Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 1 Contents 14 futurebuilding Volume 3 Number 1
From missiles to motorways
take advantage of a short-term position to jeopardise
the long-term outlook, but I like to look at the bigger
Charlton is impressed by the way the governments
of countries like Singapore and Hong Kong create
value by investing in infrastructure that won't be
needed for 10 or 20 years.
'Australia seems more focused on trying to keep
up with historical lack of spending,' he says.
'When the bidding was on for the M5 East tunnel,
the whole industry predicted that it would be full
from day one. At the time, we could have added
another lane for a few hundred million dollars, but
the governments argued that that would be over
budget and they didn't have the money. Now an extra
lane is going to cost billions of dollars and, in the
meantime, commuters and the whole economy have
had to suffer. It's a shame.'
A range of solutions
Australia's capital cities are straining under
chronic congestion, which is stripping billions from
the nation's economy each year and compounding
the decade-long productivity slump.
Charlton said that solutions will lie in well-
considered, well-executed reforms, including
broader consideration of user-pays concepts.
In America, Transurban has built high-occupancy
toll lanes -- known as HOT lanes. HOT lanes generally
run next to existing freeway lanes and, unlike
standard toll roads, they give drivers the choice of
paying for a faster trip.
'HOT lanes don't work everywhere -- they're most
effective on congested routes used by people who
are both time-sensitive and conscious of the value of
their time,' says Charlton. 'They could be useful in
some Australian situations, but I see them as just one
of a possible range of options. There is always more
than one solution to a problem, and they all need to
be taken into account if you're going to come up with
the most ef cient outcome.'
Australians are less comfortable with paying
to use infrastructure than Americans; there are still
people who, on principle, will drive kilometres out of
their way to avoid paying a toll.
While it is a politically complex issue, Charlton
said it's up to policymakers to lead the debate about
the bene ts of road pricing mechanisms.
'It's a dif cult subject for politicians and
bureaucrats, but the public needs to understand the
bene ts user-pays can bring to whole communities,
as well as individuals,' Charlton continues. 'The M7,
for instance, brought a great deal of economic value
to communities in western Sydney.'
Few people think of buying petrol as a way to
pay for infrastructure but, as tax makes up two-thirds
of the price, the more you drive the more petrol you
use and the more you contribute to the upkeep of
'In some ways, I think this model is more
disingenuous because some of that tax goes to
general revenue rather than roads,' says Charlton. 'I'd
be interested to see what would happen if we made
user-pays systems more transparent.'
Many Australians are also uncomfortable with the
idea of raising funds through privatisation.
'There does seem to be a mindset that infrastructure
needs to be owned by government -- and it's one you
don't tend to see in the United States or elsewhere,'
he says. 'As long as the money made from a sale is
put back into creating new infrastructure, it's just
recycling capital. The process can be very dif cult
politically, but I do think governments are getting
better at it.'
When it comes to other forms of nance, Charlton
sees a good deal as a good deal, whatever the model.
'The government needs the maturity to balance
the risk pro le and take the ef ciency of the wider
network into account when these deals are done,' he
says. 'Whether you're looking at a road or a stretch
of rail or a port, if you do a discreet deal with no
alignment of interests between the ultimate regulatory
or government authority and the people who own the
asset, you're always going to have either a combative
relationship or a focus on just one link in the chain.
'There needs to be an alignment of interests so
that, if you do need to adjust one of the links to make
the chain more ef cient, there's a way of doing that.
I think a lack of incentive for that alignment could
explain some of the high-pro le failures in public
private partnerships (PPPs) we've seen in recent
The challenges in Australia
Charlton identi es the high cost of delivering
infrastructure as a major challenge for the sector.
'The cost of tendering and bidding for major
projects is higher in Australia than anywhere else in
the world,' he says. 'Government preference is for far
more detailed documentation, funding and design
continued on page 16
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