Infrastructure Delivery Panel Paul Lindwall Commissioner Warren - - PowerPoint PPT Presentation

Productivity Commission

Paul Lindwall Commissioner

Warren Centre, University of Sydney 28 April 2015

Infrastructure Delivery Panel

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Growth in living standards

1986-87 to 2012-13, per cent

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• 3

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1986- 87 1988- 89 1990- 91 1992- 93 1994- 95 1996- 97 1998- 99 2000- 01 2002- 03 2004- 05 2006- 07 2008- 09 2010- 11 2012- 13

Real GDP per capita Real net national disposable income per capita

Source: ABS (Australian System of National Accounts, Cat. no. 5204 , Nov 2013).

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Contributions to growth in average incomes – forecast labour productivity growth

Source: PC estimates based on ABS, Australian System of National Accounts, 2012-13, Cat.

• no. 5204.0, Table 1 & Treasury calculations.
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1 2 3 4

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1 2 3 4 1960s 1970s 1980s 1990s 2000s to 2013 Decade to 2023 Labour productivity Labour utilisation Terms of trade Net foreign income Per capita income Percentage points contribution, annual average

Forecast labour productivity growth (Treasury)

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Contributions to growth in average incomes – needed for long run GNI growth

Source: PC estimates based on ABS, Australian System of National Accounts, 2012-13, Cat.

• no. 5204.0, Table 1 & Treasury calculations.
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1 2 3 4

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1 2 3 4 1960s 1970s 1980s 1990s 2000s to 2013 Decade to 2023 Labour productivity Labour utilisation Terms of trade Net foreign income Per capita income Percentage points contribution, annual average

Productivity growth needed to preserve long-run GNI per capita growth

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Key productivity trends

Sources: ABS (Estimates of Industry Multifactor Productivity, Cat. no. 5260.0.55.002, Dec 2013).

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30 60

1993-94 1995-96 1997-98 1999-00 2001-02 2003-04 2005-06 2007-08 2009-10 2011-12

Cumulative growth since 1993-94, per cent Multifactor productivity Recent rise in LP

• nly part of

the story Capital productivity Labour productivity Continued decline

Capital productivity is the major drag on Australia's (measured) productivity performance

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Rome’s Cloaca maxima and Madrid’s Ciudad Real airport

Still in use after 2600 years Closed after four years

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An Ancient PPP contract

Dr Robert Pitt,

Deputy Director British School at Athens

Temple of Zeus Basileus in Lebadeia

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Expenditure on engineering construction work for the public sector (per cent of GDP)

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Canal, rail, road

Par UK

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Autonomous car

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Project selection

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Understanding construction costs

Costs Productivity

Bidding price, quality & timeliness Market structure Regulations Procurement capabilities & models Industrial relations Labour skills Factors largely

• utside policy

control

v Intermediate inputs (cement, bitumen, steel) v Cost of debt v Economywide labour costs v Land costs v Tunnelling v Scale economies v Firm innovation

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Funding

• Well-designed user charges should be used to

the fullest extend that they can be economically justified

• There is a political economy problem in some

jurisdictions with cost based user charges, especially roads, but increasingly energy

• However, because of an absence of well-

functioning product markets, significant externalities or distributional issues, some infrastructure can only be government-funded

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Financing

• No shortage of private finance if the price is right
• Public sector financing constraints largely self-imposed

if right projects are selected and properly funded

• Guarantees, concessional loans and tax concessions

are costly, lack transparency and potentially distortionary

• Only if implemented well does private sector

involvement (including financing) deliver efficiency gains

− Private sector financing does not offset all fiscal pressures

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Conclusion

• Transparent cost-benefit analysis for project selection
• Better data collection
• Apply user charges
• Allocate risk appropriately
• Build in flexibility
• Credibly reserve corridors but allow alternative use
• Better procurement practices
• More efficient approval processes
• Displacing bad projects with good ones
• Managing procurement and financing/funding better
• Privatise assets more efficiently managed by private sector

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Thank You www.pc.gov.au