NATIONAL AFFAIRS: by Patrick J. ByrneNews Weekly
Infrastructure back on the agenda
, April 9, 2005
A report for the Business Council of Australia has highlighted the terrible deterioration of Australia's ageing infrastructure, but it is flawed in its solutions.
Infrastructure like roads, bridges, power stations, water delivery systems, eventually need replacing due to age, and new investment is needed to meet growing demand. Government spending on infrastructure is at its lowest since its peak in the mid-1960s.
On water, the report's assumption is the same as that of numerous other recent state water reports - no new dams. Instead, it wants market forces to limit consumption. It proposes raising the price of water to shift irrigation from low-valued agriculture like grazing (for which farmers pay $30/megalitre for secure water) to high-valued city and industry use (where users pay $1,200/megalitre).
This naïve economic solution fails to grasp that low-valued irrigation water for low-valued agriculture is what helps provide Australian consumers with the lowest priced food in the developed world, and helps to sustain important, competitive agricultural exports.
The report makes no suggestion regarding the vast water supplies in northern Australia which could be tapped to supply both cities and for irrigation.
On transport, the report graphically describes the increasing demands placed by heavy transports on our roads and highway systems, yet on current trends, the proportion of freight carried by rail will continue to shrink.
This is partly because of the rundown in the nation's rail systems (for instance, some bridges on key routes were built in the 1880s); and partly because the cost of road maintenance is met substantially by the taxpayer not heavy transport users, and freight rail has to cover past capital investment costs.
The report says this situation has to change, and calls for a huge investment increase for Australia's rail networks, and the building of a new inland east coast freight rail system.
The report warns of more brownouts as Queensland, Victoria, South Australia and NSW face electricity shortages in the future.
It largely blames the current situation on:
(a) the failure to adequately link the separate state electricity grids; and
(b) on price capping which means privatised energy companies don't have the financial incentive to invest in new generating capacity.
NSW has not privatised, and the Government doesn't want to build new power stations, while private concerns won't build either if they have to compete with government generators.
The report fails to consider that privatised electricity generators have a vested interest in limiting production to force prices up.
In all areas, the report focuses heavily on market-driven solutions. Ironically, part of the crisis is because instead of governments investing to ensure adequate basic services needed for economic growth, the financial markets have set the benchmark for government performance.
The markets have demanded continuous budget surpluses, therefore low levels of public borrowing and this has squeezed long-term investment on infrastructure.