Turnbull Morrison welfare spending

The Commonwealth’s role in infrastructure investment is one of the biggest economic policy issues in Australia currently, and it’s not at all clear that it is not being dreadfully mishandled by a government — and a Parliament — more focused on placating sectional interests than addressing the national interest.

The Commonwealth has been MIA on infrastructure for several years now, leaving the New South Wales and Victorian governments to lead the way on investment. The government purported to rectify this in the most recent budget with headline investments in inland rail, Badgerys Creek Airport and a “National Rail Fund” but there has been plenty of scepticism, and not just from the opposition.

[Treasury gives budget warning on inland rail boondoggle]

“This budget cuts Federal infrastructure funding by $7.4 billion over the forward estimates and sees infrastructure funding at its lowest level in more than 10 years,” the head of Infrastructure Partnerships Australia, Brendan Lyon — a former Liberal staffer — said on budget night.

This wouldn’t be the first government to hype its infrastructure spend, but there is something decidedly flakey about its sudden interest in appearing committed to building stuff. Senate estimates this week revealed not merely that the cost of Malcolm Turnbull’s Newspoll-shifting Snowy Hydro 2 could end up being $4 billion instead of $2 billion but that the whole idea was slapped together in a few days at the behest of Turnbull’s office, with no departmental analysis or cabinet process to assess its merits.

Then there’s the National Rail Program, ostensibly a $10 billion fund for urban and regional passenger rail projects, which only had $600 million allocated in the budget — $200 million in 2019-20 and $400 million in 2020-21. When questioned about how the fund would operate, all officials from the Department of Infrastructure could say this week is that they’d be talking to their state counterparts about projects and the process for assessing them, although there would be some role for Infrastructure Australia to assess them as well. There was no detail of any kind beyond that. Then again, no one need lift a finger until late next year anyway.

Rail, in particular, has been hit by the Coalition’s abandonment on infrastructure investment. This table is taken from each year’s budget papers, showing what was expected to be spent on rail over forward estimates, and the actual amount spent in the most recently completed financial year. Actual rail spending fell from at least $1 billion a year under Labor to a measly $270 million, and while forecast spending always trails off toward the end of the forwards in each budget, it literally trailed off to zero last year, but has now been bumped up again.

 

Sensibly, the government’s construction of the Badgerys Creek Airport in Sydney is being treated as an investment, and will eventually produce a highly valuable asset. However, funding for the vital rail link to the airport (which, as we’ve learned, Nationals MPs think is too far from Sydney for them to fly into) is, to the extent it might ever exist, floating off in the National Rail Program beyond the forwards, not even the subject of an Abbott-style “aspiration”.

Then there’s the inland rail line, for which the Commonwealth’s grants to the Australian Rail Track Corporation — of $8.4 billion — are also being treated as an investment. The outright falsehood of that treatment has been explored in Crikey and elsewhere. But that’s not the limit of the Commonwealth’s funding — it has already received around $900 million in funding in previous budgets under both sides, and the ARTC will also borrow money to spend on the line. It will also, additionally, develop a public-private partnership for the extraordinarily expensive final segment of the line, between Toowoomba and Kagaru south of Brisbane Brisbane (the majority of the spending on the project will be north of the NSW-Queensland border).

[Hang the debt, 2017 budget a tax-and-spend voter honeytrap]

It’s well-known the project won’t ever cover its capital costs — its proponents readily admit that — as is the fact that it has a benefit:cost ratio of just 1:1. But what this week’s estimates hearing revealed was how limited parliamentary scrutiny is likely to be of the project. Greens Senator Janet Rice asked a long series of questions about the project predicated on the basis that the route should be extended to the port of Brisbane, despite there already being a rail line from Acacia Ridge to the port, and despite there being minimal need for freight brought from Melbourne to be put on a ship in Brisbane (Melbourne, at least on the most recent advice, had its own port). As officials explained, over and over, nearly all of the freight that would travel on the line would be for Queensland domestic consumption, not export. Senators appeared dubious, presumably because Queensland interests are lobbying for the rail line to be extended all the way to the port, which would add several billion dollars to the project.

Rice, who kept confusing high speed rail and inland rail, also wanted to know whether allowance was being made to put high speed rail along the same route, or “futureproofing”, as she called it.

Parliament’s resident Rothschilds conspiracy theorist Malcolm Roberts then joined the hearing and demanded to know why an alternative, entirely new route advocated by a Queensland group called “National Trunk Rail” hadn’t been used. He appeared uninterested as Infrastructure Department secretary Mike Mrdak repeatedly explained that the proposed project mostly utilised existing track and required relatively little new building, unlike the Queensland proposal, which would have cost many multiples of the $10+ billion taxpayers are already up for.

The nearest the project got to rigorous questioning was from Labor’s Alex Gallacher, but he failed to interrogate assurances from officials that the project would earn a Return On Equity sufficient to warrant being treated as an investment. Labor supports inland rail, as do the Greens, and it seems One Nation supports it as well if it has an extra zero on the end of the price tag and, presumably, no Muslims work on it. It bodes very poorly for the prospect of rigorous scrutiny of what is by any reasonable standards a waste of $10 billion of taxpayers’ money when far more beneficial rail projects are off in the never-never of media releases.

We don’t have the level of infrastructure funding right, and we don’t have the process of selecting projects right, nor do we have the accounting treatment of them right, or parliamentarians to aggressively vet spending. Let’s hope a weaker economy doesn’t rely on the Commonwealth performing its infrastructure role properly.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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