Image by David Arnold CC 2.0 via Flickr

One of the most farcical, and disturbing, aspects of political and public attitudes to government spending is how it is acceptable to launch attack after attack on so-called abuses in welfare spending, “dole bludgers” and the like, while wasting billions and billions on poorly specified and implemented major projects, particularly in defence procurement and infrastructure.

Sure, welfare abuse must be addressed to ensure that adequate benefits are effectively directed to those in genuine need. But the amounts “saved” are mostly petty relative to what are often massive cost overruns, and wasteful pork barrel spending for the sake of “jobs and growth”, or “national security”, or whatever emotive justification is proffered for the said project.

As bad as this has been, it is about to get worse as the perceived failure of neoliberalism and market processes is being embraced as further justification for governments to get even more involved in major projects, mostly debt funded and on balance sheet, without proper and objective cost/benefit assessment, fully open and transparent opportunities and tenders to test for genuine private sector interest or adequate accountability and governance.

In recent years, we have seen the submarine projects farce for the sake of jobs (and votes) in South Australia and the National Broadband Network debacle, the consequences of which are starting to bite politically.

Now, governments are threatening coal and gas-fired power plants, a massive expansion of Snowy Hydro and so on to cover up for years of neglect, short-term political point-scoring, and bad policy. Billions and billions are being committed, and this will not prove to be the full sum of it, if ever delivered.

These projects, and many others, are simply being driven by base politics and pork barrelling, rather than good and effective government.

Take for example the Brisbane-to-Melbourne inland freight rail line, favoured by Barnaby Joyce, and the second Sydney airport, favoured by Malcolm Turnbull.

While the second airport should probably stack up on a full-blown cost/benefit (economic, social and environmental) assessment, including the longer-term operating costs, there are serious doubts about the Australia Rail Track Corporation freight rail project, even citing the marginally favourable assessment by Infrastructure Australia. At the very least, such projects should be fully and independently assessed by (say) the Productivity Commission before any serious money is committed or spent.

Setting aside the mounting distrust of markets and market processes, and doubts that the private sector would ever build them, it should be a fundamentally important aspect of any assessment to test whether there is any genuine private sector interest.

Many projects are most obviously better done as public-private partnerships, drawing on the strengths and capacities of both sides, and sharing development and operational risk but, unfortunately, PPPs have developed a bad name in recent years, especially at state level, mostly because they have been poorly designed and implemented, with poor accountability and governance.

But rather than throw the baby out with the bathwater, a reference to the Productivity Commission could be directed to include a full assessment of likely private sector involvement, and to suggest the most effective means by which it could occur.

Sticking with the inland freight example, ARTC would undoubtedly claim that it has “tested” private sector interest, but really only as subcontractors to the ARTC for elements of their project.

What hasn’t been assessed is whether there is a genuine private sector alternative, not confined to the ARTC project structure that attempts to upgrade the existing lines and then link them with new track, but rather offers a completely new alternative route that is shorter, flatter, straighter, cheaper, faster, generating more freight, and reduces the necessity for government involvement and spend.

This is an important assessment. First, in the context of the alternative of more spending on roads. Moving freight up and down the east coast already sees something like one truck each minute on the Newell Highway.

Second, against the ARTC’s record with such “upgrade projects” – their only large-scale development was the $3 billion “upgrade” of the coastal route, which saw huge cost and time blowouts, with the result that rail’s share of the freight market fell from 25 per cent to below 15 per cent, against a target of 55 per cent.

The last budget committed some $8.4 billion to the project, against a reported headline cost of some $10.7 billion. But I have seen other estimates as high as $16 billion. In the end, it will probably take longer and cost more – it always does.

In desperation under the impact of electricity prices, and as yet another sop to the Nationals, the government is promising to fund a new ultra super-critical coal-fired power station when, clearly, the private sector wouldn’t contemplate such a project.

Time to take the short-term politics out of such significant projects. Start by using the objectivity and independence of the Productivity Commission.

First published at the Sydney Morning Herald on Friday 21 July 2017.

Leave a comment

Your email address will not be published. Required fields are marked *