The Asset Recycling Fund Bill 2014 and the Asset Recycling Fund (Consequential Amendments) Bill 2014 are a desperate and belated attempt by the Abbott government to gain some credentials as an ‘infrastructure government’. It is though infrastructure is an afterthought to them, not something they care a great deal about. The government do not even go close to matching the former Labor government’s record investment in infrastructure.
After all, it was Labor that invested $16.2 billion during the height of the global financial crisis, through the BER program, Building the Education Revolution, to build the school infrastructure of the 21st century. This was investment which helped stimulate the economy. We saved hundreds of thousands of jobs during the GFC, opposed by those opposite who, had they got their way, would have seen Australia plunged into recession.
Our economic stimulus plan, including the BER program, was praised by Nobel prize winning economist Joseph Stiglitz as being well designed. In fact, Professor Stiglitz said that, had it not been for the economic stimulus package designed by Labor and opposed by the economic neophytes opposite, Australia’s national debt would have been considerably larger.
It was a Labor government which initiated Australia’s largest ever national infrastructure project. I am talking, of course, about the National Broadband Network. I cannot emphasise enough how people from my home state of Tasmania, who are now connected to the network, are describing to me the transformative effect it is having on their lives and businesses.
Infrastructure spending overall under Labor went up by 42 per cent since the last full year of the Howard government—a government which paid very little attention to building Australia’s infrastructure. Labor lifted annual infrastructure spending in Australia, from $132 per person to $225. We upgraded 7,500 kilometres of Australia’s road network and upgraded 4,000 kilometres of Australia’s rail network. Road spending doubled under Labor and we invested $13.6 billion in urban rail—more than had been invested by all of our predecessors combined since Federation. We also invested a further $3.4 billion in rail freight, which has been of great benefit to my home state of Tasmania, which relies heavily on rail for the transportation of freight across the state.
When Labor took office, Australia ranked 20th in the OECD in infrastructure spending; because of Labor’s record investment in infrastructure, Australia now ranks first. In my home state of Tasmania, we saw significant investment going into the south of the state for the first time in over a decade. While the Howard government had focused on projects in the marginal electorates of Bass and Braddon, Labor delivered hundreds of millions of dollars in funding to projects such as the Blundstone Arena upgrade; the Brighton bypass and transport hub; the Kingston bypass upgrades to the Brooker Highway; trade training centres and GP superclinics; the Huon Valley and south-east Tasmania water schemes; and several of the first rollout sites of Labor’s National Broadband Network—that is, the real NBN, not the coalition’s second-rate alternative. Under a Labor government, the annual infrastructure spending to Tasmania almost doubled—from $157 per Tasmanian to $264 per Tasmanian. Not only did Labor in government dramatically boost Australia’s infrastructure investment, we implemented important reforms to make sure that we got the best value out of all our infrastructure spending.
Infrastructure Australia was established as an independent expert authority to advise the government—and, more importantly, the public—on Australia’s infrastructure needs. One of Infrastructure Australia’s roles is to evaluate the contribution of proposed infrastructure projects and rank them in order of their contribution to Australia’s productivity. An important part of this reform was that Infrastructure Australia’s advice be provided to the public. Part of the reason Infrastructure Australia was established with this function was to give the Australian government an incentive to invest in the infrastructure projects that provided the best outcomes for Australians, not the best outcomes for the government’s political fortunes.
Unfortunately though, pork-barrelling to marginal electorates has been a longstanding practice of coalition governments—and one of the reasons why we need a national body to provide independent advice on infrastructure. Our reforms to infrastructure funding were implemented after the Australian National Audit Office released a damning report on the Howard government’s Regional Partnerships program. The report said that the program had ‘fallen short of an acceptable standard of public administration’. Grants had been provided for projects that had not been properly assessed, that government departments had advised against, and—listen to this—to groups that had not even applied for funding. You did not even have to apply for funding and you got some!
I am pleased that the government has not proceeded with its previous plans to gag Infrastructure Australia and take away its independence and has agreed to the Senate’s amendments to its bill. It was completely bizarre that the government guillotined debate on that bill in the House back in December but did not bring it to the Senate until as late as June this year. Perhaps they finally succumbed to pressure from the business community, who supported Labor’s call that infrastructure policy actually be made on the basis of what is in the national interest. The attacks by the Abbott government on the independence of Infrastructure Australia were just one part of the story of this government’s poor record on infrastructure. The coalition has made various attempts to trumpet its achievements as ‘an infrastructure government’—and all of them have fallen flat. After all, this is the government which has scrapped both the Regional Infrastructure Fund and the Regional Development Australia Fund. The government’s decision to gut funding for regional Australia has been supported by, strangely, the Nationals, who continue their bizarre charade of pretending to stand up for regional Australia.
The Abbott government has claimed credit for various road and rail projects, worth more than $12 billion, despite these projects already being announced and funded by Labor. A great example of one of the road projects funded by Labor and then re-announced by the coalition is the Huon Highway-Summerleas Road intersection. This particular intersection is in the electorate of Franklin and just a stone’s throw from my electorate office in Kingston. I stood at that intersection, with the federal member for Franklin, Julie Collins, in August when Labor announced a $17.5 million commitment to the intersection which had been funded in the 2013-14 federal budget. So I was quite amused to see a contribution from Senator Bushby in the local newspaper, the Kingborough Chronicle, in which he announced that the government was funding this project where Labor had ‘failed to deliver on it’. Senator Bushby referred to years of inaction by state and federal Labor governments and said that the dangerous intersection was of great concern to him. It is interesting, therefore, that Senator Bushby was strangely silent on the intersection during the federal election. Maybe that is because the coalition failed to match Labor’s $17.5 million commitment until February the following year, a full five months after the election, even though the upgrade had already been funded in the previous year’s budget.
After failing to commit to this and several other funded infrastructure projects in the south of Tasmania, the Abbott government has now set about re-announcing them as if they were its own. These projects include the Huon Highway-Summerleas Road intersection; upgrades to the Brooker Highway between Elwick Road and Howard Road; and Tasman Highway on and off ramps at the East Derwent Highway intersection. The Abbott Government has still failed to make up the $100 million shortfall in Labor’s funding for the Midland Highway. While Labor had provided $500 million funding for upgrades to the highway, the Abbott government announced that it would provide $400 million for the full duplication of the highway to four lanes. Good luck with that! In reality, this project would cost about $2 billion, whereas $400 million would probably provide duplication as far as Bridgewater to Bagdad. Unfortunately, it took until after the election for the Prime Minister to belatedly admit that $400 million would not provide for full duplication.
As if they have not embarrassed themselves enough in Tasmania, in the last budget the Abbott government triumphantly announced infrastructure spending of more than $40 billion over the next six years. But many of those projects were also recycled Labor commitments. Prior to this budget, Labor had already approved projects worth $35 billion over the next six years, and several of the coalition’s new road projects—$5 billion worth—have been funded by ripping money out of rail projects. In fact, by refusing to fund any new rail or other public transport projects, this government is creating a perverse incentive for state and territory governments to divert funding to road projects even if roads do not provide the greatest productivity gain.
This is a double whammy for commuters, who will be faced with fewer public transport options and slugged another $2 billion to $3 billion with the government’s reintroduction of the petrol excise. The budget also rips funding out of public transport concessions. Perhaps the government has a secret agenda of trying to get more transport users on the roads so that they can collect more revenue from the fuel tax hike. If that is not the reason, then I fail to see the logic in determining, as this government has, that roads are the responsibility of the Commonwealth but rail infrastructure is not. I would be willing to bet that most Australians are with me on that one too.
Of course roads are an important part of our transport infrastructure, but so is public transport. In fact, investment in public transport helps reduce traffic congestion, provides a cost-effective alternative for many commuters, and is better for the environment than car transport. But, unfortunately, the Abbott government seem unable to see the bigger picture when it comes to transport infrastructure funding. Unfortunately, they have also gone back to their old practice of pork-barrelling—the old practice that the Howard government engaged in.
According to Fairfax Media analysis, as reported in the Sydney Morning Herald last month, the infrastructure projects that have received new funding favour coalition electorates by a ratio of three to one. The Herald also pointed out that the majority of projects the Abbott government had withdrawn Commonwealth funding from were in non-coalition electorates. The Herald article quotes Monash University Professor of Transport, Graham Currie, who said:
The question is whether they want to be a professional government or they want to pork-barrel, and whether we’ll forge the idea of trying to be professional about how we manage resources or just do it on a political basis.
I don’t think that’s how a country should be run.
So that, in a nutshell, is the Abbott government’s record on infrastructure investment so far—pork-barrelling, recycling old projects, attempting to deny proper public assessments of projects and having a bizarre bias against rail projects in favour of roads for no explicable reason. The two bills that are now before the Senate, regrettably, do not improve on this record.
The two bills we are currently debating form part of the Abbott government’s infrastructure package announced in the 2014-15 federal budget. The key element of the bills is the Asset Recycling Initiative, which will be used to incentivise the states and territories to invest in new productive infrastructure by privatising existing assets. The Commonwealth will provide a contribution of 15 per cent of the reinvested sale proceeds to the cost of the project. This initiative is still subject to a national partnership agreement.
With these bills, the government are up to their old tricks again—trumpeting the investment they are making in infrastructure when they are actually just redirecting money that is already committed to other things. In the case of the Asset Recycling Fund, the government are doing some recycling of their own—taking $2.4 billion of uncommitted funds from the Building Australia Fund and $3.5 billion of uncommitted funds from the Education Infrastructure Fund—for an initial contribution of $5.9 billion. Like the EIF and the BAF, the Asset Recycling Fund will be managed as part of the Future Fund. Unlike the EIF and the BAF, projects to be funded by the portfolio ministers will not be subject to recommendations by an advisory board as to the merit of the projects. It begs the question: how does the government know that a project is going to be ‘productivity enhancing’ when it is put forward for a grant or payment? Is it just another case of the government picking winners, like they will with their Emissions Reduction Fund? The more important question is: how does the public know? How can the public have confidence that this fund is actually investing in projects that produce an economic gain for Australia? They have provided no independent mechanism for ensuring the project will actually have productivity gains or for comparing the productivity gains of different proposals.
Labor achieved record investment in infrastructure, and we did so during the largest global economic crisis since the Depression. We also achieved this by funding projects on a 50-50 basis and without the need for state and territory governments to sell public assets. Given Labor’s record investments in infrastructure in partnership with the states and territories, we believe that replacing this support with a 15 per cent incentive payment is a backward step. This government is handballing its responsibility for real investment in infrastructure to the states and territories. Wouldn’t it be better if the government would help the states to fund their infrastructure priorities regardless of where the funds come from? Why does the government see it as necessary to provide the states with an incentive—or a ‘bribe’ as it was described by Chris Aulich, Professor of Public Administration at the University of Canberra—to privatise their assets?
We on this side believe that the concept of asset recycling can have merit in some circumstances. For example, in 2007 in my home state of Tasmania, there was a very sensible instance of asset recycling when the Labor government sold the Hobart Airport site and invested the proceeds in the Brighton transport hub, the Royal Hobart Hospital and irrigation projects. However, we want to ensure that the money that is invested in new projects is invested wisely—that Australians get maximum bang for their buck. After all, when state and territory governments privatise their assets they can only sell them once.
Labor will be moving amendments to this bill. The amendments will require, as a precondition for spending Commonwealth funds on the Asset Recycling Initiative: an assessment by Infrastructure Australia of the new infrastructure as ‘productivity enhancing’, including a published cost-benefit analysis; and tabling of a disallowable instrument for each privatisation and reinvestment transaction. I hope that the government senators and the crossbenchers will support our amendments to this bill. I am disappointed that the government did not support our amendments in the other place, as it was a good opportunity for them to demonstrate that they support transparency and due diligence. These amendments are about increasing the accountability and transparency of the Asset Recycling Initiative, to ensure that the projects funded through this initiative will genuinely enhance productivity.
Labor believes that Infrastructure Australia, an independent and expert body, is best placed to assess the contribution of new infrastructure projects to Australia’s productivity. Strengthening the role of independent expert bodies to ensure good policy outcomes is a core belief of Labor, as distinct from a government that is working to dismantle independent advisory bodies such as the Climate Change Authority, the Immigration Health Advisory Group and others working on positive ageing, social inclusion, animal welfare, Indigenous leadership and a variety of other policy areas. It is vital that infrastructure decisions are made by this government with the national interest in mind, not their own political interests. We do not intend to allow the Asset Recycling Initiative to become a slush fund to allow state and territory governments to pork-barrel to marginal electorates.
These amendments are about taking an evidence based approach to decisions on infrastructure funding. Before the infrastructure minister makes a grant or payment to a state or territory, they must first receive an independent evaluation of the project which confirms that the project will actually have productivity gains. The requirement for the minister to approve grants via a disallowable instrument is to ensure that not only are quality decisions made on infrastructure investments but quality decisions are also made on privatisation of the assets sold to fund them.
Unlike those opposite, Labor is not of the view that all privatisation is necessarily good. These bills are providing the states and territories with an incentive to privatise assets, and the Commonwealth should not be rewarding them for engaging in a fire sale of assets or for selling assets without appropriate regulatory protections. The idea that privatisation is good in all circumstances is Tea Party thinking—the kind of attitude that the ideologues who have taken over the Liberal Party seem to be engaging in more and more. This is a flawed bill, but it can be improved with Labor’s amendments, which I hope that the other side will agree to and which I commend to the Senate.