Article: Playing catch-up

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Playing catch-up

Playing catch-up
Article from: Herald Sun

Felicity Williams

March 01, 2008 12:00am

IN THE coastal waters off Newcastle, a fleet of empty container ships line the horizon.

It's a familiar sight at the world's largest coal export port, which is straining to meet insatiable demand for the fossil fuel from China and other emerging markets.

Newcastle ships around 80 million tonnes of coal worth more than $5 billion every year -- but Asia's hunger for the raw material is much, much greater.

This week a dozen container ships lay anchored outside Newcastle harbour. They face a 12-day wait before they can get into the coal loaders to receive their cargo.

But that's relatively good going by recent standards, with unexpected events like foul weather throwing the already-struggling system into chaos.

Last year more than 80 ships were moored offshore in queues that lasted over a month, after coal supplies were disrupted by flood damage to the rail network feeding the port.

That was just one instance of the huge infrastructure bottleneck that is not only crippling Australia's mining industry but also our national economy.

Elsewhere, rail and road networks are buckling under the pressure and valuable mineral resources lie untapped because they lack the water supplies needed to develop them.

"We are missing out on huge opportunities in Australia," Chris Fraser, executive director of the Victorian division of the Minerals Council of Australia, told BusinessDaily.

T HE Committee for Economic Development of Australia, a leading independent think tank, has warned that the infrastructure logjam costs Australia $8 billion -- around 1 per cent of the nation's annual gross domestic product -- every year.

Congestion robs the nation of a further $16 billion a year, CEDA has calculated.

Enter Sir Rod Eddington, the businessman annointed by Prime Minister Kevin Rudd to end the country's infrastructure torment.

This week Perth-born, Melbourne-based Sir Rod was named chairman of Infrastructure Australia -- the Federal Government's new body charged with developing a blueprint on the nation's infrastructure needs and overseeing its implementation.

The Rhodes scholar, who played first-class cricket for Oxford University, is one of Australia's most distinguished company directors.

Knighted for his services to the aviation industry, Sir Rod, 58, is a former chief executive of British Airways and defunct Australian carrier Ansett Airways.

He sits on the board of News Corporation (the company that owns the Herald Sun) and Rio Tinto and serves as chairman of JP Morgan. He is also an independent director of Allco Finance Group.

At the helm of Infrastructure Australia, Sir Rod will work with a 12-member board comprising five figures from the private sector and seven from state and federal politics.

The directors won't be appointed until March 20 -- but the rumoured short-list includes Leighton Holdings chief executive Wal King, Transfield Services chairman Tony Shepherd and Transurban chief executive Kim Edwards.

O THER possible candidates include Mark Birrell, chairman of peak industry body Infrastructure Partnerships Australia, and former NSW premier Nick Greiner.

The board promises to be an impressive line-up backed by decades of hard-earned business experience.

But Sir Rod and his high-profile team will need to draw on every bit of their expertise to make up for decades of under-investment in the backbone of Australia's prosperity.

"Australia faces great challenges in developing the right infrastructure, in the right places and delivering them at the right time," IPA's Mr Birrell told BusinessDaily .

"The national freight task and urban congestion are set to double in the next 12 years, making the government's plans for a national response to emerging challenges both timely and welcome."

CEDA has calculated that $25 billion must be spent to address the "serious backlog" in infrastructure investment in water, energy and land transport alone.

And it warns that the figure is a conservative estimate aimed only at fixing the problems that require immediate attention.

"Australia's infrastructure -- investment in roads, railways, telecommunications, electric power, sea and airports and the like -- is struggling to cope with the cumulative demands of Austalia's sustained period of economic growth and the vast new trade and investment opportunities emerging, particularly from China," CEDA said in a report.

Longer term, the figure for national infrastructure investment is expected to be much higher.

ABN Amro analyst Greg Goodsell estimates at least $184 billion will be spent on economic infrastructure -- that's roads, rail, ports, airports, electricity, water and gas pipelines -- over the next 10 years.

The Federal Government is expected to foot around 80 per cent of the bill, with the private sector picking up the rest.

The Government is pushing for Australia's superannuation funds to channel some of their $1.4 trillion towards the much-needed venture.

IPA has identified 166 priority projects, including 21 in Victoria, aimed at sustaining national economic growth at 3 to 4 per cent a year over the coming decades.

Locally, the list provides for the east-west underground road and public transport links across Melbourne and the controversial channel deepening at Port Melbourne to allow the entry of huge container ships.

E LSEWHERE, IPA has tagged projects including the creation of a four-lane highway between Sydney and Brisbane by 2011; the channel-deepening of Newcastle port; the Oakajee port development in WA and the roll-out of a national high band-width data network.

The list highlights decades of under-investment in vital facilities such as road, rail and port.

The investment shortfall is largely linked to years of buck-passing between state and federal governments and a lack of long-term vision. Public opposition to controversial infrastructure projects has been cited as another contributing factor.

"Everyone wants to be able to have electricity and turn on their tap and get water but no one wants a dam or a desalination plant or a power plant in their backyard," an industry source told BusinessDaily.

Another issue was the costly and complex process faced by private companies tendering for government-funded projects.

"A constant complaint from the construction industry is that the planning, procurement and risk processes in Australia are far from effective," Leighton's Mr King said in a recent speech to the IPA.

"Procurement is very expensive with huge costs of tendering. For example, a project like EastLink in Melbourne would cost $20 million to bid. Airport Link is costing about $30 million to bid."

By any measure, it's clear that Sir Rod and his team have a monumental task ahead of them if they are to make up for years of neglect and inaction.

But the response to the creation of Infrastructure Australia has so far been overwhelmingly positive.

"This new body will align the interests of Australia's governments and harness the expertise and capital of the private sector toward the delivery of the nation's most important projects," IPA's Mr Birrell said.

"Infrastructure Australia will fundamentally change the way Australia prioritises and procures national infrastructure -- and give Australia's governments a clear, comprehensive picture of the most pressing priorities and projects we need to sustain growth in the years ahead."