Advising the infrastructure sector

The infrastructure sector is facing a period of unique uncertainty, with a range of complex global trends affecting asset management now and into the future.

Australia’s infrastructure network faces a series of complex challenges and risks such as public transports reliance on digital connectivity, economic competition from global markets and climate change.

Decisions made in the next decade are crucial to Australia’s future as the growing population puts stress on infrastructure networks across the country.

As the newly appointed CEO of Infrastructure Australia, Romilly Madew takes on a crucial position as the industry seeks to meet future challenges.

Ms. Madew was previously the CEO of the Green Building Council, the authority on sustainable buildings and communities in Australia.

“As you would expect, I am excited to build on the work Infrastructure Australia has already done around resilience and sustainability in the infrastructure sector,” she says.

Sustainability and resilience was a key focus in the 2016 Australian Infrastructure Plan, while planning for climate impacts was built into Infrastructure Australia’s Assessment Framework several years ago.

“What really excites me about my new role is the broader opportunity to improve quality of life for each and every Australian. I feel privileged to be leading Infrastructure Australia at such an important time for infrastructure investment. We are facing a changing climate, a re-ordering of the world economy and a reshaping of global institutions and norms,” Ms. Madew says.

Closer to home, Ms. Madew also recognises the growing population and rapid technological advancements as new and challenging trends.

Infrastructure Australia is preparing to publish its 2019 Australian Infrastructure Audit to address these challenges.

“The Audit takes a forward-looking view at the decisive trends impacting Australia’s infrastructure over the next 15 years and beyond,” Ms. Madew says.

She says it will prioritise community needs and provide a clear picture of problems with Australian infrastructure. It will also strengthen the evidence base for decision making across the country.

Following the release of the Audit, Infrastructure Australia will invite submissions from government, industry and the community and undertake a three-month consultation process to inform the development of the Australian Infrastructure Plan released every 18 months.

“This will be a blueprint for the most pressing reforms infrastructure decision makers will need to make,” Ms. Madew says.

When asked about the most pressing risks for road and transport infrastructure across the country, Ms. Madew began with increased reliance on digital platforms.

She says cyber security is a growing risk as reliance on digital systems to support operations across all sectors increases.

“As the complexity of networked systems grows, so too does the potential for failures and disruptions that are more difficult to predict and more pervasive in their impact.”

Ms. Madew presents economic risks from greater exposure to global markets as another pressing issue.

“Competition from growing and developing Asian nations can cause uncertainty in demand for domestic supply chains and freight hubs, while changing trade conditions could impact our infrastructure networks.”

Ms. Madew also highlights the significant risk climate change poses to road and transport infrastructure.

“Much of our existing infrastructure faces new and challenging conditions, such as higher temperatures, changed stream flows, rainfall, water availability and soil conditions, more intense bushfires, more extreme winds and rising sea levels, causing coastal inundation and erosion,” she says.

Sustainably funding Australia’s transport networks is another challenge Ms. Madew points out. She says the issue is being exacerbated by technologies and business models.

“Fuel excise is the principal source of revenue associated with road use. However it is increasingly under threat as the popularity of fuel-efficient and electric vehicles grows. In the 20 years to 2018, Australian vehicle kilometres travelled have risen, while excise revenue decreased by 20 per cent.”

She says this is an area that clearly needs new and innovative solutions.

Ms. Madew says while our infrastructure faces risks from shifts in technology, the economy and climate change, resilience strategies provide limited guidance for Australian asset managers.

“Planning for resilience requires a comprehensive risk assessment, and an understanding of the potential social, economic and environmental costs of outages, damage, disruption or failure,” Ms. Madew says.

The upcoming 2019 Australian Infrastructure Audit will call for clear, publicly available guidance for the infrastructure sector explaining how to manage risk and plan for greater resilience.

Ms. Madew says a common challenge for private businesses is a lack of information about the scale of risks, impacts and the costs of addressing them.

“This is important in a rapidly changing environment, where risks are shifting in nature and severity. Understanding the scale of potential threats, their impacts and the costs of addressing them is critical to proactively respond to both short- and long-term risks to infrastructure assets and networks.”

In addition to addressing these risks, Ms. Madew acknowledges challenges already in need of attention, such as the large road construction maintenance backlog.

Ms. Madew says there is little doubt a maintenance backlog exists across many parts of the infrastructure networks, with variations by sector and region. She notes, however, funding decisions and project delivery are matters for governments.

“Some of the maintenance backlog is evident to users of many roads and bridges that suffer from poor upkeep, particularly in regional areas, causing safety risks, reliability issues and adding to vehicle costs.”

Ms. Madew points out the causes of the maintenance backlog are diverse. In some cases she understands the absence of cost recovery arrangements mean there is no mechanism linking usage, driving the physical deprecation of assets.

In other cases Ms. Madew says the backlog has been caused by governments prioritising the construction of new assets over maintaining existing ones, or failing to undertake preventative maintenance, leading to higher costs for reactive maintenance.

“These are all issues which will need to be addressed as we look to accommodate a growing and changing population,” she says.

When talking about Infrastructure Australia’s priorities for this year, Ms. Madew points out the Infrastructure Priority List.

The Priority List, created by Infrastructure Australia, presents nationally significant investment opportunities for all levels of government to choose from.

The most recent update of this list was released in February 2019 and included a $58 billion pipeline of potential investments.

“Many projects on this year’s Priority List respond to the challenges of population growth and congestion in our growing cities.”

While the list includes major public transport investments such as the Sydney Metro, Brisbane Metro and Victoria’s Ballarat Line Upgrade, Ms. Madew says it is not all about new large-scale investments.

“A number of inclusions on this year’s Priority List focus on getting the most out of existing infrastructure through the use of smart technology, such as intelligent transport systems,” she says.

These included projects such as the Monash Freeway upgrade stage two, the Regency Road to Pym Street section of Adelaide’s North-South Corridor and a proposal to improve the performance and efficiency of motorways in Sydney’s CBD.

The list also identifies regional road safety improvements as a national priority.

“Between 2008 and 2016, more than half of Australia’s road fatalities occurred in our regions, meaning that, relative to population size, the fatality rate was more than four times greater than for major cities.”

Infrastructure deficiencies have a role to play in causing accidents and she says the expected increase in heavy freight vehicles on roads could lead to further fatalities.

“Given the scale of the problem, we are calling on governments to prioritise investment in high-risk sections of regional roads across Australia.”

Under the leadership of Ms. Madew, Infrastructure Australia will continue its strong focus on improving project selection and infrastructure decision-making such as calling on governments for positive change.

“We know that well-developed business cases are critical to ensuring investments deliver the best results. We are also focused on driving sustained infrastructure reform to ensure services are meeting community needs,” Ms. Madew says.

With congestion, overcrowding and service outages a common feature of networks, she says, it is clear infrastructure needs to work harder to support Australia into the future.

Ms. Madew recognises Infrastructure Australia has an important role to play in highlighting the long-term opportunities for investment and reform that will improve living standards and national productivity.

“To deliver lasting benefits for the community, we must also be a consensus builder and ensure decision makers are appropriately planning for the future. As we seek to drive better outcomes for the community, improving collaboration and coordination with stakeholders across government, industry and the community will be a key focus.”