Cost benefit analysis of Australia’s infrastructure

Infrastructure Victoria has released a paper discussing how improving cost benefit analysis can capture more economic, social and environmental impacts from infrastructure projects.

Moving from evaluation to valuation is the first in a series of research papers which aims to improve how infrastructure projects are assessed and compared.

Chief Executive Officer of Infrastructure Victoria, Michel Masson, said cost benefit analysis was a rigorous and transparent framework but it could be improved and used more consistently.

“Cost benefit analysis is an important and necessary tool for appraising and comparing infrastructure projects and policies on a consistent basis, but it is not perfect and it’s not the only tool,” Mr Masson said.

“Cost benefit analysis of major transport projects does not currently capture all economic, social and environmental impacts. For example, we do not currently capture the impact on the urban amenity or biodiversity.”

Infrastructure Victoria has considered international best practice examples and research from other jurisdictions, and hopes to use these to ascribe dollar terms to other economic, social and environmental values for use in the social housing, health and criminal justice sectors in Victoria.

“While we may never be able to capture all impacts, we think there is an opportunity to expand the use of cost benefit analysis in transport and other sectors which face key challenges and require substantial investment,” Mr Masson said.

“In New South Wales, cost benefit analysis is already being used in the health sector, and we think it could be used in Victoria in appraisals for building infrastructure like hospitals and prisons.”

In 2017, Infrastructure Victoria will develop a practical tool for the social housing, health, criminal justice and transport sectors—and will set out a comprehensive list of economic, social and environmental impacts to be considered.

“To meet Victoria’s infrastructure needs over the next 30 years, government needs to get the most value-for-money for infrastructure investment and cost benefit analysis is a key tool to support decision making,” Mr Masson said.

“Importantly, our research will complement but not replace the existing state and federal guidelines.

“We are inviting feedback to help refine initially what impacts should be considered for each sector and what method we can use to value these impacts.”

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