2018 CCF Victorian Infrastructure Outlook Report 1 | Page 42

An increasingly toxic political environment, in State and
Federal Government, does not help the progress of tax
and expenditure reform, where good policy ideas from
one party are far more likely today to be opposed outright
by others, rather than seeking areas of common ground.
Ken Henry himself noted in a speech to the Committee for
Economic Development of Australia (CEDA) in February
2017 that:
“Today’s dysfunction stands in marked contrast to earlier
periods of policy success – where politics was adversarial,
every bit as partisan – but when the tribal tensions within
parties were generally well managed and the political
contest appeared to energise policy, not kill it.
Almost every major infrastructure project announced
in every Australian jurisdiction in the past 10 years has
been the subject of political wrangling. In the most
recent federal election campaign, no project anywhere
in the nation – not one – had the shared support of the
Coalition, Labor and the Greens.
Every government proposal of the last 10 years to reform
the tax system has failed.” 11
The lack of bipartisanship in infrastructure policy has
not only seen different projects and programmes being
advanced, but has also led to increasing sovereign risk
as contracted projects have been cancelled following
elections – a situation that could threaten future private
participation in infrastructure delivery.
Given the long road to tax reform, the mismatch between
tax collections (which is mostly undertaken by the
Commonwealth Government) and infrastructure provision
(which is mostly managed by the States) creates an
inefficient and complex horizontal fiscal equalisation
grants process. Moreover, this mismatch also affects
Commonwealth-State relations. Political party change
can result in difficulties and delays in agreements.
Nonetheless, it is important that reforms be designed so
that the changes to the tax/transfer system satisfy basic
efficiency and equity criteria.
11
Private sector infrastructure
funding also on the rise
While much of the infrastructure investment task
is currently focused on public sector funding, it is
important to remember that the private sector plays an
increasingly important role in infrastructure finance and
delivery in Australia, albeit at a lower level than during
the resources boom. Currently there are a number of
significant projects that either are under construction
or proposed across all states. Government mechanisms
to facilitate investment within the private sector still
need work, however, with relatively few “unsolicited
proposals” from the private sector (from the hundreds
submitted) actually moving to a delivery phase. Despite
this, privately funded civil infrastructure construction is
expected to stabilise