Fixing NSW: A LONG-TERM VISION FOR BETTER INFRasTRUCTURE A submission to Infrastructure NSW Infrastructure Partnerships Australia is a national forum, comprising public and private sector CEO Members, advocating the public policy interests of Australia’s infrastructure industry. Infrastructure Partnerships Australia 8th Floor 8-10 Loftus Street Sydney NSW 2000 T +61 2 9240 2050 F +61 2 9240 2055 www.infrastructure.org.au For more information please contact: Brendan Lyon Chief Executive Officer Infrastructure Partnerships Australia Level 8, 8-10 Loftus Street, Sydney NSW 2000 PO Box R 1804, Royal Exchange, Sydney NSW 1225 T +61 2 9240 2051 E [email protected] Adrian Dwyer Director, Policy Infrastructure Partnerships Australia Level 8, 8-10 Loftus Street, Sydney NSW 2000 PO Box R 1804, Royal Exchange, Sydney NSW 1225 T +61 2 9240 2056 E [email protected] I II I II Contents Executive Summary V Recommendations VII 2 Principles 1 2.1 The Long-Term Infrastructure Plan Must be the Principal Focus for Infrastructure NSW 1 2.2 Strategic Corridor and Land Preservation 4 2.3 Infrastructure NSW as a Strategic Partner Across Government 5 2.4 Project Conception and Prioritisation 5 2.5 Procurement Agnosticism 6 2.6 Contestability in Public Services 6 2.7 Oversight and ‘Step-In’ Powers 7 2.8 Ex Post Review and Project Monitoring 8 2.9 Commonwealth Government Submissions 8 3 Background to the Infrastructure Challenge 9 3.1 A Burgeoning Population 9 3.2 The Challenge of a Constrained Balance Sheet 11 3.3 Economic Growth 12 3.4 Productivity Growth 14 4 Transport 16 4.1 Integrated Land-use and Transport Planning 17 4.2 Network Tolling 17 4.3 Tripling of the Freight Task 18 III IV 4.4 Building for Future Capacity 21 4.5 Preserving Corridors for Future Transport Infrastructure 21 4.6 Resolving the Role of Rapid Transit 22 4.7 Regional NSW Transport 23 5 Energy 24 6 Water 27 6.1 Metropolitan Water 27 7 Social Infrastructure 29 7.1 Health 29 7.2 Corrective Services 31 7.3 Public Housing in New South Wales 33 8 Critical Projects 35 8.1 M5 East Duplication 35 8.2 Northern Beaches Health Services 35 8.3 M4 East 36 8.4 F3 – Sydney Orbital Links 36 8.5 Passenger Rail Upgrades 37 8.6 Freight Rail Upgrades 37 8.7 Moorebank Intermodal 38 8.8 Pacific Highway Upgrades 38 9 New South Wales Infrastructure Maps & Pipeline 39 9.1 Infrastructure Prioritisation List 42 10 Annexures 48 III IV Executive Summary New South Wales needs to substantially increase the quality, capacity and efficiency of its transport, utilities, social and community infrastructure. This will require the State to increase both the quantum of money it invests, and ensure that it invests in the best infrastructure projects to meet social and economic outcomes. Achieving a permanent increase in infrastructure investment will require substantial reform to the State’s budget; while increasing the quality and value for money achieved from these investments will require a fundamental overhaul of the way projects are conceived, funded, delivered and operated. This new approach will require substantial changes to the established roles of government and the private sector. Shortfalls across transport, utility and social infrastructure are constraining the State’s productivity and imposing significant pressures on taxpayers, households and businesses through higher costs of infrastructure services. Efficient infrastructure is the lifeblood of any economy; it underpins: • the productivity of the economy; • the ability of businesses to compete in a national and global market; and • the quality of life and prosperity of the community. At its core, infrastructure underpins the delivery of efficient services to drive forward economic growth and social development. However, solving the infrastructure challenge in New South Wales is not as simple as issuing contracts for new projects. It will first require a fundamental shift in the way that infrastructure is conceived and planned – and a substantial period of budget reform to allow projects to advance from concept to completion. Currently the New South Wales budget does not have the capacity to fund new projects without endangering the State’s AAA credit rating. Analysis by Infrastructure Partnerships Australia estimates that New South Wales can borrow only an additional few billion dollars before it reaches its AAA downgrade trigger point. The NSW Government estimates that a drop to a AA+ rating would result in additional debt servicing costs of $3.75 billion over 10 years.1 In the past decade, New South Wales has suffered from the lack of a well-considered, well- founded and suitably long-term plan for the infrastructure needed to support economic and social outcomes. But this lack of a long-term vision for infrastructure is a relatively recent phenomenon. Indeed, the State has historically benefited from ambitious and very long- term approaches to infrastructure. Examples include: • Governor Macquarie’s reorganisation of the Sydney road network in the very early years of colonial Sydney; • John Bradfield’s 1923 Master Plan for Sydney; and • The 1951 County of Cumberland Planning Scheme. 1 NSW Budget Speech, 2012-13 NSW Budget. V VI Each of these plans contained substantial foresight and ambition and acted to fundamentally change the shape, operation and development of the State. In the past decade, that level of long-term strategic planning and sustained project delivery has been replaced by a series of rapidly changing planning and project priorities. The result has been a regrettable lack of integration and cohesion across government; and an equally regrettable lack of progress on the delivery of critical projects. Done well, the creation of Infrastructure NSW, with its mandate to develop a long-term strategy for the State’s infrastructure networks, offers a generational opportunity for the State to recapture the vision and ambition contained in the Macquarie, Bradfield and Cumberland plans. A strong and evidence based strategic infrastructure plan spanning the State offers the opportunity to shape the development of New South Wales across the coming half century. Infrastructure NSW was formed after significant consultation across government and industry to perform two key functions: • The delivery of an integrated long-term state infrastructure strategy and prioritised project pipeline; and • The identification and adoption of major policy and market reforms, ensuring that New South Wales has the financial capacity to fund the massive infrastructure programme that is required. Expectations are high among business and the broader community that Infrastructure NSW will be able to make immediate impacts on the State’s infrastructure backlog. However, the pursuit of immediate-term goals must be considered in the context of longer-term requirements for the State’s growth infrastructure. Developing a whole of government infrastructure strategy will be a complex task. Prioritising the delivery of health projects against transport, community, justice, social housing and utility projects presents a significant challenge in its own right. The development of a robust project prioritisation methodology, which accurately identifies requirements and costs – whilst allowing for the flexibility to innovate in the provision of infrastructure and services – will be a crucial part of ensuring the right projects are prioritised and advanced. Of course, a robust long-term strategy alone will not solve the State’s infrastructure shortfall. The strategy will likely identify hundreds of billions of dollars of project investments that will need to be funded over the coming decades. That will mean that the Infrastructure NSW strategy will need to be backed by sustained fiscal reforms across the State’s public sector. Creating sustainable capacity for increased taxpayer investment in infrastructure will require complex reforms to the cost and quality of public services; as well as an ongoing process of privatisation of public assets and the consideration and adoption of targeted taxation and user pays measures to increase the availability of funding. For example, research undertaken by Infrastructure Partnerships Australia found a full privatisation of the State’s remaining electricity assets would liberate between $32.5 billion and $41 billion that could be invested in new projects. Full privatisation would also transfer future energy infrastructure investments away from taxpayers and on to the private sector. Reforming electricity alone would therefore strengthen the State’s capacity to invest by more than $50 billion. The NSW Government’s privatisation of the Sydney Desalination Plant, and planned divestment of Port Botany, Port Kembla and the State-owned electricity generators must form the start of an ambitious and sustained programme to recycle taxpayer dollars from existing assets, for investment in new projects. This submission makes a range of suggestions about fiscal, governance and project priorities that should be considered by Infrastructure NSW and the NSW Government in approaching this task. V VI Recommendations 1 The long-term infrastructure strategy must be the principal focus of Infrastructure NSW and must look at requirements beyond the 20 year planning horizon to deliver a robust and stable infrastructure programme. • To be effective, the long-term strategy produced by Infrastructure NSW should integrate with the individual strategies and project plans of the State’s central and line agencies, in particular the Long