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Cooperation between the Federal and Queensland Governments on Infrastructure will deliver productivity growth

Photo courtesy of the ABC

The $1.9 billion road and rail package announced by the Prime Minister and Queensland Premier is excellent news for the Sunshine State - boosting vitally needed economic growth in the short term but also providing the infrastructure to deliver longer lasting productivity growth.

Under the announcement the Morrison Government will bring forward nearly $650 million in funding and provide more than $680 million in new funding and the Palaszczuk Government has committed $606 million.

This is an illustration of the cooperation needed between tiers of government to deliver responsible and considered economic management.

 

Quotes from the Prime Minister include:

“We want these road and rail projects delivered as quickly as possible so Queenslanders can benefit from better infrastructure, but importantly we want to boost the economy now."

“By bringing forward these important road projects we will drive jobs, boost the economy and make Queensland roads and highways safer, while reducing travel times so people can be with their families instead of being stuck in traffic."

“We will bring forward funding for a total of 20 projects right throughout Queensland, including key upgrades on the M1, Bruce, Warrego and Cunningham Highways, and the North Coast Rail Line.”

 

Quotes from the Queensland Premier include:

“I have always said we work best when we work together."

“We have called for a better deal for Queensland and the Prime Minister has listened."

“We’re getting projects off drawing boards to create more jobs in more industries and deliver the things that make people’s lives better."

 

Pleasingly both governments have also reached an agreement on $9.3 billion Inland Rail project, paving the way for the delivery of the project in Queensland.

 

New and additional federal funding for projects

$400 million for future priorities on the National Network including M1;

  • Funding to flow immediately over the next two years;
  • This commitment builds on the $91.4 million in federal funding for existing M1 upgrades being brought forward, and the $46.3 million in additional funding for M1 Interchange Upgrades Exits 41 and 49;
  • Expenditure of remaining funds will be agreed between the Australian and Queensland Governments;

$157 million for Stage 3A of the Gold Coast Light Rail project;

  • Funding to flow immediately over the next four years;
  • This commitment builds on the $60 million in federal funding being brought forward;
  • Total cost of the project is $709 million
  • The project will create more than 760 jobs during construction.
  • Australian Government contribution is now $269 million up from $112 million.
  • Queensland Government contribution is $351 million.
  • Gold Coast City Council contribution is $89 million.

$50 million for the relocation of the Loganlea Station; 

  • Funding to flow from 2020-21;
  • Total cost of the project is $95 million;
  • Queensland Government contribution is $45 million;

$46.3 million for M1 Interchange Upgrades Exits 41 and 49;

  • Funding to flow immediately and increases the Australian Government’s contribution to the project to $96.3 million;

$20 million for planning for the Port of Brisbane connection

  • Funding to flow from 2020-21;
  • Total cost of the project is $20 million;
  • Queensland Government will provide an in-kind matching contribution;

$10 million for the development of a business case for the Salisbury to Beaudesert rail line

  • Funding to flow from 2020-21;
  • Total cost of the project is $20 million;
  • Queensland Government contribution is $10 million.

 

Federal Government project funding brought forward

$225.6 million for Bruce Highway upgrades, including the Linkfield Road Overpass, the Pine River to Caloundra corridor, Stage 2 of the Mackay Ring Road, the Rockhampton Ring Road, and Stage 5 of the Cairns Southern Access; 

  • Funding to flow immediately after previously being allocated beyond the forward estimates.

$118.5 million for Roads of Strategic Importance (ROSI) initiative upgrades including the Cooktown to Weipa, Townsville to Roma, and Toowoomba to Seymour (Queensland section) corridors, as well as Shute Harbour Road;

  • Funding to flow immediately after previously being allocated beyond the forward estimates.

$94.3 million for M1 Pacific Motorway upgrades between Eight Mile Plains and Daisy Hill, Daisy Hill to Logan Motorway, and Varsity Lakes to Tugun;

  • Funding to flow from 2020-21 after previously being allocated beyond the forward estimates.

$90 million for the North Coast Rail Line Upgrade between Beerburrum and Nambour;

  • Funding to flow immediately after previously being allocated beyond the forward estimates.

$62 million for Stage 3A of the Gold Coast Light Rail project;

  • Funding to flow immediately after previously being allocated beyond the forward estimates.

$22 million for new upgrades along the Warrego Highway; 

  • Funding to flow from 2020-21 after previously being allocated beyond the forward estimates.

$27 million for new upgrades along the Cunningham Highway; 

  • Funding to flow from 2021-22 after previously being allocated beyond the forward estimates.

$9 million for road upgrades associated with the Hinkler Regional Deal including the Torbanlea Pialba Road Upgrade, Bargara Road Upgrade, and Isis Overtaking Lanes;

  • Funding to flow from 2020-21 after previously being allocated beyond 2021-22.

$7 million for the North Brisbane Bruce Highway Western Alternative to examine the viability of constructing a western alternative corridor parallel to the Bruce Highway in north Brisbane;

  • Funding to flow from 2021-22 after previously being allocated beyond the forward estimates.

 

Queensland Economic Update - November 2019

The Queensland economy is experiencing a difficult period with growth generally below trend and at levels similar to during the GFC.  The economy is shaping up to be a crucial issue in 2020 with the local government elections (28th March), the State Budget (28th April), the Federal Budget (early May) and the State Election (31st October) all an opportunity to stimulate business activity at a micro level and through aggregation the broader economy.

This economic update in particular contrasts Queensland against our two biggest rivals for attracting and retaining business investment - New South Wales and Victoria. 


Please click on this link for the latest performance assessment of the Queensland economy by QEAS.   

Queensland's Infrastructure Pipeline is currently unfunded, unapproved and uncertain

During the week I had the opportunity to deliver a key speech at the Queensland Infrastructure Summit hosted by the Infrastructure Association of Queensland (IAQ). 

What my presentation confirms is that the future of our State’s infrastructure pipeline is potentially a very good one provided that we convert unfunded projects into reality and address issues around planning delays.

For a full copy of my speech and slide deck please click on this link.

 

 

Extending the Brisbane Metro to Brisbane’s airport makes economic sense

Brisbane Lord Mayor Adrian Schrinner’s proposal to expand the Brisbane Metro project to Brisbane Airport is an excellent idea.

People who are arriving as tourists at the airport have an option of catching a taxi, an Uber or the Airtrain, but for people who work there every day it’s not affordable,” Cr Schrinner

The Brisbane Metro is a one billion dollar high frequency rapid transit transport system along 21km of existing busway from the Royal Brisbane and Women’s Hospital to Eight Mile Plains. It includes 18 stations, including 11 interchange stations, two of which will link with Cross River Rail.

The extension proposal utilises the Airport Link tunnel to approach the airport, rather than any new infrastructure having to be put in place and would most likely link with BNE’s SkyGate and the BNE Master Plan’s Mass Transit System

The proposal would improve the accessibility of the public transport network, provide increased mode choice and encourage additional public transport patronage for BNE’s 23,826 employees.

This will be of crucial importance in light of BNE's anticipated growth.  Based on passenger growth the airport's total economic contribution is forecast to grow from its current figure of $4.7 billion per annum to an estimated $8.7 billion by 2040 and employment at the airport is forecast to reach more than 46,000 employees by 2040.

Currently 91 per cent BNE employees use a car to travel to their workplace but only 13 per cent use public transport (some employees use both as part of their commute). 58 per cent of BNE employees have an average commute time in excess of 30 minutes.  
 
The proposal would undoubtedly ease road congestion for fellow Brisbane motorists and reduced commute times - currently estimated at an average 67 minutes each day and has been steadily rising across the past decade. The Bureau of Infrastructure, Transport and Regional Economics (BITRE) has previously estimated that road traffic congestion costs for Brisbane will rise from $3.1 billion at present to $5.9 billion by 2030 if we do nothing. 

BNE employees have indicated that higher frequency, more ‘out of hours’ services, more public transport stops across the BNE precinct and greater intermodal connection would all influence increased usage of public transport. The Brisbane Metro extension proposal is consistent with this.

The Brisbane Metro’s cost benefit analysis has previously indicated that for every $1 of total expenditure, Brisbane Metro is expected to return $1.91 of benefits to the local economy.  The proposed extension would strengthen the business case for Brisbane Metro even further.

For the above reasons this proposal is more than just a thought bubble and accordingly warrants serious consideration, support and ultimately implementation.

The danger for business from CEDA’s latest research

I am very big fan of the work that CEDA (Committee for the Economic Development of Australia) does and their latest research is no exception. 

CEDA has released the results of its first nationwide poll of Australian business, to better understand community expectations of business; and the challenges facing business leaders. CEDA’s inaugural “Company Pulse” is a nationwide survey of the general public and business leaders that includes more than 3000 people.

Overall, the results show the community expects a broad contribution from business including on social and environmental issues. Key results included:

  • More than 70 per cent of the general public agreed that large companies should place equal importance on economic, environmental and social performance; and
  • More than three-quarters of survey respondents supported business leaders speaking out on issues of national importance, including social and environmental issues.

 “While there has been much debate on the appropriateness of corporate leaders speaking on issues outside their core business, it is clear from these results the community consider this to be acceptable.” CEDA Chief Executive Melinda Cilento 

The danger of course is that regardless of how commendable such social causes may be, many tend to be divisive amongst the community.  

My warning to business is that they should choose carefully what cause to weigh in on or risk losing market share. The reality is that many (or some) of their customers may have a differing view and since that business has chosen to make it an issue they may now support another business who has their view or are silent on the issue. The question is ..... who can afford to lose any customers these days.

Sometimes respectful silence can be the most sensible play.

The CEDA research is excellent and thought provoking.  If you get the time access it here

 

 

Queensland's domestic economy - June Quarter 2019

Key points:

Over the year to the June quarter 2019 Queensland's domestic economy in trend terms grew by 0.9% on par with growth in the national domestic economy (0.9%). GDP growth for Australia over the year was 1.5%.

Queensland's domestic economy in trend terms grew by 0.3% in the June Qtr 2019 and compares to national domestic growth of only 0.2% (GDP 0.4% includes net exports). Tasmania leads the way (0.6%) followed by Victoria.

Queensland's domestic economic growth in context. Over the past year Queensland's domestic economy has grown in trend terms by only 0.9% exactly half of the ten year average (1.8%). The only consolation is it mirrors national performance (yearly %: 0.9% 10 yr ave: 2.4%).

Queensland's domestic economy is relying on Government spending to keep our economy growing (not going into recession)

Queensland Councils revenue grab on non-residential property owners

The Property Council and the Queensland Resources Council recently commissioned QEAS to determine how local councils in Queensland are complying with State Government guideline principles in applying differential and minimum rates on land owners.

The report analyses local government rating practices and performance for non-residential properties across Queensland and illustrates the practical dollar implications of inconsistent, inequitable and volatile rating practices facing property owners across Queensland.

Queensland's 77 councils generate more than $6.2 billion revenue in rates and levies each year representing approximately 65 per cent of their total operating income. For most councils rates are the main source of revenue other than Queensland and Australian Government grant funding. 

The revenue pressure on local councils is significant, and this is evident in their rating practices. Many councils are continually departing from established ‘Guideline Principles’ when balancing competing budgetary pressures. 

Councils in Queensland unlike other jurisdictions are privileged with more autonomy and minimal constraints in levying differential rates - there is no legal obligation on councils to provide justification for their rating decisions.   

The QEAS report confirms that councils are inconsistent in their approaches, are not transparent in their decision-making and lack accountability. The resultant outcome is a lack of consistency, a lack of certainty and a patchwork of approaches that impedes new investment and economic growth across Queensland. 

The QEAS report demonstrates that there is a need for reform of the way council rates are determined in Queensland.

Key findings include:

  • There is considerable complexity in the determination of rates applying to non-residential properties in Queensland.  Over 607 rating categories were specifically analysed for non-residential properties across 15 LGAs. This complexity has only further increased in 2018-19 with an additional 39 non-residential categories introduced.
  • At present there is no overall consistency in approach as to how Queensland councils are applying their rating practices.  
  • The number of differential rate categories within a LGA appear to be based more on the opportunity to raise revenue—by singling out property owners and their capacity to pay —than on its original purposes of better aligning equity and user pays principles.
  • Most councils break up categories by some measure of size.  However some councils have ascending or progressive rates based on size, some have descending or regressive rates and others have no linear pattern whatsoever (often inconsistently within that LGA).  
  • In general the pattern is for an ascending rate applied based on size of non-residential properties.
  • Many councils specifically identify individual non-residential properties or a resource project and apply a higher rate to it. Either non-residential properties are specifically named or the category is defined so narrowly to effectively capture only one property. 
  • The resulting outcome is that non-residential property owners and resource projects pay considerably higher rates than residential property owners 
  • In many instances a council has applied a considerably higher rate increase to non-residential categories between 2017-18 and 2018-19 than for residential properties, further exacerbating an already higher differential rate for commercial properties and resource projects.

A full copy of the report is available through the Property Council website: ‘Review of local government rates paid by Queensland non-residential property owners and resource projects’.

State Infrastructure Plan plays to division between SEQ and Regional Queensland

QEAS was fortunate enough to be invited to contribute the below article to Lytton Advisory on Queensland Government’s 2019 State Infrastructure Plan 2019. QEAS Director, Nick Behrens, has been on several project teams led by Lytton Advisory for Queensland Government projects including for the Department of Agriculture and Fisheries; the Department of State Development, Manufacturing, Infrastructure and Planning and the Department of Natural Resources, Mines and Energy.  The original article can be accessed here.

The recently released State Infrastructure Plan (SIP) provides a much needed framework for the planning and prioritising of infrastructure delivery in Queensland and should be widely supported. 

However, it also reinforces subconsciously the division that exists between SEQ and Regional Queensland when it comes to limited infrastructure dollars being spread across a large and high needs state.

The SIP outlines a $49.5 billion infrastructure program over the next four years from the Queensland Government ($12.9 billion in 2019-20) that claims to be supporting an estimated 40,500 jobs.  Based on these metrics alone it is delivering economic development at a time when overall economic growth in Queensland is below trend. 

Since the original SIP was released in 2016, Queensland has experienced significant changes including our population growing to more than five million, changing regional economies, and advanced technologies altering both infrastructure and service delivery. 

As a result the 2019 SIP details the infrastructure investment strategy and delivery program for the next four years, in order to provide the private sector and other levels of government with clear direction of what is in the pipeline. 

The Queensland Government’s SIP mantra is ensuring the right infrastructure is delivered in the right place and at the right time to meet the demands of a growing state.  This is a commendable goal of any government and one that directly aligns with community and industry expectation. 

If the document has one regrettable feature it is the cementing of an ‘us’ and ‘them’ attitude when it comes to infrastructure rollout across Queensland. For example the SIP reads “Importantly, about 60 per cent of the capital program and 25,500 of the jobs supported are outside the Greater Brisbane area.”

Much of the narrative of a fair split between the two parts of the State is about a political necessity following the Federal Election result whereby Queensland Labor were wiped out north and west of Brisbane.

As an illustration of this point, the 2019 SIP is 207 pages long verses 159 pages back in 2018 and these extra 48 pages are directly up front and relate purposefully to what the Queensland Government is doing in infrastructure delivery in regional Queensland.

It is not wrong to support regional Queensland but constructing a zoning of spend is counter to the commendable objectives of SIP in supporting economic development, increased productivity and the creation of communities in which people want to live across all of Queensland.

The reality is, what benefits SEQ undoubtedly benefits Regional Queensland and vice-versa when it comes to infrastructure.

Glowing examples of this point are the Gateway North Upgrade and Toowoomba Second Range Crossing whereby freight is passaged through these assets that benefits Regional Queensland.  On the other side of the coin is investment in rail and ports in regional Queensland is enabling royalties for frontline service delivery in SEQ.  The right narrative is a symbiotic relationship between the South East Corner and all of Regional Queensland.  

Putting aside the politics, what the SIP really does is highlight how incredibly difficult infrastructure delivery and prioritisation is in Queensland. Our State has the unfaltering complexity of higher economic and population growth in SEQ meaning we are continually behind the infrastructure roll out curve and yet we have the geographical size, decentralised population and low population densities of regional Queensland.

All of which mean the road, rail, electricity transmission and electricity distribution kilometres are higher than other states and we require more airports and seaports.  Quite simply infrastructure delivery in Queensland is complex and difficult - with differing priorities benefiting differing areas at differing times. 

In summary, the SIP represents a very good iteration or constant continuing roll out of enabling projects for Queensland.  Looking past the politics of its presentation it is investing in critical infrastructure and is in fact investing in a positive future for the Sunshine State.  

The schools and TAFE are delivering the skills our economy requires.  The bridges, roads, ports and rail are enabling our exports to get to market and commerce to flow.   The electricity and water assets are providing the vital inputs for our economy.

The overall spend as impressive as it sounds is still low by historical percentage of GSP standards but the SIP has been well received from many communities and industry sectors and rightly so. 

The 2019 SIP is available here.

Caption:

QEAS Director, Nick Behrens, as part of an expert panel commenting on the 2019 State Infrastructure Plan at a Infrastructure Association of Queensland special breakfast.

Infrastructure Australia’s Jekyll and Hyde 2019 Infrastructure Audit

Infrastructure Australia has released its second national audit and like its predecessor in 2015, the 2019 Audit is intended to guide the next wave of infrastructure reform in Australia.

The 2019 Audit covers transport, energy, water, telecommunications and – for the first time – social infrastructure.  It looks at both the major challenges and opportunities facing Australia’s infrastructure over the next 15 years and accordingly can be likened to Dr Jeckel and Mr Hyde.

Infrastructure is fundamental to our quality of life. It connects us to jobs and enables the economy to function. However, too often our infrastructure doesn’t meet these needs. Congestion, crowding, rising costs, outages and declining service standards can undermine these core roles. The Audit confirms more must be done if we are to maintain, let alone enhance, our quality of life and economic efficiency.

Australia’s infrastructure faces a range of challenges– vast distances, extreme weather, increasing maintenance backlogs, rapidly growing cities coupled with below OECD average for infrastructure investment. Key points from the Audit include:

  1. Since 2015 over $123 billion of work has commenced, with a committed forward pipeline of over $200 billion.
  2. However, changing and growing demand, and a mounting maintenance backlog, mean a new wave of reform and investment is necessary to ensure quality of life and economic productivity are enhanced over the next 15 years. By 2034, Australia’s population is projected to grow by 23.7% to reach 31.4 million, adding to infrastructure demand, while existing infrastructure struggles under maintenance backlogs and the condition of many assets is unknown.
  3. Constant and rapid change is creating challenges for the way we plan, deliver and operate infrastructure. For example, the sharing economy has rapidly grown across infrastructure sectors, particularly the transport sector where the use of ridesharing services have more than tripled between 2015 and 2018.
  4. Growing social, economic and environmental interdependencies have added both complexity and opportunity to the planning, delivery and operation of our infrastructure. For example, the increased uptake of electric vehicles will have implications for the energy sector. By 2040 40% of our vehicles are likely to be electric.
  5. Infrastructure is facilitating structural changes to the Australian economy, as we shift away from traditional industries, such as manufacturing, towards knowledge and service-based industries.
  6. Australia’s national productivity and global competitiveness rely on efficient infrastructure networks, however we are falling behind international competitors. Australia currently ranks 18th in the world for ease of doing business, having dropped over the past decade from 9th.
  7. Population growth impacts are being felt in fast- growing cities as infrastructure is placed under pressure, including congestion on our roads and crowding on public transport. 77% of population growth over the coming 15 years is projected to occur in our fast-growing cities (Sydney, Melbourne and Brisbane), leading to pressure including road congestion growing by $18.9 billion to $38.8 billion in 2031.
  8. People live in diverse areas across Australia (and Queensland), from fast-growing cities to remote areas, meaning infrastructure accessibility, quality and cost differ for users in different places. For example, the National Broadband Network (nbn) is able to deliver internet speeds via Fibre to the Premises of over 100 Mbps to some residents in urban areas,14 whereas some remote areas rely on satellite services that can only deliver speeds of up to 25 Mbps.
  9. Policy uncertainty and poor coordination has affected investment in the energy sector and delayed an effective response to rising energy prices, impacting energy reliability and increasing community anxiety regarding climate change. Over the past decade, the unit price of electricity has risen in real terms by 56%, while retail gas for households has risen by 45% over the same period.
  10. Some infrastructure services will continue to require government subsidies, however these are not transparent and often poorly targeted to those in need. There are 315 community service obligations for infrastructure, 39% of which are not transparent.
  11. New data is being generated in real-time on the performance and use of our infrastructure, enabling improved decision making by users and operators. Road agencies are providing live traffic data on smartphones, in car devices and roadside signage, while transport operators are using smartphone data and third-party apps to show train carriage capacity and to direct waiting customers to empty carriages.

Looking to the future, Australia faces an unprecedented period of uncertainty, our population is growing and changing, the structure of the economy is shifting, our communities and environment are experiencing weather extremes, and rapid technology change is fundamentally reshaping our day-to-day lives. As a result, Infrastructure Australia indicates Australia must evolve the way we plan for infrastructure to embrace this uncertainty. Historically, infrastructure planning has sought to predict future conditions and then provide infrastructure to meet anticipated demand. Today, we require a more robust approach.

Rather than projecting forward the status quo, our infrastructure planning should set an ambitious vision for the country, anticipate and adapt to change, manage risk, and deliver infrastructure that works towards – rather than against – the current and future needs of Australians.

The Australian Infrastructure Audit is the starting point for this process and it confirms sustained reform and increasing investment are required.

The full audit can be accessed here.

QEAS work features in draft Brisbane Airport Masterplan 2020

One of the exciting projects QEAS has been involved in is working with the Brisbane Airport Corporation to evaluate the economic contribution of BNE’s new runway.  Some of this work has recently featured in the draft Brisbane Airport Masterplan 2020 that is out for consultation at present.

Due to open in 2020, Brisbane Airport’s new runway will be a key driver in the long-term growth of the Queensland economy. QEAS analysis revealed that the new runway is set to generate new jobs, create new investment and boost economic opportunity in Brisbane and across the state. 

Forecasts indicate that the direct economic contribution to the Queensland economy attributable to the runway will rise over the next 20 years to an estimated $2.1 billion with an indirect contribution growing to an estimated $1.1 billion. 

It is anticipated that this contribution will directly support more than 18,600 jobs by 2040-41 and another 8,700 indirectly. Each of the new jobs created will result in wages being paid to Queensland workers and their families. It is estimated that by 2040-41 Brisbane airport based business and their supply chain as a result of the new runway will be contributing $1.2 billion in direct wages and $640 million in indirect wages to employees in Queensland. 

In short, as a key enabler to Queensland’s economy and catalyst for future prosperity, the new runway is essential for the whole state.  

The 27,000 plus jobs are equivalent to around 0.6 per cent of all jobs in Queensland and the $3.2 billion in economic activity will represent approximately 0.5 per cent of Queensland’s Gross State Product. These contributions are in addition to the already sizeable economic benefit that BNE provides to the Sunshine State.

This QEAS work helped to demonstrate the economic activity created by BNE’s new runway in an accessible and digestible manner.  In summary, it will enable continued growth bringing more flights, more choice and better service for business, exporters and leisure travellers that is in turn benefiting thousands of employees and businesses across the State.

For further information about the considerable economic contribution of BNE’s second runway and to have a say on the draft Brisbane Airport Masterplan 2020 click here. 

 

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