PARLIAMENT HOUSE, Canberra: I want to express my absolute alarm over an action that the Victorian government is considering taking, and that is annulling the compensation payable if they breach the East West contract and doing that through a legislative instrument. This is an extraordinary proposition. Even the discussion of this proposal to legislate away the compensation payable is causing the business community to be concerned about future investment in Victoria.
If the Andrews government goes ahead and puts this legislation through the parliament, it would put Victoria back to the Cain-Kirner era of governance and make every investment in Victoria more risky and, consequently, more expensive for every future investment project. What does this mean? This means ultimately fewer investments in Victoria and fewer jobs for Victoria.
Victoria as a state already has to deal with the most militant unions in the country, causing some global companies to literally boycott doing any construction in the state of Victoria. If Premier Andrews legislates to annul contractual rights, he will be trashing Victoria’s reputation and the impacts will reverberate across Australia. How did we get to this position? I would like to give you a bit of context. This is not a new initiative. It has not even been a partisan initiative.
For almost nine years, both parties in Victoria have encouraged it, facilitated it or actively supported it, until only a few months ago. When you look at some of the history, for example, you see that it was initially put on the table by the Victorian Labor government when they commissioned the Eddington report in March 2006, almost nine years ago to the day. In 2008, the important Eddington report was tabled and it made 20 recommendations. There were two very significant infrastructure recommendations, one of which was, of course, an 18-kilometre road connection, including tunnels, linking the Eastern Freeway with Footscray, CityLink and the Western Ring Road—that is, the East West Link as we know it today. In that report, Sir Rod Eddington made some very decisive comments. He said:
The evidence is clear: doing nothing is not an option.
The evidence is also clear that failing to take action will undermine Melbourne’s future prosperity and reduce the benefits being generated by the city’s growth and development.
Premier John Brumby responded to that report in August 2008. He said:
One way or another we’ve got to address this issue of a second east-west crossing and one way or another we’ve got to build capacity on the public transport system.
The Victorian Labor government at that time commissioned the report themselves, which recommended the East West Link. The Labor Premier at the time, Mr Brumby, had actively supported the proposal. Julia Gillard herself, an emerging leader, said that:
There are a range of possible options but I think everyone is recognising that something needs to be done to deal with traffic congestion from the west of Melbourne into the city.
The AWU at the time, which was led by the now Leader of the Opposition, actually said something in 2008. He would no doubt recall, sitting opposite me now, that it said:
The Australian Workers Union (AWU) believes that the new east-west link is crucial to jobs and economic growth. A new transport link from Melbourne’s booming west to the south east and eastern suburbs has the AWU’s strong support because the Victorian economy relies on the efficient movement of freight and people.
In fact, it actually went further than that in that. It makes comments about people who were opposing this. It said in that submission, back in 2008 when Bill Shorten was the leader of the AWU:
Opponents may prefer a declining population as the best means of dealing with congestion and the challenges of growth as their children leave the state to search for better jobs and migrants choose other destinations. However, such a proposition would never be supported by the AWU. Better solutions are at hand.
That solution that was at hand then, as it is today, was the East West Link project.
We are now in this situation and Daniel Andrews now has a choice. There are three options available to him.
Now that the Prime Minister has arrived, I seek leave to continue my remarks later.
Leave granted; debate adjourned.
I rise to continue the discussion which I had begun to outline before we had two very moving speeches from the Prime Minister and the opposition leader to mark the tragedy which occurred a year ago today. I also acknowledge that and the people who have been here in the gallery and add my respects as well.
I was in the process of discussing the context in which we now have a situation where the Victorian government is seriously considering legislating to remove compensation that would be payable if they tore up the East West Link contracts. I was pointing out that this East West Link idea has been on the table now for almost nine years, since the commissioning of the Eddington report, the tabling of that report and the warm endorsement that the key recommendations got, of which the East West Link was one. Following that, the Baillieu and Napthine governments put money towards the planning, development and, subsequently, contracting of it.
There was then a change in government and we are now in the position today where the Daniel Andrews Labor government is threatening to take the action I have outlined. The Andrews government, given the context, has three options available to it. The first option is that Mr Andrews could honour the contract that was signed by the Victorian government. This is the most sensible course of action and it perfectly aligns with the firm commitments that he gave pre-election. The pre-election commitment he gave was, ‘Sovereign risk is sovereign risk. A contract is a contract.’ This was said by Daniel Andrews on 13 August 2014.
The member for Chisholm may want to listen to what he said pre-election. He said:
“A responsible government—a government that actually values our state’s reputation and good name—doesn’t rip up contracts.”
That is what Daniel Andrews said pre-election. He made a firm commitment to the Australian people that he would not rip up contracts. Tim Pallas, the then shadow Treasurer, said similar things.
It is the standard way that governments operate. Regardless of what a government might think of a contract made by the previous government, it is the strong convention that contracts are honoured. That is the strong convention. People know that. Daniel Andrews knew that. Bill Shorten knows that. He has said so himself. Chris Bowen knows that. He has said so himself. No doubt even the member for Chisholm, who has been interjecting—and I would have thought her constituents would support this project—acknowledges that the standard convention in a country like Australia is that if a contract is signed by the government of the day it is a contract which is honoured even if there is a change of government subsequently.
If Mr Andrews does go ahead and honour the contract and build the road he will have overwhelming support from Victorians. Every single poll has indicated that. By honouring the contract, the road would be built. That would mean 7,000 jobs. It would mean a road that would finally link the Eastern Freeway to the Western Ring Road and the Tullamarine Freeway. It would take pressure off the Monash in the process.
The roads in Melbourne are not getting less congested. In fact, our population is growing very rapidly. It is growing by something like 100,000 people per year. The projections are that by 2030 there will be twice as many heavy vehicles on the road as there are today. So this is a project that is not just for today; it is to build for the future as well. We know what the population projections are. We know what the heavy vehicle projections are. People are not going to be riding their bicycles, as Daniel Andrews might suggest, to and from Ringwood or Wantirna or the member for McEwen’s electorate. They are still going to be relying upon their cars and increasingly public transport as well to get around.
That is the first option—to actually honour the contract. His second option is to breach the contract and pay the compensation for this breach.
Again, this option is a poor one, because the compensation itself will come to something like $1.2 billion. That has to be kept in mind, because the overall state contribution was only ever going to be $1.5 billion. It would seem bordering on insanity to throw $1.2 billion on the scrap heap in compensation when for $1.5 billion he could get the road built, 7,000 jobs created and a piece of infrastructure which will last for absolute decades.
The final option is the one that is under active consideration now and that I have mentioned—that is, to legislate away any compensation payable for breaching the contract. This is the catastrophic option for Victoria and Australia. It would mean, as I said at the outset, uncertainty for every single infrastructure project agreed to in the future. Uncertainty leads to higher costs as companies factor in risk premiums. In some cases, businesses will just not bid, because they believe it not worth their while. One national company CEO has already mentioned to me that his global board will not fund projects in Victoria, because of the risk of industrial militancy. This proposal would just add to that risk in Victoria.
The principle of honouring contacts, or having certainty about compensatory clauses if contracts are breached, goes to the heart of what makes countries wealthy. Every single developmental economist will tell you this. They say that two key ingredients absolutely underpin economic growth: one is property rights, and the other is enforceable contracts. Those two preconditions are so important and one of the reasons that developed countries are wealthy today.
It is very rare for infrastructure projects to be cancelled in First World countries. It is even rarer in democracies for a contract to be retrospectively annulled by a legislative instrument. It is, unfortunately, not uncommon in developing countries. The World Bank, in a report that they have produced, notes that this does occur much more often in developing countries. Many of those developing countries are struggling with their economic growth, in part because they cannot rely upon contracts which have been signed and cannot rely that they will be delivered upon. We do not want to join with those developing countries. We should honour contracts that are signed and we should get on with actually delivering them, and that is what Daniel Andrews should do.
Let me finish by mentioning the position of the Leader of the Opposition, Bill Shorten. Mr Shorten today is being a brother in arms with Daniel Andrews in threatening to destroy Victoria’s sovereign risk profile. He did not always have that position, by the way. When he was the AWU leader, he strongly supported the East West Link. He said that it was absolutely vitally important for the economic growth of our state. He also said that when he was a member of parliament—along with many other members of parliament, including Julia Gillard, expressing their very strong support for the East West Link project. Even as recently as 2014 it was mentioned by Chris Bowen, the shadow Treasurer. He said:
Bill Shorten and I are of one mind, Labor honours contracts. Labor in Government honours contracts entered into by previous governments. Even if we don’t like them for issues of sovereign risk Labor honours contracts in office signed by previous governments.
That was Chris Bowen on 11 September 2014. We are now in the position, though, unfortunately, where Bill Shorten has been asked at least five times whether he supports Daniel Andrews’ proposals to tear up the contact and potentially legislate to remove any compensation. He is just squibbing it now. He is squibbing it. He should stand up for Victorians, and he should stand up for what he has said in the past—that is, honouring contracts and building the East West Link, because that is the best course of action for Victorians.