Home' Future Building Australian Infrastructure Review : Volume 3 Number 2 Contents futurebuilding 15
Volume 3 Number 2
Sir Rod Eddington AO
would not have been achieved if not for the newfound
exibility of our national economy.
But that process of reform has stalled, and so has
our productivity growth.
Australia's ability to compete will be increasingly
hampered by inef cient infrastructure unless real
solutions are found.
Those solutions, I believe, will lie primarily in
Markets in infrastructure sectors like energy and
communications are reasonably well understood in
the community. Prices vary according to demand,
and ef cient price signals are sent for both
consumption and investment.
But in other areas, like transport -- and in some
parts of the country, water and social services --
the concept of reform and efficient markets is not
Markets exist where supply meets demand,
where ef cient pricing meets the cost of capital and
operation, and where there are suf cient numbers of
buyers and sellers to provide for the discovery of an
ef cient price.
The challenge for Australia is to begin an honest,
rational and evidence-based debate about how
market creations can assist in solving the funding
challenge, particularly in infrastructure.
I would suggest that the best place to start, if we
are going to be serious about productivity, should be
completing the National Electricity Market reforms:
they have to be our rst priority.
Completing the NEM requires Queensland, New
South Wales and Tasmania to provide their remaining
electricity assets to the market, so that the NEM can
nally operate, without distortions and inef ciencies,
across the nation.
The inefficient pricing of electricity causes
substantial pain to Australian households, and
it's eroding the capacity of our businesses to
In 1995, the National Competition Policy
agreement saw Australia's NEM states restructure
government monopoly electricity businesses to
promote ef cient markets. That was well received not
only here, but globally. The reforms were dif cult,
but they delivered real results.
Only Victoria and South Australia have achieved
competitive, wholly private electricity sectors.
In the other states, some or all of their assets are
either publicly owned or privately owned. In many
cases, much of it is still government-owned -- prices
are regulated by governments, and the result is
inef cient pricing and distortion.
But I would argue that policymakers in the states
where the reform is incomplete should be con dent
in the outcome of well-executed reform.
Since privatising the state's electricity assets
between 1995 and 1997, power prices have been
consistently lower in Victoria than in any other NEM
state. In 2011, an Ernst & Young study found the price
The challenge to Australia is
to begin an honest, rational and
evidence-based debate about
how market creations can assist
in solving the funding challenge,
particularly in infrastructure
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