Tasmanian Government submission to the National Infrastructure Audit July 2008 EXECUTIVE SUMMARY The Tasmanian economy has undergone significant structural change in the past decade, which has contributed to the State’s long-term recovery in economic performance characterised by strong employment growth, a substantial reduction in unemployment, high levels of private sector investment and population growth. These structural changes include: • growth in Tasmania’s total productive capacity, and the potential to improve Tasmania’s productivity, through increased private and public investment; • increased household wealth due, in part, to the realignment of Tasmanian house prices with those on the mainland; • an expanded tourism sector due to the budget airline market; • the development of a natural gas market in Tasmania and increased competition in the electricity and gas retail markets; • closer integration with the national and international economies; and • a transformed fiscal position, including the elimination of State net debt, which has led to improved tax competitiveness and higher levels of business confidence. The effect of these structural changes has been a change in Tasmania’s industrial base, with high productivity industries such as mining, finance and insurance, and some high value manufacturing growing at a faster average rate in the five years to 2006-07 than experienced nationally. These industries have, in recent years, also accounted for a greater share of total factor income than previously. Essential to sustaining this economic growth over future decades is further infrastructure investment targeted at maximising Tasmania’s competitive advantages and facilitating productivity improvements and industry investment. An interpretation of ‘nationally significant infrastructure’ that focuses solely on urban congestion and bottlenecks in the major cities ignores the potential productivity gains to be realised by investing in nationally significant regional infrastructure. Tasmania has a diverse range of agricultural, mining, forestry resources and significant potential for additional value adding service industries if key infrastructure challenges can be overcome. While Tasmania shares many of its challenges with other regional jurisdictions, it is important to highlight that we are in many ways unique. The State’s infrastructure needs stem from a number of factors including: • the nature of its transport and freight task; • a small, dispersed population; • ‘island-based disadvantages’; Tasmanian Government submission to the National Infrastructure Audit 2 • historic investment patterns that have failed to achieve economies of scale; • challenging topography; and • a legacy rail system. Tasmania has always been an outwardly focused export-oriented part of the Australian economy. The Tasmanian economy is going through a major period of sustained growth and diversification and is currently playing a more vibrant role in the economic development of Australia than it has for decades. It is critically important to the economic and social health of the State and to sustaining our contribution to national economic progress that there is investment in infrastructure to underpin this. Tasmania has demonstrated that a regional economy can change and grow through targeted infrastructure investment that fosters continued and sustained regional economic growth. It is important that Tasmania and other regional economies can continue to contribute to, rather than be a burden on, national productivity growth. Transport Transport productivity improvements are important in a value added and bulk commodity market, such as Tasmania, where cost savings in the transport of goods increase the scope for competitive pricing. As an export-oriented state, Tasmania faces major challenges in a carbon and oil constrained future due to distance from export markets and cost of importing retail goods. Over 99 percent of Tasmania’s interstate export movements are by sea. The container market, in particular, has been undergoing major growth. Future export and industry growth will require land transport investment that links to the future role of the ports, including the long-term potential to focus container movements at Bell Bay, from the current focal point at Burnie. Tasmania’s major intermodal facilities are currently port-based. Operational and land use constraints limit improvements to efficiency, capacity and transit times at all intermodal facilities. Tasmania has an extensive, substantially mature transport system with a high maintenance liability. The freight and passenger task is highly dispersed across the AusLink and regional road networks. Industry relies on regional road networks for the movement of product to export and processing points. Without significant investment in regional road infrastructure and maintenance, sections of Tasmania’s road network will not support future freight productivity reforms, including longer and higher mass vehicles, leading to higher transport costs for industry and infrastructure maintenance costs for Government. Tasmanian Government submission to the National Infrastructure Audit 3 Historically, Tasmania’s rail network has received limited investment compared to road. As a mode, rail is suited to Tasmania’s bulk commodity freight task, however infrastructure deficiencies, duplication by the road network, a generally short-haul task and volatility in rail ownership and management since the late 1990s are significant issues affecting the viability and attractiveness of rail. Significant improvement in rail efficiency and productivity is necessary for rail to remain competitive. Tasmania relies on air services for interstate passenger travel and the movement of time- sensitive freight. Maintaining the existing level and competitiveness of air services to Tasmania is essential. Priority projects • Brighton Bypass (stages one and two): address significant safety, efficiency and amenity issues • Frankford-Birralee-Batman Bridge: significant upgrade of strategic freight route • Brooker Highway: upgrade of strategic urban freight route, including key intersections, and sections of three lanes • Bass Highway: Port Sorell to Deloraine, Deloraine to Illawarra Main Road and west of Wynyard • New Bridgewater Bridge • Brighton Transport Hub: address current intermodal operational deficiencies, improving north- south connections • North east forestry freight strategy: separate heavy vehicle and passenger traffic on key passenger routes (includes upgrades to Bridport Main Road and strategies to address deficiencies on the Tasman Highway) • Bathurst-Wellington: Measures to address through freight movements and traffic flows • Rhyndaston rail capacity improvements: remove tight curves on approaches to Rhyndaston tunnel and sections south of Antill Ponds • Rail upgrades, Melba line: includes additional spurs to link to mine sites • Rail upgrades, Main and Western lines, to support higher speeds and increased axle loads • Murchison Highway: road upgrades to support a growing mining freight task • Projects to separate heavy vehicle and passenger traffic, south and North West regions (includes potential rail upgrades, Derwent Valley and Wiltshire lines) • Bell Bay intermodal - realignment of rail access to Port; future expansion and land reclamation; development of new siding to cater to a higher volume freight task • Tasman Highway to Airport: Pavement reinstatement/improve eastern approaches to Bridge • Midland Highway: targeted improvements to support heavy freight task and safety • Illawarra Main Road: improved safety, efficiency and level of service • Urban freight route improvements – to improve freight movements and access on major urban freight routes that are at or approaching capacity (Brooker and Tasman Highways, Bathurst-Wellington couplet) Tasmanian Government submission to the National Infrastructure Audit 4 Water Irrigation The Tasmanian Government is currently implementing a strategy to realise the economic potential of agricultural areas by removing constraints on irrigated agriculture. Up to $220 million has been committed to Tasmanian water development projects, aimed at drought-proofing Tasmania and securing more reliable water supply for irrigation and towns. Without additional Government funding, the balance of the total project cost will need to be provided through private sector investment. The Tasmanian Government has recently established the Irrigation Development Board to direct the development of these projects. The Australian Government has committed $140 million towards six of the projects. This is unlikely to be sufficient to complete all of the projects and additional funding may be required. All of the remaining first priority projects have been identified as filling strategic gaps in irrigation water demand to both underpin the existing investment in irrigation businesses to meet the challenges of drought and climate change, and capture opportunities for growth of irrigated agriculture in the State. Tasmania has huge potential for further irrigation development and additional Government funding will be required to realise this potential, through both ensuring the successful completion of the priority projects and progressing a second suite of larger scale projects currently being investigated by stakeholders. Urban water A recent review of the State’s water and sewerage sector found up to $1 billion of new infrastructure is required over the next decade to improve environmental