Our cities are suffering from traffic congestion and inadequate transport networks. Here are five areas in which government and the private sector can collaborate to help solve our urban transport problems.

In Australia we’re fortunate to have cities that are considered to be amongst the most liveable on the planet and we enjoy a relatively strong economy. But our cities are facing a dilemma. Traffic congestion and inadequate public transport are detracting from our productivity, impeding our competitiveness and decreasing the liveability of our cities.

Under-investment by successive governments has led to a real shortfall in our infrastructure provision in urban areas whether it be roads, public transport or freight networks. There is a pressing need to make those investments, but Federal Government or State Governments just don’t have the money and they’re not willing to borrow or impose what are considered to be politically unpalatable solutions such as taxes and tolls.  So there’s the problem. But there are solutions and I’ve grouped those solutions into five broad categories.

Firstly, we need a robust and reliable pipeline of projects. Infrastructure Australia has done a great job in identifying our infrastructure needs across the country for projects in excess of $100 million. But when you look at that list of projects there are only three that are urban transport projects, and indeed there is some question as to when and if they will proceed because there are a lot of hurdles to jump across before they come to fruition. Likewise at State Government level, they’ve done a great a job in identifying the projects but there are serious question marks about them. So there we have a lack of immediate opportunities, perhaps a lack of even mid-term opportunities, but we have a crying need for this investment.

Secondly funding, we need to explore a range of funding options. As I mentioned governments don’t have funds at the moment but there are options that I believe governments can explore.  Firstly, privatisation of existing assets: ports, electricity assets, surplus land and redeploying those funds into infrastructure development or, in the same vein, looking at privatising existing freeways. Perhaps even tolling those freeways for a couple of years so the government can sell them as a mature asset, a reliable asset. Taxes, imposts, user charges, increased public transport fares, we can see there are political ramifications for those sorts of solutions in what is a finely poised parliament in many parts of the country. But perhaps there is a point where the electorate would be happier to pay a premium in return for enhanced infrastructure. Whilst government dismisses more borrowing because they want to preserve their AAA credit rating - which is indeed a worthy and noble objective - perhaps there is a point where more borrowing at the expense of a credit rating is a viable outcome because the debt servicing costs that would increase through a drop in credit rating may be outweighed by the economic and social benefits of more infrastructure. 

There are also huge opportunities in private sector funding, including, for example, public private partnerships. Privately financed infrastructure projects using debt and equity markets sourced by the private sector and the private sector providing a whole of life solution. There have been very few of those projects in this country relative to other jurisdictions, but the appetite is there. The private sector wants to invest. They’ve got the funds and the appetite, but they’re just lacking the opportunity and the stimulus to make these projects happen. Admittedly there have been some projects that have not been successful that have been privately financed, but I would suggest that’s not due to the funding structure or the way the project has been structured.

Likewise our superannuation funds have expressed a deep desire to get involved in infrastructure projects. It just makes sense to tap into that reliable revenue stream whilst also providing nation-building infrastructure. Again, we need to clear the pathways to ensure that the superannuation industry can invest in this nation building infrastructure.  In parallel, there are the sovereign wealth funds with massive amounts of money at their disposal, and an expressed interest to be involved in Australian infrastructure investment. And, there are also overseas pension funds. We’ve already seen some of them, such as the Canadian funds, entering this market. I think there is a huge pool of availability of funding in the private sector and we need to do a lot more to align the need with the investment desire. 

The next area of focus is in streamlining government procurement processes. It’s well documented that it costs millions of dollars to bid for an infrastructure project. That’s just to bid for the opportunity. In many cases it takes a couple of years to reach an outcome,  tying up executive time and resources in bidding for these projects. This has led to a contraction of the market and a lack of vibrant competition or activity. However, the sort of measures that I think can be implemented are fairly straightforward. Governments need to clearly define the scope of the project and the outcomes they are looking for.  Secondly, looking to bundle projects to get more value capture out of a project in order to make it a more attractive investment opportunity for the private sector. Thirdly, simply streamlining documentation - contracts, tender documents - we don’t have consistency within States, let alone across the country. Making sure that there are sufficient human resources within government to handle multiple projects, rather than just sort of doing one or two a year because of resource constraints. There are a range of measures, but what is important is that the government does receive value for money for these processes. It is not intended to sound critical of the way government runs these processes, but I do think there is a desire within government and the private sector to make them more efficient. 

The fourth area of reform is in the regulatory sphere.  At the moment players in the infrastructure sector need to navigate a range of regulations and laws across the country. It makes eminent sense to standardise, certainly from a technical perspective, but also to get some harmonisation around regulations that are common across the country, whether it be industrial relations or occupational health and safety.  As well as that I think there are regulatory reforms that can actually act as a stimulus to activity such as the tax treatment of trusts, for example, to increase the appetite of the private sector to invest in infrastructure.

Fifthly and finally skills, we have a skills shortage across the country. I’ve already mentioned the need for depth of skills within the public sector and that hasn’t been helped by recent rounds of job cuts. Also in the private sector we’ve seen a drawing of skills, both professional and labour, to the resource states and that needs to be rebalanced or reweighted by increasing both on the job and educational training.  Perhaps looking at liberalising our visa restrictions to target the sort of skills that we  need to bring into the country. Making Australia a more attractive destination for incoming residents from a tax perspective and even recognising the qualifications and experience of others who are looking to come to Australia and providing the necessary skills. 

That’s a package of suggestions if you like – I’d like to call them “solutions” but I believe it’s incumbent on the government and the private sector to work collectively to really explore these solutions and take ownership of them, because the benefits, both social and economically, through integrated urban transport networks are massive.

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