Sydney, the second most expensive city in the world. The new Premier, Gladys Berejiklian, declares it “the biggest issue”.

Nationals leader Barnaby Joyce tells us to accept it.

But why?

I see this as a complete failure of leadership, and of understanding.

Sydney is lovely, beaches, rivers, parks, infrastructure. There are beautiful beaches for the length of the eastern coast. There are rivers and creeks everywhere. Parks abound. So infrastructure is key to the attraction of Sydney, and to the escalating costs, congestion and other trials for our leaders.

To quote “Field of Dreams” “If you build it, they will come.” And they do, by the thousands.

I spoke to a group of young people and asked them why they moved to Sydney, “because it is close to everything” they told me.

Building more infrastructure in our capitals generates more demand to live in our capitals.

Our regional centres spend year after year, planning different ways to improve the lot of their citizens, without significant success. The deck is stacked against them.

Until our secondary cities can offer proximity to services (and that means infrastructure) they will remain a “negative good” in the minds of our young people, our new people and our businesses.

Long term planning is necessary to relieve the pressure on our exploding Capitals and bring equity to our regional centres. We don’t need a way to build more free-standing dwellings in Sydney. We need to lift the service provision in other areas.

How can this be done?

There used to be two economic policy tools – monetary policy and fiscal policy. With monetary policy, we would raise or lower the interest rate to decrease or increase the amount borrowed and spent.  It was argued that reducing the interest rate would decrease the readiness of consumers to save and so would lead to more consumer spending and simultaneously increase the willingness of firms to borrow and invest more.  But interest rates have hovered close to zero (and in the case of Japan, below zero) for close to a decade and the expected increase in spending – either consumption or investment has not arisen.  Despite calls that suggest governments should take advantage of low interest rates to spend on infrastructure, it is noticeable that investors (playing with their own money) are not doing so.  The point is that it is only when the economy is healthy that tinkering with the interest rates is likely to work. For a long period after the end of the second world war, that was the case. We simply assumed it would always be the case, but we were wrong.

So, now we are down to one policy tool – fiscal policy.  In the recent past governments have been trying to build up their surpluses while simultaneously encouraging the population to do the reverse!  Communities have been urged to spend, while governments have struggled to save. But government savings (mostly through reductions in the public service or by outsourcing) has resulted in loss of jobs and, as this has mounted, loss of confidence. So consumers are not spending, they are saving for that inevitable ‘rainy day’.  Again, when our economy was healthy, governments used capital spending as a tap that could be readily turned on or off.  Recurrent spending was not seen to be so amenable to manipulation. This has morphed into today’s focus on infrastructure with a simultaneous reluctance to spend on the upkeep and operations that are necessary to provide service from that infrastructure. But infrastructure spending during the global financial crisis of 2008, which was seen as so successful at the time, led to severe reductions in spending subsequently in order to pay the interest bills incurred.  So a short term gain at a slightly longer term cost.

Are we now down to zero economic policy tools?  Are we clinging to the belief that infrastructure spending will save us simply because we know of nothing else?  And is infrastructure spending better than nothing?

Switch (courtesy Falk2)

If we have information that can lead to better decisions, can we fail to act? Can we excuse ourselves with “it’s their job”, “not my responsibility”, “I don’t want to be involved”.

Philippa Foot devised a thought experiment in 1967, routinely called the “Trolley Problem”. The experiment involves a train (trolley) heading toward 5 workers. The train is a runaway and all 5 workers will certainly be killed if nothing is done. There is a side track with only one worker and you are in the right place at the right time to make a decision. You can activate the rail switch, diverting the train and resulting in a single certain death. Or not. There is no time to alert the workers, or gain assistance; the train can’t be stopped.

As a tool to teach ethics this particular experiment is deceptively simple, should I sacrifice 1 to save 5? It does however raise numerous questions, “am I obliged to act?”, “do I have a duty?”, “is interfering wrong?” “do I act morally or ethically?”, “do I act for the greater good, the good of the people involved, or for myself?”

This dilemma is very long lived and has captured the imagination of the professionals and public. There are many variations – is it Ok to stop the train by pushing someone in front of it? What if that person was responsible for the runaway train? What if the workers could be saved by sacrificing a bystander, or a loved-one?

When anyone is faced with making a decision at a switch they can make a moral choice, an ethical choice, a popular choice, and when making that choice they can include longer time frames, wider consequences, how the action will make them feel, how others will think of them.

Questions today:  When it comes to infrastructure decision making, when our decision takers are standing at the switch, how do we know if we should contribute to the conversation? When would we join in if we do, and with what level of action?

In this post, Geoff Webb picks up on the question of infrastructure access.

The concept of ‘universal service provision’ stands in stark contrast to the ‘user pays’ model which is so often cited as a fair method of delivering services to the community, but is it?

Australians have long taken pride in being considered a fairly egalitarian society with an attitude of a fair-go for all. For many years, this was reflected in public policy and in the provision of essential infrastructure to all Australians, whether they be located in major cities and urban areas or in remote and isolated locations.

The history of telephone connection fees in Australia exemplifies the point, where actual costs for individual connections could be several orders of magnitude higher for a connection in the bush compared to connection in town, but a standard connection fee was charged for both.  The community at large was, typically, fairly accepting of the idea that service charges, as long as they seemed reasonable, paid by the high number of users in the major metropolitan centres would effectively subsidise the relatively low numbers of remote and isolated services.

While critical infrastructure ownership and operation remained in government hands, Read More →

Today’s post is by Mark Neasbey of the Australian Centre for Value Management

We’ve all heard the line, usually around election cycles “crime is a concern to the community, crime rates are getting worse under this government – we can do better and we’ll put more police out there…blah, blah blah”. The proposal is never costed but always described as affordable and “there’ll be no tax increases to pay for this…blah, blah, blah”.

The extra police need somewhere to work – so we need more police stations. They need vehicles to respond to incidents and do their follow-up interviews etc. So we’ll need to buy more cars for them as well. So we’ve already locked-in some infrastructure commitments just bydeciding to employ more police. Well, Well, of course, the extra police are successful in arresting more suspects – that’s what you’ve employed them to do. These additional suspects need to be brought to justice. That means more appearances before magistrates and judges. But to get there they first must have legal representation and also more prosecutors – so the Director of Public Prosecutions needs more staff and most likely also needs more offices and support facilities. So a second infrastructure impact is becoming evident. The successful arrest and presentation of suspects before the courts could mean the need to appoint more magistrates and judges to deal with the increased number of cases, which in turn could mean the need for additional court rooms and related holding cells for the suspects. So we now have a third potential commitment for additional infrastructure.

But wait – there’s more…. Read More →