In normal times — if and when we ever return to normal times — the Infrastructure portfolio would be a huge target for a Government desperate for budget savings. The portfolio is bursting with road funding stretching into the future, ripe for “re-profiling”, not to mention the Government’s Infrastructure Australia funding; there are — despite the departure of the National Party from office — big regional programs that could be slashed, and lots of untied funding for local government.

When the Coalition went looking for budget savings in 1996, the then-Transport and Regional Development department took a huge hit, losing road funding and having the previous government’s entire regional and urban development programs wiped out.

The dilemma for the Government leadership, though, is that not merely is this Government supposed to be all about more infrastructure spending, but that such cuts will withdraw money from the economy, and particularly in construction, which is a key target of the Government’s efforts to prop up spending. It can’t cut for the sake of the budget bottom-line, but must cut for the sake of spending the money more effectively elsewhere.

Some programs cry out for slashing. In his pre-budget round of savings early last year, Lindsay Tanner announced spending on an inland rail route, a Mark Vaile fixation to which Labor had remained notionally committed, had been delayed into 2009-10. A study is currently underway on yet another inland rail route after a previous one by the Infrastructure Department’s economic research area determined it was a dud.

In fact the whole idea is a dud, a rail track from nowhere to nowhere that would carry nothing, like the Alice Springs to Darwin line without either Alice or Darwin. The $65m allocated to it can be returned to the budget with no effect beyond upsetting rail nutters. There are also some savings available from ending the process of bureaucrats junketeering around the world “negotiating” air access agreements with other countries as part of the pro-Qantas protectionist racket that is our international aviation policy.

And we still continue to subsidise transport across Bass Strait to the tune of more than $130m every year, via the “Bass Strait Passenger Vehicle Equalisation Scheme” and the “Tasmanian Freight Equalisation Scheme”. With northern Tasmanian seats permanently marginal, no Government is ever likely to tamper with the subsidy. In fact, it was expanded to King and Flinders Islands last year. But in late 2006, the Productivity Commission considered the schemes and could find no economic rationale for them, suggesting that if the goal was to support the Tasmanian economy on “regional development” grounds then there were better, more targeted ways of doing just that.

But there is a way to extend existing infrastructure funding further without slicing or delaying projects. The only problem is it won’t be at all popular: requiring all road users, not just the road transport industry, to pay the cost of their infrastructure use.

In December the Government managed to get through the Senate new heavy vehicle road user charges that the Coalition had blocked earlier in the year, which fixed a growing gap between heavy vehicle charges and the damage they were causing to roads, as well ending the subsidy of heavier trucks by smaller trucks. Cars and light commercial vehicles, however, still get to use major roads for free.

The revenue stream from tolls would make projects more appealing to the private sector, especially at a time when private infrastructure investment has dropped precipitately due to the financial crisis. It would also put an end to the perversity of charging for every other form of infrastructure except the one with the biggest economic impact.

Tolling need not be extended to every road funded directly or indirectly by the Commonwealth — which also provides considerable local road funding through untied grants — but could be applied only to “National Projects” roads, which form the bulk of Commonwealth funding and are meant to have “high national benefits”.

The use of road funding for pork-barrelling would then be confined to smaller and local roads, but no government or private sector partner would be willing to build a toll road with no customers.

This would also increase the pressure on recalcitrant state governments that refuse to accept the need for urban congestion pricing if regional drivers and businesses were paying to use major roads outside cities.

Tolling would make infrastructure investment more efficient and its use fairer. And it would signal that the Government was serious about a new approach to infrastructure, rather than simply throwing more money at it.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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