KEITH CONLON: … the desal plant is back in the news and it’s because the federal Auditor-General has given it a slap. With the details, federal Liberal Senator Simon Birmingham from South Australia. Good morning, Senator.
SIMON BIRMINGHAM: Good morning, Keith. Good morning, Jane and listeners.
KEITH CONLON: How significant is this slap from the federal Auditor-General?
SIMON BIRMINGHAM: Look, it is a very significant slap, Keith. The federal Auditor-General has looked specifically at the Commonwealth funding of the desal plant which came in two tranches – $100 million for the 50-gigalitre plant and a further $228 million for the doubling of that to 100 gigalitres’ capacity – and the Auditor-General’s really been quite scathing and if I read just one really short statement from him:
‘The advice indicated that the proposal was not supported by a full business case, the quality of the costings was low and the Commonwealth’s exposure to project risk was high.’
That’s a pretty damning statement in itself but there are many other criticisms about the Government’s failure to follow through on its usual grant application processes, the fact that this decision was made by a gang of four Cabinet ministers including Julia Gillard and Wayne Swan yet the Water minister of the day, Penny Wong, wasn’t even informed of the grant decision until at least a week after it had been made,so…
KEITH CONLON: Let’s go back on some of those issues. First of all, on the issue of… who said that it wasn’t appropriate in terms of an economic case and so on?
SIMON BIRMINGHAM: Well, Infrastructure Australia, so the Federal Government’s primary body to provide independent advice on infrastructure projects. It’s been exposed in this report they had done a full cost-benefit analysis, they found the doubling of the plant did not stack up, they recommended against it being funded and yet the federal Labor Government went ahead and put a further $228 million into its doubling.
JANE REILLY: Simon, how did they push it through so quickly, you know, without sort of any objection to it?
SIMON BIRMINGHAM: Jane, pure politics, it would seem. That’s the significance of this gang of four Cabinet ministers. It’s the same group of Cabinet ministers who at the time were driving the school halls project, the ‘Pink Batts’ project and so on, so a number of failures of Government policy can be traced back to this group. It was under Kevin Rudd’s leadership but, importantly, this group of four included the current Prime Minister, Julia Gillard, and the current Treasurer, Wayne Swan, but, strangely when it comes to funding a water project like this in South Australia, excluded the then Water minister, Penny Wong.
KEITH CONLON: The cost-benefit analysis… can you take us further into that; why the Infrastructure Australia advisory group would say that something we need – a desal plant – didn’t stack up?
SIMON BIRMINGHAM: Well, Keith, I’ll certainly be trying to get further info out of Infrastructure Australia as to their cost-benefit analysis but what the Auditor-General says is that Infrastructure Australia concluded that the project was not supported by robust cost-benefit analysis and in any event calculated the project was too low in terms of the net economic benefit that it offered. It also is quite critical as to how it calculates water cost and in fact highlights in this report that the cost of water that was assumed to be the case was significantly underestimated in the funding applications that were made and, of course, South Australians know only too well that they’re now paying through the nose for that very high cost of water.
JANE REILLY: Now, Senator, there’s a number of proposals and a number of sort of merit points that they have to reach to make that approval stage. Apparently this proposal didn’t meet three of those five merit assessments?
SIMON BIRMINGHAM: Well, that’s right. This proposal failed in a number of ways, Jane, and the criticism here is that the Government abandoned its own assessment processes. These are put in place for good measure, for good reason, so that projects can be compared against each other, so that you can take the politics out of assessing major infrastructure projects but in this case it appears very clearly that the decision to provide this funding – hundreds of millions of dollars of funding which simply adds to the wasteful spending and big debt of the federal Labor Government… the decision to do this was driven purely by a desire, it seems, to get some quick headlines in Adelaide for the Federal Government rather than it being meritorious under any of their grants programs they were operating.
KEITH CONLON: Now, some South Australian listeners may be saying ‘well, I don’t care too much about the process, we’ve got a good desal plant, we are drought-proofed’ but there seems to be a sting in the tail again from the report that says the price of water has been affected?
SIMON BIRMINGHAM: That’s right, Keith, and that’s, as I mentioned before, the assessment that was given to the Auditor-General indicated that the work that was done by the Commonwealth department underestimated the cost of water. The information they’d been given by the State Government underestimated the cost of water and that also assumed that the plant would be running at full capacity all of the time.
KEITH CONLON: That’s the bit that I was looking for, yes, is that you reckon the costings were done on an assumption that it would run flat out all the time?
SIMON BIRMINGHAM: That seems to be the case and that is what the Auditor-General’s highly critical of – that those assumptions, of course, have proven to be completely false with plans to mothball the plant as soon as it gets past its trial period and that, of course, makes the capital cost far, far greater in terms of what you get for it.
KEITH CONLON: Well again, you use that phrase ‘plans to mothball it’. What evidence do you have that it will be mothballed?
SIMON BIRMINGHAM: Well this was a… the mothballing announcement was one made by SA Water some months ago. Now, obviously I think they’re keeping their options open at least, as you would expect them to do, as they manage water environments in response to rainfall conditions and otherwise but, you know, they were the ones who flagged the term ‘mothballing’.
KEITH CONLON: But is it more accurate to say ‘may be mothballed’?
SIMON BIRMINGHAM: Well, I think there was an indication that it was likely to be mothballed.
KEITH CONLON: That’s another one to be teased out. Senator Birmingham, thanks very much
KEITH CONLON: Senator Simon Birmingham just teasing out some of the detail in the federal Auditor-General’s report which damns the big Labor grants – first the $100 million grant and then another 228 million, so we’re talking over $300 million all up and those pictures last night were fairly dramatic, weren’t they, of Prime Minister Rudd flying in onto the tarmac with the helicopter…
JANE REILLY: Delivering the papers.
KEITH CONLON: The cheque in hand. It’s just that the cheque hadn’t been through the proper process.