NSW in infrastructure project shake-up

Greiner further emphasised that he made the distinction between reformative projects and new construction. “It isn’t about engineers wanting to build stuff; it may end up with engineers building stuff but for the moment you have to do the strategic planning. In 20 years we’ll have a bunch of projects that are economically defensible,” he explains.

“We’re not going to shy away from fixing the quality of existing infrastructure and existing government operations. Investing in fixing the existing one is more prospective than building new projects, it’s where we think we can get bang for your buck.”

Funding the portfolio

If you want a step change in infrastructure, the money has to come from somewhere, Greiner states: “NSW needs to get real: the politicians, the bureaucracy, the public, the companies.”

Unfortunately, public stakeholders have been reluctant to shell out on many different counts. Not only are we averse to debt, we’re also opposed to tax increases, asset sales, congestion charges or other fee-based funding. “In fact, we don’t like any of the things which would be part of an overall approach to funding infrastructure,” Greiner points out.

Public Private Partnerships (PPPs) are therefore on the agenda, as are asset sales. “Asset sales are an absolutely unavoidable part [but] you need to look at everything in combination in terms of surpluses, demand management, how we manage the existing assets,” Greiner reveals. “There is obviously use of PPPs and private money but they’re not a magic solution. At the end of the day somebody has to pay back the investor, whether PPP or not.”

Superannuation funds may provide some of the money, but these funds currently tend to come from foreign sources. “It’s common to say that super funds are the natural owners of infrastructure because they’re long-term investors who want to earn 5% for 25 years and infrastructure is that sort of asset. The truth is that the Canadian funds are very large investors in Australian infrastructure. Australia super funds only invest in listed assets or mature infrastructure assets,” Greiner explains.

Then there’s the question of risk, which doesn’t invite a blanket solution. “It’s a horses for courses approach. There are various models as to how you slice and dice the risk and how you price the risk. I hope the government and Treasury will have an open mind as to what model is appropriate to particular projects,” he says.

“Treasury has been a naysayer in the past 15 years but Treasury is supposed to be a strategic partner procuring government policy. Like a CFO, how do you fund things in an economic, rational, balanced, achievable, sustainable way?”

The future of infrastructure

Infrastructure NSW is due to submit a report of its recommendations in September 2012. This report will also, as a side issue, incorporate state involvement in federal projects such as the National Broadband Network (NBN) and proposals for interstate programs such as plans to construct high-speed rail.

While critical of both these projects—Greiner says Federal Labor’s philosophy is akin to saying “This is a good thing to do, we don’t need a business case, we’ll just spend $40 billion”—he is not averse to the importance placed on technological infrastructure, particularly for ICT.

“You need to regard IT and physical infrastructure as inextricably linked. You can’t treat a road or a railway line in isolation from both its direct and indirect IT implications,” he says.

“You can’t assume that technology is going to stay still and you keep building stuff. It’s the opposite: technology is going to change and therefore how people work and live is going to change faster than any body or government can keep up with building roads and bridges. There has to be an approach that moves with changes in technology. It’s perfectly apparent that IT is a significant part of infrastructure going forward.”

And Infrastructure NSW will be there for the long haul. “We will develop a 20-year strategy that identifies major infrastructure requirements, the barriers to these projects being successful as well as identifying how to activate the resources to deliver them,” Greiner states.

“Infrastructure NSW will be future proofing infrastructure investment in this state so that, in 20 years’ time, today’s young people are living and working in a society underpinned by reliable infrastructure networks. It will barely be a topic of conversation at that point.”