You can’t love mass immigration and hate expensive infrastructure

By Leith van Onselen

Mass immigration booster, Peter Martin, has penned a contradictory article decrying the costly infrastructure projects being built across Melbourne and Sydney:

Victoria is spending $5.5 billion building the West Gate Tunnel, another $1 billion widening CityLink, probably $10 billion on the North East Link, $11 billion on Melbourne Metro, $8 billion removing level crossings, and, if the Coalition returns, more than $3 billion on the East West Link.

NSW is spending $16 billion on WestConnex, $14 billion on Western Harbour Tunnel Beaches Link, $9 billion on the F6 Extension, $3 billion on NorthConnex, $11 billion on Sydney Metro South West, $8 billion on Sydney Metro NorthWest, $3 billion on Parramatta Light Rail, $2 billion on Sydney Light Rail, and billions more on Sydney Metro West.

It would be nice to know it was money well spent.

There’s a fiction that a benefit-cost ratio above “1” means things are OK…

[But] the numbers are sometimes rigged…

One of the easiest is to hike the traffic forecasts. On some toll roads, the number of cars predicted to use them was greater than the capacity of the roads…

You needn’t stop at bulking up travel time saved. Also useful for bulking up benefits is “travel time reliability”…

And you can get more creative. You can add in the benefits of other projects tens of kilometres away as was done for the West Gate Tunnel. You can add “wider economic benefits” to fill the gap that remains…

Each of Australia’s two biggest states is engaging in an unprecedented transport spending spree, often with the help of willing partners in the finance industry hungry for access to tolls. Neither can demonstrate convincingly that it is getting value for money.

It’s fair enough to question the validity of these projects – MB has done it continually. But it is highly hypocritical of Peter Martin to strongly endorse crush-loading Sydney and Melbourne via mass immigration while at the same time whinging over the expensive infrastructure investment required to accommodate this growth.

What Peter Martin continually fails to mention is that the cost of infrastructure projects in Sydney and Melbourne will continue to spiral as long as these cities grow by 90,000 to 100,000-plus people a year, primarily via mass immigration. Why? Because in already built-out cities like Sydney and Melbourne, the cost of retrofitting new infrastructure to accommodate greater population densities is prohibitively expensive because of the need for land buy-backs, tunnelling, as well as disruptions to existing infrastructure. These are basic dis-economies of scale.

But don’t just take my word for it.

In November 2013, the Productivity Commission (PC) released its final report on An Ageing Australia: Preparing for the Future, which projected that Australia’s population would swell to 38 million people by 2060 (mostly via immigration) and warned that total private and public investment requirements over the 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century:

The likely population growth will place pressure on Australian cities. All of Australia’s major cities are projected to grow substantially. Sydney and Melbourne may grow by around 3 million each over the next 50 years (figure 2). In response to the significant increase in the size of Australian cities, significant investment in transport and other infrastructure is likely to be required. This is true both within the cities themselves and for the links between regional and major cities. Policies will be needed to reduce congestion problems, and to ensure adequate infrastructure funding and investment efficiency…

Total private and public investment requirements over this 50 year period are estimated to be more than 5 times the cumulative investment made over the last half century, which reveals the importance of an efficient investment environment…

In last year’s Migrant Intake into Australia report, the PC revised up its population estimate by 2 million to 40 million, with Sydney’s and Melbourne’s populations now projected to hit more than 8 million mid-century. The PC also stated that if immigration is maintained at the last decade’s average, then Australia’s population could hit 50 million mid-century. This obviously means that the infrastructure requirement would also be much higher than stated above, and the PC did not have much faith that Australia’s policy makers can deliver on such a requirement:

..governments have not demonstrated a high degree of competence in infrastructure planning and investment. Funding will inevitably be borne by the Australian community either through user-pays fees or general taxation…

And just last month, the PC’s Shifting the Dial: 5 year productivity review explicitly noted that infrastructure costs will inevitably balloon due to our cities’ rapidly growing populations:

Growing populations will place pressure on already strained transport systems… Yet available choices for new investments are constrained by the increasingly limited availability of unutilised land. Costs of new transport structures have risen accordingly, with new developments (for example WestConnex) requiring land reclamation, costly compensation arrangements, or otherwise more expensive alternatives (such as tunnels).

Clearly, the most obvious and least cost policy solution to mitigate Sydney’s and Melbourne’s infrastructure woes is to significantly dial back Australia’s immigration program and forestall the need for costly new infrastructure projects in the first place.

You can’t love mass immigration and then whine about expensive infrastructure projects, Peter Martin.

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