Introducing incentive payments to encourage states and territories to progress infrastructure reforms could boost the economy by $66 billion and deliver better infrastructure, according to Infrastructure Australia’s Making Reforms Happen report.
The report, released this week, argues that the Australian Government should make additional investments in state and territory infrastructure – over and above existing commitments – in return for the delivery of reforms.
“If we don’t seize the historic opportunity in front of us, we could miss out on the significant impact national infrastructure reform could have on our future productivity and prosperity,” Infrastructure Australia Chair Julieanne Alroe said in a statement.
Making Reform Happens builds on the Infrastructure Australia’s 15-year Australian Infrastructure Plan, to provide evidence of the long-term benefits of progressing opportunities for infrastructure reform including: Introducing road user charging, reforming the urban water sector, reforming the electricity market, reforming land tax and franchising public transport services.
“The reforms we’ve identified in this report across water, energy, transport and land use planning could deliver a $66 billion increase in GDP by 2047 and a $19 billion ongoing increase in national tax revenue. This is money that could be used to deliver better infrastructure services for our growing communities,” Ms. Alroe said.
“This is not an exhaustive list of the reforms we need to address today’s infrastructure gaps and meet the challenges of tomorrow. Rather, this paper is intended to show what can be achieved through a well-designed incentive program.”
Ms. Alroe said an incentive-based approach recognises that, although there are significant national benefits to be gained from infrastructure reform, it is state and territory governments that wear the implementation costs – as well as any short term political pain.
“Incentive payments can help redress this imbalance between costs and impacts, and effectively drive outcomes that may not have come about otherwise.
“This approach is a win-win for Australian governments. Using incentives to drive reform can deliver a short-term boost to the economy through increased infrastructure investment, as well as delivering productivity and revenue gains in the longer term.
“We’ve successfully used incentive payments to spark reform before in Australia, with impressive results. We now have an opportunity to learn from these experiences and design an incentive-based reform program to boost our national productivity and ultimately build a fairer and more prosperous Australia,” Ms. Alroe said.
Industry association for consulting firms in the build environment – Consult Australia – welcomed the report.
“This report shifts the infrastructure narrative from projects we can or cannot afford, to reform we simply cannot afford to ignore,” Megan Motto, Chief Executive of Consul Australia, said in a statement.
“There is no doubt that infrastructure reform is the key to Australia’s lagging productivity. Reform in this area gives us a double whammy – not only does efficient infrastructure deliver long-term productivity dividends, it also boosts real jobs in the short and medium term,” she said.
“But the Commonwealth needs to be a more active participant to drive the changes we need as a nation. The Prime Minister has espoused that the government should be more than an ATM on projects, but similarly it needs to use its financial levers to drive system and program reform as well as projects.”
Ms. Motto exemplified road user charging as one example.
“For too long this has been placed this in the ‘too hard’ basket, whilst commuters suffer the consequences in rush-hour traffic. If the reform in this report was implemented, it could see travel times cut on congested roads at peak hour by up to a third,” she said.
“The pay-off here can’t be ignored at an estimated $66 billion increase in GDP.”