local government in the macro-economic picture...to a range of dsge (dynamic stochastic general...

LOCAL GOVERNMENT IN THE MACRO-ECONOMIC PICTURE

PRESENTATION TO THE

2017 LOCAL GOVERNMENT NSW FINANCE SUMMIT

CUSTOMS HOUSE, CIRCULAR QUAY, SYDNEY

11TH SEPTEMBER 2017

Infrastructure investment is ‘flavour of the month’ – globally and in Australia

“The case for increasing public investment is very strong almost everywhere in the world in light of

the low long-term borrowing costs and substantial infrastructure deficiencies” − International Monetary Fund, Fiscal Monitor, April 2017

“A more active use of fiscal and structural policies is needed to boost potential output and support

aggregate demand, given waning benefits from monetary policy support … Fiscal measures could

include increased spending on hard, soft and remedial infrastructure investment and other measures

that add to demand and enhance supply” − Organization for Economic Co-operation and Development (OECD), Economic Outlook, June 2017

“We stress the importance of quality infrastructure investment, which aims to ensure economic

efficiency in view of life-cycle cost, safety, resilience against natural disaster, job creation [and]

capacity building … while addressing social and environmental impacts and aligning with

economic and development strategies … Infrastructure connectivity is key to achieving sustainable

development and shared prosperity” − G20 Leaders’ communiqué, Hangzhou, China, 5th September 2016

“Government spending on infrastructure, where this is backed by a strong business case … can

provide support for the economy and can help generate the productive assets that a prosperous

economy needs” − Philip Lowe, RBA Governor, Address to Committee for the Economic Development of Australia

(CEDA), 15th November 2016

2

For more details…

Why is infrastructure spending ‘flavour of the month’?

The world needs to spend US$3¼ trn a year on infrastructure to keep pace with economic growth – but is spending about $350bn less than that

Global annual economic infrastructure investment required to keep pace with projected

economic growth, 2016-2030

4

Note: Assumes global GDP growth averaging 3.3% pa between 2016 and 2030. Estimates of required infrastructure investment excludes infrastructure spending required

to mitigate climate change and its effects, and to achieve the UN Sustainable Development Goals.

Source: McKinsey Global Institute, Bridging Global Infrastructure Gaps, June 2016.

0

500

1000

1500

2000

2500

3000

3500

Roads Rail Ports Airports Power Water Telecom Total

US$ billions (2015 prices)

Aggregate

spending 2016-30 (US$ trn)

11.4 5.1 0.9 1.3 14.7 7.5 8.3 49.1

The quality of infrastructure is perceived as deteriorating in most ‘advanced’ economies – whilst improving in many ‘developing’ countries

World Economic Forum Global Competitiveness Index assessment of quality of overall

infrastructure, 2006-07 and 2016-17

5

Note: The World Economic Forum’s Executive Opinion Survey is based on the responses of 13,877 executives in 135 economies. The infrastructure questions ask

respondents to assess ‘the general state of infrastructure’ in their country from 1 (‘extremely underdeveloped – the worst in the world’) to 7 (‘extensive and efficient –

among the best in the world’). Source: World Economic Forum, The Global Competitiveness Report 2016-17 and GCI database.

0

1

2

3

4

5

6

7

Aus-

tralia

Can-

ada

France Ger-

many

Japan New

Zealand

Norway Sing-

apore

Sweden United

Kingdom

United

States

Brazil China India Indo-

nesia

Philip-

pines

2006-07 2016-17

Average score

Infrastructure investment is (in principle) more effective in stimulating economic activity than other fiscal policy measures

Short-term ‘multiplier effects’ of alternative fiscal policy instruments in the US and EU

6

Note: Multipliers show the impact of a change in each instrument equivalent in magnitude to 1 pc point of GDP on the level of real GDP in one year’s time, according

to a range of DSGE (dynamic stochastic general equilibrium) macro-economic models.

Source: Nicoletta Batini and others, Fiscal Multipliers: Size, Determinants and Use in Macroeconomic Projections, International Monetary Fund (IMF) Fiscal Affairs

Department Technical Notes and Manuals no. 14/04, September 2014, Appendix II.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Consumption

taxes

Company

income taxes

Personal

income taxes

Transfer

payments

Government

consumption

Government

investment

US EU

And infrastructure investment may be more effective when monetary policy has reached the limits of what it can do to stimulate growth

Central bank policy interest rates in major ‘advanced’ economies

Private non-financial sector debt in major

‘advanced’ economies

Sources: US Federal Reserve; European Central Bank; Bank of Japan; Bank of England; Bank for International Settlements.

7

-1

0

1

2

3

4

5

6

7

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

% pa

US

Japan UK

Euro area

120

130

140

150

160

170

180

190

200

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

% of GDP

US

Euro area

UK

Japan

Hence many governments have increased their infrastructure investment spending since the financial crisis

Government investment as a proportion of GDP, Australia and other OECD countries

8

Source: OECD Economic Outlook 101, June 2017.

0

1

2

3

4

5

6

7

8

Australia Belgium Canada Den-

mark

Finland France Ger-

many

Japan Korea Nether-

lands

New

Zealand

Norway Sweden Switzer-

land

United

Kingdom

United

States

1990-2007

2011-2016

2008-2010

% of GDP

The RBA hasn’t thought it necessary to push Australian interest rates to (or below) zero, but monetary policy may have reached its limits here too …

RBA cash rate Australian private sector debt

Sources: Reserve Bank of Australia; ABS Australian National Accounts: Finance and Wealth (5232.0), March quarter 2017.

9

0

5

10

15

20

25

62 67 72 77 82 87 92 97 02 07 12 17

% pa

40

50

60

70

80

90

100

110

120

130

140

90 93 96 99 02 05 08 11 14 17

% of GDP

Households

Non-financial

corporations

… as both the previous and current Governors of the Reserve Bank have recognized

“The most powerful domestic expansionary impetus that comes from low interest rates surely comes

when someone, somewhere, has both the balance sheet capacity and the willingness to take on

more debt and spend. The problem now is that there is a limit to how much we can expect to

achieve by relying on already indebted entities taking on more debt”

− (former) Reserve Bank Governor Glenn Stevens, “An Accounting”, 10th August 2016

“One of the ways in which monetary policy works is to make it easier for people to borrow and

spend. But there is a balance to be struck. Too much borrowing today can create problems for

tomorrow, because debt does have to be repaid. At the moment, most households with borrowings do seem to be coping pretty well. But the current high level of debt, combined with low nominal

income growth, is affecting the appetite of households to spend, and we are seeing some evidence

of this in the consumption figures. The balance that is required is to support spending in the

economy today while avoiding creating fragilities in household balance sheets that could cause

problems for the economy later on”

− RBA Governor Philip Lowe, Opening Statement to House of Representatives Standing Committee on Economics,

24th February 2017

10

Record low interest rates promoted a surge in property investment

Interest-only loans

Sources: ABS, Housing Finance (5609.0);

Residential property prices Housing finance

commitments

11

Australian Prudential Regulatory Authority, Quarterly Authorized Deposit-Taking Institution Property Exposures;

0

2

4

6

8

10

12

14

16

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Investors

Owner-

occupiers

A$bn per month

25

30

35

40

45

50

08 09 10 11 12 13 14 15 16 17

% of loans (lenders with > $1bn in loans)

New loans

All loans

0

200

400

600

800

1,000

1,200

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

$000

Sydney

Mel-

bourne

Other capitals

Regions

, riskier lending practices , and a further spike in property prices

CoreLogic.

APRA

tightens

regulatory

requirements

Sluggish wages growth has meant weak growth in household incomes and depressed levels of consumer confidence

Real household disposable

income

Sources: ABS, Wage Price Index (6345.0)

Consumer confidence

-2

0

2

4

6

8

10

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

% change from year earlier

Trend

Seasonally

adjusted

Average, Q4 00 – Q2 11

(4.5% pa)

Average, Q3 11 – Q2 17

(1.8% pa)

Nominal and real wages

12

-1

0

1

2

3

4

5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


Wage price index

(WPI) (excl. bonuses)

Wage price index

(WPI) minus CPI

80

85

90

95

100

105

110

115

120

125

130

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Index

Trend

Westpac and Melbourne Institute of Applied Economic & Social Research.

and Australian National Accounts: National Income, Expenditure and Product (5206.0);

Weak wages growth has been common among ‘advanced’ economies, especially following periods of high unemployment

Wages growth – Australia vs four largest ‘advanced’ economies

Unemployment – Australia vs four largest

‘advanced’ economies

Sources: US Bureau of Labor Statistics; Japan Ministry of Health, Labour & Welfare; Deutsche Bundesbank; UK Office for National Statistics;

Australian Bureau of Statistics.

13

0

1

2

3

4

5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Average of four largest

'advanced' economies

(US, Japan, Germany & UK)

Australia


2

3

4

5

6

7

8

9

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

% of labour force

Average of four largest

'advanced' economies

(US, Japan, Germany & UK)

Australia

Employment growth seems likely to pick up, which should eventually be reflected in stronger wages growth

Westpac-ACCI survey –

employee numbers

Sources: National Australia Bank; Westpac and Australian Chamber of Commerce & Industry; Sensis.

Sensis SME survey – size of

workforce NAB survey of employer

hiring intentions

14

-30

-25

-20

-15

-10

-5

0

5

10

15

20

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Net balance (%)

Trend

-40

-30

-20

-10

0

10

20

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Net balance (%)

Actual

Expected

-10

-5

0

5

10

15

20

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Net balance (%)

Actual

Expectations

Similarly it seems likely that business investment has ‘bottomed out’ and will pick up over the next year

Business confidence

Sources: National Australia Bank; Westpac and Australian Chamber of Commerce & Industry; Sensis.

Business survey capital

expenditure expectations Business investment –

mining vs other sectors

15

0

5

10

15

20

25

30

35

40

45

50

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

$2014-15 bn per quarter

Mining

Other sectors

-30

-25

-20

-15

-10

-5

0

5

10

15

20

25

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Net balance (%)

Trend

-40

-30

-20

-10

0

10

20

30

40

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Net balance (%)

NAB

Westpac-ACCI

Sensis SME

Infrastructure spending by Australian governments has declined (as a proportion of GDP) over the past five years …

Engineering construction work done for the public sector, by sector, as pc of GDP

Engineering construction work done for

the public sector, by type, as pc of GDP

Note: Estimates of work done by type for 2016-17 are based on data for the first three quarters of the financial year.

Sources: ABS, Engineering Construction Activity (8762.0), March quarter 2017 and Construction Work Done, Preliminary (8755.0), June quarter 2017. 16

0.0

0.5

1.0

1.5

2.0

2.5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

By private sector for public sector By public sector for public sector

% of GDP

Financial years ended 30 June

0.0

0.5

1.0

1.5

2.0

2.5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Roads, highways & subdivisions Railways

Water, sewerage & drainage Electricity

Telecoms Other

% of GDP


… although it seems likely to increase again over the next few years …

Engineering construction commencements

for the public sector

Engineering construction work for the

public sector yet to be done

Note: Estimates of commencements and work yet to be done for 2016-17 are as at 31 March 2017

Sources: ABS, Engineering Construction Activity (8762.0), March quarter 2017. 17

0.0

0.5

1.0

1.5

2.0

2.5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

By private for public By public for public

% of GDP


0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

By private for public By public for public

% of GDP


… as it needs to, given that Australia’s infrastructure ranks poorly, and detracts from our international competitiveness …

Australia’s overall competitiveness and ‘infrastructure quality’ rankings

Perceived quality ranking of Australian

infrastructure, 2007 and 20017

Note: The quality of infrastructure rankings are based on responses to the World Economic Forum Executive Opinion Survey. The overall competitiveness rankings

are derived from a combination of 114 indicators including both ‘hard’ statistics and results from the Executive Opinion Survey.

Source: World Economic Forum, The Global Competitiveness Report, 2016-17 and previous years. 18

0

5

10

15

20

25

30

35

40

06 07 08 09 10 11 12 13 14 15 16 17

Ranking

Overall competitiveness

Quality of infrastructure

1 0

5

10

15

20

25

30

35

40

45

Roads Rail Ports Air transport Electricity

supply

Ranking

… and that the demands on Australia’s infrastructure are likely to continue to grow

19

Key findings of Infrastructure Australia’s National Infrastructure Audit 2015

Australia’s population is growing faster than that of any other ‘advanced’ economy with more than 10mn people, and is expected to exceed 30mn by 2031 (up from 24.6mn today)

− more than 70% of this growth is expected to occur in Sydney, Melbourne, Brisbane and Perth

‘Demand’ for infrastructure services is expected to grow by 3.6% pa through to 2031 − ½ pc point per annum faster than the projected growth rate of the Australian economy

In the absence of additional capacity and/or ‘demand management’, the cost of congestion in capital cities is expected to increase by 290%, to over $53bn, by 2031 (from $13.7bn in 2011)

The national land freight task is expected to have grown by 80% by 2031 compared with 2011 levels,

while traffic through some ports is projected to “significantly exceed current capacity by 2031”

Demand for airport infrastructure is projected to have doubled from 2011 levels by 2031

Although demand for water infrastructure is projected to grow “significantly slower than GDP”, water

quality in parts of regional Australia “does not meet relevant standards”

Climate change “is likely to have considerable impacts on infrastructure assets”

“There are grounds for concern that Australia’s infrastructure networks and the systems under which they are managed are not meeting” Australians’ expectations that “their infrastructure networks

support a high quality, first world standard of living” and “to improve their quality of life in the future”

Source: Infrastructure Australia, Australian Infrastructure Audit: Our Infrastructure Challenges, Volume 1, April 2015.

NSW accounts for just under 30% of the projected increase in national infrastructure demand – a little less than its current population share

Projected growth in infrastructure demand, 2011-2031, by State and Territory

20

Source: Infrastructure Australia, Australian Infrastructure Audit: Our Infrastructure Challenges, Volume 2, Appendix 2, April 2015

0

20

40

60

80

100

120

NSW Vic Qld SA WA Tas NT ACT

2011 2031 (Projected)

$bn (2011 prices)

Direct economic contribution of infrastructure

Pc of national total, 2011

Projected pc change,

2011-2031

Pc of national total

projected change

NSW 32.3 78.0 28.8

Vic 22.8 89.9 23.4

Qld 19.2 107.1 23.5

SA 7.2 71.2 5.9

WA 13.6 91.6 14.2

Tas 1.8 44.5 0.9

NT 1.1 107.6 1.3

ACT 1.8 95.6 2.0

Total 100.0 87.7 100.0

Much of the growth in NSW infrastructure will be in Greater Sydney, but also in the Hunter, Newcastle, Illawarra and Central West regions

Direct economic contribution of infrastructure in NSW, 2011

Projected direct economic contribution

of infrastructure in NSW, 2031

Note: The quality of infrastructure rankings are based on responses to the World Economic Forum Executive Opinion Survey. The overall competitiveness rankings

are derived from a combination of 114 indicators including both ‘hard’ statistics and results from the Executive Opinion Survey.

Source: World Economic Forum, The Global Competitiveness Report, 2016-17 and previous years. 21

$mn (2011 prices)

38% of the infrastructure construction work being done, and 45% of the work to be done, is in New South Wales

New South Wales

Engineering construction work done, and yet to be done, for the public sector, by State

Note: Estimates of work done in 2016-17 are for the first three quarters, at an annual rate, while the estimate of work yet to be done is as at 31 March 2017.

Figures exclude work on electricity assets and pipelines given the differences in public vs private ownership of these assets across States and Territories.

Sources: ABS, Engineering Construction Activity (8762.0), March quarter 2017. 22

Queensland

0

2

4

6

8

10

12

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Work done Work yet to be done

$bn


0

1

2

3

4

5

6

7

8

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


$bn


South Australia

0

1

2

3

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


$bn


Victoria Western Australia Tasmania

0

1

2

3

4

5

6

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


$bn


0

1

2

3

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


$bn


0.0

0.2

0.4

0.6

0.8

1.0

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17


$bn


For more details…

And what’s the relevance of all this to local government?

Local government accounts for a very small share of total public sector taxation revenue

Share of own-purpose

‘operating expenses’, 2015-16

Source: Australian Bureau of Statistics, Government Finance Statistics (5512.0), 2015-16

Share of employment,

2015-16 Shares of taxation

revenue, 2015-16

24

Commonwealth

State/

Territory

Local (3.6%)

Commonwealth

State/

Territory

Local (5.8%)

Common-

wealth

State/Territory

Local (9.7%)

; Employment and Earnings, Public Sector (6248.0.55.002), 2015-16.

, recurrent spending and employment …

… but for a much larger share of total public sector assets

Share of gross fixed capital

formation spending, 2015-16

Source: Australian Bureau of Statistics, Government Finance Statistics (5512.0), 2015-16.

Share of revenue from user

charges, 2015-16 Shares of land and fixed

assets owned, June 2016

25

Common-

wealth

State/

Territory

Local (34.4%)

Commonwealth

State/

Territory

Local (28.5%)

Common-

wealth

State/Territory

Local (28.9%)

, capital expenditures and user charges

Local governments have a larger role in infrastructure spending in NSW than in most other States

Engineering construction (EC) work done by local governments in NSW

EC work done by local governments as a

pc of total for the public sector, 2015-16

Source: Australian Bureau of Statistics, Engineering Construction Activity (8762.0), March quarter 2017.

26

0.0

0.1

0.2

0.3

0.4

0.5

0.0

0.5

1.0

1.5

2.0

2.5

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

$ bn % of GSP


As a pc of gross state product (GSP)

(right scale)

0

10

20

30

40

50

60

70

80

90

100

NSW Vic Qld SA WA Tas NT ACT Aus

By local governments By other levels of government By the private sector

% of work done for the public sector

Local government projects are often relatively small, but smaller projects often deliver relatively high productivity benefits

Capital cost of infrastructure projects vs benefit-cost ratios (BCRs)

27

Source: Infrastructure Australia, Australian Infrastructure Plan: Priorities and reforms for our nation’s future, February 2016, p. 25.

Big or small, infrastructure projects have to be paid for – what are the options for local government?

Higher rates − limited scope in NSW given long-standing rate-pegging, and state-mandated exemptions and concessions

− problematic for councils outside of major urban areas

− unfair to make current generations pay full cost of infrastructure that will benefit future generations as well

User charges − have considerable merit in principle on ‘fairness’ grounds, and (if intelligently structured) as a way of encouraging

more rational use of both existing and new infrastructure

− were supported by 2009 Henry Review

− technology is opening up new ways of charging users of infrastructure (eg roads)

New ways of tapping into increases in property values associated with infrastructure projects − ‘value capture’ could contribute 10-30% of direct infrastructure costs within a defined area

− used overseas (eg London Crossrail) and in Australia (eg Sydney Harbour Bridge, Melbourne City Loop)

− supported by Productivity Commission, Business Council of Australia, the RBA and Infrastructure Australia

− but would require change in state government policy

Grants from other levels of government − difficult given budgetary constraints facing Commonwealth government

Increased borrowing − prudent borrowing is a fair way of making future generations meet part of the cost of providing infrastructure from

which they will benefit

− many local governments have scope to take on more debt

28

There is a stronger case for raising local government rates in NSW than in any other State

Local government rates as a pc of gross state product, 2015-16

Increases in local government rates and

state land tax, 2000-01 to 2015-16

Source: Australian Bureau of Statistics, Taxation Revenue (5506.0), 2009-10 through 2015-16, and State Accounts (5220.0), 2015-16.

29

0.0

0.5

1.0

1.5

2.0

2.5

3.0


% of gross state product, 2015-16

0

50

100

150

200

250

300

350

400


Municipal rates

Land tax

% change, 2000-01 to 2015-16

na

Note: There is no land tax in the Northern Territory; while in the ACT, municipal rates are levied by the Territory Government.

‘User pays’ leads to better infrastructure maintenance outcomes

30

Source: Infrastructure Australia, Australian Infrastructure Plan: Priorities and reforms for our nation’s future, February 2016, p. 83.

Comparison of user pays and maintenance across infrastructure sectors

Further extension of user charges by NSW local governments could be politically challenging unless very well ‘sold’

Local government rates and user charges in NSW

Local government user charges as a pc

of gross state product, 2015-16

Source: Australian Bureau of Statistics, Government Finance Statistics (5512.0), 2011-12 through 2015-16, and State Accounts (5220.0), 2015-16.

31

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Rates

User charges

$ bn


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


% of gross state product, 2015-16

na

It’s surprising how little debt local government (as a whole) has, given the size of their asset holdings

Net debt by level of government, Australia Net debt by level of government, NSW

Note: Figures for Commonwealth and State/Territory net debt include non-financial public enterprises.

Source: Australian Bureau of Statistics, Government Finance Statistics (5512.0), 2011-12 through 2015-16, and State Accounts (5220.0), 2015-16. 32

-5

0

5

10

15

20

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

% of GDP


Commonwealth

Local

State/

Territory

-2

0

2

4

6

8

10

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

% of GSP


Local

NSW State

Local governments in NSW have (in aggregate) a lot of financial assets, and (at least on the surface) would seem to be able to carry more debt

Local government financial

assets, 2015-16

Local government net

debt, 2015-16 Local government gross

borrowings, 2015-16

33

0

5

10

15

20

25

30

35

40

45

50


% of revenue, 2015-16

0

10

20

30

40

50

60

70

80



0

5

10

15

20

25

30

35

40

45

50



Source: Australian Bureau of Statistics, Government Finance Statistics (5512.0), 2011-12 through 2015-16.

However in practice councils vary considerably in their capacity to borrow more

NSW councils, debt service ratio by OLG group, 2014-15

NSW councils, debt service ratio vs

revenue, 2014-15

Note: Figures for OLG groups are averages for each council in the group weighted by revenue from continuing operations.

Source: NSW Office of Local Government, Comparative Information on New South Wales Local Government Councils 1994/95 to 2014/15.

34

0

5

10

15

20

25

30

35

40

0 100 200 300 400 500 600 700 800

Revenue ($mn)

De

bt

serv

ice

ra

tio

(%

)

Sydney Blacktown The Hills

Young

Coffs Harbour

Gosford

0

1

2

3

4

5

6

7

8

City of

Sydney

Metro-

politan

Metro-

politan

fringe

Regional

town/

city

Large

rural

Other

rural

%

For more details…

The importance of good project selection and governance

Infrastructure investment is only a ‘Good Thing’ if projects are rigorously selected and subject to appropriate governance

“Poor governance is a major reason why infrastructure projects often fail to meet their timeframe, budget and

service delivery objectives”

− OECD, Getting Infrastructure Right: The Ten Key Governance Challenges and Policy Options, March 2017, p. 2

“All government spending, whether for day-to-day operations (recurrent) or capital, should be closely

scrutinised for its quality. This requires a strong commitment to rigorous project assessment and program

evaluation to determine which spending generates the strongest public benefits”

− Australian Government, 2017-18 Budget Paper No. 1, Budget Strategy and Outlook, May 2017, p. 4-5

“There are many examples in Australia of poor project selection leading to highly inefficient outcomes. In

such cases investment in public infrastructure is a drain on the economy and tends to lower productivity and

crowd out more efficient projects”

− Productivity Commission, Public Infrastructure, Inquiry Report No 71, May 2014, p. 75

“Strong governance is critical to make sure money is spent wisely in this area. There is no substitute for

rigorous and transparent cost-benefit analysis … Building public confidence in the governance process not

only helps ensure that the most pressing projects are selected, but also helps build public confidence that

the money is being spent wisely”

− Then Deputy RBA Governor Philip Lowe, ‘Productivity and Infrastructure’, 26th November 2013

“Australia needs key infrastructure investments but there is a lack of rigor in identifying and assessing them

… There is unacceptable secrecy surrounding many projects; secrecy which undermines democratic

accountability, erodes community trust and leaves everyone open to being misled and blindsided”

− John Menadue (former Secretary PM&C, Qantas CEO), Pearls & Irritations, 8th September 2017

36

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