1. Home

state of decay 2

﹛﹛The bigger the project, the less competition and transparency, with planning processes often bypassed. Major projects lacking feasibility studies, businesses cases and costings. All seem to get approved based on concocted investment cases. Projects magically emerge outside national/state planning priorities and strategies (unknown to Infrastructure Victoria and Infrastructure Australia). So if these projects don*t originate from inside the public service, who does magic them up 每 big accounting firms and toll road companies?

﹛﹛Then there is the cost of construction. In Victoria the market is captured by a cosy foreign-owned oligopoly, with no incentive to reduce costs or bear risk. No engineering, procurement and construction lump sum cost for these firms, ie, the careful allocation of risks expected in competitive markets. Instead, the public is required to bear the burden of cost plus contracts that sheet home all but the most benign of risks to the taxpayer. This keeps build prices high and locks out domestic competition.

﹛﹛Big, inefficient projects will burden future generations with hundreds of billions in debt. They may also saddle the state with other liabilities such as health and environmental risks from contaminated soil and toxic land from lax technical and engineering processes in the planning stages.

﹛﹛Follow the robust example of the Kennett/Stockdale and Bracks/Brumby governments. Don*t limit ambitions but be better at targeting them.

﹛﹛Advertisement

﹛﹛If projects are really worthwhile, why the haste? Why not auction them off to domestic or foreign institutional investors? Or perhaps consider more modest and aesthetically pleasing designs. Why leave the Melbourne Metropolitan area looking like a concrete version of Tolkien*s Mordor.

﹛﹛Consider Skyrail. It may have delivered a speedy outcome, well co-ordinated with the political cycle. But where is the third rail track for the south-east*s two busiest lines? Mistakes compound. Remember the Kennett era sell-off of the circular railway reserve? That now leads to the enormous cost and complex engineering of the proposed Cheltenham to Box Hill line.

﹛﹛Projects such as the Skyrail have set a dangerous precedent and established the modus operandi for bizarre decisions such as locating industrial elements of projects like train stabling and maintenance yards in one of Melbourne*s ※green wedges§, established by Sir Rupert Hamer and protected most effectively by former planning minister Mary Delahunty.

﹛﹛So why have successive Victorian state treasurers engaged in this population Ponzi scheme? It sure beats working for a living (also known as real policy reform). Big population growth generates momentum for construction (effectively a Clayton*s industry policy), fuels property prices, which benefits existing owners (both householders and institutional investors).

﹛﹛Advertisement

﹛﹛The strategy is embraced by the powerful property lobby and key unions. It garners big revenue windfalls from stamp duties and land taxes and delivers a bigger tax take. All this with no tough decisions and courage required.

﹛﹛Victoria*s decline began when the Howard government ramped up the temporary visa migration program after the Work Choices defeat.

﹛﹛Regrettably, this approach became a permanent policy setting. It held down real wages and helped to crimp productivity growth via the Uber-isation of the low-skilled labour force. All this was against expert advice (think of Dr Ken Henry and his population-participation-productivity framework, and the work of the Productivity Commission).

﹛﹛So the Victorian government must slow down, be more careful and considered and observe proper processes. It has twitchy ratings agencies sitting worried on the sidelines. Any hint of incompetence or fraud will pay a heavy price tag. Follow the robust example of the Kennett/Stockdale and Bracks/Brumby governments. Don*t limit ambitions but be better at targeting them. And follow NSW in the pursuit of micro reform.