October 16

Political Costs Trash Public Private Infrastructure Benefits

Political Costs Trash Public Private Infrastructure Benefits

The Productivity Commission’s draft report on public infrastructure provide a variety of helpful recommendations to get projects evaluate and deliver on schedule. The report doesn’t go beyond the conclusion public-private partnerships are not a magic bullet. New research shows that private investment can make efficiency gains. However, it is best to look at what happens if the project fails.

Although this may seem counterintuitive, it is because private investors have the ability to seek bankruptcy protection, while governments can’t. This causes a distortion in their behaviour and may lead to inefficiencies. When PPPs are compare to traditional public investments, this issue is often overlook.

Private financing is use often because it is believe that it will provide the appropriate incentives for the private partner to maintain the project’s schedule and budget. This argument stems naturally from similar arguments for fixed-price contracts in conventional projects. For example, a fixed-price contract for construction provides powerful incentives to the contractor to finish on time and within budget. The argument is not valid in the context of PPP.

A PPP is not just a construction project, but a multi-decade agreement to deliver and maintain the infrastructure. We have not explored the consequences of a private partner entering the post construction phase with large debts. What effect will this debt have on performance reliability over the 25-30 year period of a typical concession?

This question was the basis of the two research papers Matthew Ryan and I co-authored. The government has real potential to manipulate the private sector by borrowing large amounts from its partners to pay for construction costs.

Private Public Borrowings

PPPs usually combine construction with ongoing operation and maintenance in a single long-term contract. Private investors are require to raise funds for all phases of construction. Sometimes, the government doesn’t have to pay until the road is complete and meets pre-specify performance standards.

It may take many years before the project can make a profit if it’s fund through the collection of tolls. This model was use in the Cross City Tunnel, Sydney, and the Airport Link and Clem7 Tunnels, Brisbane. All these projects ran into financial difficulties.

It is the idea of transferring the cost and risk to governments to a private partner. However, despite how appealing this may seem, there is no way to transfer the risk. Construction typically privately fund in a PPP. This means that the private partner will have to service significant amounts of debt after the completion of construction.

To Force The Government To Do What You Want

If the demand is lower than anticipate and the project is paid by tolls the private partner could default on its loans. In this case, its bankers may try to renegotiate with the government. Because the political cost of renegotiating and reassigning the contract is high, the government will likely be more open to making a transfer payment in order to keep the private partner financially viable.

The transfer does not have to be a payment. This could include allowing an increase or prolonging the contract. Private financing, in other words, exposes the government’s ability to bail out the private partner when it is under financial strain. The private partner can exert some control over the transfer by strategically choosing the level of its debt.

Other countries have recognized the negative effects of renegotiating contracts on efficiency. Some of them have made specific arrangements for arbitration.

These long-term contracts will reduce efficiency because liability is not unlimited. Because the private partner’s efforts at cost containment and its handling of debt can impact its default probability and the amount it can get from the government, this is called the private partner effect.

Split The Bill Public

This distortion could be neutralize by public financing. Construction and maintenance do not have to be paid separately just because they are combine. Construction could be fund by the government.

The government would pay the total amount to the winning bidder, while all construction costs could be invoice. The remaining balance would paid in regular service payments throughout the term of the contract.

This would eliminate the need for the private partner take on significant debt. However, even with low debt, financial problems could still arise if the costs are too high. But, there are small guarantees and minimal equity participation requirements that could reduce hold-up risk.

This problem could be address by requiring minimum equity or guarantees that are much higher than the current requirements.

A closer examination of the relative merits and disadvantages of private and public financing of PPP projects is need. Our research shows that there efficiency issues hidden in PPP projects. These are mention in the Productivity Commission draft report but not fully understood. This is why the debate about infrastructure funding seems to have missed them.

October 16

Work Exposed To Cancer-Causing Agents Deserve Compensation

Work Exposed To Cancer-Causing Agents Deserve Compensation

Contrary to workplace accidents, which can be quickly assess and compensate for, work related cancers can take many years or even decades. It is clear that some workers have been diagnose with cancer after being expose to asbestos in the past. This happened even before the connection between cancer and exposure was clear, as with early asbestos miners.

Modern occupational safety and health legislation in Australia has been in place since the 1970s. We gathered data from Safework Australia over the period of 12 years, to calculate the cost of cancer at work. Today’s report shows that 4,745 Australians paid compensation for cancer that was at least partially cause by occupational exposure. Over the twelve years, this amount was A$360 millions.

Two of the most expensive items were sun exposure and skin cancer. 53 percent of claims were related to Neoplasams, another term that refers to skin cancers of any kind. 15% of funds paid to people with skin cancers cause by outdoor work. Another was asbestos: About three-quarters (or A$360 million) of that amount has paid to mesothelioma patients.

These numbers seem huge until you consider that approximately 5,000 cancer cases per year (roughly 4,400 of which are men) result from occupational exposure. This means that less than 10% of cancer cases linked to work exposures are eligible for compensation.

Why Is There So Little Work Compensation?

There are clear causes for some cancers but not all. Mesothelioma is, for example, unambiguously linked to asbestos exposure. Lung cancer can be cause either by smoking or by exposures like silica at work, formaldehyde, asbestos, and second-hand smoke at home. There are likely to be two more cases of mesothelioma cause by asbestos. Workers who have been expose to cancer-causing agents in the workplace may not be eligible for compensation.

Sometimes occupational exposures can also occur outside of work, such as sunburns. However, compensation should be provide if the injury was work-relate. The PE teacher, who is also a surfer and cricketer, can still claim compensation for her squamous cells carcinoma. She has been a PE teacher for 15 years and she did not wear sunscreen or a hat.

Chemical Exposures

When considering this issue, there are chemical exposures that are specific to certain industries. Some workplaces in Australia are expose to benzene, formaldehyde, and nitrosamines which are all known carcinogens.

Diesel is another example. A recent study found that almost 14% of Australians were expose to diesel exhaust. Nearly 2% were expose to high levels of diesel exhaust in their current jobs.

Truckie who spends 50 hours per week in the cabin, inhaling the exhaust from his own truck and the traffic around it, is increasing his risk of developing lung cancer. The underground miner who uses diesel-driven equipment to mine, especially in tight spaces, is also at risk.

Emission-reduction technology can help. Transport workers from the past should be aware that their previous exposure could contribute to future lung cancer. This risk is much greater than for routine commuters.

Plumbers, plumbers and metal workers who are exposed to lead and electricians who are exposed to cadmium as well as farmers and gardeners who are exposed to glyphosate should all be protected. It would be more beneficial to look for other substances that can perform the same function.

Prevention Of Work-Related Cancers

We’ve made steady progress in prevention. We’ve been talking about SunSmart for over 30 years and asbestos has been banned for many decades. In both cases, we’re not out of the woods.

There is no way to know how much asbestos exists in Australian homes and buildings, both public and private. Construction, maintenance, renovation, or refit workers lack confidence in the ability to identify asbestos. They don’t have a diagram that shows where it might be found in the work they do.

There are still many employers that have employees who work outdoors and do not have sun protection policies. We need a better way to find the cause and to compensate those who have been diagnosed with cancers.

We must improve working conditions for the future and present generations to reduce exposure to cancer-causing agents. Employers need to be aware of the risks in their industry. If that is not possible, they should find other ways to address the problem.

Others also have an important role to play. Regulators must keep up-to-date with the latest evidence regarding cancer-causing agents. It is a good idea to brush up your work history and record skills for doctors who diagnose cancer. Workers must also play their part in following safety and health procedures. We can prevent the worst form of cancer.

October 16

Roads Users Must Pay, Sooner Rather Than Later

Roads Users Must Pay, Sooner Rather Than Later

Australia has adopted the idea that motorists should pay for their roads beyond tolls and fuel excise fees. The idea of a user-pays system could replace the existing fees with charges that are based on motorists actual road use. The use of new technologies could allow for different charges during peak periods, similar to how we pay for electricity or telecommunications.

It’s now, according to the Henry Tax Review, Harper Competition Review and the Productivity Commission’s Public Infrastructure Inquiry. However, politicians aren’t certain it will pass the pub-test with voters.

To reduce congestion and increase productivity in the future, a user-pays system will be necessary. It is important that we have a discussion about how and not if we implement a road user pay system. There is a good chance that political debates will end up dragging the user-pays concept down the rabbit hole before it begins.

Can It Pass Roads The Pub Test?

A user-pays system for roads is not something that any politician wants to do. While the jury isn’t yet out on whether motorists support user-pays, current fuel excise impacts those who can least afford it. A user-pays system that is well designed would be more fair. Road users would be able to see exactly what they are getting for their money. A debate about transport reform is not possible. The debate on user-pays should cover:

  • Road-related revenue from construction and maintenance: Hypothecation earmarking
  • Our existing transport infrastructure can be made efficient or sweated
  • There are many ways to enable intermodal freight movement
  • Public-private partnerships are used to maximize capital availability and increase infrastructure spending
  • Effective approaches to competitive tendering in infrastructure projects
  • Changes to existing fuel excise
  • There are effective ways to reduce the impact of user-pays for those who cannot afford it.

Infrastructure improvements can provide new opportunities to capture the added value of nearby properties

Better Ways To Finance Public Transport Roads

It will be a heated debate. Business-as-usual only leads to increased congestion in cities, lower productivity, and ultimately a decrease in our standard of life. Without a user-pays system, it will be difficult to implement necessary reforms https://qqonline.bet/.

Pricing And Charging Are Two Different Things

Pricing and charging are two important topics that must be addressed separately. First, it is necessary to recognize the price, which is the price consumers will pay to use roads, relative to the costs involved in funding, construction, and maintenance. A second requirement is to allow users to pay for actual use of roads, where the price is reflected in the charge.

The main issue in the political debate will be about charging. However, pricing will be the most important reform. Although voters already pay for roads, they don’t know how much or what the contribution will be to actual road use.

We can only guess how to prioritize road construction and maintenance without accurate pricing. Without such market information, building more roads won’t address the root causes.

A per-kilometre charge is popular, but accurate pricing would result in different charges depending on the demand. It may be necessary to combine congestion and per-kilometre charging. Charges should be adjust to reflect the amount motorists are willing to pay in different situations. As the cost of commuters becomes more transparent, a broad user-pays system may encourage flexible work practices.

There are many issues. One is that the Australian Motoring Enthusiasts Party opposes any user-charges on existing roads. However, road pricing might make it more fair for motorists living in rural areas.

The Money To Buy Another GST Birthday Cake

Road pricing could prove to be as challenging, if not harder than the GST. It took over 30 years for this to happen. We can’t afford to wait so long. The Coalition’s Fightback! is 650 pages long! Fightback! was the longest political suicide note in human history. Fightback! was implement more than 20 years later. Fightback! has successfully implement.

The GST debate was, however, simpler than the road user-pays discussion. John Howard was able to get the support of the States in introducing the GST. Road pricing will require the States to get back on board, but only in an area that is within their constitutional rights.

Tony Abbott, Prime Minister of Australia, has not had a good relationship with Victoria and Queensland. Transport reform is a key issue at all levels of government. It is easy to see why politicians are concerned about a backlash from voters over transport reform.

Reform Will Be Hamper By Media Snark Roads

Even worse, transport reform will be harder to explain in media-grabbing quips than the GST’s impact on birthday cakes. History suggests that transport reform could put on hold for many years by another birthday cake incident.

Our politicians cannot take all the responsibility. It is vital to have a thoughtful debate and large-scale support from the community for reform. If this is not done, the implementation of GST will look like a cakewalk. In the meantime, regardless of whether user-pays occurs now or in future, the longer that we wait, we will pay more.