Wednesday, July 28, 2010

The big projects go where the people and the votes are

YOU cant accuse Auditor-General Ian McPhee of going soft on the government. Two reports issued by his team show the government playing fast and loose with its own rules in allocating money for infrastructure projects.

Report 1, on major infrastructure projects, found the government ignored the criteria set by Infrastructure Australia, and funded projects that failed to meet its benefit/cost criteria, while ignoring others that did including the top project in bang for buck.

Report 2, on the stimulus program to fund shovel-ready local projects, found that by June, when the program was intended to end, only a quarter of the money had been spent. Instead, most was sitting in councils bank accounts.

That might be overlooked in the brawl over the distribution of funding between electorates. The auditors found that while Labor and Coalition seats as groups got roughly their fair share of funding (with a small bias towards Labor), only 18 per cent of applications from councils in Coalition-held seats were funded, as against 42 per cent of applications from councils in Labor-held seats.

The Coalition is screaming unfair, and it has a point. The audit team points out that Infrastructure Minister Anthony Albanese gave no explanation about why he chose 131 of the shortlisted applications, rejected 57 others, and waived the rules to fund six others. You can bet politics played a part.

But the reality is most applications failed, not because of the minister, but because they failed to make the departments shortlist. And a state breakdown hints at why: Victorian councils had twice the success rate of councils in South Australia, Western Australia and Tasmania, where there are many rural councils with few people. Size counts.

The real scandal uncovered by the audit team is that while the projects selected were meant to be shovel ready to provide immediate work in the 2009 downturn, few of them were. By June 30, when the program was to end, $550 million had been allocated, $438.5 million paid to councils, but only $142 million actually spent.

Why? The audit team finds many projects in fact were not shovel ready. Others were planned for a longer time period. And many involved high delivery risks, which have been realised. Most of the money is now planned to be spent in 2010-11.

The audit of Infrastructure Australia highlights a different problem. On one hand, the government pledged that project selection would be based on rigorous analysis of the costs and benefits. But on the other . . . well, infrastructure programs help to buy votes.

Infrastructure Australia found the biggest bang for buck would be delivered by Canberras eastern bypass, the Majura Parkway.

But there are no marginal seats in Canberra. So the government instead allocated $91 million towards Sydneys metro project, which had no cost-benefit analysis. Fortunately, no money was handed over before the metro died in February.

The noble intentions are being trampled in the dust. Yesterday both parties pledged $750 million or so to build Brisbanes Moreton Bay rail link another project yet to pass the benefit/cost test. Tony Abbott also pledged to build a ring road around Mackay, a winnable Labor seat. Your taxes at work, for the politicians.