CHAPTER 3
INFRASTRUCTURE
Regional Australia has all sorts of infrastructure and environmental
problems which will not be adequately dealt with unless governments
attack these problems through public means. The employment thus generated
would give life and employment opportunities in rural towns which are
dying as a result of demand as resources such as government departments
(for example, schools and railways) and private sector branches (for
example, bank branches) are withdrawn under the guise of `economic efficiency'.
[1]
3.1 The McKinsey Report has supported OECD opinion that the quality of
a region's hard and soft infrastructure is a major determinant of business
investment, and therefore employment. In Australia, as in all OECD countries,
the private sector is assuming a dominant role in the provision of infrastructure,
but the role of government should not be allowed to diminish in those
public benefit areas which can only be realised through continued government
investment. The two ends of the infrastructure provision argument are
represented by those on the one hand who see the private sector as being
responsible for infrastructure investment as a spur to profitability:
the other end holding the view that public infrastructure investment is
a prerequisite for private investment in employment creating ventures.
3.2 A high proportion of submissions received by the Committee, as well
as the evidence given by many witnesses at public hearings dealt with
the infrastructure needs of regions. There is a strong relationship between
good infrastructure, especially transport infrastructure, and employment
opportunity. This is particularly so on the fringes of metropolitan areas,
although, communications infrastructure, and to a lesser extent, roads,
are an issue in rural areas.
Transport links
3.3 Labour mobility within regions and between regions has an important
bearing on employment opportunities. Within metropolitan areas there is
a dense pattern of cross-city movement. Long distance commuting is routine.
Considerable expenditure on arterial roads in the major cities has given
the advantage of mobility to those who can afford the expense of motoring.
Expenditure on public transport has been severely restricted, by comparison,
with the result that passenger growth has not reached the threshold which
makes infrastructure expenditure a political imperative. In the Committee's
view there is an important obligation on governments to provide transport
infrastructure.
3.4 The Committee heard evidence of urban public transport inadequacy
in a number of regions. In Parramatta the Committee was told that the
completion of a proposed rail link between Sydney and the North Shore
would solve a number of access problems for a number of localities. [2]
Deficient as Sydney's current railway network may be, it covers proportionately
more of the settlement area of that city than does the network in Perth.
It was pointed out to the Committee that youth unemployment was particularly
high in regions south of Perth. The fact that the Commonwealth had closed
down its support agencies in Armadale, which at least is on a railway
line, indicates the lack of understanding of the importance of public
transport to unemployed people. Jobs are hard to get to when the infrastructure
elements are so poor and lacking. As a member of the South Metropolitan
Perth Regional Development Organisation stated, `I guess there comes a
point in time where you just give up.' [3]
3.5 The workforce in the suburban regions south of Perth and extending
further south to Rockingham is particularly disadvantaged. The Committee
was told, in relation to access to the Rockingham campus of Murdoch University:
There is still the problem of (students) finding the transport to and
from the area until such time as they are able to drive and afford a
vehicle….We would love to have a railway to the Rockingham area
and this has been planned for quite some time….If it ran, as it
does in the northern suburbs, on regular intervals and late into the
evenings that would assist quite substantially in alleviating some of
the problems we do have, with not only the youth unemployment but unemployment
generally within the area. [4]
3.6 Since the Committee visited Perth and heard details of the need for
a railway to serve the area south of Perth, the Western Australian government
has decided to accelerate its timetable for construction of this line
to Mandurah, which is now to be completed by 2007. Most of the proposed
route has been agreed to, with only details of access to Rockingham town
centre to be decided. The electrified railway will take trains from Mandurah
to Perth in about one hour. [5]
3.7 In Melbourne, as is well known, there has been heavy emphasis on
improving mobility by constructing arterial link roads. Evidence given
to the Committee by the Hume City Council, covering the northern outskirts
of Melbourne industrial region, pointed out that ring roads encourage
the commuter, `bringing other people into our city to take jobs'. At the
same time:
It is not actually making it any easier for our residents to get from
Craigieburn to Sunbury as there is no public transport route across
there. There is no ability for people to cross the city without coming
through Broadmeadows, which is the transport hub…so transport across
the city is very difficult for people, yes.' [6]
3.8 A similar point was made in a submission from Moreland City Council,
covering the most populous suburban region in northern Melbourne. Industrial
estates developed in Hume, Melton and Altona were located without regard
for transport linkages, and there is no easy access for the unemployed
without public transport. [7]
3.9 The transport difficulties faced by people in rural areas appear
almost insurmountable in some cases. There is often no practical alternative
to private transport and probably no effective way in which governments
can assist individuals overcome the problems of isolation when so few
of them are involved. A submission from the Orange City Council put the
view that because labour market and vocational training schemes were `often
developed by bureaucrats with thinking based in large urban centres' their
understanding of the limits of rural infrastructure is generally poor.
Transport subsidies available to trainees in cities are not available
in the country because public transport is often non-existent. It gave
as an example the case of a young person of limited means, without access
to public transport, having to travel 100 kilometres return each day from
Cudal to Orange TAFE college. Boarding in Orange might appear to be a
logical solution, but is unaffordable for students without adequate means
and there are currently no assistance programs. [8]
3.10 Evidence was given to the Committee from Lakes and Wilderness Tourism
in Bairnsdale that the closure of rail services to that city in 1991 caused
some inconvenience to the tourist industry. The effect was described as
`dramatic', although it appears to have affected mainly those tourists
with an entitlement to a once–yearly travel pass: indicative of the
level of patronage and revenue. Even so, buses have not taken over from
the train, and Bairnsdale and its backpacker tourist industry are served
only by interstate coaches which stop at inconvenient times. `We have
an overall transport problem…It is not only train but bus services
as well. It has quite a severe impact on people who just want to travel
around on public transport.' [9]
3.11 According to conventional wisdom Australia lacks the population
and population density to require the extension of its public transport
infrastructure. In the funding contest with road construction, railways
have scarcely been in the race despite lower construction costs per kilometre.
Land resumption for arterial road construction has been negotiated, albeit
with some difficulty, but rail construction needs have never received
this level of planning priority.
3.12 Yet railway infrastructure neglect has actual and potential impacts
on country regions as well as metropolitan regions, though for different
reasons. At a public hearing in Nowra, a representative from the Illawarra
Area Consultative Committee reminded the Committee that 14 per cent of
the workforce in Wollongong works in Sydney, a large proportion of them
being rail commuters conscious of the earthworks stability problems along
some sections of its winding alignment. [10]
Illawarra witnesses also spoke of the need for electrification of the
railway between Dapto and Bomaderry.
3.13 Rail freight is also an issue for one region. While considerable
funds have been expended on the New England Highway through the Liverpool
Ranges, no funding has been found to replace the Ardglen rail tunnel and
its approaches whose grades and alignments restrict loads from the northern
coalfields at Gunnedah to uneconomic levels. While the closure of two
out of the three Gunnedah coal mines has more to do with a world glut
in coal, there is a local view that a new tunnel would improve rail links
between the port of Newcastle and the north west region. A concern of
local government here, as in most rural areas is to transfer bulk goods
from road to rail in order to cut the costs of road maintenance. As is
often the case, the closure of railways leads to the transfer of costs
from one agency to another, resulting in false savings.
3.14 For a number of obvious and understandable reasons, successive Commonwealth
governments have had reluctant involvement only in schemes to improve
urban public transport, and, with less excuse, the funding of railway
infrastructure. The Committee is of the view that the Commonwealth should
offer more direct assistance to the states in `seeding' funds for infrastructure
development of the kind envisaged in the post-2000 plan for Sydney's rail
network expansion and similar plans for Perth. This would be justifiable
expenditure aimed at reducing the isolation of regions, and to allow increased
mobility of labour and improved access to services, in particular educational
facilities.
3.15 Road funding has more obvious electoral appeal than rail funding,
and more obvious relevance to regional councils. The need for road upgrading
was impressed upon the Committee during its visit to Broken Hill by the
Far Western Regional Development Board. By doing so, it was claimed that
this would encourage tourists to drive to far western New South Wales
and use Broken Hill as a base from which to travel an outback loop over
a fully bitumen road. [11] Creek crossings
were claimed to be too steep for small vehicles, and rain made most roads
impassable.
3.16 While in Lismore the Committee was told of the potential advantage
to the Northern Rivers region of the upgrading of the Summerland Way,
a secondary road of currently variable standard, linking Grafton with
hinterland towns north to Brisbane, running roughly parallel with the
northern railway line. According to the Northern Region Economic Development
Organisation, the direct benefit to local industry would be in the order
of $4 million in the first year of significant improvement, an estimate
which takes no account of tourist trade or service industry benefits.
[12] The Committee accepts that all regions
could produce a similar wish list of infrastructure improvements on which
roads would feature prominently. Decisions about road funding priorities,
apart from those relating to major interstate highway links are the concern
of state governments, and the Committee does not see the need for any
change to the way this responsibility is exercised. It does, however,
note that inter-regional road links are often poor – as from Goulburn
to Bathurst, for instance, or from the NSW Central West to the Hunter
Valley – which adds significantly to transport costs. The Committee
believes that there should be more formal and transparent processes of
consultation to deal with these issues, involving where necessary, all
spheres of government.
Telecommunications
3.17 Much attention has been given to the decline in the level of financial
services in smaller and more remote rural areas, and to misgivings about
the proposed privatisation of Telstra. Banking and telecommunications
services are expensive to maintain with a low customer base, and cross-subsidy
arrangements no longer apply in highly competitive and deregulated industries.
Financial and telecommunications services are mutually dependent. It is
possible that electronic banking services with a capacity equal to that
available in cities can be offered to remote regions, but only via telecommunications
links of the highest available standards.
3.18 The Committee was concerned about several accounts of dissatisfaction
with telephone services. One was critical of centralised government information
services:
As many business and government services are centralised, rural people
are subject to doing an increasing amount of business and gaining services
by telephone. Often this means an endless number of recorded messages
and then a service below the normal face to face contact as a customer.
Banks, Telstra and Centerlink are a few organisations that I have had
personal experience where it becomes so frustrating that you give up.
[13]
3.19 While it is conceded that such frustrations are experienced as much
by city dwellers, isolation and the lack of alternative courses of action
give these problems an added weight of seriousness in rural areas. Added
to this are the higher charges which operate in the regions away from
metropolitan areas. Complaints by rural telephone subscribers were acknowledged
by the Productivity Commission in its draft report on the impact of national
competition policy on regional areas, but this inquiry indicated that
there were mixed messages from the regions:
Telstra's connection service for new country customers is now better
than for metropolitan businesses, but far below that for metropolitan
residential customers. Repair services for remote customers have been
relatively poor but rural customers have generally fared better than
urban customers. [14]
3.20 The Committee heard evidence of the poor coverage of the cellular
telephone network, and remains concerned that regional and remote Australia
will suffer commercial and social disadvantage under proposed schemes,
despite government reassurances. It notes the expectation held in some
circles that the forces of competition will advantage rural telephone
subscribers and businesses. It urges the government to note carefully
advice from the Tamworth City Council's submission to this inquiry which
typifies the concerns of rural regions:
Inadequate access to telecommunication services (mobile phone, digital
and fibre optic communications) has limited the growth of regional businesses
and acts as a major employment disincentive…Telecommunications
will itself be a major source of job creation over the next ten years,
and, as such, major infrastructure such as the provision of a `broadband
communications network' is paramount in regional areas to ensure that
they are able to compete with the metropolitan centres. It should be
noted that the further privatisation of Telstra also has serious equity
considerations which could render regional areas even more uncompetitive,
ie fees for distance–based calls. [15]
3.21 Government assurances of a guaranteed level of service in remote
areas following any sale of Telstra must be weighed against the potential
risks for regional areas. As one study has pointed out:
The high delivery networks may not be extended to some regional areas.
Without government imperative, private communication providers may not
consider smaller regional markets justify the expense of providing the
latest technology networks. The faith in competitive forces to provide
effective and efficient service to all sectors may be misplaced…There
are many impediments to competition, not the least of which is the threat
of control by the major players via merger and takeover activity. It
is also possible that competitive private market finance providers may
not find the delivery of a full range of financial services to all regional
markets a viable proposition. One must accept the potential for market
failure to apply to some regional areas. [16]
3.22 The Committee noted that opposition in regional areas to the sale
of Telstra was based not so much on any ideological considerations of
private shareholder ownership versus public ownership so much as a stark
understanding of the relative worth of the rural telecommunications market.
Economic activity in the `bush' is seen to be dependent to a great extent
on continued regulation in key activities and infrastructure. Without
that commitment there would be no confidence in the continued viability
of industry.
3.23 At its Rockhampton hearings the Committee was given a strong indication
of this attitude from the CEO of the Cattlemen's Union of Australia who
reported that most members of the union had trouble connecting to the
Internet or lacked the stability of access. It was considered `iniquitous'
and `ludicrous' of the government to insist that the modernisation of
telecommunications in `the bush' should be conditional on the sale of
Telstra. Such a condition did not apply to city consumers. The evidence
continued:
I want to say here that the Cattlemen's Union and the other two organisations
truly are apolitical…I think people get hung up on the fact that
it is the sale of Telstra. We do not care what you do with Telstra…It
is the services that we are most concerned about. We have members who
have had five weeks to have a phone mended. These people live on properties.
It takes half an hour to drive off the main road to their property.
It takes two hours to drive to them from the main town. If they have
an accident or something happens or if there is an emergency, or if
they just want to ring up and talk to their kids at school. It is not
like being in the city. [17]
3.24 Yet the deficiencies of the telephone service were not limited to
isolated Queensland cattle properties, as the Committee learned at its
Lismore hearings. Not only did the rationalisation of Telstra staff in
the region, associated with its partial privatisation, result in local
job losses; the level of service also dropped significantly. As the Mayor
of Lismore explained:
People find that it is weeks before they can actually have a connection
and, if you have a service difficulty that requires people to come out
and do something to your phone, you can be waiting for much longer than
that. So whilst there could be arguments supporting the decisions that
have been made, we feel that the impact should have been assessed and
there should have been a regional development policy implemented to
soften the impact in rural areas. [18]
3.25 Experiences similar to those above were described to the Committee
in Whyalla. Telstra acknowledged its community service obligation when
service standards were discussed with representatives of the Eyre Peninsula
telecommunications group, but it was clear that service levels were already
low. As an Eyre Regional Development Board member related:
I do not think I can speak on behalf of our board members, but my personal
view is that, if you fully privatise Telstra without increasing or improving
that universal service obligation in the sense of the sort of transmutation
speeds that are needed to rural communities, then it will mean little
to us… For instance, on the Eyre Peninsula we have digital radio
concentrated network systems that provide phone hook-ups. They drop
in and out and switch off. They cannot shift the sort of bandwidth even
for a farming or business operation to move a fax transmutation around
effectively. We are expecting our businesses – and a lot of our
businesses are rural businesses – to start trading on line, but
you cannot even get a phone hook-up. [19]
3.26 It was also reported in Whyalla that telecommunication inadequacies
were also restricting access to distance education programs. The scattered
campuses of the University of South Australia and South Australian TAFE
outposts normally experienced `fuzzy images and a whole range of distortions'
in their electronic classroom hook-ups to the point where these interfered
seriously with learning. As one witness stated: `the strategies are posited
on the fact that there is a reliable telecommunications infrastructure,
and that has not been demonstrated yet.' [20]
3.27 In response to the concerns of regional communities, the Commonwealth
has provided $250 million under the Regional Telecommunications Infrastructure
Fund to fund projects aimed at improving telecommunications infrastructure
and services, and reducing disparities of access to these services.
3.28 A `social bonus' of around $1 billion dollars for funding of further
initiatives in telecommunications infrastructure will also be made available
now that the sale of the second tranche of Telstra has passed the Senate.
About $750 million of this will be allocated to initiatives including
continuous mobile phone coverage along some of the nation's busiest highways,
and improvements to telecommunications infrastructure for people in remote
and isolated communities. Opposition and Democrat senators view this amount
as inadequate to fund these initiatives.
3.29 One initiative of interest being funded under the `social bonus'
is the $70 million over five years allocated to the establishment of Rural
Transaction Centres. Arguably, this payment provides nothing for regional
telecommunications infrastructure or services. Similarly, up to $150m
over three years has been allocated to extending unlimited local call
zones in rural areas, however, the Government has not given an indication
of whether it will provide further support after three years. Without
such government subsidies, a fully privatised Telstra may not maintain
extended call zones of its own volition.
Business and infrastructure
3.30 The McKinsey Report emphasised the importance to business of hard
and soft infrastructure as a factor in determining business location.
`Soft' infrastructure refers to recreational, social and service amenities
(schools, hospitals), and its quality and availability were considered
more crucial to location decisions than `hard' infrastructure like airports
and railways. [21] Assessing infrastructure
needs poses the problem of reconciling costs and benefits, and of overcoming
the difficulty of valuing the unpriced flow of benefits from it. It also
involves reconciling the `common good' and the claims of sectional or
vested interests.
3.31 The McKinsey report, and the author of one submission to the Committee,
have proposed that broadly representative infrastructure investment bodies
be established to determine priorities for funding. The purpose of this
would be to make investment decisions transparently free of suggestions
of `pork-barrelling' that are so often associated with expenditure of
this kind.
3.32 The submission from Australian Project Developments Pty Ltd urged
the Committee to consider recommending the establishment of a regional
infrastructure investment fund run on lines similar to the Queensland
Investment Finance Facility. The proposed new organisation would have
the following features:
- an annual appropriation of around $500-800 million for possibly 4-5
years, drawn from the sales of Commonwealth infrastructure assets;
- to fund projects with one-off grants, with a provision for Commonwealth
equity;
- eligibility to be restricted to projects where specific public benefit
can be identified, that is, private sector business ventures would be
ineligible;
- criteria would include the need for a project to facilitate regional
best practice, sustainable jobs and export development, and evidence
of matching funds from other key parties; and
- recommendations would be developed by advisory machinery comprising
a mix of government officials and eminent industrialists and possibly
cross-party representation of Commonwealth parliamentarians, for approval
by a council of relevant ministers, thus providing for an inclusive
and transparent process.
3.33 The proponent of this scheme admitted that its weakness was the
perpetuation of a centralised and paternalistic decision making process
that was at odds with the ideal of a regionally-based process. `Such a
model seems years away'. [22] While the Committee
does not endorse this particular investment model, it concurs with the
general idea of the government putting aside considerable amounts each
year to be devoted to infrastructure development. The Committee views
with concern any apparently ad hoc expenditure by any governments on projects
which appear to be determined by political expediency. It sees the need
for more considered and sustained financial assistance to projects, whether
infrastructure or industry development, that will create wealth and employment
in selected regions.
3.34 Australia's expenditure on infrastructure is low by OECD standards.
The record is a patchy one. Electricity, gas, telecommunications and port
infrastructure have fared reasonably well. So have roads, thanks to the
road transport lobby and the electorate which have combined to ensure
that expenditure on roads has remained high, although rural shires complain
that they see less than their fair share of benefit.
3.35 Railway infrastructure, with the conspicuous exception of that operated
by the Queensland government, and the private mining railways of north
west Western Australia, has for a number of reasons, received very little
investment and has fallen into decline over a long period of time. The
Committee notes the recommendation of the House of Representatives Standing
Committee on Communications Transport and the Arts, made in its 1997 report
Tracking Australia that the Commonwealth provide up to $1 billion
for rail infrastructure improvements over a five year period.
3.36 The Committee notes considerable private investment in railway operations
over the past few years which may result in new operations over routes
formerly and concurrently operated by government railways. The Committee
suggests that progress on this should be monitored.
3.37 In summary, the Committee acknowledges the relationship between
adequate infrastructure, investment and lifestyle choice.
The Committee recommends governments of all levels place a higher
priority on the provision of adequate infrastructure in regional Australia.
This includes telecommunications, transport, gas, electricity,
water, sewage, renewable energy and gas pipeline infrastructure. In addition
the Committee recommends that road funding formulae be re-examined
with a view to placing a higher priority on regional development.
3.38 The majority of the Committee also recommends that the government
be more vigilant in the interests of remote populations in their access
to telecommunication facilities, which should be viewed not simply as
a commercial issue but as a civic entitlement to be guaranteed by the
state. The Committee notes evidence from some regional areas that concern
about telecommunications provisions lay not with who owns the facilities
but with maintaining and expanding their access to vital services. It
is the belief of the majority of the Committee, however, that the full
privatisation of Telstra will lead inevitably to a reduction in services
in regional and remote areas. The majority of the Committee therefore
recommend that the remaining one third of Telstra not be privatised.
3.39 Government senators do not support these final two recommendations.
Government senators believe that the telecommunications policy has ensured
that services to regional areas will be maintained and in many cases will
be enhanced. The Universal Service Obligation ensures that standard telephone
services, payphones and digital data services are available to all Australians,
regardless of where they live or conduct business, at affordable prices.
In addition to this, regional areas have benefited from extended call
zones which extends untimed local calls to regional areas. Regional areas
will also benefit from Telstra Big Pond Advance. Telstra Big Pond Advance
allows people in regional areas to access the internet via a satellite
link. Unlike the old landline telephone link, this services enables all
Australians to get access to the internet and at much faster rates than
was previously possible. Government senators are of the view that regional
Australia is already benefiting from the partial privatisation of Telstra
and believe that further gains are likely to accrue from the sale of the
remaining one third.
Footnotes
[1] Peter Kenyon, `Infrastructure Spending and
Unemployment: Government Responsibility for Growth and Jobs', in Australian
Economic Review, Vol. 30, Issue 4, December 1997, p. 428
[2] Professor Robert Fagan, Hansard,
Parramatta, 23 July 1998, p. 1048
[3] Mr Henry Zelones, Hansard, Perth,
18 August 1998, p. 1415
[4] Mr John Green, Hansard, Kwinana,
17 August 1998, p. 1351
[5] Railway Digest, May 1999, p. 15
[6] Ms Margaret Larmer, Hansard, Ballarat,
17 June 1998, p. 637
[7] Submission No. 106, Moreland City Council,
vol. 4, p. 239
[8] Submission No. 36, City of Orange, vol.
2, p. 5
[9] Ms Gabrielle Gelly, Hansard, Bairnsdale,
4 May 1998, p. 325
[10] Mr Gerard McLean, Hansard, Nowra,
18 June 1998, p. 814
[11] Mr James Parkinson, Hansard, Broken
Hill, 30 April 1998, p. 223
[12] Northern Region Economic Development Organisation,
Summerland Way Feasibility Study, 1996, p. 1
[13] Submission No. 138, Future Employment
Opportunities Inc., vol. 6, p. 78
[14] Productivity Commission, Impact of Competition
Policy Reforms on Rural and Regional Australia: Draft Report, May 1999,
p.xxxv
[15] Submission No. 131, Tamworth City Council,
vol. 6, p. 23
[16] Walker G., Corby D., and Murphy T., Finance
Industry Restructuring: Implications for regional Australia, paper
presented to 15th Pacific Regional Science Conference Organisation 8-12
December 1997, p. 15
[17] Ms Jean McRuvie, Hansard, Rockhampton,
4 August 1998, pp. 1216-19
[18] Ms Roslyn Irwin, Hansard, Lismore,
21 July 1998, p. 822
[19] Mr Ian Nightingale, Hansard, Whyalla,
29 April 1998, pp. 136-7
[20] Mr Anthony Harvey, Hansard, Whyalla,
29 April 1998, p. 160
[21] McKinsey & Company, Lead Local
Compete Global: Unlocking the Growth Potential of Australia's Regions,
Report for the Department of Industry, Transport and Regional Development,
Canberra 1994, pp. 66-7
[22] Submission No. 114, Australian Project
Developments Pty Ltd, vol. 5, p.113