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Restoring Sydney's Mojo

Tuesday, November 1, 2011 - 13:13

Nick Greiner is charged with fixing NSW's infrastructure mess. He describes his plans to Tom Skotnicki.

Former NSW premier Nick Greiner admits Melbourne has dramatically outperformed Sydney for the past decade on infrastructure and growth. The yawning gap between the cities in the early 1990s has narrowed greatly. And in his new role as chairman of Infrastructure NSW, Greiner is calling for a substantial infusion of private sector funding and the sale of state assets, including electricity, to invest in new infrastructure and restore Sydney's "mojo".

Greiner could be described as the accidental politician. He said as a politician he made a fine businessman. "I am not a career politician, I was always a businessman who ended up in politics," he told Mt.

Within three years of entering politics at 33, the Harvard Business School graduate was elected opposition leader. Five years later, in 1988, he became premier of Australia's most populous state. In 1992, he resigned after a decision by the Independent Commission Against Corruption (ICAC) regarding his offer of a government post to an independent parliamentarian. The ICAC decision was subsequently found on appeal to have been wrong in law and it was determined to have exceeded its jurisdiction.

One of his proudest moments came in 1987 when in opposition he outlined his plans for road development in Sydney. His plans were reliant on private funding working with government. It was one of the first explicit plans for public-private partnership (PPP) in Australia.

"I should not dub myself as the father of PPP in Australia. But if you look at the private toll roads, the M4 and the M5, they were certainly created in the time of my government and I was certainly the driving force trying to find new ways to fund infrastructure."

As NSW's new infrastructure supremo, his first responsibilities will be the creation of Australia's largest convention centre on the site of the Sydney Entertainment Centre, the development of the North West Rail Link from Rouse Hill to Epping, the duplication of one of the major roadways (yet to be identified) and a feasibility study on the extension of Sydney's light rail.

Convention Centre

The new authority's first task will be the convention centre, set to be the largest in Australia and expected to be operational by 2016. Greiner admits the decision to place Infrastructure NSW in charge is a major vote of confidence on the part of the new government.

"The idea of Infrastructure NSW is not to be a whole new layer of government ... it is designed [for] complex projects. This is a one-off, governments don't deliver too many convention centres, perhaps one in 50 years."

Greiner described it as a vote for the model of heavy private sector involvement and a minimum of government involvement. "We want the market to tell us what is needed."

The government felt Sydney was missing out on the convention market not just within Australia but the Asian region because of the limitations of its existing convention facilities.

"Sydney in many ways has lost its mojo as the major international city in the Asia Pacific region," Greiner admitted. "We were losing market share (to other states and cities in the region) and not getting the biggest exhibitions."

He said the government would like the centre completed in its current term but it "was more important to get it right".

Greiner said there were already five consortia being formed with plans for the convention centre and the next 12 months would be crucial in determining the structure of the project. He said it would be the catalyst for the revitalisation of the entire precinct right up to the University of Technology.

The convention centre project will be chaired by a PPP expert from Victoria (who Greiner was unwilling to name). Others represented will be Infrastructure NSW, the NSW Department of Planning and NSW Treasury as well as the Sydney Harbour Foreshore Authority which is the landlord. "It is a whole-of-government approach, although it will be privately funded.

"Infrastructure NSW is responsible to the premier (Barry O'Farrell) … and dare I say it, the premier is being courageous because he wants to be the 'infrastructure premier'."

Poles and Wires

Greiner said the role of Infrastructure NSW was different to Infrastructure Australia because it would not be setting priorities. This will be a matter for government. However, Infrastructure NSW will make its views known through submissions on specific federal project proposals and submissions to bodies such as the current Justice Brian Tamberlin inquiry into the possible privatisation of the NSW electricity.

He said the submission did not say whether the poles and wires should be sold. "However, my personal views are well known, if you want to move the needle of infrastructure in NSW then you must have a means of funding that goes beyond operating surpluses and debt borrowing. If what you are relying on is how much money you have and how much you can borrow then you won't get the infrastructure you want. You will get more of what we've had. Therefore I have said I think asset sales are part of creating a new infrastructure generation in the state.

"The reason Victoria has done so much better than NSW is because they made that decision 20 years ago [to sell assets] and it is clear that poles and wires are the most saleable assets."

Development Danger

Greiner argues it is easy for major developments to financially destroy governments. He frequently makes reference to the almost $500 million spent by the previous NSW government on the CBD Metro project which he claimed had no result. "It made us a laughing stock internationally. It was almost certainly a world record, spending half a billion dollars on a project with no outcome. It should have been obvious that Sydney did not have the density for a large-scale metro system."

Greiner said the North West Rail Link would be a massive project and "you don't want it to eat the government". He said many of the issues that need to be resolved deal with scope and timing of the project to ensure it could be managed within the government's budgetary constraints.

The key decisions include the type of trains, station locations, how quickly it is built and how it will be financed. "From operation to design, it's all on the table," Greiner said.

Sydney-Centric

Greiner is not reluctant to claim that what is good for Sydney is good for Australia. "And my counterpart at Infrastructure Australia, Sir Ron Eddington, has said that as well." He claims it has nothing to do with silly interstate rivalry. Greiner claims it is simple mathematics. "Roughly, NSW represents one third of the population and economic activity in Australia while Sydney is our largest and most global city.

"So if it fails, as it has done egregiously over the past decade, then it affects Australia. If Sydney fails, for Australia to succeed is mathematically impossible.

"Is infrastructure in Sydney of automatic importance for the nation, of course not, but getting it right is of importance to NSW and the nation."

Politics of Infrastructure

Greiner said it was essential to ensure there was a context for projects and that they were part of a unified strategy. "This is an essential aspect of ensuring the benefits exceed the costs and that projects have flow-on benefits.

"There is a natural tendency to focus on projects. Politicians like projects, the media likes projects, construction companies like projects. Everyone likes projects, but projects are the outcome - what comes first is an agreed view on population assumptions, where people live and where they work and what you need for the city and the country before you build. Part of our job is to hold the politicians back whether they be in Macquarie Street, in council chambers or in Canberra before they say 'you beaut, let's build something'."

International Interest

Greiner said he was unconcerned by the large number of resource-related infrastructure competing with government projects. He said they were being funded by the mining and resource industry and not by taxpayers. "It's not a binary outcome, it's not either or."

The greater issue is with non resource-related infrastructure such as water projects, highways, railways, health facilities and schools. He said unless government tapped into private equity funding, the capacity to finance infrastructure would not be there. One source of private funding will be the super funds, but Greiner said he was detecting interest from around the world.

"There are companies all over the globe that are keen to get into construction in Australia and in my first three months in this role I have had meetings with construction and infrastructure companies from Scandinavia, Spain, Italy, France, China, Japan and the UK and there might have been others."

As a former chairman of the local arm of one of the world's largest civil engineering groups, Bilfinger Berger Australia, he said one of the major problems confronting infrastructure developers was a skills shortage. He said the world downturn meant it was a good time for construction in Australia.

"There is a willingness to invest and put resources into Australia but there is an absence of a pipeline of projects that would justify that investment," he added.

High-Speed Interest

The current feasibility study being undertaken into an east coast high-speed rail project is unlikely to lead to any short-term decision, according to Greiner. He said while Infrastructure NSW would ensure it does nothing to obstruct the project, he personally doubts it will proceed.

He said after first being involved in the proposal as premier in 1988-89 and having followed it when it was raised again during the Howard years he is naturally sceptical. He doubts the economics will stack up and that any of the proposed sites on the HSR (high speed rail) would be suitable for a second Sydney airport.

The CEO of Infrastructure Australia Michael Deegan said he had no doubt Greiner was a very good appointment. "It is no coincidence that the NSW Government has adopted a similar model to ours," he said.

"Make no mistake, Nick is a breath of fresh air."

The Profit Motive

The history of private road and infrastructure developments in Sydney has seen investors make profits and losses on projects. Greiner said from the taxpayer's view, the only thing that counted was the quality of the outcome.

"We need a 'full court press' on infrastructure and we should not worry about who owns it or operates it but what results are being provided. If we had not had private investment then Australia's road system would have been a lot worse as would our electrical system, water plants, hospitals and jails.

"The private sector is not the answer but it is part of the answer. This is not part of some ideological Thatcherite obsession."

He said people needed to be more realistic about infrastructure. "Governments do not have the operating surplus to fund projects, there is no support for higher debt levels, and asset sales are unpopular. It is a magic pudding approach to the issue.

"Governments in Australia are not within a bull's roar of meeting the requirement for dramatically improved infrastructure."

Greiner said the whole world was struggling with sovereign debt. "The people of this generation and often the next generation have to pay for infrastructure, it does not come from heaven so of course at some stage there is a price to pay but we are talking about who pays and when.

"The people of Greece today are paying because they just let the government do it.

"The argument about profit and efficiency - there is no argument - projects run by the private sector are far more likely to come in on budget and on time than the public sector because the incentives are different. Some people have ideological concerns about the issues but it is the results that matter. The Harbour Bridge toll goes to government whereas the tunnel toll goes to the private sector but as a commuter what I worry about is the quality of my trip to work."

After years of stagnation it is to be seen whether the O'Farrell Government aided by Greiner and his team can in NSW achieve the sort of transformation that saw Melbourne regain its "mojo" and rival Sydney in so many areas of economic and cultural life.