Transport Infrastructure Needs More Funds

Another way of facilitating investment currently under consideration by the Commonwealth is the application of public/private partnership models to parts of our arterial road system.

My Department has been examining whether the experiences of other countries are transferable to the Australian situation. One of the options put forward which I consider worth exploring further is what has been called a Public Private Partnership – or PPP. The specific form of PPP I feel may be most applicable to the Australian situation is an adaptation of the United Kingdom experience, also known as the Private Finance Initiative.

Under PPPs the private sector could finance, build, own, operate and maintain a road for a defined term – basically the BOOT arrangement I have already mentioned. One possible adaptation for Australia is that the Government might provide the revenue stream to the private operator through a shadow toll, based for example on a charge per vehicle. Recent developments in the UK include such payments being made on the basis of serviceability and safety of the road over time.

A key factor for the Federal Government in focussing on the PPP approach would be that the primary road network for which we are responsible – the National Highway – has very few sections where the traffic volumes could sustain the traditional form of private sector participation – that is a user toll.

Use of a PPP mechanism could potentially involve dedicating a significant portion of existing Commonwealth roads program funds over the longer term to bring forward important road projects that would otherwise remain on the drip feeder.

The UK experience is that PPP projects deliver savings through the private sector being able to use innovation in the design, operation and maintenance of the road project.

Combine this with the general lowering of overall costs because of the significant transfer of risk from the Government to the private sector proponents and you have the capacity to get a much better outcome with the federal roads budget.

The National Highway and Roads of National Importance programs have built and will continue to build vital transport infrastructure for Australia. But we will be straining to go anywhere near delivering on key projects in the near future that the community has an understandable and legitimate expectation will be built.

Examples include the Toowoomba range crossing; the Western Sydney Orbital, the upgrading of the F3 north of Sydney, the Craigieburn deviation of the Hume Highway into Melbourne and the new connection of the Western Highway to the Western Ring Road also in Melbourne.

Clearly the job is not done. The question is can it be done without the private sector becoming a senior player on the team.

The potential tax treatment of this form of PPP will need to be worked through and therefore the Government will need to finalise its consideration of business tax reform before consideration of any PPP initiative can be taken further.

And I would point out that the Government has indicated its in principle support for the Ralph Report and the vast majority of its recommendations. There are very few exceptions.