Gittins: PPPs no magic pudding
It's become terribly fashionable for governments to turn infrastructure projects over to public-private partnerships, but the Productivity Commission reminds us the private sector isn't always more efficient than the public sector. Ross Gittins reports.PT3M39S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-34zfg 620 349 March 18, 2014
We get bombarded with economic and political news. Some of it is worth knowing, some isn't. Some gets much attention, some gets little. Sometimes we give too much attention to things that aren't worth knowing and too little attention to things that are. The Productivity Commission's draft report on public infrastructure is one of the latter.
Ostensibly, it's a report advising Tony Abbott on how to achieve his dream of becoming the ''infrastructure prime minister''. In fact, it's an urgent warning to Australia's voters and taxpayers: we've wasted a lot of money on infrastructure and, if we're not careful, we could waste a lot more.
The point is not that all infrastructure is a waste of money, but that we tend to get too emotional about the topic and not sufficiently hard-headed. We need to think a lot more carefully, demand that our politicians - on both sides - lift their games, and insist on a lot more information being made public.
Illustration: Kerrie Leishman
Almost all of us believe the country is suffering a serious infrastructure deficit, that there's a huge backlog of essential public infrastructure waiting to be built and our top priority must be to get on with clearing it as soon as possible.
I believe there's some truth to this perception. There most certainly are categories where we have an infrastructure problem. Big-city traffic congestion is a glaring example.
But to say we have an infrastructure problem is not to say we have an infrastructure deficit. To say we have a backlog is to presuppose the answer to the problem: just get out there and build a lot more ASAP.
It never occurs to us that, when we jump to that conclusion, we are, first, rewarding the lobbying efforts of the infrastructure industry and, second, making life too easy for our political leaders. We're doing just what the radio shock-jocks make their not-inconsiderable living encouraging us to do: use our hearts not our heads, react emotionally rather than intelligently.
Remember, we live in the age of rent-seeking - of big business interests using public opinion to extract favours from governments. Favours that, one way or another, you and I end up paying for.
It has suited the pockets of the infrastructure lobby - big developers, engineering construction companies and associations of engineers - to give us the impression we have an infrastructure crisis that's getting bigger by the minute and needs fixing by yesterday.
Much less effort has gone into checking out the existence of this backlog and its precise whereabouts than into spending like fury. Although these figures probably understate the full extent of spending on public infrastructure, it's true that, measured as a proportion of national income, spending on engineering construction work for the public sector fell to a low of just more than 1 per cent in 2003.
By 2012, however, it had doubled to more than 2 per cent. In present-day dollars, that's more than $30 billion a year being spent on new infrastructure.
Ever seen a headline screaming we've more than doubled our infrastructure spending in a decade? No, didn't think so. It suits too many people to have us go on thinking the backlog's getting bigger by the day.
One problem with the not-spending-enough approach to the infrastructure question is that it rewards politicians - particularly state politicians - merely for spending more of our money which, as we've seen, they've been doing like crazy for up to a decade.
Another problem is we have too little assurance the money is being well spent. In our concern about the backlog, we seem to have forgotten how prone politicians are to pork-barrelling - spending money disproportionately in marginal or National Party electorates - and how tempting it is to spend on those projects that happen to be the forte of generous corporate donors to party funds.
And not just that. Politicians of all stripes are terribly prone to favouring big-ticket, showy, popular projects over smaller, technical, hidden, boring projects that would actually do more good. They almost invariably favour projects where there's a ribbon they can cut.
They tend to underspend on boring repairs and maintenance then, when the infrastructure has gone to wrack and ruin, make heroes of themselves by building a brand new replacement.
For reasons I don't understand, the present crop of Coalition governments - federal and state - seem biased against public transport as the answer to traffic congestion and have reverted to the 1960s notion that more tollways will fix everything.
As the Productivity Commission has outlined, the answer to this is much more rigorous evaluation of the costs and benefits of projects - taking account of social factors, not just financial ones - by genuinely independent infrastructure authorities, with all their findings made public and no exceptions for bright ideas such as the national broadband network.
As well, the commission makes the obvious but easily forgotten point that we should make sure existing infrastructure is being used efficiently before we rush off and build more. Often this will involve smarter charging for infrastructure. This failing explains much of the rise in electricity prices being blamed on the carbon tax.
In infrastructure, as in everything, there's no free lunch. One way or another you and I end up paying for it. That's an argument for thinking it through.
Ross Gittins is economics editor.