Productivity Commission

Issue Paper into Public Infrastructure

Dr Elizabeth Gibson, reports on the recently released Productivity Commission’s Issue Paper.

THE Australian Government has asked the Productivity Commission (the Commission) to undertake a broadranging inquiry into public infrastructure,comprising two broad streams of work:

• The provision, funding, and financing of major public infrastructure and
• The scope for reducing the costs associated with such infrastructure

The Issues Paper was released in November 2013 and can be found at http://www.pc.gov.au/projects/inquiry/infrastructure. As spelt out in more detail in the terms of reference (attachment A), the Commission has been asked to analyse:

• How infrastructure is currently funded and financed in Australia, including by the Commonwealth, the States and the private sector
• The rationale, role and objectives of alternative funding and financing mechanisms
• The financial risks to the Commonwealth posed by alternative funding and financing mechanisms, as well as their possible impact on the budget and fiscal consolidation goals
• The cost structure of major projects in Australia, including where infrastructure project costs have increased considerably compared with other countries
• The ways to improve decision making and implementation processes to facilitate a reduction in the costs of public infrastructure projects
• Other relevant policy measures, including any non-legislative approaches, which would help ensure effective delivery of infrastructure services over both the short and long term.

This inquiry will draw on Australian and overseas evidence in examining these issues. these analyses will provide the basis for the Commission to make recommendations to improve outcomes in infrastructure provision for the benefit of the community as a whole.

Of interest to the Productivity Commission is the impact of the cost of construction materials on public infrastructure costs. A teleconference was held in December 2013 with Jared Greenville from the Productivity Commission, who was focusing on costs of public infrastructure, and Dr Elizabeth Gibson.

It was highlighted to the Productivity Commission that due to the increasing population and the usage of 7 tonnes/annum per person of construction materials there is a need for a new 50 million tonne quarry per year in Victoria alone.

Victoria is hampered by an inefficient approvals process for quarries, requiring vast sums invested in this process with the final outcome uncertain either due to a politically influenced decision from local government or due to the conditions being placed on the proponent so onerous that it makes the quarry unviable.

Due to costs associated with transport (approximately 17¢/tonne/kilometre) of the heavy construction materials the quarries need to be located close to the site of construction.

However, urban growth and residential development often goes ahead without consideration of the proximity of the source for construction materials nor that sterilisation of construction materials may also be occurring.

It requires public identification of resources that is beginning to be recognised by the Victorian Government. For example, in the Economic Development and Infrastructure Committee “Inquiry into Greenfields mineral exploration and project development in Victoria” a number of recommendations have been made that will assist in the prevention of sterilisation of construction materials.

In recommendation six (6) the Victorian Government proposes to develop a state-wide integrated, strategic land use policy framework to better manage competing land use in Victoria.

The Government’s response to this includes involvement by the Minster for Energy and resources in Planning Scheme Amendments and to utilise DSDBI as a referral authority for developments near existing quarries. In recommendation seventeen (17) as part of the development of an integrated state-wide strategic land use framework, that the Victorian Government ensures studies are undertaken to determine areas of high prospectively for extractives and future extractives needs in Melbourne and regional Victoria.

The Government’s response includes co-funded geoscience studies to identify extractive resources; establish a task force to identify current resources and future needs; incorporate Extractive Industry Interest Areas into regional Growth Plans; and identify and implement the most effective mechanism to ensure appropriate planning protection for extractives.

These Government responses will go a long way to protecting construction material resources once implemented.

In summary construction materials are a major cost in the building of public infrastructure. the requirement for affordable construction materials will only increase with population growth and so now is the time to identify key resource areas as well as streamline the works approvals process

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