Incentive payments could be the key to progressing infrastructure reforms
New economic modelling released by Infrastructure Australia shows that introducing incentive payments to encourage the states and territories to progress nation-shaping infrastructure reforms could boost the economy by $66 billion and deliver better infrastructure for our growing cities and regions.
Infrastructure Australia has published a new report in the infrastructure Reform Series, Making Reform Happen, which argues that the Australian Government should make additional investments in state and territory infrastructure—over and above existing commitments—in return for the delivery of much-needed reforms.
“If we don't seize the historic opportunity in front of us, we could miss out on the significant impact national infrastructure reform could have on our future productivity and prosperity,” said Infrastructure Australia Chair Julieanne Alroe.
“Australia is undergoing a period of profound change—our population will grow to over 30 million people by 2031, our economy is in a state of transition, and technology is changing the way we live and work.
“We need infrastructure and services that enhance the liveability of our cities and regions, strengthen our role as a global exporter, and support the transition to a more diversified economy,” Ms Alroe said.
Making Reform Happen builds on the recommendations in the 15-year Australian Infrastructure Plan to provide further evidence of the substantial long-term benefits of progressing five key opportunities for infrastructure reform:
Introducing road user charging.
Reforming the urban water sector.
Reforming the electricity market.
Reforming land tax.
Franchising public transport services.
“The reforms we've identified in this report across water, energy, transport and land use planning could deliver a $66 billion increase in GDP by 2047 and a $19 billion ongoing increase in national tax revenue. This is money that could be used to deliver better infrastructure services for our growing communities.
“In addition to improving infrastructure services across the country, these reforms would boost Commonwealth revenue and potentially remedy Australia's stalled productivity growth.
“This is not an exhaustive list of the reforms we need to address today's infrastructure gaps and meet the challenges of tomorrow. Rather, this paper is intended to show what can be achieved through a well-designed incentive program.
“An incentive-based approach recognises that although there are significant national benefits to be gained from infrastructure reform, it is state and territory governments that wear the implementation costs—as well as any short term political pain.
“Incentive payments can help redress this imbalance between costs and impacts, and effectively drive outcomes that may not have come about otherwise.
“This approach is a win-win for Australian governments. Using incentives to drive reform can deliver a short-term boost to the economy through increased infrastructure investment, as well as delivering productivity and revenue gains in the longer term.
“We've successfully used incentive payments to spark reform before in Australia, with impressive results. We now have an opportunity to learn from these experiences and design an incentive-based reform program to boost our national productivity and ultimately build a fairer and more prosperous Australia,” Ms Alroe said.
Making Reform Happen is available for download at infrastructureaustralia.gov.au.