View
217
Download
0
Category
Preview:
Citation preview
TheCIE.com.au
Evaluating infrastructure
priorities and economic contribution
Presentation to the Economic Society Sydney
12 July 2006
2
Study’s objectives
Identify where opportunities to invest in state significant, economic infrastructure exist
Indicate priorities among the infrastructure needs
Demonstrate approach to investment prioritisation
Illustrate expected returns from investment
3
Overview of the process
Input from GHD
Consultation with PCA members and other stakeholders
Set the macro storyWhat has NSW been doing?
1.
Stakeholder consultations to test the priority list
4.
Prioritise projects to identify top 20 infrastructure needs
3.
Identify what hard (economic) infrastructure is needed
2.
Estimate the boost that the top 20 projects can deliver to NSW economy
5.
Prepare report6.
Multi-criteria analysis (establish criteria, weights and score projects)
GE model to assess economic impacts
4
2: Infrastructure dynamics
Funds committed to capital investment (private & public) is growing; as a share of the economy’s resources, it’s falling – private sector plays an increasingly important role– NSW Govn’t plans to increase spending over
current budget forecast
NSW has shortfalls in physical infrastructure & governance – current planning arrangements do not give private
sector enough information for it to play the increasingly important & expected role in infrastructure provision and financing
5
Capital Expenditure by the NSW public sector (nominal)
0
2,000
4,000
6,000
8,000
10,000
12,000
97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09
$m
PTE capital expenditure
Total capital expenditure
General governmentcapital expenditure
6
NSW General government capital expenditure
0
0.5
1
1.5
2
2.5
96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05
% o
f GSP
(rea
l ter
ms)
Budget
Actual
7
Infrastructure report card results
Infrastructure Type Aus NSW Qld Vic SA NT WA TAS ACT
Category Sub-category
Roads National C+ C+ C+ C C B- B- B
State C C+ C C- C- C- B- C
Local C- C- C C- D C- C+ D+
Overall C C C C- C- C B- C B
Rail C- D C+ C- C A C+
Electricity C+ B D+ C B- B- B- B- B
Gas C+ C C B+ A B+ A-
Ports C+ B- C B+ B- B
Water Wastewater C+ C- C+ B C C B- D+ B
Potable water B- C B B C+ B- B- D+ C
Stormwater C- D C C- D C+ C+ C- C
Irrigation C- C+ D B C+ D
Overall C C+ B- C- C+ C+ C+
Airports B B B+ B
Overall Rating C+ C- C+ C C B B- C- B-
8
3: Investment opportunities
Identified projects of state significance ($100m+)
Key findings:– around 60 unfunded projects of state significance
were identified– projects tended to address infrastructure needs in
the Sydney metropolitan areas– projects tend to play catch up to compensate for
past under-investment– transport (freight & passenger) had the greatest
number of identified projects
9
4: Setting priorities
Used MCA to identify top 20 priority projects
Key findings:– funded projects tended to rank highly among the
priorities– high priority, unfunded projects largely respond to
passenger transport needs– top 20 projects tend to be very robust - ranking
well regardless of how criteria are weighted
10
4: Setting priorities - MCA
Criteria To what extent does the project…
Economic
Bottlenecks reduce congestions to existing services?
The criterion also considers availability of substitutes, the size of the sector, etc, and has a temporal element, emphasising current or immediate needs.
Gaps provide missing services or services anticipated to be missing in the near- to medium-term future?
Competitiveness provide services to industry in NSW that are at a lower cost or raises efficiency?
Affordability reduce costs for households or consumers, ie, balancing possible charges with savings from use?
Employment assist in creating new jobs (or prevent the anticipated loss of jobs)?
Social
Safety change the risk of loss of life or threats to well-being (eg, reduces road accidents)?
Social cohesion connect, or raise opportunities to connect, people and communities?
Community view have (on balance) the likely support of affected communities?
Environment
Environmental footprint
reduce environmental/ecological damage (eg, reduce point source pollution, minimise impact on critical habitats)?
11
4: Setting priorities - MCACriteria To what extent does the project…
Strategic
New opportunities enable existing or future economic opportunities (eg, support targeted employment growth areas)?
Regional development
assist regions of particular significance in generating economic opportunities or jobs?
Risk have less risk relative to projects of a similar nature?
The criterion also considers the project’s expected utilisation or likelihood of delivering the desired outcomes.
Governance
Planning consistency align with relevant regional plan(s)?
This criterion gave particular weight to the projects consistency or complementarity with the Sydney metropolitan strategy.
Performance review have arrangements in-place to provide for adequate and/or independent assessment of its outcomes?
Delivery have an efficient/effective whole of life provider (eg, build plus operation and maintenance) already in place or clearly defined?
Funding pathway have an established or available cost-recovery (eg, user charge) system in-place?
12
Triple bottom line
Infrastructuresector
Rankings of projects - ‘top 10’
Economic focus
4610Electricity distribution upgrades to include Parramatta CBDEnergy
13139Sydney water recycling projectsWater & sewerage
11128Harbour rail link (Eveleigh to Chatswood)Passenger rail
12117Western Sydney bus transitwaysBuses
226Pacific highway upgradesRoads
775M4 East and M4 to Botany TunnelRoads
644Peak load electricity generator (gas fired)Energy
333Southern Sydney freight lineFreight rail
552NW Rail link (Cheltenham to Rouse Hill)Passenger rail
111Sydney Port intermodal freight networkIntermodal freight Project name
Unadjusted
13
Rankings of projects - ‘2nd 10’
Infrastructure sector Project name Economic focus
Unadjusted Triple bottom line
Roads F3 to M2 Connection 11 9 9
Energy Mount Piper Baseload Electricity Generator Upgrade
12 8 8
Freight rail Rail Tunnel to improve Newcastle Port link to North West (Liverpool Range Freight Rail Tunnel)
13 10 10
Passenger rail Parramatta to Sydney High Speed Rail Link 14 15 16
Freight rail Inland Rail Freight Route Link (Brisbane - Sydney - Melbourne)
15 16 14
Passenger rail Parramatta Rail Link Section 2 (Epping-Parramatta)
16 18 20
Light rail CBD Light Rail Loop 17 19 19
Light rail Inner Sydney Light Rail System 18 17 18
Water and sewerage Southern and Western Suburbs Ocean Outfall Sewer
19 14 15
Passenger rail Sydney to Warnervale High Speed Passenger and Rail Link
20 23 22
14
Project scores
0
10
20
30
40
50
60
70
0 5000 10000 15000 20000 25000 30000 35000
Cumulative cost ($m)
Scor
e
1 2 4
5
6
73
8
9
10 11 12
13
14 15
16 17
18
19
20
PCA
1. Sydney Port Intermodal Freight Network
2. NW Rail Link (Cheltenham-Rouse Hill)
3. Southern Sydney Freight Line
4. Peak Load Electricity Generator (gas fired)
5. M4 East & M4 to Botany Tunnel
6. Pacific Highway Upgrades
7. Western Sydney Bus Transitways
8. Harbour Rail Link (Eveleigh-Chatswood)
9. Sydney Water Recycling Projects
10. Electricity Distribution Upgrades to include Parramatta CBD
11. F3 to M2 Connection
12. Mount Piper Baseload Electricity Generator Upgrade
13. Rail Tunnel to improve Newcastle Port link to North West (Liverpool Range Freight Rail Tunnel)
14. Parramatta to Sydney High Speed Rail Link
15. Inland Rail Freight Route Link (Brisbane - Sydney - Melbourne)
16. Parramatta Rail Link Section 2 (Epping - Parramatta)
17. CBD Light Rail Loop
18. Inner Sydney Light Rail System
19. Southern and Western Suburbs Ocean Outfall Sewer
20. Sydney to Warnervale High Speed Passenger and Rail Link
15
4: Setting priorities
Key messages:– prioritisation can be undertaken in a manner that
is consistent with both stakeholder and state goals– highest priority projects generally meet triple
bottom line and strategic criteria– transparent process enhances understanding of
what tradeoffs are necessitated by prioritising investment
16
5: Contribution to growth
GE modeling to estimate how 20 highest priority projects could impact on the NSW economy
Key findings– impact on NSW economy– regional implications– performance of individual projects (top 10)– effects of a second investment (2nd 10)
17
TERM
A CGE model of the Australian economy
Up to 166 sectors
Up to 57 regions (ABS statistical divisions)
CGE and benefit cost analysis– direct effects– indirect effects– full accounting of opportunity costs
18
NSW impacts of 10 priority projects
-20
0
20
40
60
80
100
120
140
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
%
Year
Cumulative impact of an infrastructure investment
19
NSW impacts of 10 priority projects
-2.72Consumer price index
1.01Aggregate capital stock
-0.19Imports price index
-1.58Export price index
1.79Import volumes – landed
1.75Import volumes – used
9.10Export volumes
0.73Real investment
0.51Population
0.90Real wages
1.55Employment
1.85Household consumption
2.89Real GSP
%
NSW (average annual % change)Indicator
Investment of $18.5 billion infrastructure could produce the following benefits:
20
Regional impacts of 10 priority projects
Regional NSW benefits from improvements to infrastructure services
-4
-3
-2
-1
0
1
2
3
4
-4 -3 -2 -1 0 1 2 3 4
% change consumer prices (x ax is)
% c
hang
e ho
useh
old
cons
umpt
ion
(y a
xis)
NSW Regions Other States
-4
-3
-2
-1
0
1
2
3
4
-4 -3 -2 -1 0 1 2 3 4
% change real GSP (x ax is)
% c
hang
e em
ploy
men
t (y
axis
)
NSW Regions Other States
21
Sydney Port Intermodal Freight Link
Indicators NSW VIC QLD SA WA TAS NT ACT
Real GSP 0.36 -0.04 -0.04 -0.02 0.18 0.03 0.30 0.07
Employment 0.19 -0.05 -0.05 -0.03 0.13 -0.01 0.23 0.03
Average real wage 0.15 0.03 0.04 0.03 0.12 0.06 0.18 0.11
Export volume 2.82 -0.25 -0.53 -0.24 -0.74 -0.92 -0.78 -0.15
Import volume 0.51 -0.03 -0.04 0.01 0.28 0.07 0.46 0.10
CPI 0.08 0.02 0.02 0.02 0.09 0.02 0.04 -0.02
Population 0.08 -0.06 -0.05 -0.06 0.03 -0.03 0.10 0.03
22
Sydney Port Intermodal Freight Link
Far WestMurrayMurrum-
bidgeeSouth
East
Central West NSW
North West NSW
Northern NSW
Mid North Coast
Richmond TweedIllawarraHunterSydneyIndicators
0.160.020.040.030.060.070.050.03-0.020.100.120.08Population
0.200.050.040.020.030.100.070.01-0.010.130.120.08CPI
1.040.320.290.330.420.630.430.250.160.700.720.50Import volume
-0.74-0.26-0.25-0.17-0.27-0.52-0.38-0.19-0.060.612.043.33Export volume
0.310.100.110.110.130.190.130.110.070.180.200.16Average real wage
0.440.120.130.100.160.270.160.090.020.270.290.19Aggregate
0.770.230.240.190.450.520.270.190.100.610.730.31Real GDP
employment
23
Economic impacts of additional investment in infrastructure
Second investment of $11 billion would further stimulate the economy
0 1 2 3 4 5 6 7 8 9 10
Real GSP
Real household consumption
Aggregate employ ment
Av erage real w ages
Population
Real inv estment
Aggregate capital stock
Ex port v olumes
Import v olumes (used)
Average annual % change
Top 10 priority projects
2nd 10 priority projects
24
Permanent growth
today 1 2 3 4 5 6 7 8 9 10
Additional infrastructure impact ($bn constant prices)net impact 0 8.9 9.2 9.5 9.8 10.1 10.4 10.7 11.0 11.3 11.7
GSP ($bn constant prices)Without additional infrastructure investment 300 309 318 328 338 348 358 369 380 391 403With additional infrastructure investment 300 318 327 337 347 358 369 380 391 403 415
Growth rates (%)Without additional infrastructure investment na 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03With additional infrastructure investment na 0.06 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03 0.03Difference in growth rate 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
25
5: Conclusion
NSW would become more competitive, attracting population, jobs, and investment– GSP increase by 3%, about $8.8 billion annually– employment increase by 1.6%, additional 50,300
jobs in today’s workforce– household consumption would rise by 1.9%– export volumes would increase by around 9%– CPI would fall by 2.7%– NSW population increase by 0.5%, about 37,000
additional residents based on today’s population– all 12 regions in NSW would benefit
26
For economists...
Pre-screening projects:– assists with priority identification– focus effort on obtaining greater returns– could raise transparency and certainty– is practical
Economy wide evaluation may assist in– comprehensive evaluation– accounting for flow-on implications– assessing regional impacts– forming stronger views about value for money
27
Full Paper Building Wealth through infrastructure
For the Property Council of Australia
Available from: www.TheCIE.com.au
Presentation by Kerry Barwise
Centre for International Economics
Telephone: 02 9250 0800
Fax: 02 9250 0888
Email: kbarwise@thecie.com.au
Recommended