Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 2 Contents futurebuilding 71
Volume 3 Number 2
Public Sector Reform Panel
Brendan Lyon: What is it that Australia needs to
do if we're going to surmount our productivity and
Kerry Schott: In New South Wales, what is really
needed is a lift in management of the public sector to
enable the budget to be run with a surplus of around
$500--$900 million per year, which could be used to
fund social infrastructure, in particular.
And you would've seen with the most recent New
South Wales Budget that it is designed to do just that
by the end of the four-year term, and I'm optimistic
that they will get there earlier.
Terry Moran: The big issue is nancing. I've
argued quite strongly that although some major
pieces of infrastructure can be adequately done
through PPP mechanisms, particularly if there are
some different assumptions made about how risk
is shared between the government and the private
sector, there are still a lot of projects that won't be
suitable for a PPP approach.
In order to get those done, governments need to
wrestle the issue of debt to the ground. I think there's
a credible argument to be put to the community that
parcels of debt can be raised for large infrastructure
projects, if assurances are given, namely:
• that the delivery of those projects is not
through normal departmental or agency-based
arrangements, but is actually put out into a Special
Purpose Vehicle with private sector boards and
CEOs to make things happen
• that there is a plan to repay the debt over time
• that the projects chosen for this treatment have
come through an exacting period of analysis
and that the projects to be funded are the most
important on the basis of some credible approach
The public is wary of debt, particularly when
government raises large amounts of debt and it's not
clear to the public what the debt is being devoted to.
To break through that wariness, you not only
need some political gures to decide to have the
conversation with the community, but you also need
a different approach to what debt is, how it's used
and who's responsible for making things happen.
All of this has to lead to large pieces of
infrastructure that members of the public can see,
feel and use when they are completed.
Graeme Samuel: There is leadership needed at
the political level to explain to the public exactly
what is involved in infrastructure funding.
Firstly, state governments need to recognise
that there are a lot of assets tying up a lot of cash
that can be used for infrastructure funding, and
those assets ought to be sold. They don't need to
be owned by government.
Secondly, the funding of a lot of infrastructure can
be done on a user-pays basis, but who in government
is ever prepared to say that they are going to work
towards the development of a toll road, or of network
pricing or road pricing?
They are politically unacceptable, because we
won't take the leadership position. Users should
be able to pay and should be required to pay for
everything other than social infrastructure.
I'm a big advocate for PPPs, but, equally, I think
there are some green eld infrastructure investments
that will never be put out on an economically or
commercially viable basis as a PPP, because the risks
are just too great, particularly post-GFC.
Therefore, it requires careful analysis by
government, and it requires the government
taking that risk on its own books, but not
necessarily on the budget.
Equally, it requires explaining that there is a
point in time at which infrastructure development
will be able to be sold or privatised, and the debt
repaid. There's an awful lot of explanation involved
in those things.
One other thing in respect to PPPs: if they are
properly structured and there's a proper allocation of
risk, they should inevitably work.
There will always be failures, like there are
failures in corporate Australia from time to time.
I'm bemused by the fact that whenever a PPP
fails, it's seen to be a failure by government, rather
than a failure by the private sector that has either
determined that it's going to be the provider of the
infrastructure under the contract with government, or
by the lenders.
BL: What is it that will create the burning platform
for changes to happen?
TM: I suspect it will be individual projects that
the public is led to understand well and accept.
Politicians will have to get back to explaining
the problem and what might be done about it. We
are in a situation where politicians are pushed in
the direction of being risk-averse because of the
criticisms they face if anything goes wrong, even if
they're not responsible.
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