Infrastructure Australia is an agency established by the Commonwealth Government to advise on how to spend upward of $20 billion on national infrastructure projects. IA has been taking public submissions and bids from State and Territory Governments for a couple of months; now it's getting close to crunch time. How the Board intends to factor in climate change and peak oil still seems to be a work in progres...

Rural and Regional Affairs and Transport Committee October 21, 2008

Senator LUDLAM—I recognise it is probably too early for you to disclose too much detail about the actual projects that you are short listing, but can you give us a sense of the criteria for selection, the way that you are drafting up the interim list at least, and the assumptions that underpin that selection? And, maybe just give us a bit of an overview. I understand the cost-benefit analysis model is fairly central in how you are doing the prioritising.

Mr Deegan—Again, if I can refer to appendix C, ‘Summary of initiative profiling’, of the document, Infrastructure Australia’s prioritisation methodology, which is on our website. Can I just show senators and then table it. It details our overview of how we intend to profile these various initiatives. Indeed, Senator Minchin has outlined the sorts of issues that are in there, including obviously a big focus on Australia’s productive capacity, how to increase Australia’s productivity, diversifying Australia’s economic capabilities, building on Australia’s global competitive advantages, developing our cities and/or regions, reducing greenhouse emissions, improving social equity and quality of life in our cities and our regions and the linkages that operate between those.

Senator LUDLAM—When you talk about productivity is that just an assumption of labour productivity or is that energy and water productivity as well?

Mr Deegan—The full gamut of productivity benefits that we might accrue.

Senator LUDLAM—Obviously the model itself is going to be very sensitive to the inputs that you give it particularly the way in which you have chosen to monetise certain variables. Can you tell us what kind of carbon price assumptions you have built into the model particularly, I suppose, with reference to transport infrastructure? The kinds of answers that fall out of the model will be highly sensitive to carbon price assumptions that you are putting in.

Mr Deegan—We are still developing that.

Senator LUDLAM—Can you give us a bit of a sense of how you are planning on doing that?

Mr Deegan—We are still developing the process.

Senator MINCHIN—Have you not got to do that by your December deadline?

Mr Deegan—Yes.

Senator MINCHIN—Which is—

Mr Deegan—It is two weeks away.

Senator LUDLAM—We will do these two together because I suppose they are related: how are you incorporating oil price assumptions on the same basis? You are going to get very different answers out of your model, depending on your oil price inputs.

Mr Deegan—Again, we are still developing that.

Senator LUDLAM—That is a fairly crucial part of whether this thing is going to work or whether it is—

Mr Deegan—We are working closely with Department of Climate Change, the Garnaut committee, the Garnaut review and others on those issues.

Senator LUDLAM—Whose advice are you taking in terms of the oil price assumptions, for example?

Mr Deegan—We are considering that.

Senator LUDLAM—Sorry, I cannot hear the witness.

CHAIR—Sorry, can we have a bit of order! We are not going to go down that path again, Senator McGauran, after our sort-out last night. Senator Ludlum?

Senator LUDLAM—Sorry, Mr Deegan, I did not hear your last answer.

Mr Deegan—We are still developing that, Senator.

Senator LUDLAM—Can you give us anything at all? This is weeks away from having a draft priority list.

Mr Deegan—Not at this stage.

Senator LUDLAM—Is that concerning to you?

Mr Deegan—We are working on the criteria to develop this priority list; we are working that through.

Senator LUDLAM—Can you just tell us as a yes or a no answer?

Mr Deegan—Excuse me, Mr Chairman, I am doing my best to answer the questions. If Senator McGauran has a particular question, I would be happy to engage.

CHAIR—Yes. Thank you, Mr Deegan. Senator McGauran, I have asked you—

Senator McGAURAN—Well, Mr Deegan ought to engage with—

CHAIR—Order, Senator McGauran! Senator McGauran, Mr Deegan is answering questions from members of the committee—

Senator McGAURAN—He has sought to engage with me.

CHAIR—and your continual interruptions are putting everyone off. I would ask you to hold your tongue and you will get the call when you put your hand up.

Senator McGAURAN—You heard my question, Mr Deegan, see if you can answer it.

CHAIR—Senator McGauran! Senator Ludlum?

Senator LUDLAM—Thank you, Chair. I would just like an answer as to whether carbon price assumptions and oil price assumptions will be built into the draft infrastructure model?

Mr Deegan—We are developing that process.

Senator LUDLAM—I am still not sure if that was a yes. You will have—

Mr Deegan—We are developing that. We need to consider that.

Senator LUDLAM—It will be considered?

CHAIR—Senator Milne? Senator McGauran!

Senator MILNE—What I clearly want to understand, though, is you have to have a list out by December; you are going to match that list against the assumptions of criteria assessment, one of which is climate change, and we are relating that to oil price. It is now the end of October; we have got a matter of weeks. Can you confirm that when you bring out the first list it will have been assessed against the climate and oil price assumptions, given that you are saying that at this stage you are still working on how to do that? We would like an answer as to whether the first list will be assessed against those criteria or whether it will not be. It is only a matter of weeks and you must be able to give us an answer as to whether it will or will not be assessed against those criteria for the first list.

Mr Deegan—It is one of the criteria against which we are assessing these submissions.

Senator LUDLAM—Oil prices are not directly actually referenced as a criteria. Are they being built into the model?

Mr Deegan—We are asked to assess against greenhouse emissions. Clearly there is an internal discussion about how we best manage that and we have not come to a conclusion as yet but of course that is only a short while away.  

Senator LUDLAM—Going to the question of oil prices, which is not one of your five criteria, I suppose with transport infrastructure it would be very difficult to do it without estimations of future oil prices?

Mr Deegan—A number of submissions go to that issue in a particular and we are considering those. Remember, a number of the public submissions that go to that issue we received last Wednesday.

Senator LUDLAM—Presumably you are not going to wait until the submissions are in before you start?

Mr Deegan—No, we have been dealing with a range of other organisations as well in that process. We have not finalised how we will process that.

Senator LUDLAM—Will you be publishing the model and the assumptions that you have, your inputs if you will, in the cost benefit analysis?

Mr Deegan—We will provide that advice, as indicated to Senator Minchin, to government.

Senator LUDLAM—Then it will be up to government to release that or not?

Mr Deegan—Yes.
Senator LUDLAM—Can you tell us how you are incorporating the non-monetary impacts of climate change, for example, inundation of coastal infrastructure? Are you doing those sorts of analyses as you are going?

Mr Deegan—What we have sought to do in the time frame that we have, in dealing with the wider economic benefits, is to monetise wherever possible the impact of the sorts of changes where we can. In some areas it is more difficult to deal with how you assess those particular criteria. We are managing what we believe is sensible to monetise and using that as part of the cost benefit analysis. The wider economic benefit work has been pioneered in the UK; it has had some success there. We believe from our overview of what is happening internationally that it is sensible to deal with the wider economic benefit to the extent that we can monetise it.

Senator LUDLAM—You have gone to the trouble of inviting public comment for your input. It is going to be very difficult for the public, or even for other senators, to assess what has happened to that because from an outsider’s perspective it looks as though this material is going into a black box. We are not even sure whether your outcomes will ever be made public or whether it will just be cabinet-in-confidence material. What role is there for the public from here on in assessing, evaluating and critiquing the material that you will produce in your draft short list?

Mr Deegan—I think that the process we have adopted to date from Infrastructure Australia has been open and transparent. I am not sure of too many other agencies that have produced the sorts of detail that we have provided for people to consider. All of the material that I have here today is available on our website. We have been open and transparent in that process. The advice to government, as we are an advisory board, is then to go to government and it is a decision of government as to what they publish from there. But I think that we have indicated to all those making public submissions that we have taken their submissions very seriously. While there is an amalgam of that advice and providing advice from Infrastructure Australia to government— and necessarily they will take a view of which ways they want to push—the process has meant that the public has had a great deal of engagement in this process.

Senator LUDLAM—Engagement is one thing, feeding inputs into a process is one thing, but being able to have some sort of comment or say on the outputs is actually quite a different matter. But we will leave that there.

Mr Deegan—Could I say that I am sure government is cognisant of that approach.

Senator LUDLAM—In respect of the fact that some of the states have not made their bids public, although some of them have, can you give us an idea in a general sense about the balance of transport proposals that you have received for roads as against those for rail?

Mr Deegan—There is a mixture across all the states and territories in each of the four sectors: transport, telecommunications, water and energy. Within transport there is a vast array of road and rail projects, bicycling projects and a number of pedestrian initiatives as well.

Senator LUDLAM—So you are okay to be looking at, for example, cycleway infrastructure, pedestrianisation initiatives; that would qualify in your definition of infrastructure?

Mr Deegan—There are a range of submissions along those lines. In one case, quite a detailed cost benefit analysis has been provided.

Senator LUDLAM—Of?

Mr Deegan—Of a bicycle infrastructure.
Senator LUDLAM—Okay, and pedestrianisation initiatives, for example, you would consider as a genuine—

Mr Deegan—They are less detailed at this stage but certainly in dealing with urban congestion and integrating land use and land use planning they will part of that process.

Senator LUDLAM—Have there been any proposals for track straightening of rail infrastructure, particularly regional rail?

Mr Deegan—Track straightening?

Senator LUDLAM—Track straightening to make regional rail faster?

Mr Deegan—There is a range of regional rail proposals. I am not aware of any particular major and periodic maintenance proposals for track straightening. There are some proposals for urban rail where perhaps the condition of the track is not suitable or sustainable in the long term, which would include, no doubt, resleepering, electrification, track improvement, formation improvement—the sorts of things that you would expect in operating railway.

Senator LUDLAM—But there is nothing to coming to mind about intercity rail straightening proposals?

Mr Deegan—Intercity rail or inner city?

Senator LUDLAM—No, intercity—between cities?

Mr Deegan—There are a number of proposals from the Australian Rail Track Corporation dealing with rail improvement for both passenger and freight services between cities.

Senator LUDLAM—But not from the states that you are aware of?

Mr Deegan—Again, there is a mixture of things that go in there. Rail projects include a whole host of services and improvements that might be considered.