pwc.com.au prioritising and delivering infrastructure regionally to transform and leverages business...
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pwc.com.au
Prioritising and delivering infrastructure regionally to transform and leverages business activity locally
Strictly Private and Confidential
July 2012
Scott Lennon, Partner, Economics and Policy
Agenda
Regional Growth • Population and employment growth 1• Regional Growth Plans 4
Approaches for analysis & forecasting• Prioritising according to the needs 6• Target investment in key projects 8• Attracting new investment to regional areas 9
Case Studies• Bendigo as a health precinct 12• Intermodal terminals & relocating railyards from
CBD 13
• New irrigation water pipelines 14
Page
PwC
Regional Growth
PwC June 2012
Population and employment growth
1
Regional Growth
Australia has had moderate GDP growth since GFC. Forecasted GDP growth in FY13 is 3%
GDP growth is likely to be achieved by 3Ps:
• Population – facilitate new housing, new business activity and migrant settlements
• Participation – improve childcare, create working opportunities for older citizens
• Productivity – enhance road capacity, decrease red tape, consult with local businesses to fix constraints to expansion, enhance broadband speeds
Encourage local population growth & at the same time enhance infrastructure
Population growth is beneficial to regional growth as it:
• increases the size of the economy,
• expands the community’s skills base
• stimulates demand for housing, infra & services
• drives growth in investment and employment
Source: ABS 2012
1985
1990
1994
1998
2003
2007
2011
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
19.0%
20.0%
21.0%
22.0%
23.0%
24.0%
25.0%
GD
P
$ M
VIC
SFD
as
pro
poti
on
of
GD
P
Australia GDP and VIC State Final Demand (SFD)
VIC SFD as proportion of GDP (%)
PwC June 2012
Population and employment growth
2
Regional Growth
Historically, population growth rate in regional centres has significant variability eg.......
• 2006-11 Latrobe population growth was 1.3%, which is as four times growth 2001 to 2006.
• Popn growth in Bendigo & Ballarat above Victoria & national growth driven by new services & infrastructure
Source: Cat. No. 2003.0, ABS 2012
Graph 2: Compound Annual Growth Rate (CAGR) of local population, VIC and Australia
Mild
ura
Latro
be V
alley
Geelon
g
Austra
lia VIC
War
rnam
bool
Shepp
arto
n
Bendig
o
Ballar
at
0.0%
0.5%
1.0%
1.5%
2.0%
CAGR 2001-2006 CAGR 2006-2011
Strong economic growth is achievable with integrated strategy and plan
Examples include........
Greater Shepparton City Council initiated Community Engagement Strategy with more involvement in identifying areas best suited for growth & necessary accompanying infrastructure
Latrobe City Council developed a Economic Sustainability Strategy focused on continued job creation & reducing unemployment rate, economic growth & a smooth transition to a low carbon economy.
Latrobe Transition Committee recently identified opportunities to help grow and diversify the region's industry base and labour market. These include encouraging greater participation in higher education & infrastructure to support industry growth eg upgrades to the La Trobe Airport & to Sale RAAF base , Gippsland Logistics Precinct, Lurgi Heavy industry site, the Gippsland Gateway at the Warragul Station Precinct, Sale Education Precinct, redevelopment of the Latrobe Regional Hospital, Macalister Irrigation District (MID) upgrade, extension of the NBN rollout and port development options at Hastings or other sites along the Gippsland coast
PwC June 2012
Population and employment growth
3
Regional Growth
Regional Victoria to grow from 1.5m to 2.3m by 2051 (CAGR of 1.1%)
• Popn > 60 growing faster in Mildura, Latrobe, Geelong, Warrnambool, Shepparton, Bendigo & Ballarat
• Working age popn drives regional economic growth
• Ageing population will have significant influences on infrastructure and services needs e.g. health facilities
Planners should target growth industries as they invest in new facilities & employ
• Consecutive strong growth is observed in construction, retail trade and health care industry as well as arts and professional services
Graph 3: Forecasted population in key regional centres by age groups
Source: Victoria in Future 2012
0-45-9
10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-84
85 and over
0 10,000 20,000 30,000 40,000 50,000 60,000
Population 2011Population Increase by 2031
Agri,f
ores
try &
fish
ing
Mining
Manuf
actu
ring
Electri
city,
gas,
water
&waste
Const
ruct
ion
Who
lesale
trad
e
Retail
trad
e
Accom
&food
ser
vices
Tran
spor
t,pos
tal &
wareh
ousin
g
Info
rmat
ion m
edia
& telec
ommun
icatio
ns
Finan
cial &
insu
ranc
e se
rvice
s
Renta
l, hir
ing &
real
esta
te s
ervic
es
Profe
ssion
al, s
cient
ific &
tech
nical
serv
ices
Admini
stra
tive
& sup
port
serv
ices
Public
adm
inist
ratio
n & s
afet
y
Educa
tion
& train
ing
Health
car
e & s
ocial
ass
istan
ce
Arts&re
crea
tion
serv
ices
Other
ser
vices
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1996 2001 2006
Graph 4: Employment by industry
Source: Cat. No. 2003.0, ABS 2012
PwC June 2012
Regional Growth Plans
4
Regional Growth
Key initiatives: • Comprehensive land use & urban planning including infrastructure to support regional population
& jobs growth
• Assess the growth potential, land supply, employment precincts and housing needs
• Improving urban design and sustainability in growth areas consistent with Regional Strategic Plans
• Provide consistent approaches to address common issues across the regionCustomise regional growth plans reflecting local strengths & competitive advantages. Ensure plans are..
Building on strategic assets and competitive advantages to support and manage growth across the region
Integration with strategic land use and growth planning already done across the region
Identifying opportunities for enhancing regional infrastructure, to boost growth & sustain region
Close monitoring of the rate of development and land supply to facilitate sustainable regional growth
PwC
Approaches to analyse & forecast future infrastructure requirements to inform investment planning for new Regional Growth Plans
PwC June 2012
Prioritising according to the needs
6
Approaches for analysis & forecasting
Understand current service level and efficiency & identify infrastructure bottlenecks
Develop sustainable options meeting the challenges & future community needs to support business development & regional collaboration
Test potential options through socio-economics impact modelling such as Cost Benefit Analysis
Assess affordability & develop funding plan culminate into developing regional growth plan
1
2
3
4
Prioritise a growth strategy enables viable projects to be delivered with a focus on economic & infrastructure capacity in regional areas most at risk from an undersupply of resources
PwC June 2012
Prioritising according to the needs
7
Approaches for analysis & forecasting
CBA is a socio-economics impact analysis determining the feasibility & justification of an investment. It compares all the alternative options by evaluating the total life benefits vs cost
A hypothetical CBA Country town A has experienced traffic congestion. A CBA is conducted on two feasible options relative to a base case of no new infrastructure• Option 1: expanding the existing bridge from 2 to 4 lanes• Option 2: constructing a new highway bypass town AImpact Bridge upgrade Bypass
Economic Impact Analysis
Employment in town A +20 jobs (construction) +40 jobs (construction)
+5 jobs (on-going) -30 jobs (on-going)
Employment in the region +5 jobs (on-going) -10 jobs (on-going)
CBA
Time savings 800,000 hrs ($10 m) p.a. 160,000 hrs ($20 m) p.a.
Pollution/ Noise reduction 20 tonnes CO2 ($0.2 m) p.a. 50 tonnes CO2 ($0.5 m) p.a.
Vehicle operating costs $1 m p.a. $5 m p.a.
Construction costs $30 m(spread over 2 years of construction)
$60 m (spread over 3 years of construction)
Benefit Cost Ratio 2.2 1.5
Options culminate in Tradeoff decision between retailer interests & regional road user travel times. CBA & EIA assist in quantifying & evaluating this difficult tradeoff
PwC June 2012
Target investment in key projects
8
Approaches for analysis & forecasting
Establish a robust evidence based investment planning approach for guiding capital
allocation
• Pursue major projects for regional growth e.g. mines, hospitals, IMT, hotels, business parks,
warehouses etc
• Streamlining and improving planning approvals & outcomes, building capabilities & lifting
workplace productivity
• Encourage innovative projects to achieve maximise outcomes and benefits local community &
surrounding regions
Form strategic partnership with 3 levels of government & private sectors, for the
benefits of:
• Develop regional prospectus to explain strengths & growth outlook
• Support investment and infrastructure delivery via private ownership and operation
• Create economies of scale in the management of different funding sources
Delivery significant gains locally and transform into municipalities
• Create employment opportunities by enhancing labour mobility into your region
• Provides improved services and increases work participation opportunities
• Develop sustainable services and integrated infrastructure linking communities into your
region
PwC June 2012
9
Attracting new investment to regional areasTo achieve regional economic growth requires detailed analysis of a regions key attributes, industry and employment base and key advantages for SMEs considering a new base
Local solutions to local problem – For example.........10 Big Ideas in NSW Central West (NSW Business Chamber)
Idea Problem Recommendations
Foster small business growth
The region needs redevelopment and improvement in amenity infrastructure planning and implementation
• Support and improve efficiency in SMEs sector
• Support the regeneration of the retail sector through upgrades to local infrastructure
Develop a regional tourism and marketing plan
Consumer awareness of attractions beyond well recognised tourist icons is low
• Develop and market a list of attractions• Facilitate greater cooperation and
communication between tourism operator
PwC June 2012
Attracting new investment to regional areas
10
Approaches for analysis & forecasting
Embed this evidence into Regional Growth Plans setting out economic, environmental & social vision for the region including:
• articulating the drivers of change• identifying strengths, weaknesses and opportunities• listing priorities for action
Riverina regional action plan – developed based on communities participation on “Have your say” website
Vision
•Prosperous and diverse economy
•Coordinated and effective service delivery
•Quality infrastructure
Local
Prioritie
s
•Support economic growth
•Increase community participation and employment opportunities
•Integrated and coordinated human service delivery
•Improving regional infrastructure and securing water supplies
Priority Action
•Facilitate additional growth in key and value adding industries
•Support the establishment and expansion of businesses
•Reducing red tape
•Develop a regional logistics strategy
•Upgrade priority infrastructure and road to complete links with rail freight
PwC
Case Studies
• Bendigo as a health precinct
• An intermodal terminal in regional Victoria
• New irrigation water pipelines
PwC June 2012
12
Bendigo as a health precinct
• Bendigo provides access to progressive health services & collocated Uni / medical training in
Loddon-Mallee region
• A investment of $630 million to redevelop the Bendigo Hospital in a public-private partnership
(PPP)
• The construction will commence around December 2012 and expect to be completed by 2016
The direct and indirect benefit to communities:
• Able to treat an extra 10,000 patients p.a. (double its current capacity)
• First class health/medical teaching & university facilities
• New staff accommodation, ambulance facility, new mental health facility including a Youth Care
Service
• New GP Super clinic & collaborations between government, private & NGO health service
providers
• Require 735 direct construction jobs and approximate 2,000 jobs in total attracting new residents
• Additional 600+ FTE hospital jobs after commissioned (current hospital has over 3,000 jobs)
• Reduce the needs of travelling to Melbourne for treatment
• Create investment opportunities both during and post construction
Source: Newbendigohospital.org.au
PwC June 2012
13
Intermodal terminals & relocating railyards away from town centres• An IMT is a location for efficient and cost effective transfer of freight between road, rail and sea
• The demand for an IMT infrastructure in regional Victoria is driven by increasing rail’s share of the
freight demand and reducing congestion on roads
• The Department of Transport partnership with local government and private sectors are planning
IMTs at Dooen, Gippsland, Shepparton and West Warrnambool
• Railyards in town centres can demarcate CBD & retard development. Level crossings create
congestion & delays
The direct and indirect benefit to communities:
• Increase supply chain productivity and freight efficiency
• Support local government to achieve economic and social objectives
• Provide a central location for freight handling facilities & improve service delivery to regional
export industry
• Deliver potential safety and environmental benefits by shifting freight from road to rail e.g.
decrease in accident rate, road congestion & track noise
• Improved CBD amenity & connectivity leading
to more investor & tenant interest in commercial
office developments
PwC June 2012
14
New irrigation water pipelines• Wimmera Mallee Pipeline (WMPP) was funded by the Government partnership with Grampians WM
Water
• The total cost was estimated at $688 million.
• Substantial private landholder investment has followed justified by reduced risk from better water
security
• WMPP enables long-term sustainable management of water resource in Western Victoria
• The project commenced in Nov 2006 and completed in Apr 2010 within budget and on time
The direct and indirect social benefit to communities:
• >85% of water was being lost through evaporation and leakage.
• Improved current farm practices & increased tourism activity, recreational opportunities
• Enables new business and industry investment in the WM, such as intensive animal enterprises and
food packaging
• Strengthening the regional economic base and encourage diversification of agriculture, grain and
oilseed processing
• Potential environmental benefits from pipeline water saving for regional river systems, landscape
• Enhance regional sustainability from improved standard of living supporting move to higher value
agriculture
eg biofuel, lambs, beef feedlot, nuts, herbs, flowers, olives etc Source: GWM Water
