David Havyatt
March 4, 2016

Infrastructure Aust urges NBN push

Infrastructure Aust urges NBN push

Christopher Pyne: Responsible for drafting next National Digital Economy Strategy

In the latest Australian Infrastructure Plan it was easy to be distracted by its recommendations on privatising assets, including the NBN. It wasn’t the only reference in the plan.

One of the plan’s recommendations was for government to make sure the maximum value is extracted from infrastructure.

Recommendation 1.7: Governments should increase funding for investments in projects and technologies that make better use of existing infrastructure. Australia can extract more from existing infrastructure networks through smarter operation, maximising their productive capacity and delaying the need for large-scale investments.

A good example of how this can be done is the work that NICTA used to do on port infrastructure, and how port movements could be increased through the application of information technology rather than just new roads or rail lines.

In the text leading up to the recommendation the NBN was singled out, noting the National Broadband Network “represents a major investment by the Australian Government in the future capacity of the nation’s telecommunications networks.” The report said “Governments at all levels should leverage this investment to deliver greater productivity.”

This was expanded on later with Infrastructure Australia saying “We should ensure we realise the full suite of benefits for cities and regions made possible by the delivery of the NBN.”

Calling the rollout of the “hard infrastructure” only half the story, the entry of the NBN should be met by initiatives that ensure businesses and individuals take advantage of this transformational investment. This led to an additional recommendation.

Recommendation 3.6: The Australian Government should work with communities and business to maximise opportunities created by the National Broadband Network. This will boost productivity and increase the efficiency of services and infrastructure. Government should lead the way by increasing the delivery of government services and information online.

Infrastructure Australia advised that governments should build on work already underway, to deliver tailored toolkits, information packs and education courses to support individuals and businesses to understand and capitalise on the technological advancements made possible through access to high-speed broadband services.

The “work already underway” referred to includes all the programs developed under the National Digital Economy Strategy (NDES) and its update.

The Coalition committed to an update of the strategy in its first term, a responsibility that now rests with Christopher Pyne as Minister Industry, Innovation and Science. In making the commitment in its policy the Coalition was both critical of the NDES for focussing on the use of the NBN, but also committed to engagement with the states, territories and local government.

Both [the] 2011 and 2013 documents focus on justifying Labor’s mismanaged, costly, delayed NBN by framing it as a pre-requisite for global digital greatness.

Many of the aspirations contained in the updated NDES are outside the scope of this policy because they fall under other portfolios (for example expanding the Medicare Benefits Schedule to include remotely delivered services or changing the taxation of employee shares), are largely the responsibility of the States and Territories (for example the National Plan to Fight Cybercrime), or are both (for example adding ICT to the National Curriculum in schools)…

If elected, the Coalition will update the NDES during its first term of government. Such an update will include a greater focus on presenting an integrated view across the different tiers of government, much greater input from the States and Territories, a focus on ensuring digital policies and programs at national and State or Territory level complement rather than duplicate each other and a much clearer commitment to leveraging public sector ICT to lead by example.

Australia’s business community thinks there is still much to do; digital opinion leaders surveyed by Ernst and Young do not consider Australia to be a standout digital economy. 57 per cent rate Australia as being “less advanced” than other leading developed countries.

Mr Pyne will be representing Australia in June at the OECD Digital Economy Ministerial ‘Meeting the policy challenges of tomorrow’s digital economy.’ Australia has chosen to join in the workshop on the Internet of Things.

Given the Government’s first term ends in September, Mr Pyne should be able to explain to his OECD colleagues how Australia plans to fulfil Infrastructure Australia’s recommendation on making the most of national assets.

The Infrastructure Australia report did recommend the privatisation of the NBN in 2024. Using a simple EBITDA multiple approach prepared by PwC the expected proceeds were estimated at $26b. Given the Government equity in the project is capped at $29.5b that means the net cost to the taxpayer would be just $3.5b under that sale strategy.

The Economist in its lead editorial of 20 February warned of the inability of central bankers to do much more to stimulate what is still a sluggish global economy.

The editorial in particular highlighted the potential for a greater role for fiscal policy. It noted:

Bond markets and ratings agencies will look more kindly on the increase in public debt if there are fresh and productive assets on the other side of the balance-sheet. Above all, such assets should involve infrastructure. The case for locking in long-term funding to finance a multi-year programme to rebuild and improve tatty public roads and buildings has never been more powerful.

It is convenient sometimes to forget that the final NBN policy was crafted in the context of the GFC. That was a factor in the inability of proponent’s to the original tender to raised capital. The reason why the Communications Minister had to present the proposal to the PM on a plane rather than in an “ordinary meeting” was due to the frenetic activity to create the second stimulus package. As Wayne Swan in his memoir noted the plan was initially considered for inclusion in the February announcements.

In the long run the NBN represents a very small net investment by the Government, if any. Upfront it is a sizeable investment, though the annual equity injections have been less than Commonwealth expenditure on roads.

Developing the digital economy provides us not only a return on this investment, but also the opportunity to make better use of all infrastructure. Realising that requires Government to at least be aware of the opportunities. The full benefit will come from Government that works with other governments, business and community groups in realising them.

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