If companies rather than governments were making large investments in public infrastructure, those companies would have reporting obligations under the Corporations Act 2001 (Cth). Listed companies are required to report a change in their financial forecast or expectation, or that their earnings will be markedly different to market expectations.
If an equivalent regime applied to governments in respect of their investments in public infrastructure, governments would be required to report to the electorate through Parliament any material changes to expected costs, expected benefits, or expected timing of infrastructure projects, during the construction phase and on completion.134
Taxpayers are investors in public infrastructure. Governments should be legally obliged to reveal to taxpayers what they are funding.
Governments should also be transparent when they settle claims for extra funding. Even if governments view the settlement amount as confidential, they should issue an opinion from the government lawyers that the settlement amount constituted a fair and reasonable outcome for taxpayers.
Such arrangements could also improve real-time monitoring. It is well understood in other industries that close monitoring enables a project owner to nip problems in the bud. Timely information on divergences from expectations, or major and unforeseen incidents, can prevent problems in settings ranging from mine safety135 to industrial megaprojects.136
Box 3: Melbourne's suburban rail loop was promised without appropriate scrutiny Melbourne's suburban rail loop is a particularly egregious example of a large project being announced without appropriate scrutiny. It is expected to be the most expensive transport infrastructure project announced in Australia.a Yet, before the Victorian Government announced it, the project had been subjected to far less scrutiny than most large projects. In August 2018, three months before a state election, the Victorian Government promised to build the 90km loop connecting Cheltenham in the south-east with Werribee in the south-west. It would be built over 30 years, starting in 2022.b The project did not appear on Infrastructure Australia's priority list. Infrastructure Victoria did not recommend the project, and was not consulted before the Government's announcement.c Neither was Cabinet, nor the Department of Economic Development, Jobs, Transport, and Resources? Instead the project had been worked on by Development Victoria, reportedly with the knowledge of only four ministers?
a. No official cost estimate has been announced to date, though an initial figure of $50 billion was widely reported: for example Jacks and Preiss (2018), Hosking (2020), McGinn (2019) and Fox and King (2018). The 2019 Budget included only $300 million for a business case, design, and pre-construction works. The Budget did not specify an estimated total investment: Victorian Government (2019, p. 157). The strategic assessment published by the Victorian Government mentions an expected cost 'in the order of $30-50 billion': Victorian Government (2018b, p. 28). b. Andrews (2018); and Jacks and Preiss (2018). c. Carey (2018); and Lucas and Jacks (2018). d. Lucas and Jacks (2018). e. Ibid. |
Recommendation 2 For projects with an expected cost greater than $500 million, the relevant state minister should be required to report to Parliament on a continuous disclosure basis where there is material change to the expected costs, benefits, and/or completion date of the project. |
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134. The Australian Government has noted that private owners of infrastructure would be required to develop and monitor these requirements as part of their obligations to their shareholders: DIRD (2016, p. 66).
135. Brady (2019).
136. Merrow (2011).