Friday, October 30, 2009

Infrastructure and planning

I must be having one of my right-wing days!

John Roskam of the IPA had a column in the AFR today (thankfully reproduced on the IPA website) that was warning us against the idea that the Federal Government was hoping to reach out from Canberra to help us plan our cities.

Now apart from the fact that I would disagree with him on the qualities of Canberra I must agree with him on the idea that city planning from Canberra would be a mistake. I am not an absolute fan of Adam Smith and Fred Hatek but they are right about the "genius" of markets in being able to transmit large amounts of information about preferences. Letting people make their own decisions can be the best policy.

But we also know there are plenty of weaknesses to that. That includes externality (we all suffer if one person puts up an ugly building), free riders problems (the public goods that are non-rival and non-excludable like roads), and the reverse problem of booms (too many people at the same time identify a need resulting in an overinvestment).

Roskam was responding to the Prime Minister's address to the Business Council of Australia annual dinner, in which he said;

The previous government vacated the field on future planning for our major cities.

More broadly, the previous government vacated the field on infrastructure per se - as this was passed off as the responsibility of the states, despite their financial and in many cases planning constraints. There was a failure of planning, a failure of coordination, a failure of investment and a failure in service delivery.

The BCA is well aware of the shortcomings in our nation's infrastructure planning and development, and this was a focus of the 2005 Infrastructure Action Plan for Future Prosperity. The Government that I lead was elected to tackle the challenge of providing national leadership for long-term infrastructure planning and investment.

and later;

Clearly, the Commonwealth should not take over state responsibilities for land planning or have a direct role in the day-to-day decisions of state and local governments.

As Minister Albanese has said, no Commonwealth Minister wants to decide development applications or where to lay sewerage pipes. But we must recognise the economic reality of the 21st century.

The national government has a clear responsibility to provide national leadership in the development of strategic planning frameworks for our largest cities. That is why, working with State and Territory governments, we established the Council of Australian Governments Cities Taskforce.

We created the Major Cities Unit within Infrastructure Australia to identify opportunities where national leadership can enhance the prosperity of our cities and the well-being of their citizens. We have also created the Australian Council of Local Government so that we can hear from, and talk to, all levels of government involved in economic development.

and then announcing;

In partnership with the States and Territories we will now propose the development of national criteria for the future strategic planning of our major cities. The first in our country's history.

And, the Commonwealth will now consider linking all future infrastructure funding to compliance with these criteria.

If the Commonwealth is to foot any significant part of the urban infrastructure bill - the Commonwealth will legitimately expect to have confidence in the integrity of the strategic planning system in our major cities.

The goal is that our cities have strong, transparent and long-term plans for growth and high-quality urban development; that our cities are productive, liveable and sustainable.

The criteria are listed in the speech. So realy all the PM was saying was that he has deviated from the policy of the previous Government by investing directly in urban infrastructure. Secondly he announced that further funding would be contingent on being satisfied that there was a robust planning process in the relevant area before committing funds.

In that regard the PM was hardly anouncing micro-planning from the Stalinist centre. In fact, uit sounded awfully like the role the BCA called for the previous Government to take on infrastructure. We don't need Government necessarily to make all the investments, we do need Government to facilitate the information exchange that doesn't always happen because markets aren't perfect.

Perhaps then we could respond to the latest paper from the Centre for Independent Studies that tells us we can solve our rail problems by introducing business class train travel.

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