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Australia’s 2050 challenge: what Intergenerational Report Three (IGR3 means for infrastructure in Australia | By Brian Haratsis, Chief Executive Offi ce, Macroplan Australia
By Brian Haratsis, CEO Macroplan Australia, Fellow of the Victorian Planning & Environment Law Association
Table B: Infrastructure and population growth
Over recent decades, investment in infrastructure-related industries has closely correlated with population growth.
Table A: Infrastructure and population growth
7.0
Per cent of GDP Per cent
6.0 2.1
5.0
4.0
3.0 0.9
2.0
0.5 1972-73 1984-85 1988-891980-81 1976-77 1992-93 1996-97 2000-012004-05 2008-09 Investment in infrastructure-related industries (LHS) Working age (15-64) population growth (RHS) Population growth (RHS) Note: Excludes inventory investment. Infrastructure-related industries are electricity, gas, water and waste services, transport, postal and warehousing and information media and telecommunications. Sourec: ABS cat. no. 3201.0 and ABS cat. no. 5204.0.
Cities require less fi xed infrastructure per capita relative to rural areas because of the economies of scale that accompany infrastructure networks in cities. Still, increasing population density can lead to signifi cant congestion costs that offset the benefi ts of these economies of scale.
The population projections in the IGR3 are no cause for concern. Over the past 40 years, the population of Australia has increased by 78 per cent. Between 1970 to 2010, big-ticket infrastructure included new international airports, freeway networks virtually built from scratch, new ports, major secondary and tertiary education expansion plus major new hospitals or extensions in every state.
Age range 1970 2010 2020 2030 2040 2050 Population as at 30 June (millions of people)
0-14 3.6 4.2 4.9 5.4 5.7 6.2 15-64 7.9 15.0 16.6 18.2 20.0 21.6 65-84 1.0 2.6 3.7 4.8 5.6 6.3 85 and over 0.1 0.4 0.5 0.8 1.3 1.8 Total 12.5 22.2 25.7 29.2 32.6 35.9
Percentage of total population
0-14 28.8 19.1 19.0 18.3 17.4 17.2 15-64 62.8 67.4 64.7 62.4 61.3 60.2 65-84 7.8 11.7 14.3 16.6 17.2 17.6 85 and over 0.5 1.8 2.1 2.7 4.0 5.1 Source: ABS cat. no. 3105.0.65.001 (2008) and Treasury projections.
The big difference between the past 40 years and the next 40 is that the number of people aged 65 and over will increase by 5.1 million, where between 1970 to 2010 this group increased by only 1.9 million. The increase in the number of people aged 65 years and over is enough to fi ll an entire Sydney metropolitan area (current population of 4.5 million).
IG3 argues that the key reason to invest in and reform infrastructure markets is to drive productivity. In particular the report points out that: - An International Monetary Fund study found that increasing public infrastructure stock by one per cent increases output by around 0.2 per cent; and - OECD research indicates that investment in physical infrastructure can increase long-term economic output more than other types of development; - The Productivity Commission estimated that achieving best practice in energy and transport infrastructure could increase the size of Australia’s GDP by around two per cent.
So, what are we waiting for? Why insist that infrastructure spend should be substantially increased? What are the hurdles?
The Rudd Government is spending money but not on the scale required.
The government invested $22 billion in the 2009-10 budget to improve Australia’s core infrastructure. This included $8.5 billion on expanding Australia’s land transport networks targeting roads, rail and ports, including: - $4.6 billion on improving metropolitan rail networks in six major cities: Melbourne, Sydney, Brisbane, Perth, Adelaide and the Gold Coast; - $3.4 billion on improving the quality and effi ciency of Australia’s road network, including a number of strategic investments in Network 1 – Australia’s busiest freight route stretching along the eastern seaboard between Melbourne and Cairns; - $389 million towards developing, constructing and expanding critical port infrastructure in Western Australia and the Northern Territory. This investment in Australia’s gateways will play an important role in driving economic growth into the future – improving access for Australia’s mineral resources and commodities to global markets; - the National Broadband Network (NBN), which will provide high speed broadband to meet the growing need for advanced telecommunications services over the long term, and aid in the delivery of services in areas such as education and health.
Reform is required on infrastructure planning (through COAG), town planning, fi nancial regulation, and by adopting a national approach to public private partnerships. There is still no effective national market for energy and water, which have limited investment appeal. The proposed Emissions Trading Scheme has been a major source of uncertainty for energy investors. COAG’s proposed seamless National Economy National Partnership Agreement, seeking a more effi cient system of environmental assessment and approval, has gained little real traction.
Conclusion
The IGR3 set out a clear case for major infrastructure investment but is likely to have understated the required rate of growth in expenditure signifi cantly due to the infrastructure cost of health and ageing, and also the size of the economy in 2050. The regulatory framework shaping and guiding infrastructure investment is outmoded.
TRANSFIELD SERVICES – MANAGING INFRASTRUCTURE IN AUSTRALIA
The Australian Rail Track Corporation’s (ARTC) Parkes to Cootamundra rail line running through central west NSW is relatively small (only 201 kilometres) but it is an essential asset for the companies and towns that rely on it.
In early 2009, the ARTC was given the funding as part of the Federal Government’s Stimulus Plan to replace wooden sleepers with 301,000 concrete sleepers.
The project would deliver a more reliable line with a faster track speed as concrete sleepers hold rail in place during extremely hot days, unlike wooden sleepers which tend to buckle.
The project was fast-tracked and scheduled for completion in just nine months after the contract was awarded to Transfield Services. The team was given three months to mobilise before starting a six-month period of laying 3,000 sleepers a day.
In December 2009, the last sleeper was laid ahead of time and within budget.
The ‘Transfield’ name dates back to 1956 and is synonymous with projects such as the Sydney Harbour Tunnel and Sydney and Brisbane airport rail links. Transfield Services was originally Transfield Holdings’ operations and maintenance division before it was listed on the Australian Securities Exchange in 2001.
Transfield Services Chairman and Transfield alumni, Tony Shepherd, received the Australian Constructors Association’s Services to Construction Award late last year.
Transfield Services CEO Australia and New Zealand, Mr Bruce James, said: “We are an operations and maintenance company at our core but we have a strong reputation for being involved in infrastructure projects from start-up to long-term asset management.”
“As managing contractor or alliance contractor for major public sector funded infrastructure, we focus on the long-term operations and maintenance from the very beginning of the project.”
In Australia, Transfield Services operates and maintains more than 4,500 kilometres of rail infrastructure, provides services to more than 6,000 kilometres of irrigation infrastructure and operates and maintains major tollways, tunnels and road networks in NSW, Tasmania, Western Australia and Victoria.
“Our water business is involved in projects such as the world’s largest and fastest constructed channel automation project the Northern Victorian Irrigation Renewal Project (NVIRP).
“As part of the FutureFlow alliance with Comdain, Sinclair Knight Merz and Goulburn-Murray Water, we installed 1,516 FlumeGates within one winter works period when the previous largest number in Australia was 271.”
The entire project was delivered in 18 months, with the team working along a channel network, that if laid out end-to-end, would run from Sydney to Perth and half way back again.
The alliance recently won the Engineers Australia Award in Victoria 2009 for Infrastructure Projects over $20 million and the Australian Water Association Victorian Division’s Infrastructure Innovation Award for their work on NVIRP.
