Infrastructure Productivity Garry Bowditch Chief Executive - - PowerPoint PPT Presentation

Infrastructure Productivity

Garry Bowditch

Chief Executive

Presentation to Warren Centre for Advanced Engineering, Sydney June 2015

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What is happening to infrastructure investment?

Public Corporations (utilities) investment trends have reflected policy and governance reforms and asset renewal cycles

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$- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600

$, real per capita Source: ABS National Accounts, Table 54.

Real Public Corporations Investment per capita (1984-2014)

Public ownership of Utilities Corporatisation/Privatisation Major asset renewals (electricity/water) Mining Boom/GFC response Fiscal constraints/consolidatio n

Transport & Utilities investment is growing strongly

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$- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $, real per capita

Net Capital Stock per capita, EGWWS and Transport

EGWWS K per capita ($,real) Transport K per capita ($,real) Linear (EGWWS K per capita ($,real)) Linear (Transport K per capita ($,real))

• Investment in Electricity, Gas, Water and Transport remains above trend,

reflecting cyclical catch-up (hence strongly growing net capital stock).

• But questions remain about the wisdom of some investments as

productivity has fallen in both industries.

High input growth not matched by growth in output

• Productivity has declined since 2003-04

– Ramp-up in mining boom investment without corresponding increase in output, but benefits from production boom now – Very poor performance in EGWWS, mothballed desal plants,

• ver-spec NEM.

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Source: AER November 2014, Annual Benchmarking Electricity

Productivity Comparisons for Electricity Distribution

But it is clear that major pressures remain

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Infrastructure costs & efficiency considerations?

• Does history repeat?

Transport Energy

Planning Assumptions

Asset Renewal Cycle

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Overall result - rapidly rising infrastructure costs

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Mega-Project or just Mega-Expensive-Project?

Gateway Bridge – 1 v 2

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Cost Inefficiencies driving up investment risk

• Environmental Management

– EPBC Act, Fisheries Act, Environmental Protection Act, Vegetation Management Act, Water Act

• Planning

– Sustainable Planning Act

• Technical standards

– Many instances of more

• nerous standards;

questionable whether benefits exceeds costs

• Health and Safety standards

$4 -$5 billion pa is lost to inefficiencies & wastage

What can be done to improve efficiencies?

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Infrastructure ≠ Innovation

31 31 30 28 25 25 22 22 19 18 14 12 11 11 11 11 10 20 24 30 19 18 14 17 15 16 20 18 15 25 12 16 16 10 10 20 30 40

Agriculture Electricity, Gas & Water services Transport & Warehousing Construction Real Estate services Administrative services Financiall services Hospitality Health care Recreation services Other services Professional services Media & Teleco Wholesale Manufacturing Retail Mining

Source: ABS, Summary of IT Use and Innovation in Australian Business, 2012-13

Better priority setting Better incentives Better governance

• Less focus on

major ribbon cutting

• More use of

well-targeted ‘pinch point’ interventions

• Improved life

cycle management

• Ensure assets have

‘owners’ whose returns depend on life-cycle performance

• Improve contracts

to better align risk, effort and reward

• Use prices or

shadow prices to signal costs

• Benchmark service

performance, reward for

• utcomes
• Clarify roles of

Commonwealth / State bodies

• Better align

analysis methodologies

• Greater

transparency at all stages

• Improve

public/private balance 18

Garry Bowditch CEO SMART Infrastructure Facility +612 4298 1241 Garry_bowditch@uow.edu.au