Strengthening Australia’s infrastructure

Dr Ian Watt AO, Secretary of the Department of the Prime Minister and Cabinet, delivered the following address at Global Access Partners’ National Economic Review 2011: Australia’s Annual Growth Summit on Friday 16 September 2011.

Infrastructure is a term that helpfully groups together net structures and systems that ensure a society can function well, from its telephone connections and airports to its school buildings and hospital technology. Strengthening Australia’s infrastructure has been an important priority for Australian governments for a very long period of time.

Nowadays, this goes well beyond fiscal productive capital to include the foundations of our performance as a knowledge economy, including the education and health of the Australian people. Today I’ll talk about two areas where the government is currently developing what lies beneath to strengthen the foundations of our knowledge economy.

The first one I’ll talk about will be the National Broadband Network (NBN), which is a more traditional large-scale infrastructure program with a twenty-first century focus on changing high-speed broadband to improve connections for Australians with each other and the rest of the world. Secondly, I’d like to talk about national health and hospitals’ reform, which will help Australia’s health systems to provide advances in medical technology to an ageing population.

Australia’s health system is built on values that have not only ensured its strength, but which still present enormous challenges in the coming decades. Perhaps most important is the expectation by Australians that everyone will have access to good, affordable healthcare. Of course, this means that governments will have to provide care for those who cannot pay for it themselves. It’s a commitment and an expectation that Australians take for granted. But it’s far from universal, even among other advanced economies. As someone who has spent a significant amount of time in the United States, it’s very apparent, as I’m sure you all know, that this commitment doesn’t exist in the same way in the US.

The cost to governments of making sure that everyone has access to good affordable healthcare is increasing rapidly. As our population ages, a smaller proportion of working taxpayers fund a growing proportion of older Australians in need of additional care. More importantly, we welcome advances in healthcare which make it expensive to provide the ever-increasing standard of healthcare that the Australian public expects. Without health reforms, much of this cost burden in the hospital sector falls to the state and territory governments, which have experienced growth in health spending of around 9% over the past five years prior to 2010. This is well above their average increase in revenue growth of 6% a year. This is likely to be unsustainable over time, no matter what anyone might think about state government’s ability, or otherwise, to reduce health and hospitals costs.

The National Health and Hospital reform that was agreed by the Council of Australian Governments (COAG) in July, will help prepare our health system for the increased stresses in places in the years ahead. The reforms contain three changes which I think are particularly important. Firstly, the use of activity based costing, which is a micro-economic reform that will see hospitals receive funding on the basis of a proficiency price or the number and types of services that they provide. This will provide incentives to ensure that health processes are efficient and of higher quality.

Secondly, the evolution of accountability to local hospital networks and Medicare locals. I’ve never been enamored with the thought of running hospitals from Canberra. I just don’t see how that would ever work for anyone. Thirdly, transparent reporting so that governments, local authorities, patients and their families have up-to-date information about where funding is going and how hospitals are performing. These reforms will also provide a stronger financial base for our hospital system, increasing the Commonwealth’s contribution to hospital funding to 50% of the efficient growth funding of public hospital services from 1 July 2017.

Health reform provides a good example of the importance of COAG at its best. While negotiations around health reform are slower, the result is a series of reforms that have been better thought through than otherwise would have been, and which were built with extensive input from the states and territories. In other words, they should be a series of reforms that are more workable and more implementable.

COAG is a sometimes frustrating. It’s often seen as rather a messy, unwieldy way of getting reforms through and it is, no doubt about that. But the system we have is the best way of making national progress on important issues and it does work.

Let me turn to the NBN and cyber-world. The national broadband network is a response to a predominantly Australian challenge. We are a relatively small, mobile and well educated population spread in concentrated urbanised clumps across a fairly large landscape. We have a reasonably egalitarian view of telecommunications service availability and access. It is a set of circumstances that make it especially difficult for commercial operators to provide high-speed internet that everyone can access at a politically and publicly acceptable price.

The intention of the NBN is to provide reliable, ubiquitous, high-speed broadband to all Australian premises. It will help Australia become one of the world’s leading digital economies by 2020. The NBN is the largest ever infrastructure project undertaken in Australia.

Internet technologies offer opportunities to make our businesses more efficient, our education and health systems more effective, our information more accessible, and our communities more connected. A critical benefit that the NBN will bring is to acknowledge that all Australians will have access to the technology that will make these goals possible. The NBN is partly about laying cables, but it’s also about building skills within communities so that high-speed internet is not just available in homes, but is being used effectively. Programs including the Digital Communities initiative will broaden the social impact of the NBN.

Along with the enormous opportunities offered by digital technologies, there are also new risks to government, business and citizens from their interactions online. It’s partly for this reason that the

Department of Prime Minister and Cabinet is leading the development of a Cyber White Paper which provides an analysis of the risks that will confront Australia’s online cyber users and our possible responses to them.

The theme of the Cyber White Paper is ‘connecting with confidence’. The paper will consider the roles and responsibilities of government, including how Australia will work with international partners to advance our internet security, how we will improve our assistance to businesses and to the public so everyone can benefit, and how we can make sure that we can respond rapidly and effectively to evolving threats. The Cyber White Paper will be a world first and play an important role in preparing Australia to be a leading digital economy in the future.

The instruction paper was released online yesterday. Over the coming months, the government will be consulting widely to ensure that the contents of the paper are well-informed, relevant and useful. The paper will be released in the first half of next year.

Health reform and ICT reform are two examples of an agenda striving to create the right conditions that lie beneath what is built. They are interesting because they illustrate one particular characteristic of modern infrastructure reform: they’re not projects that the Commonwealth is undertaking alone. Health reform is negotiated through a COAG process and provides a boost to Commonwealth funding, while keeping state governments involved and giving much more responsibility to new and global authorities.

The national broadband network will include long-term collaboration with Australia’s governments, businesses, health and education providers, NGOs and communities. These examples demonstrate investment in providing good infrastructure and conditions for productivity and innovation to continue to come from its national sources, businesses and communities.

Dr Ian Watt AO was appointed as Secretary of the Department of the Prime Minister and Cabinet from 5 September 2011. Previously, Dr Watt was Secretary of the Department of Defence, Secretary of the Department of Finance and Deregulation, Secretary of the Department of Communications, Information Technology and the Arts, and Deputy Secretary of the Department of the Prime Minister and Cabinet and Executive Coordinator of the Economic, Industry and Resources Policy Group. Dr Watt is the former chair of the Organisation for Economic Co-operation and Development’s (OECD’s) Working Party of Senior Budget Officials, and also the former chair of the OECD Asian Senior Budget Officials. In June 2008, Dr Watt was made an Officer of the Order of Australia.