Stop the infrastructure ‘boom bust’

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The Australian Financial Review’s National Infrastructure Summit last week resonated with calls for reform to deliver better value for money, proclamations of broken procurement models, need for more rational risk allocation and furious agreement about importance of infrastructure to help rebalance Australia’s post-mining boom economy.
No doubt these sober deliberations confirm once again that Australia is a much better manager of adversity than it is of prosperity. This national characteristic was clearly evident at the Summit, and begs the question how Australia can be better prepared for the next bonanza and have more to show for it.
The boom-bust cycles of commodity prices are here to stay, but that does not mean infrastructure has to follow suit. Currently it does, which is a serious indictment on the nation that is failing in its long-term planning capabilities.
Despite the measured and grounded discussions of reform at the Summit a framework for growth remains illusive until Australia rebalances the scales so that its passion for more infrastructure is matched with its reason.

PROLIFIC BENEFITS
Sure, governments invest in infrastructure because the benefits are so prolific. It connects people and institutions with markets and opportunities, creates competition, drives up productivity and elevates living standards.
The promise of so much, however, is not an excuse to passionately invest in the blind hope the next crop of infrastructure will yield more again.
But governments need to heed the message and plan infrastructure for the long term. Current 15-year planning horizons of Infrastructure Australia and their state equivalents are a good start, but remain too short-sighted.
Infrastructure plans should not be just a project list but also a narrative of Australia’s demographic and spatial challenges, aspirations and intentions. The population task alone in accommodating 70 million people by 2100 is an unprecedented national challenge.
What is the future shape of Sydney, Melbourne and Brisbane as these cities absorb most of the additional 30 million people. For example, do we have in place the rudimentary options for growth that our mega cities will need such as land corridors for freight, utilities and passenger logistics.
President Eisenhower made the astute observation that ‘plans are useless, but planning is indispensable’.
The challenge before Australia is to break away from the stop-go, boom-bust approach to infrastructure, and set out a purposeful and strong planning framework for growth of cities and regions. This will demand a fundamental mind shift of policymakers and stakeholders alike.
Governments across the globe are calling for more long-term investors to finance infrastructure. When that is done well, the old way of ‘invest, set and forget’ should be a relic of history.
For that to happen, owners and operators of infrastructure must be more exposed to customers, and incentivised to meet their preferences. This strengthens scope for innovation, improves business cases, lifts ROI and long-term asset values while lowering revenue and political risk.
Unfortunately, the model today is back to front; infrastructure first, customer second.

SWEATING THE OPTIONS
The big utilities like electricity and gas companies are sweating the options to better understand and partner with customers, despite decades of loyalty they still know very little about them. Utilities have not been helped by plethora of regulatory changes that have been poorly thought out and executed in a vacuum of research and data on customer behaviour.
Transport and electricity infrastructure share a great deal in common. Their customers demand more in the peak as average consumption declines, which present a very challenging situation. It is exorbitantly costly to ensure reliability in the peak and holding idle capacity at other times.
The upshot of the utilities experience for the rest of infrastructure is clear, especially for transport, get closer to the customer sooner.
Of course, infrastructure needs to be marketed better in the language of community and customers. What does it mean for my commute time, access to different types of transport, kids drop off, getting to hospital, my house price and liveability of my neighbourhood.
Community support and trust towards credible infrastructure plans must be earned with sound community engagement and better customer service outcomes. These must form the central plank of the new long-term infrastructure-planning regime, not just a focus on assets and projects.
This is by far Australia’s most pressing infrastructure imperative.

 

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