Looking to history to address the challenges of the future
The challenges posed by the changing expectations around infrastructure are not insurmountable. In fact, the past provides one of the most relevant examples of how to future proof infrastructure effectively.
The Sydney Harbour Bridge was officially opened in 1932 after six years of construction. Designed as both a rail and road crossing, it was devised and built at a time when the entire state of New South Wales had a population of just 1.3 million and private car ownership was a fraction of what it is today. Despite this, the bridge’s engineers allowed for eight car lanes, two rail lines and two pedestrian or cycle walkways.
This foresight has meant the Sydney Harbour Bridge remains a vital cog in Sydney’s transport network, even though the city is more than four times the size it was when the bridge was completed.
In 2016, it was taking almost twice the number of road journeys as the city’s only other harbour crossing – the Sydney Harbour Tunnel – and remained the only method for Sydney’s trains to cross to the northern suburbs and beyond.
The infrastructure boom meets booming population
Given the rate of population growth in Australia – particularly in its two largest cities, Sydney and Melbourne – anyone involved with infrastructure must accept that their long-term assets are likely to have to eventually move many more people than when first completed.
Sydney’s population of 5.2 million residents is expected to swell to anything from 8.5 million and 11.2 million by 2066, according to the Australian Bureau of Statistics’ forecasts. Melbourne, which currently has a population of 4.94 million, is growing even faster and should overtake Sydney as the country’s largest city by 2026 if current trends continue.
Without an investment in transport infrastructure in these cities, where most commuters still drive to work, travel times could increase and have a detrimental impact on liveability as well as the cities’ and therefore Australia’s economy.
To this end, Australia’s federal government has pledged to invest $A100 billion in transport infrastructure over the 10 years from 2019/2020 and much of this will go towards improving transport connections in Sydney and Melbourne. The New South Wales and Victorian state governments have also allocated another $A65.71 billion and $A33.65 billion respectively to building transport infrastructure in these two cities in the four years to 2021-22.
Even though building transport infrastructure is an expensive undertaking, governments have the potential to recoup their investment by monetising revenue once the asset is built. This makes transport infrastructure different to many forms of public expenditure.
For example, given the market will not fully value demand risk in a greenfields context, governments can take the ramp-up risk and once the transport infrastructure is in steady state operations, seek to sell the revenue stream from tolls to private sector owners and operators. Case in point, the private sector is already contemplating future monetisation by the Victorian government for Melbourne’s North East Link project, which will be procured as a public private partnership (PPP).
The role of public-private partnerships
Both state and federal governments are likely to call on PPPs to deliver much of this infrastructure. This remains one of the preferred methods of procurement for governments in Australia – not only because they allow risk transfer to the private sector but also because they are able to deliver a level of budgetary certainty while also tapping into private sector innovation.
Current major projects such as packages within the wider Sydney Metro and elements of Brisbane’s Cross-River Rail are being delivered through this method, while upcoming projects such as the Melbourne-to-Brisbane Inland Rail (Gowrie to Kagaru section) and Melbourne’s North-East Link will go down the same path.
However, winning contracts and making them profitable will come down to more than just price. Increasingly, infrastructure builders will be expected to take the same holistic, consumer-focused approach to infrastructure that governments are adopting.
For instance, under the business requirements for the PPP-designated parts of the Sydney Metro, the system had to be designed for future growth. But the quality of the transport experience also had to be improved and urban development had to be “served and stimulated”. All of this is a long way from simply constructing a rail network cheaply and efficiently and then having the trains run on time.