Do we at last have an Infrastructure Prime Minister?


Over the weekend, Prime Minister Malcolm Turnbull delighting Queensland Premier Annastacia Palaszczuk by announcing a federal contribution of $95 million for the Gold Coast light rail project.

Journalists have leapt on this new policy stance, different from the previous PM Tony Abbott who point-blank refused to fund public transport, and called for roads, roads, roads.

This is change worth debating, but the more striking policy change is in how government expects to pay for infrastructure. At the moment, projects are funded from Consolidated Revenue, topped up with additional borrowings. Taxpayers pay, landowners benefit.

I will probably ride the Gold Coast light rail once or twice in my lifetime, so the federal contribution is a net loss for me, a gain for Gold Coast landowners and I am not particularly impressed.

Malcolm Turnbull wants to change this. He used the announcement to introduce fresh thinking about how we pay for projects, a profound departure from existing policy, saying:

“We also have to look creatively at how we capture the value that arises from the increase in property values and the improvement in the utility of adjacent land from the building of infrastructure like this. This might be by owning part of the land or it might be from some sort of differential rating arrangement. There is a lot of angles to it.”

Hooray! With thinking like this, our infrastructure defect can be shrunk and shrunk again.

When a new road or rail links are built, they reduce distance, which is measured in time, not kilometres. The improved amenity betters our lives – and raises land prices proportionate to the benefits, which are usually many times the cost of construction.

Malcolm is talking ‘value capture’, where government recycles part of the lift in land prices to fund the construction that caused the rise in values.

Prosper has been speaking out about the benefits of this approach forever.

A third of the cost of the Sydney Harbour Bridge was funded this way. Does Sydney have any regrets?

In Melbourne, the Andrews government is building a $12 billion North-South rail link right through the middle of the CBD to increase the number of trains on the network, reduce congestion and improve amenity.

The main beneficiaries aren’t the rail commuters on the Dandenong, Frankston, Upfield and Sunbury lines, they are CBD landowners, particularly those near the new rail stations who will make a motza.

The profound new thinking PM Turnbull advocates exchanges the neo-conservative slogan of ‘User Pays’ for the more targeted and economically honest ‘Beneficiary Pays’.

Turnbull’s statement “there are a lot of angles to it”, suggests government is thinking of betterment levies on land and similar.

We say, if government used land tax, the market would decide whether and where infrastructure projects actually added value, a brilliant way to protect taxpayers from white elephant civic projects.

Leave a Reply