22-May-2009
Portfolio Media Releases, Environment, Infrastructure
The infrastructure spending of the Rudd Labor Government in last week’s Budget has a $60 billion black hole, should have been the first infrastructure package seven months ago and lacks any of the promised transparency to ensure that the decisions taken were the right ones.
“The Rudd Labor Government has lost control of the nation’s finances by looking to raid superannuation funds to plug the $60 billion “black hole” revealed in their much vaunted infrastructure program,” said the Shadow Minister for Infrastructure, the Hon. Andrew Robb AO MP.
The raid on superannuation funds follows revelations by infrastructure experts KPMG that in addition to the $22 billion of Government funding over four years a further $60 billion will need to be borrowed, or raised from the private sector, if many of the Government’s 15 road, rail and port projects are ever to be built.
Less than 22 per cent of new infrastructure spending will occur either this financial or next financial year.
After presiding over the biggest collapse in the value of Australian’s superannuation savings in our history, the Rudd Government is now looking to raid these superannuation funds to pay for a massive three quarters of the cost of infrastructure projects announced in Tuesday’s Budget.
The Budget’s infrastructure spending should have been the first stimulus package, not the third. This spending is seven months late and overshadowed by Labor’s massive spending and borrowing undertaken in the meantime.
In these difficult times spending on critical infrastructure should have taken clear priority over the reckless debt funded hand-outs of recent months, the cost of which are shamefully of almost an identical amount to that now committed to infrastructure. It is why less than 15 per cent of the alleged ‘nation building’ funds are available this financial year or the next.
Every dollar in the Government’s infrastructure funds was generated by the surpluses of the former Howard Government.
The sooner this productivity related infrastructure spending had started the better placed Australia would have been to rebound in due course.
Labor went to the last election claiming to have a plan for infrastructure. It has taken 18 months in government, and 7 months into the financial crisis, before the first decision on major infrastructure has been taken and then most of the projects had been under active consideration by the former Government.
The priority now, given the $188 billion of net debt hanging over future generations, is for every one of these dollars to be spent as wisely and as effectively as possible.
The Rudd Government has now effectively emptied the three infrastructure funds they set up with much fanfare a year ago.
On May 13 last year, Minister Albanese said the Building Australia Fund would fund infrastructure for “years to come”. One year later it is virtually empty.
On May 28 last year, the Deputy Prime Minister said of the Education Investment Fund that “there is no better demonstration of this long term commitment than the new $11 billion Education Investment Fund.” Less than one year later, the fund has only $2.4 billion remaining and $2.5 billion has been stripped out of this fund to pay for other programs.
The state of the funds confirms Labor’s lack of any long-term coherent plan for infrastructure. There is no sense of priority from one year to the next and the changes to the use of monies from the Education Investment Fund to Clean Energy projects says that Labor’s commitments cannot be trusted, even after being put into l-a-w law.
The Budget also fails by not identifying clear milestones and timelines for each of these major projects. The persistent failure of State Government’s to effectively complete major projects on time and on budget must be tackled.
State Government funding commitments for each milestone must be established and these funds must not be used to bail out incompetent Labor State Governments. This is already off to a bad start given that the Queensland Government had previously committed to funding the Bruce Highway upgrade at Cooroy to Curra as part of the Traverston Dam works. 80% of this projects funding will now be provided by the Commonwealth.
Given the parlous state of the economy the quality of every infrastructure decision announced in the Budget is paramount.
Time and again the Rudd Government has promised transparency, and no political interference, to confirm the quality of any decision taken. The Government must deliver on that transparency and absence of political interference by providing full disclosure of the results of cost-benefit analyses for projects recommended and for those rejected, including all data, assumptions and models used. It also means there must be transparency in PPP contracts.
This call for transparency is underlined by the fact that some projects were selected from the priority list provided by Infrastructure Australia and some weren’t. Some projects that Infrastructure Australia said required further design and analysis were funded and others weren’t. There was no overall coherent reason for the projects selected.
Not only has this Rudd Government racked up massive debt while taking so long to process and decide on major infrastructure projects, but Mr Rudd has wasted the crisis in terms of cutting through mountains of federal, state and local government red tape.
The economic crisis provided a unique political opportunity to reform highly complex and expensive tendering processes, the myriad of planning and project approvals and the financial instruments and risk sharing for major projects. Nothing of any consequence has occurred.
These reforms are critical if private sector involvement is to occur. Without private sector investment many of these projects will never happen.
Media Contact: Stuart Eaton, 0433 298 620