Categories
Local Government

Building our Regions

The Queensland Government has replaced the former government’s Royalties for Regions program with its own  200 million ‘Building our Regions’ Program and is calling for applications from local councils.  See:

http://www.statedevelopment.qld.gov.au/regional-development/building-our-regions.html

A commendable aspect is the requirement to provide a cost benefit analysis on applications for funding over $500,000.  Application for amounts below that will still be subject to a benefit analysis.

There are pros and cons with this type of handout – are projects genuinely additional, will co-contributions be effective, is effective, long term infrastructure planning distorted?

However, it can hardly be argued local councils are drowning in funds to invest in infrastructure.

Recognising the Government is looking for shovel-ready projects, applications close 11 September.

Categories
Lytton Advisory

Quarterly Newsletter – June 2015

Now available at:

https://lyttonadvisory.com.au/media/

Categories
Infrastructure

A Bridge to Sell

Unknown Recently at the Warren Centre (http://thewarrencentre.org.au/ip30-panel-investigates-the-infrastructure-governance-opportunity/) there was some commentary around the cost of duplicating Brisbane’s Gateway Motorway Bridge.  Namely, between the original and the duplicate, costs increased fivefold.  On the surface that would be a stunning thing.  However, when we consider 24 intervening years (1986-2010) between the costings for the two projects, we are looking at an annualised increase in costs of 6.9%.  This is still significant when inflation only increased 3.4%p.a. over the same period.  I know there are construction price indices around as well.  However, I wonder whether design and materials were significantly different, and the connecting road infrastructure was more challenging. That might explain some of the residual increase.  Also, the duplicate would have been constructed in a much tighter market for engineering and construction services.  Should we have bought the extra lanes way back in 1986 or would the opportunity cost have been too large?

Categories
Higher Education

ROI on degrees

As we head towards $100,000 university degrees, the investment decision becomes increasingly critical.  No longer is an undergraduate degree simply three or four years in a person’s life.  Large debts are going to be attached.  So will the expected increase in lifetime earnings offset this?

It is hard to say because there are a lot of factors at play.  However doing an economics degree still looks like a good return on investment for school leavers:

http://thenewdaily.com.au/money/2015/04/15/uni-degrees-best-roi/

Categories
Economics

Q and A

At Lytton Advisory we say that providing commercially oriented economic solutions is all about ‘where infrastructure meets money’. In this Q and A, Lytton Advisory Principal Craig Lawrence explains what this means.

Q: So who are economists and what do they do?

A: Economists working with Lytton Advisory are typically postgraduate qualified professionals. We study, develop, and apply theories and concepts from applied microeconomics and write about economic policy. We study the firm and how its commercial operation affects its financial performance, as well as how groups of firms within an industry compete against one another, and how an industry meets the needs of a market.

Q: How does that relate to the development of infrastructure?

A: Because benefits are spread out over a long time and across a wide range of stakeholders. If all the benefits and costs were accrued in one year we could easily see whether the infrastructure was delivering and how risk was defined.

Q: Is it ever that simple?

A: No. Large capital costs of investing in economic infrastructure are recouped through small amounts of use by large numbers of stakeholders over a long period of time. Economic analysis helps identify where the risks are in building and operating infrastructure, ensuring risk is properly attributed to those best able to handle it. Invariably there are also significant social and environmental impacts that need to be considered.

So we help figure out:

  1. Why specific economic and social infrastructure is required and how users may benefit
  2. What infrastructure can cost to build, operate and maintain
  3. How external factors such as exchange rates, interest rates and technology impact on infrastructure project economics
  4. Whether infrastructure provides a sufficient rate of return to its owners, governing authorities and the wider community, as well as identifying in what form that return occurs – financial, economic, social, or environmental
  5. Who is best placed to bear the various risks around building and financing infrastructure

Q: When do you get involved in an infrastructure project?

A: We provide front-end advice and clarity before anybody even starts building; we do mid-project evaluation to ensure that the project remains commercially and economically valid; and we do post-project evaluation to ensure that infrastructure continues to deliver the right results.