3.3 The Commonwealth's role in infrastructure

Institutional arrangements

As the Commonwealth only owns a small part of Australia’s infrastructure and constitutional responsibilities mostly lie with the States, coordination of infrastructure policy, regulation, planning and development depends on cooperative arrangements.

The peak body for coordinating Commonwealth-State matters is the Council of Australian Governments (COAG). In February 2011, the COAG agreed to a new system of ministerial councils to better enable it to focus on and progress nationally significant reforms.

The Standing Council on Transport and Infrastructure was established in September 2011 and brings together Commonwealth, State, Territory and New Zealand ministers with responsibility for transport and infrastructure issues, as well as the Australian Local Government Association.

In the Australian Government, policy responsibility for infrastructure matters resides with the Minister for Infrastructure and Regional Development, with the exception of communications policy, which resides with the Minister for Communications. Multiple agencies support administration of infrastructure policy and regulation within these portfolios.

Infrastructure Australia is a statutory body with a national role of advising governments, investors and infrastructure owners on a wide range of issues. Infrastructure Australia is discussed further in the following section.

The National Transport Commission is an inter-governmental agency charged with improving the productivity, safety and environmental performance of Australia’s road, rail and intermodal transport system through regulatory and operational reform. State governments contribute 65 per cent of its funding and the Commonwealth Government provides 35 per cent (National Transport Commission, 2014). The National Transport Commission develops and submits reform recommendations for approval to the Standing Council on Transport and Infrastructure. It also plays an important role in implementation planning to ensure reform outcomes are realised on the ground, as well as coordinating, monitoring, evaluating and maintaining the implementation of approved reforms.

Other agencies in the Infrastructure and Regional Development portfolio that perform regulatory and safety functions include Airservices Australia, the Civil Aviation Safety Authority, the Australian Maritime Safety Authority and the Australian Transport Safety Bureau.

Within the Communications portfolio, the Australian Communications and Media Authority regulates broadcasting, the internet, radio communications and telecommunications and the Telecommunications Universal Service Management Agency promotes equitable access to telecommunications.

State governments have a variety of structures reflecting their interests. Some, like New South Wales and Queensland, have a separate agency similar to Infrastructure Australia dedicated to identifying and providing advice on the delivery of priority public infrastructure. Others perform these functions within a department of transport or roads. Related functions, such as planning and land management and supervision of utilities, may be in the same department or a separate one.

Infrastructure Australia

Infrastructure Australia advises governments, investors and infrastructure owners on a wide range of issues. Its focus is on assisting Australian governments to develop a strategic blueprint for unlocking infrastructure bottlenecks and to modernise the nation’s economic infrastructure.

Section 5 of the Infrastructure Australia Act 2008 specifies Infrastructure Australia’s functions:

  1. Infrastructure Australia has the primary function of providing advice to the Minister, Commonwealth, State, Territory and local governments, investors in infrastructure and owners of infrastructure on matters relating to infrastructure, including in relation to the following:
    1. Australia’s current and future needs and priorities relating to nationally significant infrastructure;
    2. policy, pricing and regulatory issues that may impact on the utilisation of infrastructure;
    3. impediments to the efficient utilisation of national infrastructure networks;
    4. options and reforms, including regulatory reforms, to make the utilisation of national infrastructure networks more efficient;
    5. the needs of users of infrastructure;
    6. mechanisms for financing investment in infrastructure.
  2. Infrastructure Australia has the following additional functions:
    1. to conduct audits to determine the adequacy, capacity and condition of nationally significant infrastructure, taking into account forecast growth;
    2. to develop lists (to be known as Infrastructure Priority Lists) that prioritise Australia’s infrastructure needs;
    3. to review and provide advice on proposals to facilitate the harmonisation of policies, and laws, relating to development of, and investment in, infrastructure;
    4. to evaluate proposals for investment in, or enhancements to, nationally significant infrastructure;
    5. to identify any impediments to investment in nationally significant infrastructure and identify strategies to remove any impediments identified;
    6. to promote investment in infrastructure;
    7. to provide advice on infrastructure policy issues arising from climate change;
    8. to review Commonwealth infrastructure funding programs to ensure they align with any Infrastructure Priority Lists;
    9. to undertake or commission research relating to Infrastructure Australia’s other functions;
    10. any functions that the Minister, by writing, directs Infrastructure Australia to perform;
    11. any other functions conferred on Infrastructure Australia by this Act or any other law.

In November 2013, the Government introduced legislation to strengthen Infrastructure Australia in its role as a key advisor to government on infrastructure project and policy reforms, by restructuring its governance and clarifying the scope of its responsibilities (Australian Government, 2013a).

Nation-building Funds

The Nation-building Funds consist of the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund. The funds were established by the Nation-building Funds Act 2008 to provide funding to invest in critical areas of infrastructure such as transport, communications, energy, water, education, research and health.

Funding was initially sourced from the rollover of previous investment funds (for the Building Australia Fund, the Communications Fund and the Telstra Sale Special Account, and for the Education Investment Fund, the Higher Education Endowment Fund) with ongoing funding intended to be sourced from Commonwealth Budget surpluses. However, with the Budget shifting into deficit from 2008-09, only one year of surplus funding, totalling $12.5 billion, was provided from the 2007-08 Budget (Department of Finance, 2014b).

Nation-building Funds can only be directed towards capital expenditure, including associated labour costs, but not to ongoing running costs such as staff wages and maintenance.

The Act gives responsibility for management of expenditure from the funds to the Minister for Finance and the relevant portfolio minister, while the Future Fund Board of Guardians is responsible for managing the assets consistent with an investment mandate.

The rationale behind the establishment of the funds as separate accounts, rather than simply providing funding through the usual Budget processes, was to ensure that the funds allocated to them were clearly committed for future expenditure on new infrastructure.

Both the capital and the investment earnings of the Nation-building Funds are available for the government to spend. This is in contrast to the predecessor Higher Education Endowment Fund, from which only annual investment income was to be spent. It is also in contrast to the Future Fund, from which no disbursements of either capital or earnings (other than to cover administration expenses) can be made until it reaches the level required to offset the present value of projected unfunded superannuation liabilities, or 1 July 2020, whichever is sooner.

As noted by the OECD (2008), in disbursing their capital, the Nation-building Funds do not operate as endowment funds. Consequently, in budgeting terms there is no difference between the government retaining surpluses and subsequently spending them on economic and social infrastructure rather than creating separate funds with the associated management and governance costs.

Expenditure from the Building Australia Fund has predominantly funded significant projects, including $2.4 billion for the NBN, $3.2 billion for Victorian regional rail and $1.5 billion for the Hunter Expressway.

Most of the projects funded under the Education Investment Fund and the Health and Hospitals Fund have been of relatively small size. Commitments have been made to 302 projects, of which 188, or 61 per cent, have a Commonwealth contribution of less than $25 million (Department of Finance, 2014b). A detailed list of projects approved under the three funds is set out at Attachment 3.1.

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