29.10.2020Lack of investment certainty and integrated planning are costing Melbourne dearly

Melbourne is a remarkable city and is recognised globally as one of the most liveable cities in the world.

However, you cannot help but wonder how that liveability will be maintained unless leaders are able to show the forethought and planning required to nurture Melbourne’s growth.

Earlier this month, Melbourne, and Victoria, appeared to be under-allocated infrastructure spend in the Federal Budget 2020-2021; one of Australia’s most important in living memory.

In a time of great economic uncertainty, particularly for Victoria, this is arguably a strategic mistake.

As part of this budget, the Federal Government announced an additional $7.5 billion to be spent on national transport infrastructure.

Of that amount, $1.1 billion will be invested in Victorian projects, compared with New South Wales (NSW, $2.7 billion), Queensland ($1.3 billion) and Western Australia (WA, $1.1 billion).[i]

The figures are somewhat surprising when you compare state population size as a percentage of national population. Victoria, with 26.1% of the national population, is receiving the same spend as WA (10.4%), less than Queensland (20.1%) and less than half of what NSW (31.8%) will receive.[ii]

This underspend in Victoria appears to be a trend. Research by Grattan Institute looked at road and rail investment over 10 years from 2005-06 to 2014-15 and found that the Commonwealth spend on infrastructure in regional NSW and Queensland was significantly higher than what has been spent in other parts of the country.[iii] This trend does not appear to have changed since.

The Federal Budget 2020-2021 is more disappointing for Melbourne. Of the amount to be invested in Victoria, the three biggest projects to receive funding include the Shepparton Rail Line Upgrade ($320 million), Barwon Heads Road Upgrade ($292 million) and the Warrnambool Rail Line Upgrade ($208 million)[iv] – all regional projects.

Victoria’s regions should receive a proportionate share of infrastructure spend. However, with its population growing disproportionately faster than any other Australian city, combined with its outsize contribution to Australia’s GDP prior to COVID-19,[v] Melbourne would benefit from a greater allocation of investment to ensure that its infrastructure requirements can be met over time.

While Melbourne has suffered from under-investment at the Federal level, we are not alone. Despite being the engines of Australia’s economic growth, federal government infrastructure investment does not prioritise cities, even though they are highly productive regions.

Federal transport infrastructure policy should be focussed on the national interest. Disproportionate spending over decades on regional roads, particularly in Queensland and NSW, can dent public confidence in decision-making. In the absence of a clear national settlement strategy, greater balance and proportional investment would be welcome.

Although GST entitlements are designed to offset the allocation of infrastructure funding, decision-makers should remain cognisant of the fact that resources are finite. Opportunity costs exist, with undisciplined project selection ultimately hampering productivity.

The actions of the Federal Government over decades are not wholly to blame for Melbourne’s current state-of-affairs. Afterall, the federal government has recommitted $4 billion to the previously axed East-West Link and has $5 billion on the table for the Melbourne Airport Rail Link.[vi]

Furthermore, to help drive Australia’s economic recovery from the impacts of COVID-19, under the latest Federal Budget announcements the states can receive billions extra in infrastructure funding on the proviso they use it or lose it.[vii]

The Commonwealth relies upon the states to bring forward possible projects. These projects should be identified within a framework for transport and land use planning.

However, Melbourne and Victoria is lacking a detailed and comprehensive plan. The Victorian Government’s key strategic planning document, Plan Melbourne, has merit although the level of detail in the document could be improved. There are more “committed” projects on the plan following the announcement of specific projects in recent years. That said, not many “potential” projects are included.

While Melbourne requires policy initiatives to reduce congestion and over-crowding, such as transport network pricing reform, it will also require new infrastructure projects to accommodate growth in population, freight and visitors.

More than ever, Melbourne requires the design and publication of a comprehensive, integrated transport plan which considers land-use and economic development planning. This is what the Committee has called for in its recent report, Transporting Melbourne.

A clear and comprehensive plan detailing how the city will grow and over what period will provide clarity around what infrastructure projects are required. Each project would be supported by a robust independent assessment confirming that the benefits of project delivery outweigh the costs and would build the case for government investment.

Having a comprehensive plan, which is closely aligned to the priorities outlined by the state’s independent advisory body, Infrastructure Victoria, would enhance the credibility of such a plan in the eyes of the community and the private sector. Such a plan would need to contain timelines and accountabilities for it to be robust.

Furthermore, a widely supported plan would ensure that the city’s required infrastructure projects are included on Infrastructure Australia’s (IA’s) Infrastructure Priority List (IPL), which is used to help guide federal decision-making.

IA released their latest IPL in February 2020. It includes High Priority Initiatives and Priority Initiatives, which are essentially over the horizon, strategically important proposals. Within these two categories, the number of initiatives identified for Victoria were comparatively less than those identified for other cities and states.

Victoria had just 15 initiatives identified across these two categories. This number is less than WA, which had 21 proposals listed, and considerably less than NSW, which had 38 proposals identified[viii] – almost triple the number listed for Victoria.

The Committee recognises that many projects and initiatives identified by IA address a range of sectors, including arts, telecommunications, water, road maintenance, and public transport. Furthermore, many of the listed proposals across the country may be warranted due to previous underinvestment or neglect.

However, when looking at the bigger picture, the number of projects and initiatives identified in the IPL for Melbourne, and Victoria, do not appear to be commensurate with the city and state’s importance to the Australian economy. More must be done locally to ensure Melbourne and Victoria have their fair share of priority initiatives included on future IPL’s.

Melbourne is a truly wonderful city which must be nurtured. It exists for the sake of living well and it deserves better in terms of a clear outlook for growth and infrastructure investment.

[i] https://infrastructuremagazine.com.au/2020/10/06/federal-budget-7-5-billion-for-transport-infrastructure-around-the-country/, viewed 26 October 2020.

[ii] https://www.abs.gov.au/statistics/people/population/national-state-and-territory-population/latest-release, viewed 23 October 2020.

[iii] https://www.pc.gov.au/__data/assets/pdf_file/0011/218666/sub024-horizontal-fiscal-equalisation.pdf, viewed 23 October 2020.

[iv] https://infrastructuremagazine.com.au/2020/10/06/federal-budget-7-5-billion-for-transport-infrastructure-around-the-country/, viewed 26 October 2020.

[v] https://www.sgsep.com.au/assets/main/Publications/SGS-Economics-and-Planning_Economic-Performance-of-Australian-Cities-and-Regions-UPDATED-2020.pdf, viewed 22 October 2020.

[vi] https://www.heraldsun.com.au/news/federal-budget-victoria-set-to-reap-the-benefits-of-infrastructure-spending-boom/news-story/2728fa5e77559975ee3b1c05aabcea49, viewed 27 October 2020.

[vii] https://www.afr.com/companies/infrastructure/start-spending-14b-in-infrastructure-funding-now-says-mccormack-20201007-p562tj, viewed 23 October 2020.

[viii] https://www.infrastructureaustralia.gov.au/sites/default/files/2020-03/2020_infrastructure_priority_list_low_resolution_-_updated.pdf, viewed 27 October 2020.

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