The document discusses financing transport infrastructure in Australia. It begins with an overview comparing Australia and Canada's governments, economies, sizes, populations, and transport systems. Australia faces a large "infrastructure gap" between projected future needs for transport infrastructure like roads and rail and current investment levels, which are estimated to need to increase by 350% by 2050 to support population growth. The document examines current methods used in Australia to finance transport projects and the challenges in developing financing policies for addressing the infrastructure gap.

1. Down
Under
Looking
Up:
Financing
Transport
Infrastructure
in
the
Land
of
Oz
Cameron
Gordon,
Ph.D.
Associate
Professor
of
Economics
University
of
Canberra
Faculty
of
Business,
Government
and
Law
hIp://www.canberra.edu.au/faculKes/busgovlaw
Director,
Transport
Ideas
Network
hIp://www.TransporKdeas.org
Principal
InvesKgator
City
University
of
New
York
Social
Policy
SimulaKon
Center
hIp://www.cunyspsc.org

2. PresentaKon
Overview
• Australia
v
Canada:
basic
comparisons
• Australia
v
Canada:
transport
challenges
• Australia’s
infrastructure
‘gap’
• Financing
transport
in
Australia
–
current
methods
• Transport
finance
policy
challenges
in
Australia
• A
way
forward?
• Prognosis

3. Australia
v
Canada:
government
• Both
the
Canadian
and
Australian
legal
systems
are
based
on
English
common
law.
• Queen
Elizabeth
II
is
the
official
head
of
state
in
both
countries
and
is
represented
by
a
governor
general.
• Both
Australia
and
Canada
are
parliamentary
democracies
headed
by
prime
ministers.
• Both
countries
are
members
of
the
Commonwealth.
• Both
countries
are
federal
systems
with
shared
powers
allocated
across
central
and
State
(Australia)
or
Provincial
(Canada)
governments.

4. Australia
v
Canada:
Economy
source:
2011
IMF
AUSTRALIA
CANADA
• GDP
(nominal)
$1.54
trillion
$1.77
trillion
• GDP
per
Capita
$66,371
$50,496
• GDP
Growth
Rate
2.1%
2.4%
• InflaKon
Rate
3.4%
2.9%
• Public
Debt
(%
of
GDP)
26.7%
87.4%
• Labor
Force
12,050,000
18,700,000
• Unemployment
Rate
5.1%
7.5%
• Investment
(gross
fixed
%
of
GDP)
26.8%
22.5%
• Industrial
ProducKon
Growth
Rate
-­‐0.1%
3.7%

5. Australia
v
Canada:
size
and
populaKon
source:
2012
CIA
Factbook
AUSTRALIA
CANADA
• Total
Area
(sq
km)
7,741,220
9,984,670
• PopulaKon
22,015,576
34,300,083
• PopulaKon/sq
km
0.36
0.29
• Median
age
37.9
41.2
• Life
Expectancy
81.9
81.48
• PopulaKon
Growth
Rate
1.13%
0.78%

6. Australia
v
Canada
transport
system
characterisKcs
AUSTRALIA
CANADA
NOTES
• Aircraj
departures
388,700
291,800
2005
CIA
• Air
transport,
freight
(million
tons
per
km)
2,444
1,526
2005
WDI
• Cars
per
1,000
people
485
459
1999
WDI
• Vehicles
per
populated
land
area
(km2)
47.91
34.91
2001
WDI
• Port
traffic
(TEU)
4,830,254
4,163,424
2005
WDI
• Goods
(mn
tonne-­‐km)
415,500
423,296
2010
OECD
• Passenger-­‐kms
(mn)
296,058
507,587
2010
OECD
• Road
fataliKes
(per
mn)
61
65
2010
OECD
• CO2
emissions
from
fuel
combusKon
383
537
2010
OECD

7. Canada’s
NaKonal
Road
Network
• hIp://www.tc.gc.ca/eng/policy/acg-­‐acgd-­‐menu-­‐highways-­‐map-­‐2151.htm

8. Australia’s
NaKonal
Road
Network
http://www.infrastructure.gov.au/department/annual_report/2003_2004/casestudies.aspx

9. The
tyranny
of
distance
• The
OECD
(2008)
esKmates
that
distance
to
markets
and
natural
resource
endowments
have
a
significant
impact
on
GDP
per
capita
in
OECD
countries
(Table
2).
Taking
Australia
as
an
example,
the
OECD
finds
that
the
distance
from
Australia
to
world
markets
contributed
to
lowering
Australia's
GDP
per
capita
by
10.6
per
cent
on
average
between
2000
and
2004
relaKve
to
the
average
OECD
country.
Australia
is
the
OECD
country
most
disadvantaged
by
its
distance
from
world
markets,
while
the
centrally
located
countries
of
Belgium
and
the
Netherlands
benefit
the
most.4
• hIp://archive.treasury.gov.au/documents/
1421/HTML/docshell.asp?
URL=01%20Economic%20geography%20and
%20economic%20performance%20in
%20Australia.htm

10. PT
use
Canadian
v
Australian
ciKes

11. PT
use
(conKnued)

12. Australia’s
infrastructure
‘gap’
• One
recent
study
by
property
and
construcKon
consultancy
Davis
Langdon
into
projected
growth
in
the
infrastructure
sector
examines
the
future
needs
aggregate
investment
in
road,
rail,
electricity
generaKon
and
distribuKon,
water
storage
and
supply,
sewerage,
telecommunicaKons,
ports
and
heavy
industry
and
reveals
annualised
investment
needs
by
2050
could
be
as
high
as
350
percent
of
today’s
annual
investment
(assuming
a
high-­‐end
populaKon
target
of
40
million).
(with
current
GDP
around
$1.5
trillion).

13. Even
medium-­‐term
esKmates
of
required
Commonwealth
transport
spending
show
doubled
levels
required
in
the
next
5
to
10
years
and
these
are
minimum
esKmates.

14. How
to
pay?
• How
will
Australia
pay
for
its
investment
transport
needs
over
the
next
generaKon?
• This
is
a
big
quesKon
since
many
current
requirements
are
not
being
met.
• How
does
Australia
finance
its
current
system?

15. Australian
Transport
Federalism
• Australia’s
current
transport
finance
system
is
inherently
local.
The
Commonwealth
government
invests
relaKvely
liIle
in
transport
(for
roads
about
23%
of
total
govt.
spending
in
2004-­‐05)

16. The
GST
• Australia
adopted
a
Goods
and
Services
Tax
(GST)
in
2000.
This
is
a
Commonwealth
tax
but
under
the
Intergovernmental
Agreement
on
Commonwealth-­‐State
Financial
RelaKons,
all
the
GST
revenue,
minus
administraKon
costs,
goes
to
the
States.
• Thus,
the
States
do
have
access
to
this
revenue
but
the
tax
and
the
tax
base
itself
remain
under
Commonwealth
control.
Moreover,
as
in
the
US,
The
Commonwealth
Parliament
can
give
states
Ked
or
unKed
grants.

17. • TradiKonally,
States
have
reigned
supreme
in
transport
policy.
• The
Commonwealth
government
has
expanded
its
role
over
the
past
twenty
years
through
providing
grants
and
GST
revenue
to
aid
transport
programs,
both
of
which
are
sKll
allocated
on
an
ongoing
basis.
• The
Commonwealth
also
provides
strategic
investment
on
an
ad
hoc
(and
ojen
poliKcal)
basis
for
specific
transport
projects.
• And
more
and
more
guidance
is
being
issued,
e.g.
on
urban
planning
(to
make
sure
local
plans
account
for
climate
change).

18. Australia:
a
leader
in
PPPs
• Much
of
Australia’s
UPT
has
private
parKcipaKon,
parKcularly
in
Melbourne
and
Perth;
many
roads
are
privaKsed
and
all
major
airports
are
operated
by
private
firms.
• Australia
has
probably
one
of
the
most
extensively
privaKsed
transport
systems
in
the
world.
At
the
naKonal
level
the
rail
network
was
spun
off
into
the
Australian
Rail
Track
CorporaKon
which
now
maintains
and
operates
that
network
on
behalf
of
private
operators.
Similarly,
airports
were
corporaKsed
and
then
privaKsed
by
the
Commonwealth
Government,
mainly
in
the
form
of
sales
of
very
long-­‐term
leases
to
private
companies.

19. Tri-­‐parKte
investment
Source:
OECD
Economic
Surveys:
Australia
2010

20. Source:
OECD
Economic
Surveys:
Australia
2010

21. A
long
history
of
land
taxes
• Property
taxes
have
been
used
in
Australia
since
the
19th
century
and
consist
primarily
of
state
land
tax
and
municipal
rates.
The
state
land
tax
makes
revenue
available
for
the
state
with
no
direct
reimbursement
to
local
government,
while
municipal
rates
are
the
prime
source
of
revenue
to
local
government,
and
levied
on
a
range
of
tax
bases,
namely
unimproved
land;
land
value
or
site
value;
improved
value
of
land
and
buildings;
and
rental
value
of
land
and
buildings
(McCluskey,
Lim
and
Davis,
2007).

22. However,
relaKvely
limited
tying
of
land
value
to
transport
investment
• Perhaps
because
of
the
heavy
use
of
PPPs,
Australian
State
and
local
governments
have
done
relaKvely
liIle
with
mechanisms
such
as
value
capture,
value
uplij,
TIF’s
etc.
• Most
States
have
Development
CorporaKons
which
use
land
tax
revenues
to
help
pre-­‐fund
residenKal
and
commercial
building
but
have
not
used
this
mechanism
to
fund
transport
investment.
• The
NSW
government
considered
value
capture
to
finance
the
New
Southern
Rail
Line
(airport
rail
link)
and
the
ParramaIa
Rail
Link
(now
the
Epping
to
Chatswood
rail
line)
but
this
approach
was
not
proceeded
with.

23. Transport
policy
challenges
• #1:
the
sheer
magnitude
of
needed
investment,
an
amount
that
is
well
over
poliKcally
or
even
economically
feasible
general
revenue
finance.
• #2:
PPProblems.
Since
States
run
ciKes,
it
is
States
that
have
been
responsible
for
privaKsing
most
urban
transport
hubs,
not
the
Commonwealth
Government.
This
has
created
a
patchwork
transport
system
driven
by
States
and
concentrated
in
municipaliKes.
• Moreover
not
all
investments
will
be
desirable
to
private
investors.

24. • #3:
Complexity
and
perverse
incenKves.
The
current
transport
finance
and
governance
system
in
Australia
has
the
advantage
of
allowing
for
local
flexibility
but,
like
many
federal
systems,
also
creates
complicated
funding
flows.
• Matching
costs
with
beneficiaries
(and/or
cost-­‐imposers)
is
tenuous
and
thus
exisKng
transport
capacity
is
not
efficiently
used
and
new
capacity
is
ojen
not
invested
in
except
as
a
crisis
stop-­‐gap.

25. Australian
transport
funding
(for
roads)
• Source:
COAG
Road
Reform
Council
2011

26. • #4:
Can’t
pay,
won’t
pay.
Of
course
Australia
is
like
every
other
democracy
in
that
consKtuents
generally
do
not
like
to
pay
for
things
if
they
can
avoid
it.
• This
tendency
is
perhaps
exacerbated
in
Australia
by
the
fact
that
there
are
many
high
tolls
on
urban
roads,
i.e.
those
built
by
PPPs.
So
travelers
ojen
think
that
they
are
paying
enough
already.
• Moreover
private
toll
road
operators
are
not
very
popular
with
the
public.

27. A
way
forward?
• Infrastructure
Australia
(IA)
was
launched
by
the
Commonwealth
Government
in
2008.
IA’s
mission
is
to
“develop
a
strategic
blueprint
for
our
naKon's
future
infrastructure
needs
and
-­‐
in
partnership
with
the
states,
territories,
local
government
and
the
private
sector
-­‐
facilitate
its
implementaKon”
and
to
“provide
advice
to
Australian
governments
about
infrastructure
gaps
and
boIlenecks
that
hinder
economic
growth”

28. Infrastructure
Australia
• As
a
statutory
authority
of
the
Commonwealth
Government
of
Australia
IA
has
three
major
funcKons:
(1)
to
provide
a
list
of
“naKonally
significant
infrastructure
prioriKes;”
(2)
to
issue
guidance
on
“policy
and
regulatory
reforms
desirable
to
improve
the
efficient
uKlisaKon
of
naKonal
infrastructure
networks;”
(3)
and
to
assess
“opKons
to
address
impediments
to
the
development
and
provision
of
efficient
naKonal
infrastructure,
the
needs
of
users;
and
possible
financing
mechanisms.”

29. Focus
on
pricing
• Much
early
aIenKon
focused
on
IA's
infrastructure
investment
prioriKes
list.
This
list,
arrived
at
ajer
an
infrastructure
audit,
idenKfied
a
total
of
$A60
billion
in
priority
projects
across
various
infrastructure
sectors.
However
now
IA
has
turned
towards
trying
to
begin
a
naKonal
dialogue
on
the
use
of
congesKon
pricing
to
finance
new
projects
and
manage
exisKng
capacity.

30. COAG
• Also
very
acKve
has
been
the
Council
of
Australian
Governments
(COAG)
which
is
the
main
authority
through
which
Commonwealth
and
State
and
local
governments
plan
and
coordinate
various
iniKaKves.
• This
body
is
designed
to
do
forward
thinking
and
is
also
the
forum
where
leaders
meet
to
design
and
do
‘deals’
on
major
federal
policies.
• COAG
has
an
acKve
agenda
on
road
finance
reform
–
though
no
major
breakthroughs
yet.

31. Prognosis
• Whither
Australian
transport?
• Australia
has
a
great
deal
of
experKse
in
PPPs
and
these
will
need
to
be
a
major
part
of
the
funding
soluKon
there.
• However
its
public
sector
has
not
been
especially
proacKve
or
innovaKve
on
public
revenue
enhancements
outside
of
private
parKcipaKon.
There
is
much
room
for
growth
there.
• There
are
also
sound
and
respected
governmental
bodies
doing
good
thinking
–
but
liIle
take-­‐up
by
poliKcal
leaders.
• The
pieces
of
a
soluKon
are
there
but
nobody
wants
to
take
the
hard
knocks
to
put
them
together.