26/04/2012 - 10:50

Private sector can help meet infrastructure needs

26/04/2012 - 10:50


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Both the federal and state budgets, due next month, are forecast to hold little joy for investment in business and industry.

Private sector can help meet infrastructure needs

Both the federal and state budgets, due next month, are forecast to hold little joy for investment in business and industry.

The state and federal governments are due to hand down budgets next month and prepare us for a tough ride as they struggle to deliver much-needed tax cuts for business, greater investment in infrastructure and new services.

The federal government is promising cuts to funding and, potentially, services as it tries to deliver on its promise to return the budget to surplus.

And the state government has budget problems of its own. It too has flagged cuts to the public service and delaying capital works projects.  

This has certainly not been helped by the current GST allocations. Western Australia  will receive just 55 cents in every dollar that is notionally collected in GST from WA next financial year. This could fall to zero by the end of the decade.

As a result, the government will have almost $2.4 billion less in GST revenues in 2012-13. 

So, it appears the need to fully invest in WA’s business and industry could be largely overlooked on budget night.

With the state the start of a new era of strong and sustained economic growth and the population expected to grow by another 750,000 people by 2026, we must think of new ways to fund the infrastructure that the economy and business need to grow.

How will we provide for the houses, roads, ports, rail, health services, education providers and community facilities our growing economy needs?

Investing in wealth-creating, nation-building infrastructure makes sense. The money spent today not only provides an economic windfall today but leaves a lasting legacy for future generations. 

However, convincing our politicians, especially those in other parts of the country, to invest in WA can be difficult.

Building the infrastructure we need does not come cheap. But the bottlenecks in the economy caused by inaction will be far greater.

Failure to address the many infrastructure bottlenecks across the state will only exacerbate the already high cost of doing business in WA. 

Employers large and small are already feeling the strain of higher operating costs such as labour, energy and materials.

The Australian economy is undergoing a fundamental structural change, with the economic centre of influence gravitating towards WA and to our internationally competitive resources sector. 

In recent weeks, CCIWA represented the WA business community in the federal government’s Business Advisory Forum. As one of the only two state-based business representative groups, one of the key issues CCIWA spoke about was the need for further infrastructure investment.

While there was a general acknowledgement about the success of WA industries, we still have some way to go to convince the Commonwealth and other states and territories of the national benefits of investing in the industries driving economic development.

How do we ensure the infrastructure needs of the state are met when all levels of government do not have the funds to deliver?

We need to be thinking outside the square, and looking at new ways to raise the money to meet our infrastructure needs today and into the future because it is clear relying on state and federal budgets is no longer enough.

One answer is for the private sector to be encouraged to play a greater role in the development of vital infrastructure. There needs to be alternative revenue areas found to fund infrastructure that will assist development.

Some options that should be seriously considered include a greater use of private and public partnerships. It’s well recognised the private sector can often deliver projects or services of the same quality for a better price. 

This has the obvious benefit of more efficient government services and ultimately more money for other government programs. 

While politically unpopular in WA, the notion that users should pay for new and improved infrastructure also needs to be on the table. 

It is a model that has been successfully used across Australia and the world to deliver the infrastructure communities need, without acting as a drag on a governments balance sheet.

The Sydney Harbour Tunnel is one example. It’s an important piece of road infrastructure, which would have been unlikely to have been built under any other model. We use a variety of user-pay systems for education and training, child care, health care and hospitals. Why not for infrastructure?

Finally, according to the Australia Prudential Regulation Authority in December last year, it was estimated there was more than $1.3 trillion held up in superannuation funds. 

Where appropriate, this could be another alternative funding option where super funds look to invest in important infrastructure that is likely to have a return on investment.

Government also has a role to play. CCIWA has long called for the development of an over-arching document that brings together WA’s energy, water, economic and social infrastructure, as well as the workforce needs of the state. 

A strategic document for the state is the best way to provide longer-term guidance to determine what projects should be a priority, in what order they should be built and what benefit they will bring. 

The strategy would benefit the business community by providing a clear direction about future infrastructure priorities, as well as the role business can play.

This sort of vision document could mean the private sector can play a greater role in helping deliver the necessary infrastructure to support more investment and a growing population. 

• John Nicolaou is the chief economist for CCIWA.


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