Productivity Commission’s final report on Public Infrastructure released: Report disappointing says ACRS President

29 July 2014

First published in the ACRS Weekly Alert No.125 (23 July 2014)

 

The Australian Government recently tabled the Productivity Commission’s Final Inquiry Report into Public Infrastructure that was provided to Government on 27 May 2014.

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Lauchlan McIntosh, ACRS President, responded to the release of the Report as follows:

In identifying ways to decrease infrastructure costs, it was disappointing that the report did not highlight the significance of increased investment in infrastructure road safety targets, and the considerable impact this would have on decreasing road crash/trauma costs in the longer term.

The Commission ignored the College recommendation to consider the lead taken by the TAC in Victoria to be an investor in road infrastructure ($1bn over the next 10 years) and ignored the potential to encourage other insurers and governments to invest in safe road infrastructure to reduce insurance and community costs. The comment relating to road safety benefits being a trade-off with costs of regulation and benefits was disappointing.

The College looks forward to both the BITRE Review and the National Road Safety Review reports exploring these principles in greater detail.

Lauchlan McIntosh AM
ACRS President

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Further background to the Inquiry is as follows:

The Treasurer asked the Productivity Commission to undertake a comprehensive review of public infrastructure in November last year, with terms of reference that included identifying ways to reduce infrastructure costs and address barriers to private sector financing.

Improving the financing, governance and delivery of new infrastructure and the efficiency of how we use existing infrastructure in Australia is critical for boosting our productivity and economic growth.

The Commission’s inquiry specifies a number of issues including:

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Of particular interest to members are the following excerpts from the Report:

8.2 Options for improving governance and institutional arrangements in the roads sector – Road fund model

The road fund would allocate revenues to projects (including for the upgrade and maintenance of existing roads) according to assessment criteria that seek to provide the highest net benefits to the community, as well as achieve other objectives, such as equity of access and road safety. There would also be public disclosure of the analysis used by the road fund to select the investment program using these criteria.

15.7 Road and rail construction standards and environmental requirements

… policy makers face trade-offs between the costs of regulation and the benefits they can bring. The Australian College of Road Safety offered an estimate of one in particular. It submitted:

“In 2013, the Australian Automobile Association’s (AAA) AusRAP program developed Safe Roads Investment Plans (SRIPs) for each State and Territory. Their analysis shows that a national investment of just over $4.7 billion has the potential to prevent over 36,000 fatalities and serious injuries over a 20-year period across the surveyed network. (sub.18,p.5)”

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The AAA submission included the following excerpts:

Improving road safety outcomes

“Australia also needs to factor road safety considerations into its transport infrastructure investment decisions. The national road toll remains at unacceptably high levels, with sub-standard roads being a significant contributing factor.

In 2012, 1,300 people were killed and more than 30,000 hospitalised across Australia as a result of road crashes. It is estimated that road trauma costs the community $27 billion a year, so it is essential to invest in infrastructure projects which reduce the economic and human cost of road crashes. The AAA’s research shows that almost 50 percent of motorists consider road safety to be their primary concern ahead of a host of other concerns.

The AAA, through its road assessment program, has examined the safety features of almost 22,000 kilometres of national highway. Our assessment awarded a ‘Star Rating’ of the condition of the various sections of the road network with 1-star being the least safe and 5-star being the safest.The most recent findings in 2013 found that nearly 40 per cent of the highways recorded an inadequate safety rating of only 1 or 2 stars, while the proportion of five-star roads was negligible. There is clearly scope to improve the safety of existing road infrastructure and make sure new roads meet the highest safety standards.

It is clear that the demand for travel has outstripped the capacity of the existing road and public transport networks. This causes significant congestion on both of these networks, resulting in higher costs to the community and significant impacts on the business sector. These impacts are in part due to the existing transport charging systems. The current process of charging motorists to access the road network and investing proceeds from those charges is characterised by a number of flaws. It is important that the Commission understands these flaws and their contribution to Australia’s current public infrastructure environment.”
Considering the benefits of reduced road trauma in road funding decisions

“It is estimated that road trauma costs the community $27 billion per year. Reducing this figure through infrastructure investment has the potential to reduce the strain on other portfolios within the Federal Budget, such as the health sector. While infrastructure project evaluations often specify safety as a goal, the inputs used to calculate safety benefits are often inconsistent when compared to the inputs used by other government portfolios.

Currently, two key inputs – discount rates and the statistical value of life – may not be accurately evaluated when considering road infrastructure projects. Discount rates vary across government portfolios which places inherent preferences on different project types. Similarly, valuing the statistical value of life differently has the potential to lead to an inefficient allocation of funding between portfolios.

Projects across all portfolios which focus on improved health outcomes should use the same project evaluation parameters, in particular, the statistical value of life and discount rates.

The AAA’s road assessment program has identified safer roads investment plans for the nation’s national highways. Our analysis shows that an investment of $4.7 billion would save 36,000 lives and serious injuries on our highways over a 20 year period. This represents a modest investment over 20 years and will prevent a large number of crashes, reducing part of the social and economic costs of road trauma.”
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Download the ACRS Submission to the Productivity Commission, the AAA Submission and the Productivity Commission Report here.