Infrastructure investment vital for growth

Two years ago, Australia elected a new government with an ambitious reform agenda. It was an agenda that embraced many reforms the Business Council of Australia had long been advocating – in areas such as education, infrastructure, tax, business regulation and emissions trading.

We welcomed these elements of that agenda. Just as importantly, we applauded the commitment and the energy that the new government brought to the job.

Neither the BCA nor the new government could have foreseen how quickly the economic landscape would change.

In a mere few months, times of plenty turned to times of great challenge.

To its credit the government acted quickly and decisively to address these challenges.

The BCA endorsed those actions as both necessary and appropriate to protect Australia from the worst effects of the global crisis.

Australia entered the global financial crisis in far better shape than almost any other OECD nation.

That it did so is a tribute to the economic management of the previous government, which left Australia with, essentially, no government debt.

That Australia is also emerging from the global financial crisis in better shape than almost any other OECD country is a tribute to the timely and appropriate actions of the current government.

However, if Australia is to reap the full benefit of this ‘blessed’ position, it is essential that the government now focuses its energy and commitment on the task of pursuing growth. Growth that is both strong and sustainable.

Growth delivers jobs. Growth delivers higher living standards. Growth eases the necessary task of repaying government debt and repairing the budget.

For some years the BCA has aspired to see Australia ranked in the top five nations of the OECD, measured by GDP per person. That goal is now within reach. We have a potent advantage as a resource supplier to the world’s fastest-growing economic region. We are not burdened by the massive government debt overhanging many competitor nations. Our financial system is in strong shape.

Throughout the global crisis, the BCA has remained optimistic about Australia’s long-term prospects. That optimism has proved warranted. It is now clearer than ever that the next decade can be a decade of great prosperity. A decade of strong and sustainable economic growth that delivers benefits to all Australians.

However, to transform this opportunity into reality we cannot rest on our laurels.

We must articulate a clear national ambition for Australia’s economic and population growth.

We must determine how we want to grow, so that we can make the reforms to provide for that growth.

Towards the end of the last boom, it became clear that the nation’s infrastructure was not coping with the opportunities available to us. From electricity to the road system, from rail freight to water supply, we found demand outstripping supply.

This left business unable to take full advantage of the opportunities. Returns were lower; investments remained unmade; and jobs that could have been created, never were. Our failure to plan for growth also deepened social and environmental stresses.

As growth returns, these problems will reappear, probably sooner than many people expect.

Infrastructure poses a special challenge for Australia. Our small and dispersed population and our distance from world markets make us especially sensitive to transport costs.

The BCA recently published a plan to address these challenges – a report called Groundwork for Growth. This report advocates: reforms to make better use of our existing infrastructure and to improve investment signals reforms to improve our infrastructure and project planning, so that investments achieve clearly defined objectives; and reforms that let us see and measure our progress in improving infrastructure delivery.

We also advocate a regular Productivity Commission audit of the capacity of Australia’s infrastructure to support continued growth.

At the same time as we deliver new and more efficient infrastructure, we need to meet our social and environmental goals.

Right now we have a unique opportunity to address this challenge. Unique because there appears to be a broad consensus as to what is at stake: federal and state governments now understand the national significance of the major infrastructure challenges; the creation of Infrastructure Australia has helped provide a national view.

This, indeed, was what the BCA hoped for when we urged the invention of such a body; and federal–state relations in general are deeper than they have been for some time.

We must seize this opportunity for nation-making change.

However, we should not underestimate the size of the reform task.

In infrastructure as in many other fields, Australia’s federal system of government makes reform tough.

Over many years the federal system has shown itself to be no friend or facilitator of change.

Since this prime minister has come to office, we have seen an increase in the frequency of Council of Australian Governments meetings and a strengthening in the administrative support for COAG.

But each of the states and territories faces pressures to keep their own rules and processes in place, rather than to deepen the national partnership.

This problem confronts us not just in relation to infrastructure, but in many other major reform tasks, including business regulation, education, healthcare, taxation and workplace laws.

However, the prize here is too great to let rivalries deny us our goal.

We want this great nation of ours to fully exploit its potential, and the potential of every Australian.

We want Australia to be the ‘best place in the world in which to live, learn, work and do business’.

This can only happen if we embrace change.

The BCA wants to continue to work constructively with both sides of politics to deliver that change.

I say ‘both sides of politics’, because democracy is most effective when the public can hear and consider positive, well thought out, coherent policy positions from both government and opposition.

I said last year that over the quarter-century since the BCA’s founding, we had moved from a view that ‘what is good for business is good for Australia’ to a view that ‘what is good for Australia is good for business’.

We have embraced a number of issues that go beyond the traditional economic agenda, including the need to ensure Indigenous Australians fully share in the nation’s prosperity. In the past week we have released our first annual report on BCA members’ indigenous initiatives and strategies. We see this as a starting point. We know we have a long way to go.

n This is an address by Business Council of Australia retiring president Greg Gailey to the BCA 2009 annual dinner, October 27 2009.