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The following OECD assessment and recommendations summarise Chapter 4 of the Economic Survey of Australia 2006 published on 31 July 2006.
Contents
How could infrastructure service provision be improved?
Major progress has been achieved in providing a coherent framework for delivering infrastructure services, but unfinished business remains. Further reforms would raise productivity and reduce bottlenecks, including those most visible recently when many ships were forced to queue, some up to a month, to load commodity exports. The new National Reform Agenda builds on and continues the National Competition Policy reform programme, focusing on reform in the areas of energy, transport and infrastructure regulation. However, important implementation details are still to be determined, particularly in relation to electricity market reform and road and rail freight infrastructure pricing, so reform outcomes remain uncertain. Cooperation between the federal and state governments will be crucial for establishing a final programme that delivers the necessary reforms. In the light of regulatory delays relating to infrastructure development, the time taken for regulatory decisions should be closely monitored, especially where it is likely to impinge on export performance. The Council of Australian Governments has agreed that an appropriate time for such decisions should be at most six months, rather than as in some recent cases a number of years. This decision was part of a broader COAG agreement on arrangements for a simpler and consistent national approach to the economic regulation of significant infrastructure. It is important that these arrangements be implemented expeditiously, but if delays continue to be excessive then further intervention by the Commonwealth would be appropriate. The central and state governments should establish an integrated transport reform agenda within a co-operative framework covering all elements of transport. Competitive neutrality across all transport modes should be achieved; barriers to competition in individual modes be removed; and interfaces between modes enhanced. Governments should also complete all outstanding National Competition Policy electricity reforms, lifting price regulations for households and instilling stronger competition in the electricity generation sector. The level of government and private sector expenditure on infrastructure has lifted markedly, partly in response to the commodities boom. It is important that this expenditure is not pushed to a level beyond the infrastructure supply capacity of the economy as this will add to cost pressures. Furthermore, in the Australian context, the major challenge is to improve pricing and regulatory arrangements, rather than increasing the total volume of infrastructure.
Trends in infrastructure investment
Engineering construction activities, current prices, in per cent of GDP
Source: Australian Treasury; ABS (2006); Australian National Accounts: National Income, Expenditure and Product (cat. No. 5206.0) and Engineering Construction Activity, Australia (cat. No. 8762.0).
Legal barriers to entry in infrastructure services are relatively high(1)
2003
1. Indicator, higher values denote greater legal barriers to entry.
Source: Conway, P., V. Janod and G. Nicoletti (2005), “Product Market Regulation in OECD Countries: 1998 to 2003”, Economics Department Working Papers, No. 419, OECD, Paris.
The scarcity of water remains a major issue and progress in this area has been disappointingly slow. The National Water Initiative is a framework agreement between the federal and state governments which provides for further reforms and it is vital that these are pushed ahead rapidly. It aims at establishing a water market with tradable water entitlements. This is a prerequisite to better integrate the rural and urban water reform agendas and to ensure that water prices reflect the scarcity of water and of environmental amenities. To this end, cross-subsidisation of water usage between urban and rural users, and also between different types of agricultural users, should be phased out.
Index of the ability of infrastructure to support economic activity(1)
1. Global competitiveness index where the scale varies from 1: infrastructure is poorly developed, to 7: infrastructure is among the best in the world. The index combines publicly available data and the results of country surveys of business executives. The OECD aggregate is an unweighted average.
Source: World Economic Forum (2005), The Global Competitiveness Report 2005-2006, Palgrave Macmillan.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.
The complete edition of the Economic Survey of Australia 2006 is available from:
- SourceOECD for subscribing institutions and many libraries
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OLISnet, under "Publication Locator", for government officials with accounts (suscribe)
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Additional information
For further information please contat the Australia Desk at the OECD Economics Department at webmaster@oecd.org. The OECD Secretariat's report was prepared by David Turner and Vivian Koutsogeorgopoulou under the supervision of Peter Hoeller.
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