The Grattan Institute report says money is being wasted on the ‘the wrong projects in the wrong places’ because governments ignore independent advice

This article is more than 4 years old

This article is more than 4 years old

Infrastructure funding is being spent on the wrong projects in the wrong places, particularly highways with dubious or weak businesses cases, a Grattan Institute report has said.

The Better Transport Infrastructure report, released on Monday, said cost-benefit analyses by bodies such Infrastructure Australia should be tabled in parliament to ensure only worthwhile projects are built.

Governments had spent unprecedented amounts on infrastructure “but mostly they have not spent wisely ... [because] too much money has been spent on the wrong projects in the wrong places”, the report said.

Infrastructure spending has not prioritised cities, instead bypassing them in favour of states and electorates where federal elections are won and lost, it said. “Too often, politics comes ahead of the public interest.”

In particular, too much is being spent “on highways that are not especially important to the economy, but are popular with local voters. Decisions on particular projects are dubious or made on the basis of weak or undisclosed business cases.”

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The institute’s transport program director and co-author of the report, Marion Terrill, told Guardian Australia a significant number of projects cost more than the benefits they provided.

The report highlighted Victoria’s East-West link, which it noted attracted a pledge in 2013 of $1.5bn from the Coalition in opposition, despite unanswered questions from Infrastructure Australia about its worth.

The Abbott government was later criticised by the Productivity Commission for spending on projects which offered poor value for money, including the East-West link and Sydney’s WestConnex, which also got funding before the business case was made available.

Terrill said Infrastructure Australia’s assessment of the East-West link showed it would return just 50 cents in the dollar, “so basically this is a project where costs are higher than the benefits”.

The report noted “substantial additional spending on transport infrastructure in regional New South Wales and Queensland” which was a bias that “[correlates] well with marginal states from federal elections”.

Big projects in marginal seats included the New England Highway in New South Wales and Queensland, the Colac to Geelong highway in Victoria, and Bell Bay to Launceston highway in Tasmania. The New England Highway runs through the electorate of New England, where the independent Tony Windsor is challenging National party leader Barnaby Joyce in one of the most keenly watched contests of this year’s election.

Terrill said the input of infrastructure bodies helped separate a project’s promoter (the department) from the evaluator.

But the report said these authorities were constrained by reporting to a minister rather than parliament, making it harder to provide advice that they know or anticipate may run counter to the preferences of the government.

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The report recommended governments should not be able to commit to a transport infrastructure project before a rigorous evaluation of its benefits, conducted by an independent body, has been tabled in the parliament.

Governments would remain free to allocate funding as they wished, but tabling the business case and evaluation would increase transparency and oversight, Terrill said.

The report said governments should aim to build every project that had net benefits because “quality assessment, not arbitrarily imposed budgetary limits, should determine the level of government investment”.

“There is a strong intergenerational equity argument for financing transport infrastructure using public borrowing. Today’s travellers benefit from past investments in the transport network; so too will future generations benefit from investments in new transport infrastructure made today,” it said.

The report recommended commonwealth funding decisions should not be overridden by sharing the GST between states. Rather, the best projects should be identified using cost-benefit analysis and then funding should “stick where it hits”, that is, where it can have the most positive impact.

The report advocated “cost-reflective user charging” such as tolls for road users, which could help to spread out the morning and evening peaks in congested cities, and would generate revenue that could be directed into the transport system.