The Roads Ahead - 2 September 2002
THE ROADS AHEAD
P J Keating
IRF and ARF Asia Pacific Roads Conference
Sydney Convention Centre, Sydney
I am very pleased to be here and I thank the International Roads Federation and the Australian Roads Federation for the invitation. This is an important conference and I am particularly glad that
The questions you are discussing here are genuinely interesting ones which affect the lives and social amenity of almost every person in every country. They touch on technology, the environment, economic efficiency, community safety, regional development, globalisation and many other issues.
I want to start the conference off from a different angle. Not, if you like, from the road surf
Let me begin with the economy.
It came from the natural inheritance of a continent, enjoyed by a small population, and mostly at a time when the things we produced and sold were more valuable than the things we bought.
The Australian Defence Model – some called it the Australian Settlement – was built on generous terms of trade flowing from the production and export of wool, grains and gold which underwrote high tariffs and high protection for domestic manuf
This game lasted a very long time. It lasted in earnest from around 1870 to 1970. But by the 1970s, the wheels had started to fall off. The value of the things we produced and sold, mostly commodities, ended up low in price and the value of the things we bought – colour televisions, m
We were not alone in this. Other countries and other societies with agricultural/industrial structures similar to our own were feeling the pinch as well.
But the problem for
It did the same with the financial system. And because arbitrarily fixed wages could no longer be sustained if we were to develop a flexible economy able to compete in the world, it deregulated the labour market into the bargain.
In sync with a floating exchange rate which was better able to absorb external shocks like, the Asian economic crisis of 1997, this permitted the domestic economy to grow with interest rates commensurate with its new, low-inflation paradigm, underpinned by a remarkable doubling of trend productivity.
The relevance of this to your industry is knowing what happened and why it happened and what must continue to happen. To understand that, as an island continent in the South P
And every bit of every industry, every sector and sub-sector, will have to be just that much more competitive if, in the end, someone else is not to eat our lunch.
Because short of the calamitous prospect of global war, globalisation is not going to be stopped in its tr
The technologies that f
Developing countries in
The stark message for all commodity producers is that the global terms of trade aren’t going to suddenly flow b
This means that you just can’t say to the farmers, or the workers: ‘You adjust but some of us need not adjust.’
The secret of mutual dependence is mutual obligation. And our obligation means that, sector-by-sector, plant-by-plant, service-by-service, we all have to have a go. This industry – the roads industry – knows what that is about because it has adjusted.
The first area
Indeed, in respect of the railways, a half a century of flagging public investment. As a consequence, trucks ran up and down the east coast carrying containers on roads ill-designed for them, to destinations that should have been served more adequately by rail and by sea.
But, meanwhile, on the sea front we used to see the stevedoring companies prepared to hold the country to ransom in order to maintain oligopoly profits, with not even a labour force of their own. Rather a large pool of employees on which they could draw; a pool managed by their surrogate partners, the maritime unions. Is it any wonder that the truckies thought ‘I’m in for this too.’?
But the selfishness of the stevedoring companies, and their grasping, could not be tolerated. The Labor Government caused waterfront employment to be cut by three quarters and obliged the stevedoring companies to stop corrupting the waterfront, to stop holding our good name and our competitiveness to ransom.
It was these things that caused the government I led to reform the ports terminals and to lift the level of public expenditure in national transportation infrastructure. I might add, despite heavy investment by the Labor government in port rationalisation and reform I think we still have a way to go. Stevedoring companies are more efficient, but because of their protected positions, there are frequent reports that insufficient benefits have flowed through to shippers. I have not seen definite figures on this. The problem is now is, how do we manage private sector monopolies, ports and duopolies. Indeed some companies have gone a long way in vertically integrating, including with rail infrastructure, and I fear without real competition principles being applied, problems will have to be dealt with in the future.
In respect of national transport investment in the Labor years, this included amongst other things, the building of the first standard gauge railway between
And when this was
Special attention and special funds were allocated to the
As for the roads themselves, for us it stood to reason that the best way of meeting the continental demands of this country was to have a national system of highway building and highway management. The 1991 Inter-governmental Road Funding Agreement gave the Commonwealth full responsibility for the National Highways System, state and territory governments responsibility for arterial roads with municipal governments responsibility for local roads.
My government laid down major funds for the Newell and Hume Highways in the One Nation program and later, funds for the urgent and necessary upgrade of the P
I always believed we needed an integrated land transport system. A road system of national highways complemented by major city arterial and ring roads and a rail system competent enough to provide reliability and to do the kinds of things that were inappropriate for the roads.
We are now much further down the pathway towards that design than we were in the 1980s.
There will always be arguments about the appropriateness of the effort; about who should be doing what and by how much. Whether fuel excises should be allocated in some hypothecated way to the task of building and maintaining roads or whether that function should be satisfied by a measured line appropriation in the budget. The roadies will argue for hypothecation, the generalists will say that a community is made up of many parts and the government should budget for e
The transport minister in the mid 1980s,
Let me say something about the private provision of public infrastructure. We’re doing a lot of it, but very little of it is properly defined. I believe this is one of the most important debates we are yet to have in the area of public policy. Our priority has to be an efficient and competitive economy, but that is not necessarily the same thing as simply moving public sector monopolies to the private sector.
In the early 1990s to lift economic
There are two major criteria for the provision of public infrastructure, especially in roads such as cross city tunnels, ring roads and motorways. And those criteria are cost and risk.
Nobody can borrow in
Perhaps I should make the risk point first. No organisation in
The relevance of this is that tunnels and motorways are currently being designed to minimise the financial risk to private investors. They are not being designed for optimal transport or flow efficiency. The traffic flow, route choices and mode of construction inherent in these undertakings are, I believe, seriously compromising traffic flow, road amenity and community standards as to construction and design.
Not one of these projects does not lead to incongruous road closures and traffic pressure designed to funnel traffic through projects in ways that minimise risk to investors. Road and traffic authorities became caught up in the developers’ and financiers’ schemes; indeed they are too often conscripted as the lead agents or surrogate promoters of the schemes. Once a developer and a financier have a road and traffic authority on the hook, that authority becomes their Trojan horse into government.
In the long run the public and the transport operators pay the price for these compromises.
And of course the major compromise is price. The operating costs of these projects are driven up by the f
In part, this is to cover the risk I have just mentioned. But the obvious point here is the Commonwealth and the States are in an unassailable position to cover risk as to usage and revenue. This is not so for property trusts and institutional investors.
The other issues in respect of price, are the ambitions promoters have for fee-based arrangements with projects of this kind, and the demand for profits. Profit is not the driver in road construction by government, it is systemic service and efficiency. I did not build the tunnel through the Adelaide Hills for profit or upgrade the Hume Highway for profit. It was done for reasons of national efficiency.
We are into profit-based schemes because the Commonwealth and State Treasuries want these major capital construction works off the budget and out of the public sector borrowing requirement.
And we have to know, indeed we all know, it is in the end, a financial ruse.
At that fork in the road of national income, you do not need a doctorate in economics to know what is being allocated for a private purpose and what is being invested in for a public purpose. What is truly public and what is truly private.
Roads and tunnels of the kind I am mentioning, are, without exception, for public purposes. It is spending, that bar tricky definitions, would otherwise be a solid part of the public sector borrowing requirement. Seeing through the ruse or pretext that the spending is private by virtue of the user pays principle, because these works are mostly part of a public network or system of traffic. They are the tagliatelle in the spaghetti bowl of our transport system.
This is not to say that they cannot be subject to the principle of user pays. That users enjoy the value of having them and that they have to pay for them. But they can pay or reimburse the public purse just as easily as they might pay a property trust or a set of financial institutions.
I am very much in favour of our city roads, in particular, being upgraded because the economic return from a dollar spent sensibly improving the flow of traffic in our cities tends to be greater than the same dollar spent in the regions, because it cuts travel time for a greater volume of traffic.
I am in favour of well designed cross city tunnels and motorways but I am not in favour of massive design compromises, traffic funnelling and high tollway prices simply because the Commonwealth and State governments want all this to be done off budget.
We can’t pretend that this is user pays investment of a private kind when it really is user pays for a very public purpose just because we are being urged to do so by a clutch of merchant banks, property trusts and large banks looking for slabs of easy returns at high margins.
I believe there is a pressing role for the Commonwealth and the State governments to invest tax expenditures directly into these projects. If they are to see these projects built off budget, to use the device of government contribution to minimise financial risk. In this way, the public is not ripped off and their ordinary right to free traffic movement within cities is not flagrantly compromised.
When the State and Commonwealth Treasuries boast about their debt levels to GDP, you can be sure they have managed to massage the statistics, so that all this major construction in roads and tunnels is not brought to the public sector
Even with these qualifications, we have ended up with a transport system which is far healthier than the one we used to have. Not a perfect one by any means, but one which recognises the prim
But, as I said earlier, that doesn’t mean that we can rest on the reform task. In a world of just-in-time logistics, the efficiency with which products can be seamlessly transferred
And that might simply mean a slowing of current rates of growth.
Because notwithstanding valiant efforts by state governments to increase the desirability, utility and affordability of public transport, I think the car is here to stay. It does seem that many people would rather lose their partners than lose their cars, no doubt for the independence and mobility they bring.
In the congestion of our still fast growing cities, public transport will have to play a more important role. This is not just for environmental reasons, but in order to ensure that those in our society who do not have the option of private transport – the sick, the old, the poor, the newly arrived immigrants – are not left behind, are not cut off from the opportunities and benefits of our economy. But cars will remain the dominant form of private transportation.
In their defence, cars are getting better in
Personally I had hoped that the movement to smaller, more fuel-efficient vehicles would have been greater in
But the advent of the large Four Wheel Drives for urban transport has become a pox on the country of significant proportions. These cars are over-engineered for their urban tasks. They have high centres of gravity. They are heavier and require more driving skills. They corner badly. They obstruct the views of other drivers and they consume twice as much fuel as a smaller car of the under two-litre variety. And, above all, the drivers of these cars threaten everyone else who drives in lighter vehicles.
For what it’s worth – and I stress for what it’s worth – if I had my way I’d tax them off the roads and feel very good about doing it. The problem is that if we wait much longer there will be such a lobby for these contraptions that governments will never take the bat to them. We may even be at that point now.
And this is not just an Australian problem. As anyone who has driven on the roads of
In the early 1990s, around 500 million East Asians lived in towns. By 2020 this figure will have trebled to 1.5 billion. 300,000 new cars drive on
The focus of this conference is ‘Roads as Business’. That is important. But roads can only be a business if they also serve other social needs. So it is important that over the next few days you also keep in mind roads in their other contexts: roads as politics, roads as environmental policy, roads as a social good.
I wish you all the best for the conference and I thank you for your attention.