The events of the last few weeks have had a profound effect on the global economy.
We have seen more than 25 banks fail or need to be bailed out around the world.
We have seen an unprecedented financial sector rescue package in the US of almost $1 trillion.
We have seen reverberations across Europe.
We in Australia are not immune from these global developments of epic proportions.
These developments will affect growth.
They will affect employment.
They will affect government revenues.
But the Australian Government has set a policy course to see Australia through the current crisis.
The cornerstone of this strategy is to maintain the stability of the Australian financial system - critical for the national economy, and critical for the household economy.
This will require tough decisions.
Some of which will be unpopular.
All of which however are necessary.
Necessary to maintain the stability of our financial system.
Another cornerstone of the Government's economic strategy is nation-building to secure our future.
Today's conference provides a unique opportunity to bring together the nation-building commitment of governments and the nation-building expertise of the private sector.
An opportunity for us to work together to help shape the future of our nation's infrastructure.
This is an historic task.
In our vast nation, infrastructure has always been fundamental to our national development.
From the building of the railways in the 19th century, to vast projects like the Snowy Mountains hydro scheme in the middle of the twentieth century, to the building of the urban infrastructure that made possible the growth of our cities in the 1970s - visionary nation-building plans have long been fundamental to Australia's economic growth and development.
The Government I lead is committed to renewing this vision for nation-building in the 21st century - and that is why today's summit is important.
In this room we have leaders in infrastructure ranging across planning, construction, finance and project management.
We have policy leadership.
We have business leadership.
We have academic leadership.
And we have the representatives of all levels of government.
The Government I lead is committed to an ambitious nation-building agenda.
That doesn't mean lifting our infrastructure investment by just a few percentage points.
It means delivering a transformational vision for the infrastructure of the 21st century.
Today's conference is about taking the next steps in transforming our national investment in infrastructure.
The conference will deal with the needs of individual sectors:
* urban transport and design;
* freight transport;
* water;
* energy; and
* information and communications technology.
The conference will also deal with the functional challenges that cut across all infrastructure sectors:
* Skills shortages;
* Finance;
* Institutional reform; and
* Demand management policies.
Put simply, as a nation we can no longer afford to waste time - we must get our infrastructure decisions right.
Australian economic conditions
The Australian Government is committed to steering Australia through tough global economic times to ensure our economy emerges in strong shape.
While we face tough times, Australia is in a better shape to weather this storm than most other nations:
* Our major financial institutions are well capitalised and profitable.
* Our regulatory framework is world class.
* Sub-prime mortgage loans account for only 1 per cent of the mortgage market compared to around 15 per cent in the US.
* Our economy continues to grow, although slower than forecast in the Budget) while nearly all G7 economies are now experiencing negative growth.
* Our budget surplus is strong while once again nearly all other major economies are in significant budget deficit.
* Australian businesses are planning for a record $100 billion of capital expenditure for 2008-09.
* Our export revenues are growing strongly.
The Government's economic strategy embraces:
* a strong budget surplus as a buffer for the future and to be used to meet the challenges of the future;
* a comprehensive strategy of microeconomic reform to boost long-term productivity growth; and
* a $76 billion nation-building plan for the future - to also help create jobs for the future.
The Australian Government is committed to responsible economic management, with a strong Budget surplus as a buffer for the future.
We achieved that surplus by reprioritising spending and cutting back on waste, implementing a total of $33 billion of savings over a four year period.
As a share of GDP, we reduced spending to its lowest level since 1989, while revenue as a share of GDP fell to its lowest level in a decade.
Second, the Government has also begun to embark upon the most comprehensive microeconomic reform program that Australia has seen since the early 1990s, to lift the nation's productivity growth.
In recent years productivity growth has declined sharply - from average annual growth of 3.3 per cent during the productivity cycle of the mid-1990s, to just 1.1 per cent in the current cycle.
The productivity slowdown reflects the long-term neglect of investing in the drivers of productivity - in particular the skills of our workforce.
The Government is committed to ending that neglect.
Because we know that in the long term, it is productivity growth more than any other factor that will deliver better living standards for Australians.
Over the last 40 years, productivity growth has accounted for more than 80 per cent of the improvement in the living standards of Australians.
The Government is committed to building long-term prosperity by investing in five key platforms for future productivity growth - education, infrastructure, innovation, business deregulation and taxation reform.
We are progressing strongly on each of those fronts - through the education revolution; the 27 items on the COAG business deregulation program; the Henry Review of the taxation and welfare systems; and the recently-completed review of Australia's national innovation system.
The third pillar of the Government's economic strategy is our nation-building plan for the future.
The Government is committed to implementing the single largest infrastructure program in the history of the Commonwealth.
The Government agreed with the States and Territories at the Council of Australian Governments meeting in Perth last week, we are now bringing forward our long-term nation-building agenda.
In our first year in Government, we have committed to a $76 billion infrastructure investment program, allocating funds for road, rail, ports and high speed broadband.
We will invest $26 billion in roads and rail infrastructure through 2008-09 to the end of AusLink II.
We will invest $20 billion through the Building Australia Fund in transport and communication priorities.
And from this, we'll invest almost $5 billion in a National Broadband Network.
We will also invest $15 billion in education infrastructure, through the Education Investment Fund, trades training centres in schools, computers in our classrooms, and by investing in our universities.
We will invest $11 billion health and hospitals infrastructure, through the Health and Hospitals Fund and other programs.
Through these investments, we are building the foundations of the nation's future prosperity.
However, the Commonwealth will not be able to meet the nation's infrastructure needs alone.
State governments, their corporations, and the private sector also have critical roles to play.
In 2008-09 alone, the Queensland will spend $17 billion; NSW Government will spend $14 billion; Western Australia $8 billion and Victoria $4 billion.
According to ABN Amro, investment in public infrastructure over the next decade will be $380 billion - including $255 on economic infrastructure and $125 billion on social infrastructure.
In addition to the Commonwealth's financial commitment to infrastructure investment, we have established for the first time in Australian history a comprehensive policy framework for national infrastructure development.
Earlier this year we established Infrastructure Australia, the independent statutory council headed by Sir Rod Eddington that will spearhead our infrastructure reforms, making recommendations to government on both policy and specific projects.
The Minister for Infrastructure and Transport Anthony Albanese has also begun work to reform specific sectors of national infrastructure, including through national heavy vehicle regulations - and improved rail and maritime safety regulations.
Infrastructure policy is a national priority for this Government because infrastructure constraints have been holding back our economy for too long.
Infrastructure constraints are a drag on economic growth, they hold back productivity, they add to inflationary pressures, and they are part of the reason we saw ten consecutive interest rate rises under the previous Government.
Infrastructure bottlenecks will tighten in coming years unless we invest now.
By 2020 our population is expected to grow to 25 million.
By 2020 our economy is expected to grow to $1.4 trillion.
With more people and a larger economy we will face greater pressures on our roads, our rail and our port infrastructure; more pressures on our electricity network and water supplies; and more pressure on our telecommunications networks.
By 2020, the Bureau of Infrastructure, Transport, and Regional Economics estimates that without action, the cost of urban congestion will soar to $20 billion.
That is a national traffic jam of truly national proportions.
The same is true for freight - a 90 per cent increase in urban light commercial vehicle traffic in the 15 years to 2020.
The same is true for energy - the National Energy Market Management Company estimated in 2007 that we will require 1,185 megawatts in additional generation capacity by 2010-11 alone, and as much as 7,000 megawatts by 2016-17.
According to Infrastructure Partnerships Australia, the need to lower carbon emissions alone is going to require an additional investment in infrastructure in the order of $120 billion across freight, passenger transport and energy infrastructure - including carbon capture and storage and renewable energy investments.
The growth in demand for information and communications technology infrastructure is likely to be even more rapid.
Every time new Internet applications develop, such as YouTube, Facebook, or Secondlife, extra gigabits of traffic are added to the nation's broadband network.
Our broadband investment is critical given the state of our broadband infrastructure.
According to Washington-based independent think tank, the Information Technology and Innovation Foundation, Australia's broadband infrastructure lags behind 26 other countries including Korea, Finland and Slovak Republic.
The growing demands for infrastructure demand a vision for building 21st century road, rail and public transport networks; 21st century energy and water infrastructure, and 21st century high-speed broadband.
This investment in 21st century infrastructure is critical for our long-term economic future.
In the long-term, this will underpin productivity, competitiveness, exports and prosperity.
And it will help drive economic growth in times of global uncertainty.
The cost to the economy of inadequate infrastructure will rise if we do not act now.
According to CEDA, if we can remove infrastructure bottlenecks we can lift our economic performance.
We could potentially raise Australia's GDP by 0.8 percent per year.
We could increase exports by 1.8 per cent, increase business investment by 1.2 per cent, and lower the consumer price index by 3.2 per cent.
While economic and population growth will add to our infrastructure challenges in the future - we are starting from behind after more than a decade of infrastructure policy neglect under the former government:
* Inadequate infrastructure investment;
* Poor infrastructure planning;
* And no infrastructure vision for the future.
But now is not the time to catalogue past mistakes in infrastructure policy.
Now is the time to act - to get infrastructure policy right.
It is time for the Commonwealth, States, Territories and infrastructure companies to roll up our sleeves and get on with the job of nation-building.
* We must undertake institutional reform.
* We must create a stable ‘national infrastructure pipe' for public and private investment.
* We must change intergovernmental arrangements to make sure there are nationally consistent PPP guidelines.
* We must resolve legislative overlays between Federal, State and local Government regulations.
* We must ensure effective principles for third-party access regimes.
* We must encourage private sector investment on the back of a major increase in public investment in the national infrastructure investment.
* We must improve our financing strategy across the infrastructure lifecycle - from design and delivery to maintenance and renewal.
We must attract the best skilled labour to support our infrastructure needs.
We must address skill shortages across all stages of infrastructure development - design, planning, provision, construction, administration, and maintenance and renewal.
This is especially true for engineers - according to Engineers Australia, migrants account for more than half of the growth of new entrants to the Australian engineering profession each year.
It is expected that by 2011, 70,000 engineers will have retired but only 45,000 new graduates will have been trained.
We must also address the challenges facing individual infrastructure sectors.
We must encourage investment in energy generation capacity - traditional and renewable - in an era of carbon trading.
In water infrastructure, we will have to boost investment and improve the operation of pricing and ownership systems to ensure sustainable water use in our cities and towns.
In communications, we have to build a National Broadband Network and take ICT investment in this country to the next level.
We will need more ICT workers and have to overcome the ‘application gap' in education, health, digital commerce and entertainment - because we need investment in the software to match the investment in the hardware.
And, of course, in transport infrastructure policy, we also face big challenges.
One of the biggest challenges will be deciding which projects get funded now, and which ones have to wait.
The tens of billions of investment dollars we need for transport projects will simply not flow overnight.
Infrastructure Partnerships Australia recently collated a list of passenger transport projects that our major cities will need over the next 10 to 20 years.
The cost of just 17 projects was $33 billion.
Priority rail freight projects cost $13 billion.
Road project proposals that have come forward carry a price tag of $43 billion.
Tackling these challenges will require strong partnerships between the Commonwealth, the States and the business community.
I am a strong believer in PPPs because they mean the Government can ensure value for money for the taxpayer through a public interest test, while bringing specialist expertise and innovation from the private sector.
Good PPPs can deliver value for money through optimal risk transfer, management synergies, and integrated whole-of-life asset management.
They can also free up public resources to focus on other core services of government.
ABN Amro forecast recently that some $80 billion of investment in public infrastructure over the next decade will be undertaken through public private partnerships.
It is because of the important role that PPPs will play in Australia's infrastructure future that the Council of Australian Governments last week endorsed the Report on the National PPP Guidelines developed by Infrastructure Australia.
This is an example of what cooperative federalism can achieve.
To put this into perspective, for the first time jurisdictions have come to the table willing to work together to change something as fundamental as how they invest their infrastructure dollars for the benefit of the nation.
The development of nationally consistent PPP guidelines were the first reform priority we set for Infrastructure Australia back in March.
The National PPP Guidelines Report brings together material from different jurisdictions and provides an agreed, unified national framework for the delivery of PPP projects.
It covers the key phases in the delivery of PPPs, how to achieve optimal risk allocation, and how to measure the value for money from a PPP project against traditional public sector procurement.
Infrastructure Australia has delivered on its first task - on time; on target.
This reform is also about changing the culture.
Because many government departments and agencies are still using the same procurement models they have had for decades.
It is not sound infrastructure policy to have a framework that leaves out PPPs.
Nor are guidelines of much use if they are not implemented by jurisdictions.
That is why, Infrastructure Australia, with COAG's endorsement, has committed to developing detailed national PPP model for agreement at the November COAG meeting.
The comprehensive PPP package will include a Practitioner's Guide, Risk Allocation and Standard Commercial Principles, Public Sector Comparator Guidance and Discount Rate Methodology Guidance.
In developing this package, Infrastructure Australia has shown the initiative to get the best policy and practical outcomes.
It demonstrates the benefit of having an independent statutory organisation such as Infrastructure Australia and the benefit of having both the public and private sectors at the table.
Infrastructure Australia is also conducting an audit of the nation's existing infrastructure.
This will be concluded by the year's end.
The next task will be to produce an Infrastructure Priority List.
The Commonwealth has also decided to bring forward an interim report on the above in order to accelerate the Government's nation-building agenda.
The National Infrastructure Priority List will be crucial to Australia's prosperity because it will identify our priorities for years into the future.
It will be the basis of determining funding allocations from the Building Australia Fund.
While no one but an elected Government can decide how to invest $20 billion of taxpayer funds, it must receive strong and independent recommendations.
To assist this, today I am pleased to announce today the next step for Infrastructure Australia's role in delivering our nation-building agenda - the National Prioritisation Methodology that will be used to assess relative need.
These guidelines outline the methodology that Infrastructure Australia will be applying to assess the infrastructure proposals it receives.
These guidelines ensure the National Infrastructure Priority List is backed up by a truly transparent process.
I believe that all interested parties - infrastructure companies, state and local governments and the wider community - should have a clear understanding of how Infrastructure Australia will determine its recommendations to government.
Key assessment criteria will include:
* How does a project expand Australia's productivity capacity?
* How does it build Australia's global competitive advantages?
* How does it develop our cities or our regions?
* How does it reduce greenhouse gas emissions?
* How does it improve our quality of life?
Infrastructure Australia will then apply a tough, clear-eyed assessment of the intrinsic value of each project.
In short it will ask: “does it stack up?”
There must be a serious cost-benefit analysis that for the first time will monetise economic, social and environmental costs and benefits.
And in the case where costs and benefits can't be accurately monetised, these factors will be rated for the purpose of fair comparison.
Appraisals will typically have to be assessed over a thirty year timeframe.
Infrastructure Australia will also ask: what are the costs - the capital costs, the operating costs and the maintenance costs?
Serious ‘sensitivity tests' of the cost-benefit ratio under different circumstances add to the robustness of this appraisal methodology and will give certainty to the government's decision making:
* What if materials cost continue to rise?
* What if there are construction delays?
* What if demand for the infrastructure doesn't meet expectations?
Proponents will not be able to overstate benefits and understate costs as has sometimes been the case in the past.
It is critically important that our infrastructure decisions are based on objective analysis of projects and needs.
Policy integrity is critical to good decision making.
This is the analytical rigour needed for modern nation-building.
Finally, Infrastructure Australia will use this information to compare many different projects, measures and solutions.
On this basis, it will recommend to Government which projects are the top priorities, and which projects might either belong further down the track or simply might not stack up at all.
There's no doubt that the tasks involved in shaping our nation-building agenda are very substantial.
That is why we have established Infrastructure Australia - to bring transparency, rigour and integrity to the task of infrastructure prioritisation that was sorely missed over the last decade.
It's why we are undertaking such a comprehensive analysis of Australia's infrastructure needs.
And it's why we have brought this conference together today.
The nation-building agenda for Australia's 21st century is about government taking leadership responsibility for addressing Australia's long-term future needs.
It's ultimately about more than just roads, bridges, ports, airports, energy networks, communications networks, training centres and so forth.
It's about a vision for Australia to achieve its full economic potential.
A vision for laying foundations for the prosperity and security of the generation that will come after ours.
A vision to which the Government I lead is resolutely committed.