I have a piece in the Herald Sun today which addresses wasteful infrastructure spending with the focus on the proposed airport link which the Victorian government is threatening to justify commercially in next week’s budget. That should be a neat piece of sorcery! Here it is
Mr Napthine has committed to building an airport to city centre rail link. While opposition to this has featured pollution and fly-overs, the key issue is the costs and the benefits. These are to be revealed by The Treasurer, Michael O’Brien in next Tuesday’s budget.
Meanwhile, the Premier is in Canberra today where, aside from promoting a tax on one-trip bottles, he is seeking support for infrastructure funding especially on transport facilities.
The focus on infrastructure spending by governments is a welcome change from the policy approach five years ago. During the 2008 global financial crisis Australian politicians and their advisers were calling for massive budget deficits to stimulate demand.
Mr Rudd was elected as a John Howard fiscal conservative with a younger “compassionate” face. But he soon rebadged himself as a conventional Labor spendthrift who would tame the financial tornado by increasing spending at a rate that would bring blushes to the faces of previous vote-buying politicians.
So we had the cash hand-outs, new school halls, home insulation plans and other measures. The Commonwealth budget went from John Howard’s $20 billion surplus to a $55 billion deficit. And we never saw the self-sustaining recovery that the spending was supposed to trigger.
Unlike hand-outs to individuals, government infrastructure spending can lift productivity, thereby offering a prospect of genuine economic growth. Unfortunately however, government infrastructure spending often ends up in creating unproductive white elephants. We see this with the National Broadband Network on which $15 billion has been wasted to date and little can be expected from the remaining $45 billion of planned spending.
So we should pay particular attention to scrutinising a proposal like the airport rail link that the government has described as a “landmark” and “fantastic”.
The airport link’s cost is yet to be revealed but is likely to be some $2 billion. In arguing for it, Mr Napthine says rail is becoming more competitive than road even over short distances and it is necessary because we need additional capacity.
Rail however is finding it increasingly difficult to compete with road. That’s largely because virtually all cities are becoming less concentrated both in terms of homes and work places. Fifty years ago half of all Melbourne’s journey to work travel was to the city centre. Today it is only 12 per cent. Fixed track rail is inherently inflexible compared to road. It is far inferior in door-to-door service and the gradually more diffuse nature of travel patterns places it at an inevitable disadvantage.
This increasingly dispersed trip pattern also disadvantages airport rail links. Brisbane illustrates this. Compared with Melbourne, it has less effective road network connections to the airport and its rail link is half the distance required by the Melbourne link. Even so, rail carries only 5 per cent of the airport’s traffic at a ticket cost of $16. For Melbourne the SkyBus at $18 would be cheaper and faster. And the Tullamarine Freeway’s capacity can be readily expanded, as illustrated by the government’s announced $850 million 30 per cent capacity upgrade.
Michael O’Brien is among the more capable Victorian ministers. But he has as awesome task to explain how the Tulla rail link can make economic sense.