Value for all that money

April 11, 2012

Unnecessarily complicated ... the Lane Cove Tunnel project.

Unnecessarily complicated ... the Lane Cove Tunnel project. Photo: Wade Laube

EDITORIAL

VOTERS in NSW will be surprised to learn that according to new research, successive state governments - Labor and Coalition - have steadily been spending record amounts of the state's wealth on infrastructure projects. As we reported yesterday, spending has more than doubled in the past five years, and during the decade to 2010-11, spending increased by 12 per cent a year.

Voters may wonder: where, then, are the results? The authors of the two studies, one of them set up by the O'Farrell government to find out what went wrong, have an answer to that question too. Spending might have gone steadily upwards but that does not mean the money has been used efficiently. We are spending more but enjoying fewer benefits.

As Russell Ross, a Sydney University economist, said: "It's not as if a billion dollars spent on capital works actually results in a billion dollars' worth of new infrastructure." Ross's point was that the cost of planning and preliminary work was included in the overall spending figure. That is clearly true. But it is also true that under Labor, plenty of money was simply wasted. The infamous story of the CBD metro, which ended up costing taxpayers $400 million in planning and land acquisitions before it was cancelled, and in compensation for those adversely affected by the whole fiasco afterwards, is the most egregious example.

There is also the suspicion that the government fails to get value for money on some of the projects it does build. The practice of announcing the budget for a project and then calling for tenders almost invites contractors to pad out their bids. Recent cost comparisons of NSW rail projects with those in other states are startling. In 2010 dollars, for example, the 12.5 kilometres of the Epping to Chatswood line cost $193 million a kilometre. The 10-kilometre line to the airport cost $102 million a kilometre. Western Australia, meanwhile, managed to build 72 kilometres of railway linking Perth with the state's second largest city, Mandurah, for $17 million a kilometre. Now, although the last did include some tunnelling which pushes costs up markedly, the task facing WA's engineers was nothing like as complicated as either of the two NSW projects. Even so, a tenfold variation in costs looks excessive. Deciding to tunnel under the Lane Cove River for the Epping to Chatswood line, instead of building a cheaper bridge over it, added unnecessarily to the cost and difficulty of that project.

That should have been a lesson learnt. It does not, however, seem to have changed things. The ever-rising cost trend appears to be continuing with the 23-kilometre north-west rail link, estimated to cost $8 billion. In the same 2010 dollars, the O'Farrell government is expecting pay more than $330 million a kilometre for a project that contains the longest and deepest railway tunnels in Sydney. The failure to plan, and reserve easements for railway development, is now proving an exorbitantly expensive folly. Voters contemplating the enormous sums involved in rectifying omissions and mistakes will hope that Infrastructure NSW can bring some rationality to the planning of capital works, and ensure better value for this ever-increasing budget.

Flexible meets fair at work

IT'S NOT surprising that employers want to reduce the working conditions mandated by Fair Work Australia's awards. Nor is it surprising that the union movement is portraying the employers' demands as a return to Work Choices, the Howard government's unpopular workplace relations system. A fear campaign using Work Choices as a bogy is one of the few potent weapons Labor and the unions have to wield against the Coalition at the next election. The task for Fair Work Australia, though, in its present review of awards, is to steer a middle course and pick out sensible reforms from the scaremongering.

The case for paying trainees and juniors less than adult wages is probably sound. Their productivity is less, and pay should recognise that. Reducing part-time shifts to 90 minutes for junior employees will increase flexibility but it carries risks: the point is quickly reached where the pay is so small it is no longer an incentive to work.

The big four banks have already applied to end penalty rates for weekend work. Penalty rates at retailers, cafes and restaurants are also coming under review. Relatively few workers in these industries are employed under awards. Far more are covered by workplace agreements. Still, award provisions influence what workers can negotiate in agreements. The banking union has claimed that ending weekend penalties is an attempt to cut wages. That would be an effect. More important though, it would end a restraint on banks - and other employers - which inhibits them from rostering staff at unsocial times. The trouble with abolishing weekends and holidays - which is what is at issue - is that it works like the man who takes a milk crate to the football. He can stand on it and get a better view. If everyone starts bringing a milk crate, no one sees better. If one industry abolishes the weekend for its workers, it may gain more customers. If all industries do, most of those customers will be at work and the advantage disappears.

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