Infrastructure reforms could deliver huge economy boost

Infrastructure Australia’s new report argues that incentive payments for state and territories to investment in infrastructure could boost the economy by $66 billion.

The incentive payments would encourage states and territories to progress nation-shaping infrastructure, providing a multitude of benefits to growing cities.

Infrastructure Australia’s report, Making Reform Happen, argues that the Australian Government should make investments over and above existing commitments in return for the delivery of much-needed 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.

“Australia is undergoing a period of profound change; our population will grow to over 30 million people by 2031, our economy is in a state of transition, and technology is changing the way we live and work.

“We need infrastructure and services that enhance the liveability of our cities and regions, strengthen our role as a global exporter, and support the transition to a more diversified economy,” Ms Alroe said.

Making Reform Happen builds on the recommendations in the 15-year Australian Infrastructure Plan to provide further evidence of the substantial long-term benefits of progressing five key opportunities for infrastructure reform:

  • Introducing road user charging
  • Reforming the urban water sector
  • Reforming the electricity market
  • Reforming land tax
  • Franchising public transport services

ARA CEO, Danny Broad, said an incentive based approach to infrastructure reform is a top priority for the ARA as a way of driving productivity and efficiency gains in rail freight sector.

Mr Broad noted that the Inquiry into the National Freight and Supply Chain Priorities Final Report also recommended linking all new infrastructure funding and agreements, like the National Partnership Agreement on Land Transport Infrastructure, to achieving freight outcomes in planning and decision making at all levels of government.

The expert panel’s recommendation, combined with the release of Infrastructure Australia’s report, provide further evidence of widespread industry support for linking additional infrastructure funding to the delivery of reform outcomes.

“The ARA believes the Australian Government should embrace this approach in the National Freight and Supply Chain Strategy as a general principle to drive much needed microeconomic reforms of the transport sector,” Mr Broad said.

ALC Managing Director, Michael Kilgariff, said, ALC applauds Infrastructure Australia’s suggestion that the Federal Government adopts an approach based on the success of past policies, including National Competition Policy Payments and the Asset Recycling Initiative.

“These both proved to be effective catalysts for securing jurisdictional cooperation for much-needed, but contentious, policy reforms,” Mr Kilgariff said.

“We also endorse the recommendation that the Federal Government subject itself to the same accountability mechanisms as apply to state and territory governments for progressing reforms.”

Ms Alroe said, “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.

In addition to improving infrastructure services across the country, Ms Alroe said that these reforms would boost Commonwealth revenue and potentially remedy the country’s productivity growth.

“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.

“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,” Ms Alroe said.

Incentive payments could help redress this imbalance between costs and impacts, and effectively drive outcomes that may not have otherwise come about.

“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.

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