Article – Former Treasury secretary Ken Henry warns of infrastructure shortfall

10 February 2014
Annabel Hepworth
The Australian

AUSTRALIA does not have the infrastructure to seize the full potential of the Asian century, Ken Henry, a former Treasury secretary and current NAB and ASX director, has warned as he called for “more creative, innovative thinking” about the nation’s infrastructure needs.

In an interview with The Australian in his capacity at the University of Wollongong as chairman of the SMART infrastructure group, Dr Henry said that there were questions about whether Australia had sufficient port, road and rail links to export its materials. He also raised concerns about whether services and people could move freely between Australia and our northern neighbours.
This is a key issue this year as the Business 20 trade taskforce has identified trade in services as a priority for the G20 summit in November.
“We do not have the infrastructure requirements for an economy and a society that is well connected with Asia,” said Dr Henry, who also spearheaded the Gillard government’s Asian century white paper.
“There is enormous potential in the Asian century and we simply don’t have the infrastructure assets, the infrastructure services, to ensure that in the commercial space — but also the social space — we make the most of those connections,” he said.
Dr Henry also said questions should have been asked about whether so many resources should be shipped from Queensland to Asia via the Great Barrier Reef instead of sending it west then north via the Port of Darwin.
“I don’t think the question has ever been asked in the right places. And really these questions should have been asked 20 years ago, or even 10 years ago would have been fine,” he said.
“Maybe someone should have said, ‘Why don’t we explore the possibilities west and north out through the Port of Darwin? And think about what that would do for the Northern Territory’.
“These are the sorts of questions we have to be asking ourselves. “It requires different, more creative, innovative thinking.”
Dr Henry’s comments come amid heated debate over shipping through the reef and amid warnings to a Productivity Commission inquiry into infrastructure that there are “excessive” costs in building infrastructure in Australia.
In a new submission obtained by The Australian, Independent Contractors Australia executive director Ken Phillips says that construction costs are 20 to 30 per cent higher than they should be.
“This situation presents as a major ‘home grown’ threat to the current and future economic development of Australia. If infrastructure cannot be built at reasonable and affordable cost, significant economic damage occurs,” the submission says.
The SMART research group has produced a green paper, which criticises “wasteful” spending on projects as a recurring problem. Research from consultant McKinsey, for instance, says Australia is spending more than is required as a percentage of GDP but the spending is inefficient.
The green paper — submitted to the PC inquiry — argues that the government should establish an “Australian infrastructure market” to remove distortions in decision-making and should be backed by quality information about what the population needs.
Dr Henry chairs the research facility’s advisory council.
On the recommendations of the green paper, Dr Henry said: “We need to have more information.
“We need clearer decision-making to inform a national market for Australia’s infrastructure.”
He said that there were deficiencies in getting information to support “sensible” decisions on projects and in the quality of decision-making.
As the country faced “enormous challenges”, including a growing and ageing population and the easing of the mining boom, “we have to think with much greater ambition and much more creatively” about infrastructure needs.
On funding projects, Dr Henry said that shadow tolling — a model used in Britain where the government pays an operator “shadow” tolls based on an assumed level of patronage — made sense in some cases.
He said that in other cases it would make sense to charge tolls for access to existing infrastructure. He pointed to Sydney’s Cross City Tunnel, saying that putting tolls on above-surface roads to finance the project would have encouraged motorists into the tunnel.
“We have to think much more creatively about the infrastructure that we provide,” Dr Henry said.
Courtesy of the Australian