Projects worth $1 billion were a rarity two decades ago. In 2001, there were just two such projects under construction; by 2020, there were 18.
Megaprojects have become more prevalent, at the same time as there has been a push to greater national integration,139 and more active Commonwealth involvement in transport infrastructure. Bodies such as the Australian Rail Track Corporation, the National Transport Commission, and Infrastructure Australia have been created to deal with this greater focus on national planning and coordination.
The Commonwealth has not restricted itself to planning and coordination, however. Every federal budget and every federal election includes announcements of big, iconic, 'nation-building' infrastructure.
Megaprojects have become normal. They have often been justified on the grounds of strong population growth. What is less often stated but just as important are exceptionally low real interest rates since the Global Financial Crisis, which have resulted in very strong land price increases. Land acquisition has become more important because planning authorities no longer assume large cities will keep expanding outwards.
Governments have choices about how to respond to these pressures.
The first resort should be efficient usage of the infrastructure we already have. If there is excessive road congestion in peak periods, the most efficient remedy is congestion pricing.140 Public transport fares should also be higher in peak periods.141
Efficient use of existing infrastructure requires dealing with the mounting maintenance backlog. An historical underspend on preventative maintenance, a lack of data, and inadequate reporting requirements have contributed to a maintenance backlog across all infrastructure sectors. This will erode the quality and reliability of many assets and cause higher costs for future asset maintenance and renewal, according to Infrastructure Australia. 'Unless addressed, maintenance of our transport networks will become increasingly unsustainable,' it said in 2019.142
Governments should also modestly upgrade existing infrastructure, such as widening or upgrading key arterial roads, improving surfaces, upgrading railway stations, and improving key road intersections. For instance, if dilapidated wooden bridges were replaced with steel bridges, they would be able to handle B-double semi-trailers which currently have to take circuitous routes instead.143 NSW's pinch point program aims to unclog traffic bottlenecks by improving the capacity of the road network without needing to build new roads.144
Smaller projects generally have higher benefit cost ratios.145 They are more robust to a range of future scenarios, such as the fall in population growth caused by the pandemic response (Section 1.2.1). Keeping options open, particularly in a time of high uncertainty, is a smart strategy.
It is a long way from these infrastructure projects to the $1 billion-plus megaprojects, let alone the $5 billion-plus mega megaprojects. Rather than reaching for the heroic and the iconic megaproject, governments should focus on upgrading and improving existing infrastructure.
| Recommendation 5 State departments of transport and infrastructure should devote more resources to identifying modest-sized transport infrastructure proposals with higher net benefits than very large projects. Megaprojects should be proposed as the last, not the first resort. |
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139. Arising from the National Competition Policy of the 1990s and the National Reform Agenda of the first decade of this century: PC (2006, Chapters 6 and 7).
140. Terrill et al (2019).
141. Infrastructure Victoria (2020).
142. Infrastructure Australia (2019, p. 50).
143. Potter (2020).
144. Transport for NSW (2020).
145. Infrastructure Australia (2019, p. 298)