Friday, April 29, 2016

Changing the Game in Australia: Federal Government Looks at Local Infrastructure

Commonwealth Government looks local
A report in the Sydney Morning Herald this morning raises some interesting possibilities, with Malcolm Turnbull indicating that the Commonwealth government is ready to deal direct on projects for urban development.  If they are economically sound it will consider assisting with favourable funding over a time period in keeping with their effective life.

The grounds for following our neighbours
New Zealand should take a lead from this on several grounds. 

(1)   Grandiose plans and projects that bear little heed to need, geography, or, in particular, to basic economic principles (don't spend more than you are going to get back by way of benefits!) continue to be promoted in both Christchurch and Auckland.  The Auckland heavy rail project is so bad that it would be a joke if it was not such an economic misfit.  The notion of throwing ratepayers’ money at a stadium locking away much of the waterfront is just as  silly.

(2)   The infrastructure spending of councils seems geared towards preserving a dated conception of the city as mono-centric. Modern cities aren’t.  They may have interesting and fun CBDs, but the bulk of life takes place outside the central city.  The suburbs are no longer undifferentiated swathes of housing, but include their own distinctive and often large centres, entertainment and recreation precincts, restaurants, and medical centres and specialists. Cities of scale have much more employment outside the city centre than inside.  Economic projects are those that fit the needs and capacity of their various communities, not some me-too dream of CBD grandeur.

(3)   Short-term funding of infrastructure through development charges is a sure way to push up costs and does not reflect the useful life of urban infrastructure.  If public monies are going into it, then that should only be on the basis of demonstrable economic benefits, not wonky, unrealistic and consequently defunct business cases.

The productivity impact
The Grattan Institute report on which the Australian Prime Minister was drawing confirms that many local and state government infrastructure projects are hopelessly uneconomic. 

Uneconomic infrastructure is a sure way to undermine national and local productivity. 

And, despite the New South Wales government's determination, there is scant evidence that amalgamation will solve the problem.  Just look at Auckland's experience.   

Beyond ageing urban form
Turnbull’s response sees grandstanding infrastructure and civic obsession with spending to preserve the CBD and sustain ageing urban form regardless of the economic consequences as contributing to the failure to achieve more sustainable urban form and the affordable housing that would follow.  

He espouses the vision of the 30-minute city –

one in which, "no matter where you live, you can easily access the places you need to visit on a daily basis". Mr Turnbull believes such cities will allow people to live further from the centre, making housing more affordable.
The plan
To help bring that about, the Prime Minister talks about commonwealth partnerships with private interests and issuing long-term, low interest government-backed bonds to fund approved projects and perhaps some form of charge on businesses that benefit.  Approved projects will be those that can demonstrate their economic worth thereby contributing to faster economic growth and a lift in tax revenue.  

Changing the game
We may or may not agree with the mechanisms proposed.  However, the Turnbull initiative confirms that central government can play a significant role in urban form and housing affordability when local government consistently gets it wrong.

That's not saying that central government consistently gets it right!  But it recognises the game changers that support decentralised urban form and the benefits that can bring. 

The Turnbull initiative may well prove a game changer in its own right.  And it highlights the question of when - or whether - central government in New Zealand will get off the sidelines and into the game.


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