The politics of infrastructure

Posted by By at 26 August, at 12 : 43 PM Print



Without appropriate investment in infrastructure, Australia will struggle to achieve sustainable economic growth and improve the quality of life for current and future generations. Asset management, a process for delivering value from assets, balanced with other needs such as cost, safety, environment and sustainability, is an essential part of this investment planning.

Any changes in political party leadership pose a potential shift in government policy, and therefore a potential shift in the political, economic and social climate. The investment and return on investment in Australian infrastructure and its physical assets however, needs to be buffered against such changes. The importance of continuity in Australia’s physical asset management is of utmost importance, as our infrastructure underpins our quality of life and the country’s future. Transport, water, energy, health and social infrastructure all function to provide for our everyday needs. These elements require strategic and systematic planning and management and should not be subject to the politics of government spending.

In 1995, Australia introduced the National Competition Policy (aimed at creating economic reform) as well as energy and water reforms. These changes led to substantial progress in reforming the national infrastructure market at the time. Additional labour, capital and product market reforms resulted in “improved frameworks for macroeconomic policy”, underpinning Australia’s recent economic prosperity. Currently however, it seems that reactive, incremental policy approaches dominate the development of our infrastructure. There is a tendency to “wait until congestion, bottlenecks, risks or inefficiencies reach a critical point before acting, leading to sub-optimal outcomes”. In fact, according to Engineers Australia, “government infrastructure assets have not been treated in a way that a major business entity would be expected to account for its capital assets… the result is that most infrastructure investment is undertaken as crisis management to address the latest calamity and/or pressure”.

These reactionary changes are far from ideal. Rather, a long-term whole-of-life approach to asset management and infrastructure, utilising rigorous and robust economic analysis of infrastructure investments on a national level, is far more appropriate and indeed necessary.

Despite Australia pulling through the Global Financial Crisis in a better position than many, to remain globally competitive, sound asset management of infrastructure is extremely important. It is in large part due to our infrastructure that Australians enjoy such a high standard of living. As mentioned earlier, Australia needs appropriate investment in infrastructure or it will struggle to achieve sustainable economic growth and improve the quality of life for current and future generations. According to a report by Infrastructure Australia, if we fail to demonstrate timely and efficient infrastructure development, we will find it “increasingly difficult to build competitive industries that offer quality jobs… [and] it will become tougher to keep pace with scientific and technological change”. The management of Australian infrastructure assets should be focused on long-term, sustainable economic development and improving Australia’s global competitiveness.

An excellent example as to the value of long-term, whole-of-life infrastructure asset management is the Gladstone Power Station. Through the implementation of a sound asset management approach to business planning, NRG Gladstone Operating Services has revolutionised the performance of a 35-year-old power station, creating a benchmark for world’s best practice.

The Gladstone Power Station is Queensland’s largest single power station and consists of six coal-fired and sea-water-cooled generating units. In 2006 the power station was in a critically poor situation.  Significant asset failures and poor business performance contributed to the station heading into commercial stress. As a significant contributor to the Queensland power system, this was a substantial issue. At that time, the Gladstone team identified that the implementation of a long-term, whole-of-life asset management approach could provide the crucially needed solution. Prior to 2006, the station’s approach to infrastructure was focused almost solely on budget compliance, and tailoring maintenance plans to meet the available resources with little regard for a long-term asset strategy.

 

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Excerpted from an article originally published in the Sep/Oct 2013 issue of Think & Grow Rich Inc. magazine. If you are a subscriber to Think & Grow Rich Inc. magazine, you will receive this article in your Sep/Oct 2013 issue of TGR. If you are not a subscriber, click here to subscribe.

Opinion, The Guv'nor


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