Building Bridges: The Introduction of the Infrastructure Australia Act, 2008.
In South Australia Local Government is responsible for and manage a massive amount of infrastructure - $10 billion worth - far more than that managed by either the State or Commonwealth Governments or the private sector. The Independent Inquiry into the Financial Sustainability of Local Government (Inquiry) highlighted in clear terms that too many Councils have significant and growing infrastructure maintenance and renewal backlogs and that as a result communities are enjoying infrastructure which will, and is beginning to, fall apart.
Much of the infrastructure being managed by Local Government has a life of 30, 40 or, in some cases, well over 100 years. The Inquiry expressed in easy to understand economic terms what most observers of Local Government already concede, that if Local Government retains the low level of debt that most Councils maintain, most will be trying to rebuild long lasting infrastructure out of current income, rather than recovering the cost over the life of infrastructure. Another finding of the Inquiry also makes good economic sense - the deferral of infrastructure renewal and replacement may be more damaging to Councils than the consequences of strategic borrowing to finance such renewal and replacement.
The challenges faced by Local Government by the infrastructure issue are exacerbated by a range of factors, including:
- a lack of consistency between the increases in the cost of supplying, maintaining and upgrading infrastructure to meet changing community needs;
- the fact that increases in rates are generally driven by CPI and if not, not well received by ratepayers; and
- that South Australian Councils have the lowest per capita state government funding of any mainland state or territory and they also receive a low level of Commonwealth support for their infrastructure needs.
The Infrastructure Australia Act, 2008 received assent on 8 April 2008 and may provide some benefits to Councils in terms of managing their ongoing infrastructure issues. The Act establishes Infrastructure Australia, a statutory advisory council, whose principal responsibilities are to:
- conduct an audit of national infrastructure;
- advise on infrastructure shortfalls and likely future demands;
- present regular reports to COAG;
- obtain feedback from all governments, including Local Government, private enterprise and the public generally in relation to Australia’s infrastructure requirements; and
- establish policy guidelines and standardised formats.
The Act is likely to be supported by the creation of an Infrastructure Fund by the Commonwealth Government in the May budget, so that future surpluses can be applied to the specific benefit of Australia’s infrastructure. The expectation is that the Commonwealth will announce that but the investment earnings will be directed to infrastructure projects overseen by a new entity, the Building Australia Fund and that Infrastructure Australia will guide the projects which are supported.
Ultimately the creation of Infrastructure Australia will most likely be a positive for Local Government. A consolidated approach to the creation and management of Australia’s Infrastructure means that there will be:
- an integrated long term planning framework across jurisdictions for the coordinated provision of infrastructure;
- the creation of an environment in which processes (such as Local Government’s approach to acquiring infrastructure) are standardised;
- the provision of advice in relation to the improvement of the utilisation of existing infrastructure;
- the establishment of a coordinated approach to applying for funding for infrastructure needs; and
- increased private enterprise investment in public infrastructure and a requirement for Local Government to take an increasingly commercial approach to managing its infrastructure requirements.
For further information about the issues covered in this article, please contact Mary-Alice Paton on 08 8210 1206 or mpaton@normans.com.au.
