. These will create big challenges for capability and capacity because in the down period, we see businesses put under extreme pressure. We see people losing jobs. We see risk and costs taken on by businesses just to survive. And it’s not a phase where we see encouraging investment in capacity

e’re segueing into the W next phase of really large projects across road and rail. The current easing is merely a timing issue between the two phases, but let’s get one thing straight: activity is only going up over the next five years

and capability. The up phase of the cycle, of course, also has consequences. We see skills shortages, material shortages, rising costs, delays, project failures, loss of quality, health and safety issues, and relationship issues, such as breakdowns in trust. In summary, cycles can be quite damaging. Now, have we seen the end of cycles? Not by a long shot. The outlook for the total construction market over the next five years in Australia shows that there are some big cycles yet to play out. We’ve got a sharp downturn in residential building over the next two years. We’ve got very strong growth coming through in non-residential building; that’s part of that social infrastructure we’ll see coming

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through over the next five years, as well, particularly in education and health. We will also see another strong cycle in engineering construction. This is where that hard economic infrastructure, and the road and rail transport occur. The engineering construction cycle will be particularly tough when it peaks around 2022–2024. On the whole, the construction industry will see another substantial cycle take place in the next five years, and it’s going to put more pressure on capacity and capability to deliver. I want to unpack that engineering story, because that’s where the biggest part of this next cycle will take place. What’s going to drive engineering construction over the next five years? Well, it’s two broad segments. One is the recovery occurring in the mining industry. Even though global economic news is poor at the moment, our miners are actually highly profitable. They’re starting to invest again, and we’re seeing some pretty big projects rolling out. We’re going to see even bigger projects in the early 2020s. The second segment is a big


cycle in transport investment, which is overlaid on the mining cycle. Transport investment just continues to grow. Right now, we are experiencing temporary easing. That’s why I mentioned the slight weakness in the New South Wales and Victorian economies in the last two quarters; I think New South Wales had 0.1 per cent growth per quarter. That’s not exciting. You may not believe it, but road construction actually fell in New South Wales over the past year. This is due to the completion of the round of projects that commenced at the end of the resources boom around 2015–2016. Now we’re segueing into the next phase of really large projects across road and rail. The current easing is merely a timing issue between the two phases, but let’s get one thing straight: activity is only going up over the next five years. Let’s look at rail construction. This is a sector that has doubled in construction work over the past two to three years. We’ve seen activity rise from around $3.5 billion to about $7.4 billion last year. Over the next five years, we expect that


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Adrian Hart

What we would like to see is a sustained high level of investment where it’s needed. In road construction, the number of large road projects starts to thin, but the scale increases dramatically. Projects such as the North East Link in Victoria, and the Western Harbour Tunnel and Beaches Link project in New South Wales will be projects with about a $15 billion spend. That is massive. Meanwhile, in rail, this cycle continues to grow, with challenges created by the scale of the work to be delivered. Historically, we haven’t invested in rail, except for the miners. We haven’t been investing in rail at this kind of magnitude, and we haven’t built the capacity to deliver projects of this size. We’re trying to build skills alongside the delivery of these rail systems, but it’s going to be a challenge. One of the key skills shortages is in tunnelling. The good news from Victoria is that it’s installing a tunnelling academy, mimicking what’s been done in the United Kingdom and other areas to address skills shortages. The tunnels themselves, at least in New South Wales, will provide valuable sandstone spoil that could be used as recycled product to help solve capacity issues in our materials markets. In Victoria, the quality of spoil may limit its re-use. A further large cycle of maintenance is yet to take place. We’ve had an echo boom of sorts in maintenance spending, because once we build all of these assets, we of course need to maintain them. We’re continuing to build a lot more assets, and the maintenance on these over time will continue to rise. For assets such as roads, maintenance is often a major undertaking, requiring the stripping and re-laying of asphalt and base layers. Major rehabilitation works will add to the capacity and capability challenge, as well. to double again. It’s going to hit close to $13 billion worth of spending in a single year by about 2023–2024. Roads activity is rising at the same time, so we’re not going to be able to just pinch resources from the roads sector to deliver our rail projects, or vice versa. We’ve reached base camp on Everest. We are standing at the top of one cycle, with the next large cycle of infrastructure work looming ahead of us – and this is just transport. This graph looks specifically at road and rail projects over $2 billion. You will notice that many of the projects haven’t started yet, but are timed to roll out over the next five to 10 years. There are further projects yet to be included; for instance, Victoria’s Suburban Rail Loop programme. You can see that from the 2022 financial year, we will begin to see some extraordinary levels of work. What’s important to me is that we don’t simply complete the projects and let the cycle subside; rather, we sustain the work and use the projects as a way of building skills and a legacy for the future, and drive the next wave of projects.

Similarly, in rail we see some challenges going forward, because not only are we trying to build the assets, but we’re also needing to operate and maintain them. We recently undertook a major study for the Australasian Railway Association, looking at the skills gaps in delivering rail projects, as well as maintenance and operation. We are going to need many more people working in the rail sector by 2022–2023 compared to now. The skills gap corresponds with the major peaks in investment demand discussed previously. The maintenance demand will continue to grow; there are staggering numbers of shortages across a wide range of skill types. When we have cycles, we tend to see them in costs, as well. We see the pressures of delivering big infrastructure projects. We tend to see cost blowouts during this up phase of the cycle. I’d like to explore a couple of infrastructure price indices, one of which is the road and bridge index, which shows particularly strong growth over the last few years – the kind of growth in construction costs that we hadn’t seen since the resources boom.

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A lot of this growth was potentially driven by the oil price surge that we saw around the same time; however, we also saw increasing prices for certain skills. In some cases, there were very significant increases in materials costs – particularly in Victoria, which is a key driver of construction costs. This is easing at the moment, as we have had a bit of an easing in road construction activity. But as those charts we talked about before indicate, we’ve got a long cycle still to play out over the next five years. You don’t want to see demand pressures amplified by an oil price boom, as well. Overall, we’d anticipate that while cost growth is easing now, it’s going to be an issue, particularly in the early 2020s as we’re rolling out that big infrastructure wave. Another area where we’ve seen movement recently – and I consider this to be a positive movement – is in the case of construction contractor margins. This index, taken from the Australian Bureau of Statistics, is the gross operating profit to sales ratio for the construction industry. It comes from its business indicators survey. At the end of the resources boom, we saw a lot of contractors willing to sacrifice margins – whether it be through taking on additional risk or bidding at very low prices to win jobs – in order to sustain themselves. You can see that the index has picked up in the last few quarters. Now, the pessimist in me – because I am an economist at the end of the day – thinks that this pick-up may be because of the residential builders that went bust, removing their very thin margins from the survey; however, I’d like to think that it’s because we’re starting to get a bit smarter about the way we collaborate and the way that we’re partnering between governments and industry, and that we’re willing to recognise that in order to build quality infrastructure, we need to have quality contractors.

I think that the smoothing of demand requires sustaining a certain level of infrastructure investment over the long term. There are many future projects that will pass through Infrastructure Australia vetting. It is essential to keep that pipeline flowing, and to utilise the legacy bill of previous projects and the skills that have been developed to drive them. It is not just skills we need, but better policies to target supply challenges in the materials markets. As I mentioned, we saw significant increases in prices for construction materials in Victoria. We need faster mechanisms to be able to get the construction materials that we need: the concrete, cement, and so forth. There is a big role for governments to play in the way that they tackle procurement. We’ve hosted various roundtables between industry and government. A consistent message that I get is that there needs to be much greater consistency and efficiency in those procurement approaches. In particular, risk allocation that isn’t solely about putting the costs and the risk onto the construction industry. We should be looking at passing the risk to those that are best able to manage it.

BIS Oxford Economics has produced multiple reports on capacity and capability in the construction industry, commissioned by entities such as the Australasian Railway Association, Austroads and Infrastructure NSW. All the reports have very similar things in common, particularly around the solutions. Partnerships are vital. We need to continue to enhance that partnership between government, industry and the education sector if we are to solve some of the pointy skills issues that will occur over the next five years.

We should also be looking at using procurement as a skills strategy. We should be rewarding those who come to the table with not just a good cost outcome, but also an outcome as to how they’re going to build skills in the industry. At the end of the day, it’s not just successful delivery of individual projects, it’s also about how we build a legacy of capacity and capability into the future. Achieving this ultimately means that we will have a broader value-for-money objective when we assess bids and tenders, rather than just looking at that bottom line. I’m yet to see if that’s really the way it is playing out in government. I certainly hope it does, because that’s the way we’re going to build sustainable, long-lasting and quality infrastructure into the future.

Adrian Hart – Associate Director, BIS Oxford Economics

mining and maintenance markets, their drivers and outlooks, the range of

Adrian Hart is the Associate Director, Construction and Maintenance at BIS Oxford Economics, and has a Bachelor of Economics (Hons 1) from the University of Sydney. Mr Hart has nearly 20 years of economic analysis and consulting experience with BIS Oxford Economics, focusing on the infrastructure, building, maintenance and mining industries. Mr Hart has undertaken a wide range of consultancy projects for the public and private sectors based on his detailed understanding of construction,


As for better management of project pipelines, that’s a bit of a pipedream to some degree. You’re not going to tell a state government that it can’t go ahead on this project because New South Wales is going ahead with its project; however, we can be aware of projects, state by state. More important is the longer term – planning for the finish of a project and ensuring that we don’t just tool up and skill thousands of people, and then decide that because of an economic circumstance we can’t afford to do the next project, and we’ll wait about five or six years.

organisations operating in this space, and the issues they face. This work includes deeper industry liaison, contractor and competitive analysis, pipeline analysis, demand and cost escalation forecasting, and capacity and capability projects for the public and private sector. He also undertakes briefings and workshops for senior management, Board members and industry associations, and facilitates and chairs roundtables between government and industry.


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The City of Ryde delivers an ambitious program of works each year to meet the needs of our growing City. We are committed to delivering for the City of Ryde to ensure we continue to be the place for lifestyle and opportunity at your doorstep. Customer Service Centre: 1 Pope Street, Ryde NSW P: (02) 9952 8222 E: cityofryde@ryde.nsw.gov.au

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Find out more about City of Ryde projects at www.ryde.nsw.gov.au/projects

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Ryde balances strong growth with sustainability and livability The City of Ryde has ambitious multifaceted plans for rapidly developing city.

Ryde Central Community Centre lobby

The City of Ryde is addressing population growth through investments in infrastructure, economic development and the area’s famed livability. Twelve kilometres north of Sydney’s CBD, the City of Ryde is expected to grow from 116,302 residents in 2016 to 160,000 in 2031. Its attractive job market, location, connectivity and open spaces have made it one of Sydney’s fastest-growing areas. ‘We have an ambitious agenda,’ City of Ryde Mayor Councillor Jerome Laxale says. ‘We are a growing city with a rapidly rising population and a thriving economy. While this growth provides opportunities, it also presents new challenges that Council needs to meet to ensure that we continue to better the lifestyle, recreation

and employment opportunities for our community.’ City of Ryde General Manager George Dedes says Council has a three-pronged infrastructure approach involving strategic leadership through extensive community consultation on projects, effective asset management that identifies current and future infrastructure needs, and effective project delivery and governance. ‘Continuing to deliver quality services is Council’s priority,’ Dedes says. ‘Our plans detail Council’s directions for the next four years, providing a path to manage growth and change, and to enhance the city’s services and livability.’ This year, Council released its Four Year Delivery Program 2019–

2023 – Including One Year Operational Plan 2019/20. ‘In developing these plans, staff and councillors worked together over many months to balance the community’s expectations and priorities with the increasing demand for services and infrastructure in a responsible and fiscal manner,’ Dedes says. Over the next four years, Council will invest $170 million in transport infrastructure and digital connectivity, $142 million in open spaces and services, $135 million in sustainability initiatives, $55 million in community services, and $16 million in economic development. These and other Council initiatives reinforce the City of Ryde’s reputation as a smart and innovative city – and

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Aerial – Putney Hill

an appealing long-term growth market for industry.

Solid foundations

The City of Ryde has several attractions. Macquarie Park, the City’s innovation hub, is Australia’s largest high-tech precinct and an economic powerhouse. Often described as Australia’s Silicon Valley, Macquarie Park ensures that the City of Ryde is a leading location for knowledge-based jobs and education, as well as a key anchor in Sydney’s global economic corridor. Set over more than 200 hectares, the Macquarie Park Corridor includes Macquarie University; a commercial district that is the head-office location for many of Australia’s top100 companies; a hospital; hotels, restaurants and serviced apartments; and residential communities. Based on its current growth trajectory, Macquarie Park is expected to be Australia’s fourth-largest CBD after Sydney, Melbourne and Brisbane by 2035, according to Macquarie University. The Corridor’s workforce is forecast to rise from 68,000 in 2015 to 269,000 by 2065, according to BIS Shrapnel research prepared for the New South Wales Government in 2015. The New South Wales Government is investing in Macquarie Park infrastructure. Three of 13 newly upgraded stations on the Sydney Metro Northwest Line – Australia’s largest public transport project – are at Macquarie University, Macquarie Park and North Ryde stations.

The metro rail services, which began in May, are expected to boost commercial and retail property development as more people commute to Macquarie Park for work. A $750-million, four-tower development near the Macquarie Park station has been proposed. In addition, in November 2017, the federal and state governments announced the construction of a $100-million interchange at Macquarie Park to smooth transitions between buses, trains and taxis while reducing local traffic congestion. Cllr Laxale says the City of Ryde’s four-year economic development and marketing plan addresses Macquarie Park’s opportunities. ‘We will continue to focus on harnessing the enormous potential for Macquarie Park as a business hub, but also as a recreation and entertainment precinct,’ he says. A key component of this is to develop a larger night-time economy in Macquarie Park. Other large-scale developments are underway. Chief among them is a proposed redevelopment of the Ryde Civic Centre. Extensive consultation for The New Heart of Ryde project has concluded, and Council has responded to community views with a fourfold increase in community spaces in the project and with full public ownership of the site. In February 2019, Council released concepts of a new shopper car park and public plaza on Eastwood’s western side, increasing the available car spaces from

450 to 600. This follows a multistorey, short-stay car park that will be built on the town centre’s eastern side.

Sustainability underpins strategy

Balancing the City of Ryde’s economic development with livability initiatives is integral to its planning. The City is known for its green, open spaces and lower-density living. Part of the 372-hectare protected Lane Cove National Park provides magnificent backdrop to the City. Council is upgrading parks, playgrounds and sporting facilities, investing in a new urban water park, and improving paths and cycleways among other initiatives to improve its open spaces. Greater activation of the City’s foreshore along the Parramatta River is also planned. Cllr Laxale says a detailed environmental program is a feature of Council’s planning. ‘There is a desire within our community for Council to take a leading role in protecting our natural and urban environment.’ This includes a focus on climate change initiatives. Council is using renewable energy to power more services and rolling out electric vehicles among its fleet. In doing so, the City of Ryde is becoming a leading example of how cities address the challenges of population growth and economic development while becoming more livable and sustainable. ♦ To learn more about the City of Ryde, visit www.ryde.nsw.gov.au.

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Fireside chat

Fireside chat Ticky Fullerton and Sir Rod Eddington AO Key points: • • •

Global sentiment towards open trade is challenging the liberal trading regime in ways never seen before. Organisations need to take a long-term view of hard and soft infrastructure when considering investments. Context and understanding are crucial for the media to discuss issues in the infrastructure sector. What worries me is that we currently live in a world where

Panellists: ► Sir Rod Eddington AO, Chairman, Infrastructure Partnerships Australia ► Ticky Fullerton, Australian business journalist

the premise on which my working life was based – things like open markets, and the free flow of goods and services – is being challenged in a way that it’s never been challenged before. It’s most visible in the US–China trade issues. Many years ago, a French economist said that if goods

Ticky Fullerton (TF): Sir Rod, you are across infrastructure and so many different sectors of the economy. I want to talk about Australia as an investment compared to elsewhere in the world. Regarding all of the current tensions in the world, what really worries you? Sir Rod Eddington AO (RE): For most of my business life, I have believed that free trade and an open trading environment lifts benefits the most. It doesn’t mean that there aren’t some losers in that environment, and you need to think carefully about it. Most of my business life was in Asia, and I saw what liberal trading regimes did in many Asian countries. It has lifted about 500 million people from the lower class into the middle class.


and services don’t flow across borders, soldiers will – and that’s broadly right. The thing about most of my time in Asia was the economic success, which has been the story of the last 50 years. It started with Japan, followed by Korea and China, and it’s been based on peace in the region. The Korean War finished in 1953; the Vietnam War was clearly a conflict of consequence, but it didn’t have an impact on trade. Peace has led to trade and free trade has led to peace, and it’s being challenged now. TF: The starting point for the tensions between China and the United States was a spat over technology intellectual property (IP). Donald Trump might argue that this is not a war


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Fireside chat

Ticky Fullerton

that’s going to end militarily. He’ll argue that this is the art of a deal and is resetting what the negotiating positions of two parties should be. Does that argument have any merit? RE: There’s some merit to that. In fact, on the IP front, it’s clear that you could argue that China is a great imitator of other people’s ideas, like Japan and Korea before it. My own view is that China will naturally come to a point where it values IP because it will want to protect its own. I think President Trump is right to push China on several fronts, but at the end of the day, we need the two sides to agree. Because if all that happens over a period is a tit-for-tat tariff war and other forms of economic headbutting without a resolution, everybody loses. I think we’re beginning to see that now. Wherever you look in the world, projections for economic growth are coming down. J.P. Morgan lowered its expectations for the US economy recently. A chunk of that is based on the ongoing conflict with China. Both sides have to find a resolution. TF: From a pragmatic point of view, Donald Trump is nothing if not pragmatic. Do you have confidence that in the end, sense will prevail? RE: Yes, I do. What I don’t know is when they’re going to reach an agreement. I think there’d be a Nobel Prize in it for anyone who had the answer to that! I have a view that this is going to go on over a longer rather than a shorter period of time. TF: Going back to the technology side, given the developments with a business like Huawei and the Five Eyes’ reaction – being Australia’s very strong reaction to Huawei – do you see the tech side and the digital side developing in two

completely different markets where there’s a Chinese internet and market, and a Western one? RE: It would be a great shame if that were true. I’m old enough to remember when we had duelling technologies. It would be a great sadness if we ended up with a China-centric system and a Western-centric system. The British, for instance, are much more pragmatic about Huawei. They won’t have Huawei at the heart of any of their intelligence systems, but Huawei is widely available. It won’t be that all Western countries will reject Huawei. TF: Why do you think Australia has been so much tougher than the United Kingdom? RE: In order to ban Huawei, you’ve got to believe two things. The first is that the Chinese can embed malware into their systems and their technology that we can’t detect. The second is that you must believe they have malevolent intent. I don’t think the United Kingdom believes that. If it did, it would ban Huawei, too. TF: Is it the geography or where we sit in the world, as well? RE: No, it’s more about the insight that your technologist and your intelligence and security services have. It’s clear that the United Kingdom and the United States have a different view about this. I hope it plays out in a way that reaches a settlement. One of the problems in China is that there’s still a substantial degree of state ownership in many of its businesses. This isn’t true for Huawei, but it’s true in other businesses. Others will be instinctively worried that if a foreign government owns part of an economic entity and that entity is invested in, or has control of, economic infrastructure, then that entity will be subject to government pressure. I get that. The state-owned enterprises in China are themselves causes for concern in many circles.

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Fireside chat

TF: Can I ask you about soft power? One of the great tools for soft power is infrastructure. We’ve got a relatively expansionist China now in the region in terms of infrastructure developments. Is Australia’s response meaningful enough to have the soft power that we would like to have from a security point of view, particularly in the South Pacific?

Sir Rod Eddington AO

RE: We thought this about Japan 40 years ago. My parents’ generation had lived through the Pacific War, and the Japanese were coming and getting involved in our economy in a substantial way. That was confronting and controversial at the time. But having lived in Japan for four years, we look back on the concerns we had, and they didn’t amount to anything. Regarding China, the challenge for Australia is that since European settlement, our major trading partners – firstly Britain, then America and Japan – were all strategic partners. For the first time since European settlement, our major trading partner, China, is not a strategic partner. To make things more difficult for us, our major strategic partner and China are now trying to sort out their differences, which are material and significant. TF: Are we right to be strengthening the alliance? RE: The bottom line is that we should recognise that the United States is our most important strategic partner, and that China is our most important trading partner. We must recognise the reality and manage it. The idea that you somehow must choose between one and the other is, at best, naïve. TF: Sir Rod, you’ve lived in Hong Kong. Were you expecting something like this at some stage down the track? RE: Four years ago, there were some significant demonstrations with the Occupy Central group, which was basically about a group of students who felt strongly about a series of issues. This time, it wasn’t just the young people who came out onto the street – it was people from all walks of life. It’s clear what the catalyst for that was, with the Chief Executive trying to introduce an extradition treaty from Hong Kong to China. That was not a sensible thing to do – that’s what provoked a whole series of people on to the streets.


the likelihood of that actually happening is rather remote, whether that wasn’t also a bit of a cry for help from business in Hong Kong? RE: I suspect they’ve been running the slide rule over the London stock exchange for some time. I first went to work in Hong Kong in the late 1970s. In 1967, there were terrible riots in Hong Kong during the cultural revolution in China, and people thought the People’s Liberation Army would come across the border. In 1967, the riots went on for months, and 50 people were killed and 1000 badly injured. They were devastating, but Hong Kong recovered and bounced back. It is a resilient place. TF: If there was military entry by China, should Australia be thinking about taking people in from Hong Kong? RE: I don’t believe for a moment that that will happen; I think that’s the last thing that China would want to happen. I think China expects the people of Hong Kong to resolve these matters for themselves. That’s what one country, two systems is about.

Now, there can never be any excuse for the violence we’ve seen in the last six weeks. Petrol bombs and rocks have no place in any sensible dialogue about a way forward. That’s not only created enormous difficulties for people and businesses in Hong Kong – including Cathay Pacific, the airline I once worked for – but the hotels are empty, as is the airport. The economic consequences are huge. I worry for the people of Hong Kong, old and young, because their economic futures are tied up there.

This was designed to provide an interregnum, and in a pragmatic sense, it’s a workable solution, but the current impasse must be resolved.

TF: What are you hearing from business in Hong Kong? It was interesting that the Hong Kong stock exchange made a bid for the London stock exchange. I wondered, given that

RE: We’ve always been vulnerable. Western liberal societies have a modus operandi that is open. We don’t want to live in a police state, so we will always be

TF: Back to infrastructure. When that drone landed recently in Saudi Arabia, blowing up critical oil resources, it seemed to be a massive wake-up call for everybody. This year, we also had a drone around Gatwick Airport in Britain. How vulnerable do you think critical infrastructure all over the world is to these sorts of attacks? What is the sector doing about it?


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Fireside chat

he best investments T in infrastructure have been in areas where governments have chosen to recycle existing infrastructure

vulnerable to evil actors. The question is, how do we protect against them? Drones are a good example. This isn’t about spying into someone’s backyard; it’s something much more malevolent than that. As you say, the fact that drones were able to close Gatwick Airport in the United Kingdom and disrupt thousands of people’s travel plans is an example of what can happen. There are many other examples of malevolence in the context of particular systems – whether it’s hacking customer information or stealing content online. There are so many things about the modern technological world that are vulnerable unless we can protect them. I don’t want to live in a police state, so we need to strike the right balance here. TF: Regarding Australia as an investment destination, the Federal Treasurer recently came out with his budget statement, declaring that we’re in balance now. Is the budget surplus important? RE: There’s another question to consider here, and that is: how should we use that budget surplus? What Australia needs to do is have well-controlled financial systems, because that attracts foreign capital. Are we an attractive inbound destination? Australia is, and always has been, resource-rich and capital-poor, so we’ve always been a net importer of capital. Unless we are seen as a favourable destination for inward capital investment, it will go elsewhere. I always say, ‘Capital is a coward. It goes where it gets best treated’. We don’t have any right to demand that the Japanese, Chinese, Americans, British, French, or Germans invest in our country. But we do want them to, because it helps to create opportunities to grow our business and generate employment.

footprint, where do you choose to base your regional headquarters? Do you do it in Singapore or Hong Kong? Do you do it in Sydney or Melbourne? Where do you do it? The matrix says that you think about education and housing for families. You think about the rule of law, political stability, the proper treatment of capital, including corporate tax rates, and the availability of a skilled workforce. All these things make up the decision tree for organisations deciding where they’ll set up. In Australia, we get elements of this wrong from time to time. As a whole, we’re a pretty attractive destination for capital and people. In many cases, people come and live here even though they could live in a tax-free world in the Middle East or a low-tax environment like Hong Kong. TF: Why infrastructure? Do you think it’s going to provide investors with big licks of money? RE: Organisations take a long-term view of hard and soft infrastructure. It’s important to look at both social infrastructure and hard infrastructure like ports, airports, and roads. There are plenty of companies that look at our best companies – for example, BHP and Rio Tinto – and say these are worldclass organisations. Investors look and say we could invest in South America, we could invest in mines in Africa, but they still choose to invest in mining in Australia. The challenge is to ensure that we have other things that are worth investing in, as well. Tourism is now a major employer in Australia, and is the third-largest export earner alongside education, after coal and iron ore. People invest in hotels. They invest in tourism businesses. They invest in our food businesses because we’re a quality supplier of food. TF: As an alternative to the equity market, do you think that, given the economic environment, infrastructure is more attractive than it was 10 years ago? RE: It depends. The best investments in infrastructure have been in areas where governments have chosen to recycle existing infrastructure. The privatisation of the airports, Port Kembla and Botany, and the Port of Melbourne are good infrastructure investments. But we all know that investing in greenfield sites, where you take construction and patronage risk, is a very different game. TF: How much damage to investment do you think the government has done by intervening in markets in this country? RE: The road to hell is usually paved with good intentions. I believe in markets. I don’t think markets are perfect, but there are a lot.

TF: Where does infrastructure sit in the pecking order when it comes to attractiveness for the private sector?

TF: We’ve got this ‘big stick’ legislation that is in play in the energy sector now.

RE: Well, it’s interesting. Consider it from this perspective: if you’re an American company and you want a large Asian

RE: Pretty much everyone other than the government of the day thinks that this is a bad idea. The Australian Competition

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Fireside chat

and Consumer Commissioner doesn’t think it’s a good idea – it’s not just the people in the space. I understand why people worry about energy prices, but you must ask the question, what’s driving them? Is the ‘big stick’ legislation the answer to the problem, or does it create other problems? I worry that in an industry that requires a large capital inward investment, governments interfering in markets strangles investment. I worked in the airline business, and Qantas is a much better airline in the private sector, living with the disciplines of capital markets, than it was when it was a state-owned entity. TF: We’ve had a lot of very prescriptive directives aimed at business recently. Where do you sit with this? Again, in the context of quite a lot of intervention happening in different sectors by the government. RE: I’m no longer a chief executive. I no longer make payroll. The best people to speak about this are people like Alan Joyce and Andrew Mackenzie at BHP. I believe in the primacy of the market, and we have a lot of good, well-run companies in Australia that are constantly juggling several competing interests to find a way forward. I grew up in the airline business, and if you didn’t look after your customers and your staff, then your business failed. In order to deliver good, long-term economic returns, you have to look broadly, and it’s true in spades today. TF: Is this post-Hayne overkill? Is this an overreach? RE: I think so. A lot of good chief executives and management teams in big businesses naturally think about community interest, environmental interest, customer interest and staff interest. They know that if they strike the right balance across that landscape, they’ll deliver great returns for their shareholders. To the second part of your question, which is the role of government in this; in my experience, government has some very important levers to encourage investment – the corporate tax rate and depreciation policies, for example. Governments get better outcomes by pulling those levers rather than jawboning business.

Sir Rod Eddington AO – Chairman, Infrastructure Partnerships Australia Rod Eddington is Chairman of Infrastructure Partnerships Australia, Chairman of J.P. Morgan’s Asia Pacific Advisory Council, and Non-Executive Chairman of Lion. Sir Rod previously served as the inaugural Chair of Infrastructure Australia from 2008–2014. Educated as an engineer at the University of Western Australia and then Oxford University as Western Australia’s 1974 Rhodes Scholar, Sir Rod’s career began in transport and aviation, and he went on to become CEO of Cathay Pacific, Ansett Airlines and British Airways, before retiring in late 2005 and returning to Australia. In 2005, Sir Rod was awarded a Knighthood by the British Government for service to civil aviation; in 2012, he was made an Officer of the Order of Australia (AO) for service to business and commerce; and in 2015, he was honoured by the


But now it’s your turn, Ticky. What do you think about the current relationship between business and the government? TF: It’s one of its most tense moments in the 30 years I’ve been doing business journalism. Let’s face it, business is partly responsible for that, given some of the behaviour we saw with the Banking Royal Commission. This has combined in a nasty way with the populist backlash. For instance, it’s easy to have a go at Alan Joyce for the money he makes, but no-one asks that of a footballer or pop star. Quite frankly, if you’ve got a big company that is a flag carrier and you want it to grow, would you be prepared to pay that man as much as you’d pay the best striker in Australia? It depends. The problem is that people aren’t pitching things in context. Context in journalism is hugely important. RE: I also worry about the current state of play. You seem to get more popular appeal by criticising business than trying to find a way to work with it. But it is critical for government and business to find common ground and make it work. TF: The media has its own role to play here. It’s been very difficult in the media, particularly in business media, where there’s not a lot of investment. Take infrastructure, for example. It’s an incredibly difficult sector for journalists to understand. It’s hard when you go to the different groups that run your sector to understand who’s owned by government and who isn’t. Everyone says they’re independent, and they all seem to be called the same names with the same acronyms. A lot of them hate each other, and there are plenty of egos. RE: It’s very difficult. Business must take some responsibility for that. If you’re running a business, you need an honest and understandable narrative about what you’re doing and why you’re doing it. I’ve always described it myself as you need a good story, well told. In the absence of that, people will make things hard.

Japanese Government with the Grand Cordon of the Order of the Rising Sun for his contribution to strengthening the economic relations between Australia and Japan. Sir Rod serves as a member of the APEC Business Advisory Council and is President of the Australia Japan Business Co-operation Committee. He also sits as a Non-Executive Director on the Board of China Light and Power Holdings and John Swire and Sons Pty Ltd (Australia). Ticky Fullerton – Business journalist Ticky Fullerton is Sky News Business Editor and co-anchor of Business Weekend, Sundays at 11am on Sky News Australia. Ms Fullerton has over 20 years’ experience in television at Sky News and the ABC. She was previously an investigative reporter with Four Corners, a political reporter in Canberra, and presenter for the national farming program Landline.


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NAB thinking long term for bold infrastructure future Leading infrastructure bank is well placed to help clients and communities. National Australia Bank’s (NAB’s) Jaron Stallard says the future of infrastructure will be built on technology, sustainability and collaboration. It’s a future that requires new thinking to build world-class infrastructure that benefits current and future generations. Stallard, NAB’s Global Head of Infrastructure Coverage, says the federal government’s Australian Infrastructure Audit 2019 is an important step in this direction. The Infrastructure Australia report emphasises the need to integrate future trends in infrastructure planning. ‘Stakeholders involved in constructing a new motorway today, for example, must consider how the asset will adapt to autonomous electric vehicles in coming decades, and how the motorway will capture and analyse data from autonomous vehicles to improve traffic flows and link with other transit systems in an integrated, on-demand transport model,’ says Stallard. Long-term infrastructure planning will extend to sustainability initiatives, says Stallard. ‘How can assets built today enhance sustainability outcomes for the community? In cities, how do we best incorporate natural elements and renewable technology, and minimise the need to travel by car by providing cycling, walking or other sustainable transport options?’ Stallard’s colleague, Phillip Mak, says future infrastructure will require greater stakeholder collaboration. ‘Increasingly, larger projects will affect federal, state and local governments,’ he says. ‘In addition to public funding, these projects will require greater private-sector capital from domestic

Jaron Stallard, Global Head of Infrastructure, Client Coverage, Corporate & Institutional Banking, National Australia Bank

Phillip Mak, Global Head of Infrastructure, Specialised & Acquisition Finance, Corporate & Institutional Banking, National Australia Bank

and international providers. There will also be more participants at the project’s operational level. The ability for stakeholders to understand each other’s needs and work together to get the best outcome will be critical.’ Mak – Global Head of Infrastructure, Specialised and Acquisition Finance at NAB – says collaboration will be needed to allocate infrastructure resources efficiently. ‘The $200-billion infrastructure project pipeline is the biggest Australia has seen and is mostly focused on the east coast. Stakeholders must consider how best to deploy raw materials and other services, and avoid a bottleneck that drives up prices and stalls project momentum.’ Mak says infrastructure collaboration must extend to the community. ‘More than ever, infrastructure stakeholders need to engage the community on a project, listen and respond to their needs, and bring them on the journey. In this era

of social media, stakeholders need a more consultative approach to the community and a willingness to adapt to their views.’ Stallard says social equity issues should be included in infrastructure planning. ‘If Australia embraces a larger user-pays model for infrastructure funding, we must consider how those on lower incomes will have fair access to these assets. How do we make user-pay transport accessible for people who can’t afford the cost every day? How can we best fund regional infrastructure in centres without a large enough population to support a user-pays model?’ Social infrastructure should be part of this debate, says Stallard. ‘We can’t just build more roads and rail lines. As our population expands, we need to plan for new hospitals, schools, parks and social housing that are required to make Australia more livable, sustainable and equitable.’

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NAB’s infrastructure innovation

This thinking is reflected in NAB’s infrastructure strategy and its recent success. NAB is the country’s topranked infrastructure financier, and is in the top 10 globally. The bank arranged $4.2 billion of funding across 64 deals globally in 2018, according to IJGlobal. NAB has also built a leading position in digital infrastructure, which includes networks that transport data and data centres that store it. The transition to cloud-based services, big data technology, the continued infilling of mobile spectrum and the 5G network rollout, smart manufacturing, and electronic payment systems are driving demand for this infrastructure. ‘Digital infrastructure is rapidly becoming a bigger part of overall infrastructure needs, and NAB has built an extensive team to finance the digital economy,’ says Mak. ‘We are arranging funding for core-plus digital assets – such as data centres, broadcast towers, fibre cables and

telecommunications – and helping clients access these opportunities.’ Funding for renewables projects is another strength. NAB is the topranked arranger of project finance in the Australian renewables market, and has a specialist clean-energy team in its infrastructure division. Stallard expects NAB to issue more sustainability-linked loans (SLL) for infrastructure projects. NAB in July 2018 provided the Pennon Group, a UK-based environmental infrastructure utility, with an environmental, social and governance (ESG)-linked term loan of £100 million. NAB was also part of a syndicate in a landmark $1.4-billion SLL this year for Sydney Airport. ‘NAB is passionate about the potential of SLLs to incentivise companies to achieve better sustainability outcomes,’ says Stallard. ‘Factoring ESG targets into funding can enhance the long-term sustainability of infrastructure, and help it meet community expectations.’

Looking ahead, NAB intends to consolidate its top-10 global infrastructure position, and is expanding in the United States, Europe and the United Kingdom. In 2017, NAB committed $100 billion to infrastructure finance over seven years. Stallard says the Australian Infrastructure Audit 2019 emphasised the need for a bolder infrastructure approach. ‘We must reimagine Australia’s infrastructure future. What worked in the past won’t work as well in the future given the expected population growth and other developments, such as changing technology and user expectations. NAB has a proud history of innovation in infrastructure funding, extensive local and global experience, and a marketleading position. Together, that helps NAB drive successful infrastructure projects that benefit communities.’ ♦ To learn more about NAB’s infrastructure services, visit www.nab.com.au/infrastructure.

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The future of social infrastructure – panel discussion

L–R: Andrew Haining, Cathryn Cox PSM, Jason Loos, Sam Sangster and Rebecca Wark

The future of social infrastructure Key points • • •

In planning for the future, we need to embrace digital technology solutions. New models of service delivery will help us move into the future. Increasing efficiency in asset construction and maintenance is important for the sector’s future.

Panellists: ► ► ► ►

Cathryn Cox PSM, Executive Director, Strategic Reform and Planning, New South Wales Ministry of Health Jason Loos, Deputy Secretary, Victorian Department of Treasury and Finance Sam Sangster, Chief Executive Officer, Western City and Aerotropolis Authority Rebecca Wark, Chief Executive, Health Infrastructure NSW

Moderator: ► Andrew Haining, Investment Director, John Laing



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The future of social infrastructure – panel discussion

Andrew Haining (AH): The vast majority of Australians are fortunate to enjoy a high quality of life by global standards. And we probably all gleefully tell our international friends that our major cities consistently rank highly in the quality of life surveys. Social infrastructure and services have played a key role in achieving those outcomes. However, maintaining this and providing services to those in Australia who don’t have a high quality of life requires social infrastructure and services to constantly evolve. There are lots of challenges that we face, like our growing and ageing population, increasing urbanisation, competition for space in our major cities, technology advancements, changing expectations about services that social infrastructure helps to provide, funding constraints, and asset maintenance backlogs. We will consider the future of social infrastructure and services by looking at a number of the trends that are disrupting the way people access and use social infrastructure and services. How will the coming two decades of social infrastructure differ from the last two? Rebecca Wark (RW): The biggest thing facing us now is changing societal and community expectations. For example, people don’t want to be in hospital. People have an expectation that we can provide services and contemporary models of care in an outpatient setting. People also expect digital technology to make life simpler, and for the built environment to be more environmentally sustainable. In short, people expect things to

be more permeable, like you are at home, where you can move from inside to outside. Sam Sangster (SS): One of the fascinating things that’s happened in New South Wales is the creation of the Department for Customer Service. Governments are recognising that we don’t just have citizens; we have customers. Service delivery is now being done in an environment where customer and community expectations have increased. New platforms are being created, changing the way we deliver government services. When you look at smart cities around the world, the ones that are successful are putting customers at the heart of what they do. This is a novel thing for all governments, and it’s interesting that the Federal Government is now looking to set up Services Australia, replicating the New South Wales model. AH: Do you think that other countries are doing that better than we are? SS: It’s mixed. Cities are doing it differently and better, but it’s much harder to do on a national scale. This is what I’ve found over the last year at the Western City and Aerotropolis Authority. AH: Jason? Jason Loos (JL): Social policymakers have a harder job than transport infrastructure policymakers. This is because the environment they’re working in requires them to be nimble and flexible in understanding the different services needed in particular locations – it differs a lot.

L–R: Jason Loos, Sam Sangster and Rebecca Wark

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L–R: Cathryn Cox PSM, Jason Loos and Sam Sangster

Depending on what is needed, this affects the infrastructure that is needed to assist service delivery – the infrastructure is almost secondary, but it’s important. Getting that balance right between infrastructure and services is much more difficult in the social infrastructure space. For example, with the conversations in Victoria around precinct-based solutions that we want around suburban rail loop stations, it’s the transport solution driving that, but we’re to work out what type of communities we want around those stations. Over the next 10 years, planning will be more about how we can respond and pre-empt where service delivery models are going, and what type of services we need to deliver locally and statewide. That changes the type of infrastructure that you ask for in a tender. It’s quite complicated, and we’re going to have to focus on that more and more over the next two decades. AH: Cathryn? Cathryn Cox (CC): There are a lot of people with Fitbits or that have an app on their phone generating data. For example, all of the information in a Fitbit – how much and how you sleep, how much water you drank today, how much you exercised – imagine if that was all shooting through to your doctor. We need to shift the conversation, because social infrastructure is only there to support service delivery. It’s not there as a means in itself. Over the next 10 to 20 years, we’ve got to think differently about that.


We need to be asking questions like, how do we enable digital services? How do we empower people to manage their own health care? We need to be focused on value-based health care, which asks people, ‘What actually matters to you? Do you want to get to the shops? Do you want a garden?’ This is rather than saying, ‘You’ve got an arthritic knee and you’re going to have a knee replacement’. It’s a different conversation. AH: When you’ve got an employee base of people who may have been in the existing system for a long period of time, how difficult is it to get their focus to change? CC: Historically, we haven’t been good at telling the story. I don’t think that we’ve talked to our people enough. NSW Health has more than 120,000 employees, but they’re also our patients and customers. They have an ability to influence what we’re doing in a major way. So, the challenge over the next 10 to 20 years is how we harness a whole range of our technologies and personalised medicine to paint a very different picture. I’d love to see my GP pop up on my TV and have a drone drop my pharmaceuticals off – that would suit me so much better. It may not be for everyone, but that’s the sort of discussion we need to be having. AH: Sam, you’re tasked with planning and building an entire new city servicing millions of people. Thinking about education, how do you forecast the kinds of infrastructure and services that people will need both in the near term and also 30 to 50 years down the track?


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The future of social infrastructure – panel discussion

L–R: Cathryn Cox PSM and Jason Loos

SS: Look, it’s essentially the thinking we’re doing already. We know the companies that we’re already trying to attract and bring into the aerotropolis. One of the primary reasons that we have been successful is because of the quality of the skills we have in this country. If you look at best practice across the world, education capability is being driven by industry as much as government. This is particularly true in vocational education. The New South Wales Government announced $80 million in the last budget to build a new TAFE. The work we’re doing now is how to adapt the TAFE model.

he challenge over the T next 10 to 20 years is how we harness a whole range of our technologies and personalised medicine to paint a very different picture

In Europe, many organisations are now training their workforces through micro-credentialing. So, you might take a 2–3 hour module, rather than attending TAFE for several years to gain a certificate in robotics. When you start thinking about that, it fundamentally changes the way you deliver education infrastructure.

not one of them is connected to a sewer – they’re all on septic

It shifts from being purely about real estate to facilitating educational outcomes. The shift is already happening. Take the new library in Camden, for instance; it’s not just a library, it’s a learning place used for a whole range of things. The shift is about thinking about how every asset built can be a learning location.

smaller scale, allowing for a much more localised response to

AH: Sustainability is currently a big focus. Sam, you have the advantage when you’re starting from scratch in embedding sustainability in everything you do. How are you factoring sustainability into your planning?

SS: In the 11,500 hectares, there are existing dwellings and tank. That provides us with an incredible opportunity to begin to reconceive how we deliver water, wastewater and other utilities with a longer-term focus. Our initial thinking is that we need to be doing things at a things. Underlying that is a fundamental tenet that we shouldn’t create a greater impact than the area we’re in. It’s very easy to say, but a lot harder to achieve in an area that will grow exponentially over the next 100 years. We need to set the building blocks by doing things like reserving the big trunk infrastructure corridors needed and

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L–R: Andrew Haining, Cathryn Cox PSM, Jason Loos, Sam Sangster and Rebecca Wark

the provision for future developments that we don’t even know about yet. For example, how do you have a refuelling station for a hydrogen vehicle that hasn’t yet been developed?

and maintenance at the same time, you end up with a situation where the asset is built and it lasts for 20 years. But what happens after that?

It’s a complex area. We’re not pretending to be able to pick technologies. But if we get the right platform and the right thinking regarding things like how we build a place predicated on mass transit and highly walkable spaces that are green – then we’re heading in the right direction.

That’s where you get benefits from the Public Private Partnership (PPP) model. Under a PPP, you’re getting a contractual and funding commitment for the new asset, including the maintenance of it.

AH: Jason, funding constraints are putting significant strain on social infrastructure and services. What kind of procurement approaches are you using to get more from your future social infrastructure assets? JL: Before I come to procurement, we’re about to go into a phase with funding and debt constraints. Given that, in social infrastructure, we need to better understand the quality of the assets we already have and how to extend the life of those through smaller strategic investments. While new projects will play a part, in the current environment it is critical to sweat and augment existing assets. Regarding procurement, the question is, ‘How do we come up with more effective procurement strategies to get more efficiency?’ Can we link new asset investment with upgrades of existing assets? When you don’t integrate asset delivery


AH: There is a lot of conjecture about how much infrastructure activity there is in Australia, and the shortage of contractors that are able to deliver it. The sort of work you’re talking about naturally lends itself to enabling smaller contractors to enter the market and participate. How important do you see that being going forward? JL: It’s very important. It’s a segment of the market that we need to focus on more, because the major transport infrastructure spend is significant. If you go back 10 years, we used to have one or two mega projects and a lot of projects in the hundreds of millions. We’ve now got many projects in the billions, and we’re stretching the construction market and project directors, project managers, on the government side. Invariably, we’re getting the A, B and C teams now working on some of these significant infrastructure projects. It is now about how we build capability in the private and public sectors together.


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he unique feature T about social infrastructure is that the public health business in New South Wales is $25 billion. Our capital spend, which is our largest ever, is about $2.6 billion

AH: As a PPP investor, risk allocation is an issue close to my heart. It’s been said that Victoria’s leading the charge, and you’ve been more willing to sit down with the private sector and ask us about what actual risks we’re concerned about. Is that a theme we’re going to see going forward? JL: Absolutely. Between New South Wales and Victoria, we’ve got all the procurement models covered. Once we have made an investment decision and know what we’re building, we’re getting far more sophisticated at tweaking the risk allocation within those models. Even in an alliance model, there are certain risks that a construction contractor should be able to take and manage through ‘painshare’ and ‘gainshare’. Then there are other risks that they probably aren’t best placed to take. And that’s where the ‘painshare’ has to kick in from government, and that’s the same in PPPs. For example, on North East Link, we’ve spent a lot of time talking to the industry to understand what its concerns are with utilities, cost escalation, ground conditions and so on. This is a process to try and establish the best approach to managing risk. Both the private and public sectors must be open-minded, and I think that’s what we’re doing. But it comes down to culture and behaviour, as well. Whenever there’s a big issue, it’s not good for either party. It requires behaviour elements from both sides.

The vision New South Wales has set is for a sustainable health system. Tracking along at $25 billion a year, we can’t continue to expect that rate of recurrent operational expenditure to keep growing. We need to put ourselves on a sustainable trajectory, and building very large hospitals, which are expensive to run and maintain, is not putting us in a very good space in that regard. The other part of our vision is delivering on outcomes that matter to patients in the community with a focus on wellness and digital delivery. When you put all of that together, you can see how that influences the kind of infrastructure and service planning we do. We’ve got a raft of processes that sit under that regarding integrating care. That includes right from when you go and see your GP through to accessing care in our hospitals and at home. We have a program called Leading Better Value Care. The program is about improving patient outcomes relative to the cost. For example, if I have an arthritic knee, I go to my GP. They say, ‘That’s terrible. Here are some painkillers; you’ll need to go and see the orthopaedic surgeon,’ and you think you’re going to have a knee replacement. What we’ve found is that if someone exercises, loses some weight and watches their diet, they’re avoiding or deferring their need for a joint replacement. A joint replacement is a big surgery; it’s costly, and they don’t always go well. But if you just stop for a moment and say to the patient, ‘What would you like?’ rather than, ‘You’ll have a new knee,’ they might say, ‘I’d just like to get to the shops,’ or ‘I’d like to garden,’ and then you have a very different conversation. That’s the sort of reforms we’re trying to drive through health – looking for the value proposition in everything. In an environment where capital is getting scarce, there is huge opportunity locked up in people’s homes. A hospital bed in a home is a lot cheaper than building a hospital bed in a great, big health facility. This will lead to a very different focus regarding infrastructure.

AH: Cathryn, the New South Wales Ministry of Health has been working to implement a range of reforms across health. How are these reforms impacting service delivery and ensuring that today’s health projects can withstand future challenges and changes in the sort of way people access services? CC: The unique feature about social infrastructure is that the public health business in New South Wales is $25 billion. Our capital spend, which is our largest ever, is about $2.6 billion. That just gives you an idea of the difference with health infrastructure and service delivery versus transport, which is more capital-intensive.

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It’s about building smarter and breaking things down into more bite-sized pieces; things like doing imaging medical equipment with a third-party partner instead of doing it all in a major hospital

population, that means we’re not just going to have major metropolitan hospitals, but we’ll also have major facilities in rural areas and remote areas. Part of what we’re striving for is getting much better access to health care. If you have blood cancer, you may not have to go from a small country town to Newcastle or Sydney for treatment, and be away from home for four weeks out of five. You may be able to have treatment within 100 kilometres of your home. Things like that make a real difference to people’s lives. Enabling that is a big step in what we do. In rural, Indigenous and lower socio-economic communities, there’s often comorbidities. For example, if you have low socioeconomic status and poor diet, you then have obesity issues. If you’re not exercising properly, you might then have diabetes and renal problems. In these instances, there’s a whole load of reasons they need to be an inpatient. But if we can make

AH: Rebecca, how are you planning, designing and building health infrastructure in response to these sort of health reforms?

go there. So, it is largely about digital solutions, and how we design and build smarter hospitals, not just bigger hospitals.

RW: A lot of it will be around digital enablement. It’s about

Regarding procurement, we now have nine mega projects

building smarter and breaking things down into more bite-sized

in New South Wales – and that will soon be 12. We’ve got 113

pieces; things like doing imaging medical equipment with a

active health capital projects. The state needs to be able to

third-party partner instead of doing it all in a major hospital.

afford to run those, not just build them. This will require building

Talking about the size of our facilities, given the growing

them in much more efficient ways.

Cathryn Cox PSM – Executive Director, Strategic Reform and Planning, New South Wales Ministry of Health

Sam Sangster – Chief Executive Officer, Western City and Aerotropolis Authority

Cathryn Cox PSM is the Executive Director of both the Health System Planning and Investment Branch, and the Strategic Reform Branch in the New South Wales (NSW) Ministry of Health. Ms Cox has extensive services and capital planning experience from roles in the previous South Western Sydney Area Health Service, NSW Ministry of Health and NSW Health Infrastructure, where she was the interim Chief Executive from December 2018 to May 2019.

Sam Sangster commenced with the Western City and Aerotropolis Authority as the inaugural CEO in December 2018. Mr Sangster’s career spans both the public and private sectors, including significant roles with some of Australia’s largest ASX-listed companies and professional service firms. Mr Sangster has worked in the Victorian Government, delivering multibillion-dollar projects, such as Melbourne’s Docklands, in partnership with the private sector. As CEO of NSW Health Infrastructure, Mr Sangster was responsible for steering the delivery of the largest portfolio of health capital works in Australia, spanning metro, regional and rural New South Wales. During the nearly six years of his tenure, Mr Sangster oversaw the growth of the portfolio from $3.2 billion in 2011–2012 to $14.4 billion in 2018–2019.

In recognition of her contribution to health services planning in New South Wales, she was awarded a Public Service Medal in the 2018 Australia Day Honours List. Jason Loos – Deputy Secretary, Victorian Department of Treasury and Finance Jason Loos is Deputy Secretary at the Victorian Department of Treasury and Finance, where he is responsible for providing strategic commercial, financial and risk management advice to the Victorian Government. Activities include managing the state’s balance sheet, prudential supervision of the public financial corporations, Public Private Partnerships (PPPs), infrastructure procurement and investment, commercial and property transactions, and the monitoring and governance of the state’s major government business enterprises. Prior to this role, Mr Loos was the Executive Director, Infrastructure Delivery (Partnerships Victoria), where he was responsible for providing strategic commercial, financial and structuring advice to the Victorian Government on major infrastructure projects. Mr Loos has overseen a number of major projects, including the West Gate Tunnel Project and Metro Tunnel project.


them better and keep them out of hospital, they never need to

Rebecca Wark – Chief Executive, Health Infrastructure NSW Rebecca Wark is Chief Executive of Health Infrastructure NSW. She is an experienced leader of major infrastructure projects and has been with Health Infrastructure NSW since 2008, overseeing the development of some of the state’s largest hospitals and public health services. Today, she is proudly leading the delivery of the largest health capital works portfolio in Australia. Previous to Health Infrastructure NSW, Ms Wark worked on significant infrastructure projects across the public and private sectors. Her experience is multisector; her first public sector role was planning and delivering venues for the Sydney Olympics, and she has since delivered facilities in education, justice and health.


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Gosford Waterfront

Central Coast primed for growth Strong case for infrastructure investment and industry co-location in strategically important area. Central Coast Council CEO Gary Murphy believes new thinking on infrastructure can boost connectivity, decentralise populations, energise regions and ensure the Central Coast in New South Wales becomes one of Australia’s next great cities. ‘Governments can’t just keep building roads – more roads inevitably attract more cars,’ says Murphy. ‘Nor can governments focus mostly on capital cities with infrastructure spending. That encourages population concentration.’ According to Murphy, ‘The most sustainable solution is infrastructure that makes it easier for people to live, work and recreate in cities, such as the Central Coast, and encourages families to relocate there because of jobs, housing affordability and lifestyle.



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‘The old model of people commuting to a capital city for work is failing. The cost to families, communities, the economy and the environment is rising. If companies want to boost productivity, the answer is partly creating jobs in places such as the Central Coast.’ The Central Coast, about an hour north of Sydney by car, has much to gain from an infrastructure-led, population decentralisation strategy. Around 40,000 of its estimated 346,459 residents work in Sydney, some spending up to four hours commuting daily. Their cars consume approximately 250,000 litres of fuel and emit 500 tonnes of carbon daily, council research shows. Most of these commuters are high-income earners who must drive to Sydney for knowledge-based jobs.

Gary Murphy, CEO, Central Coast Council

This outflow adds to traffic congestion in the Central Coast and Sydney, and contributes to wear on New South Wales roads. ‘The bigger


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cost is what it does to families,’ says Murphy. ‘They have less time together, and stress levels rise when people have long commutes.’ Central Coast Council is researching the economic and social effects of commuting – and the opportunities in alleviating this problem. ‘Imagine if the Central Coast created 20,000 jobs and took 20,000 cars off the road,’ says Murphy. ‘Our community and economy would benefit greatly, and there’d be less pressure on Sydney’s infrastructure and housing. It’s a win-win solution. ‘The key is raising industry awareness of the benefits of co-location at the Central Coast. Our research shows that 150 residents travel to Sydney to work for a single big bank. If that bank had an office in the Central Coast, 150 of its staff would get back hours of lost commuting time. The productivity gains, time back with their family and time in the community are potentially large,’ says Murphy. Peter Auhl, Chief Information Officer of Central Coast Council, says governments need to rethink


what modern infrastructure looks like in the digital age. ‘It’s not just about roads and bridges anymore. Smart cities have smart connectivity; they invest in digital infrastructure that enables people to work anywhere, anytime. In doing so, they stimulate creativity, innovation and collaboration; encourage industry to grow; boost the local economy; and create jobs.’

Development appeal

The Central Coast’s strategic location between Sydney and Newcastle is an attraction. The international experience has shown that regional cities within an hour or so of capital cities are prime economic development areas, and some have even become leading innovation clusters. ‘The Central Coast is superbly positioned to benefit from Sydney’s growth,’ says Murphy. ‘We are a strong city in our own right, but as Sydney’s population increases, companies will need more affordable locations.’ The Central Coast’s population is another attraction. The city is expected to grow by almost 70,000 people by

Peter Auhl, Chief Information Officer, Central Coast Council

2036, reaching 414,615 residents. Combined with neighbouring Hunter, the Central Coast is a hub in a region that will have well over one million people by then. ‘The Central Coast is often perceived as a holiday destination because of its beaches,’ says Murphy. ‘We are also a key area in one of Australia’s largest and fastestgrowing regions.’

Bouddi Coastal Walk – Bouddi National Park



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Central Coast Stadium

The NSW Government is investing in the Central Coast – in 2016, it announced the Central Coast Regional Plan 2036, outlining its vision to grow Gosford, the main commercial hub, and the wider municipality through better infrastructure and services. The government announced $550 million for Gosford and Wyong hospitals, more than $600 million in road improvements, and extra school funding. Gosford Hospital’s transformation is near completion, and planning for Wyong Hospital’s redevelopment is underway. Another $52 million of funding has been earmarked for the Gosford City Centre revitalisation.

‘It’s a great time to invest in the Central Coast,’ says Murphy. ‘There’s a lot of activity underway, and potential to expand health care, education, food, tourism and other sectors.’

Industry foundations

The University of Newcastle (UON) is developing the UON Central Coast Medical School and Health and Medical Research Institute in Gosford. The facility will be the centrepiece of a Health and Wellbeing Precinct at Gosford Hospital. In education, UON in 2019 outlined its vision for a $250-million campus at Gosford. Murphy says there is potential for other universities to

‘The NSW Government is investing in the Central Coast – in 2016, it announced the Central Coast Regional Plan 2036, outlining its vision to grow Gosford, the main commercial hub, and the wider municipality through better infrastructure and services’

establish campuses in the Central Coast. Food remains a Central Coast strength. Several food multinationals have operations there, and the region has a world-class agriculture sector. ‘Our food production industry is going from strength to strength,’ says Murphy. ‘The Central Coast climate, land and location are ideal for food producers.’ Central Coast tourism attracts millions of visitors each year, and is among New South Wales’s bestperforming tourism markets. Murphy says the city has opportunities to grow Indigenous tourism and accessible tourism. ‘The Central Coast has a wonderful Indigenous population and some amazing Aboriginal sites.’ A proactive council is another strength. The Central Coast Council was established in 2016 after the amalgamation of the Gosford City and Wyong Shire councils. Murphy joined as CEO last year. ‘There’s much work to do, but council is identifying problems, such as commuting, and developing strategies to turn them into opportunities. It’s an exciting time for our city.’ ♦ To learn more about the Central Coast, visit www.centralcoast.nsw.gov.au.

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Matthew Warren

Keynote address The future of electricity in Australia Matthew Warren, Author, Blackout Key points: •

• •


Australia faces financial and environmental obstacles in either maintaining the status quo or moving to a sustainable energy market. Political instability has caused great difficulty in settling energy policy. The Australian energy conversation should remain focused on emissions reduction.


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Matthew Warren

Many people are aware of the energy policy debate, but do not necessarily understand it. My intent is to try and shed some simple light on the subject. In very simple terms, the electricity system that we use was invented in the late 19th century and built through the 20th century. It was the dotcom boom of the late 19th century. Everybody wanted electricity, and governments worked tirelessly to get it to them. The original investors in electricity were private sector investors, but the capital intensity of the investments overwhelmed their ability to get returns. And that’s why government stepped in, in the 1900s and gradually bought or acquired those assets from businesses. It couldn’t develop them fast enough, and it often lost money on those investments. This reminds me of a few examples. My favourite is someone from Hobart who built the first tram system in Australia. He bought an entire tram network from Siemens in Germany and had it installed in Hobart. People in Hobart really liked the tram, and they rode it every day. But the owner went broke because the cost of the asset simply overwhelmed the returns he could get from the people travelling on it; however, governments and councils realised that it was something the public wanted. So, they took over those assets and rolled them out. The first electricity in Tasmania was coal-fired, not hydro, which always disappoints people. Energy systems were subsumed into a government department through the 20th century, and

that’s where they stayed. So, basically, energy was a machine run by governments, and there were no market arrangements. Governments simply charged whatever they thought customers and households were willing to pay for the service. It was used as a state development tool. It was only in the late 20th century that we began to think about market arrangements. This was change, and acted as an invitation for the private sector to start investing in what is a large, capital-intensive asset. But the private sector required a market setting. In essence, you have the machine – which is the generator, the poles and wires – and then you have governments introducing a market arrangement in the 1990s – the signal for the private sector to invest. So, there are two boxes sitting one on top of the other. Now, governments could run the machine without the market and return to building and owning the machine, but I don’t think that governments have the appetite to spend the $250 billion it would cost to rebuild this system. In very simple structural terms, the challenge is to work out what the new machine looks like in a setting where we have to decarbonise the coal-fired generation system that we have in Australia for the 21st century. That requires a new market design that’s fit for that purpose, including governance arrangements. In very simple terms, that’s the main challenge; however, the problem is that we don’t have a blueprint to do this.

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ind and solar W are clearly the two dominant sources of renewable generation. The big change in these technologies has been reduced costs largely through scale of production in both cases

For the last 10 years, we’ve been debating what design a new market should take. Whether we use an emissions trading or other mechanisms, that is where the frustration lies. There’s no settled blueprint – and one is needed. Distilling that right down to very simple binary options, there are two types of machine. There’s a nuclear-power-based machine, and there’s a renewables-based machine. They can be slightly compatible. You might use some nuclear in large renewables, but effectively that’s it. They don’t really work together – it’s one or the other. The second element of market design is that you can either have an energy-only market (the arrangement currently in place on the east coast of Australia) or a capacity market. The latter


means that rather than having the pure cost of the value of the electrons being transacted through parties in a market, you pay for capacity. Basically, you pay for the megawatts on the ground as a base payment for a power station, a pumped hydro facility, or a wind farm, and then make the rest of your money through a market arrangement. In essence, it de-risks that process. It’s a lot less efficient, but it’s more stable for investment. When you compare what a nuclear power grid and a renewable power grid would look like, it’s an interesting breakdown. A nuclear power grid is expensive. This is certainly the case with the most recently built nuclear power stations in Georgia, in the United States. Building nuclear assets is very expensive, especially when you add in safety and security components, and the method required to build them. If Australia were to move to a nuclear grid, it would cost more than $500 billion. The result would be a grid that looks and functions like the electricity grid of Australia in the late 1990s. This is because a nuclear power station is basically a coal-fired power station with a different heat source. If you’re a technical conservative, then it’s an attractive option because you don’t have to do anything; you already know how the grid works – it’s just nuclear instead of coal. To support reliability, you may use pumped hydro peakers like Snowy 2.0, instead of using gas peakers. That system would work, but it’s very expensive. Then there’s a renewables grid, where the capacity of this kind of grid is much higher. For a renewables grid, you must overbuild. Given the intermittency of renewables, there is a live technical debate about how much you need to overbuild. After the Greens did a deal with Julia Gillard in 2010 to get


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Matthew Warren

the carbon tax, market operators were asked to analyse what a 100 per cent renewables grid looked like. They found that you need to have double the renewable generation capacity compared to the needs of the market. There’s also a very live debate about how much storage is needed to support it, given that renewables don’t work all the time. As a proxy, take 30 gigawatts as an example – about 15 times Snowy 2.0 and all of the available pumped hydro on the east coast of Australia. That’s a lot of hydro, and it’s also a rough estimate. I’ve also included about 10 gigawatts of demand management, which is a very important growing part of the market in helping to manage demand, particularly in the industrial sector. I haven’t seen a paper anywhere that seriously looks at renewables as the main source of generation. At 80 per cent, the grid can still operate, but you would need 20 per cent of an ‘engine’ in that grid – something mechanical of scale operating inside that grid to recharge during periods of dark and still weather, and help to meet peak times in demand. That engine may be gas, nuclear or hydrogen, but the point is, you still need the engine. Wind and solar are clearly the two dominant sources of renewable generation. The big change in these technologies has been reduced costs largely through scale of production in

both cases. Solar is an incredibly simple technology. It’s just photons of light hitting silicon, and it releases electrons – it’s easy to drive down cost in that kind of technology. Both are intermittent, predictable, cheap and generate completely independently of demand. Given this flexibility capability, you will inevitably overbuild that capacity. Turning to the build rate of renewables since the Renewable Energy Target (RET) was introduced, over the last two to three years, there has been enormous growth in building assets to meet the RET goal of around 20 per cent of generation by 2020. For context, the build rate in Australia over the last two years has been the fastest per capita on Earth – twice that of Germany and about five times that of the United States. Australia also hasn’t just had one renewable energy target scheme – we’ve had two. The first was the original large-scale industrial scheme introduced in 2009, and we also have a household rooftop scheme. The latter is the scheme that is continuing to put solar on household roofs. Looking at what we require in terms of renewable and storage infrastructure for a renewables grid in 2050, the current run rate for renewables investment is where it needs to be, if maintained. But we will need to be rebuilding renewables at a fairly aggressive scale for the rest of our lives – it will be an ongoing 40-year infrastructure project.

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Where we fall is on storage; we are much further behind. Now, Snowy 2.0 will provide two gigawatts – and that’s good, but we need 30 gigawatts. Over the next 30 to 40 years, we’re going to have to build storage at an aggressive rate, much faster than at present. And that is true whether it is chemical batteries, pumped hydro, hydrogen or whatever else. Rooftop solar is also another interesting challenge. It is basically a completely political phenomenon, as it was introduced as a scheme as one of the things the Democrats wanted in return for passing the GST. That went along for a little while until the political debate around climate change hit in around 2006. The scheme was one of the few things the Howard Government had going for climate change, and then it increased the household rebate to $8000. Of course, the scheme lit up like a Christmas tree. It was incredibly popular and oversubscribed. The scheme evolved into a managed system for deploying rooftop solar panels. There were three groups of people predominantly installing them – they were either retirees, first home buyers, or those in marginal electorates. So, it’s very popular, it’s fallen in cost, and it genuinely saves households on their power bills. They buy it primarily for cost savings, not to save the environment. Given that they live in marginal electorates, governments do not want to change those schemes because of their popularity. The problem with that is twofold. One, there’s high voltage in parts of our cities, particularly Adelaide and Brisbane. Voltage is code for pressure. There’s too much electricity during mild sunny days in Brisbane and Adelaide, and the electrons can’t get to market because it’s not designed to hold them. And the cost of upgrading it would be borne by all consumers if you do.


The second problem is that there is now so much of it, it’s like a giant ‘black ops power station’ that sits in the middle of the grid, and we can’t control it. We can guess how much it’s generating, but we don’t know how much it’s generating. In Perth, they’re approaching minimum demand by mild spring and autumn afternoons where rooftop solar will be the only source of generation by 2025. Nobody knows how to run that grid, and it’s created a significant technical challenge. Now, everyone has ideas on how to fix it, but the principal challenge is in seeing it and controlling it. And it requires imposing a constraint of some description on households in marginal electorates, on something that they like. Chemical batteries are going to be a critical part of the electricity grid. The largest battery in the world is in South Australia. It’s tiny compared to the scale of the electricity grid, but it’s very good at managing frequency and stabilising the grid. But its volume is very small at grid scale, and these batteries are unlikely to be a major player in providing bulk electricity storage. But they are great in stabilising intermittent generation, and they’ll play a key role there. How do you store electrons at scale? It’s going to take more work, but currently leading this is the Wivenhoe pumped hydro generator in Queensland. The problem with pumped hydro is that it’s pipes, tunnels and a large pump, which cranks the water up a hill and then releases it – it’s very binary. If you look at Wivenhoe, it discharges about 60 times a year, which isn’t a lot. Even though prices have been volatile, it hasn’t significantly increased its discharge rate. When I asked why, I was told that it’s harder than it looks. This is because once it’s loaded, you have to wait until you can unload it – you can’t just load it again. When demand is low in Queensland and they try to charge it, they can affect the price of the market in Queensland.


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Matthew Warren

So, other market participants looking to buy low and sell high are compromised by Wivenhoe’s presence in the market. This presents a real challenge in the current energy-only market. It has an impact on how investible and bankable projects are. It will only get worse as we build more of it, because they will undermine each other. The more storage goes into the market, the more they compromise the arbitrage spread.

consistently low and zero wholesale prices, that’s bad. That’s not free electricity. It’s bad for all the asset owners who are trying to recover costs – particularly renewables investors who aren’t protected by contracts with state governments. This isn’t sustainable. We need to get prices to a point where they’re balanced and getting returns for all types of investment, particularly for builders of renewables and pumped hydro.

I theorise that the energy-only market we use on the east coast was effectively fatally wounded when the Emissions Trading Scheme (ETS) failed to pass in Parliament. The problem is that an energy-only market is a pure market design. It’s very elegant, and the price signal in an ETS was designed to work with the market by using the pricing in the market to signal investment in different types of assets. The RET has worked against the market as it drives investment regardless of price signals. That’s partly why we’re seeing volatile wholesale prices. Renewables have been built regardless of the price signal, and we need to find a way of correcting and balancing that.

This just illustrates the problem of returns. According to the market operator, the costs and returns of running a battery compared to the cost of electricity and pumped hydro varies. Running pumped hydro is a marginal business because you have to use a lot, and the loss rates are high. For instance, Wivenhoe has about a 60 per cent efficiency, so you still lose 40 per cent of the electrons you’ve used to pump the water up the hill. They’re not recoverable in the discharge.

This is an investment problem. In the current market, there’s very little investment in generation that doesn’t have government subsidy. This has been the case since 2012, with one exception being the Barker Inlet gas peaker being built in South Australia by AGL. This operating context is trampolining the wholesale price. Now, the market is designed to be volatile and bounce around – that’s part of its elegance. But when you start getting

Batteries make more money because there’s a good market now in providing frequency services. When there’s instability in the grid, batteries have proved to be outstanding in stabilising the grid. But as more batteries come online, they’ll be competing and putting the price down for that service. That’s not a bad thing, but it’s not a sustainable business model. Consider Wivenhoe Queensland during a bouncy period. The data shows it’s missing opportunities to arbitrage, because it’s got both a sticky charge and a discharge mechanism. It’s trying to guess what it needs to do. For instance, it will often hold water in anticipation of hotter days when the ramp-up rates are going to be aggressive. So, they will leave it to solar during

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hifting from an energyS only to a capacity market is one of the biggest debates right now. Germany debated this, and it’s stayed with energy only, the same as Calgary and Alberta in Canada. But it’s a live debate, and I don’t know the right answer

the day, then when that dies off in the evening you need lots of coal to recover quickly. This is where Wivenhoe comes in; they hold the water back so they help with that very rapid charge up to stabilise the grid. That means there are physical constraints on the grid. Shifting from an energy-only to a capacity market is one of the biggest debates right now. Germany debated this, and it’s stayed with energy only, the same as Calgary and Alberta in Canada. But it’s a live debate, and I don’t know the right answer. This leads to thinking about how we value different asset classes. The more complex elements are the kind of intervention in the market. It may make it less efficient and more expensive, but at the same time, do you need to do it to stabilise the grid? We’ve never changed from one market to another. We’ve changed from government ownership to a market. The main problem is that there are $120 billion worth of assets in the market. Changing the market will mean that those assets variously increase or decrease in value, depending on the change in market rules. Those who get asset increases will be cheering, but those who are losing value will be fighting with every fibre of their being to stop it. There will be significant conflict and debate about that kind of changeover.


a difficult transformation, and it’s been politicised. The problem for governance is that we won’t know whether it’s fit for purpose until we’ve designed the machine to build in the market. As a first step, we need to get the politics out of this, because it’s technically not that difficult. There’s plenty of capital and it seems investible, but the politics is impeding the transformation. So, it’s a bit of a ‘cart before the horse’ question at the moment. But we may need a significant change in the way we do this. Recently, the ‘big stick’ legislation has popped up again, which may provide the ability to force businesses to divest. Recently, the energy market regulator announced that it is taking a group of wind farm owners to the Federal Court over the system blackout in South Australia. And it’s taking another generator to court for a blackout in South Australia in February. It has also announced that it’s going to increase penalties and prosecutory powers against energy businesses.

Finally, the governance. Now, governance is a complex area. The fundamental problem with electricity is that it’s

All of this means that there’s a very strong anti-business sentiment in the market, driven by the politics at play, rather than what we need to do, to get market transformation right. If the businesses lose the court case over the system blackout in South Australia, you can expect class actions against the four South Australian companies that lost millions of dollars in business and assets. The idea that this is a good outcome for investment in the sector at this critical time is a worrying trend.

Matthew Warren – Author

He was Chief Executive of the Australian Energy Council, the Energy Supply

Matthew Warren is an economist and journalist. He has spent the past 15 years working for the electricity, downstream gas, renewable energy and coal industries.

Association of Australia and the Clean Energy Council. He was also Environment Writer at The Australian and worked for the New South Wales Minerals Council.


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Product Solutions for Intelligent Traffic Systems Enquiries T: (02) 9653 9934 E Sales@agd-systems.com.au W: www.agd-systems.com.au

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