North Melbourne Station. Credit: Peter Hyatt

+ In Melbourne, the rising population will mean local government must innovate to provide new roads, public transport, schools and healthcare infrastructure.

In growing cities, local governments are ultimately responsible for providing services like schools, transport and housing. So I think they need to be able to plan and finance infrastructure requirements themselves, rather than relying on central government funding.

I’ve worked on a range of projects for local government and funding is always an issue. For example, our independent Northern Horizons report for Melbourne showed that this area of the city needs a huge amount of investment in infrastructure. The population in this sector of Melbourne alone is expected to increase by 600,000 by 2050 and all those people will need services like schools, roads, rail infrastructure and doctors’ surgeries.

But the state, federal and commonwealth governments can’t provide funding for all these services – at least not in the timeframe that the infrastructure is needed. To resolve this, I think local governments will have to be more innovative, and look at ways to involve the private sector. 

This approach can bring other benefits too. Locally planned, locally financed infrastructure is more likely to meet the needs of the inhabitants. New schools that are close to where children live and are matched by corresponding improvements to transport infrastructure can improve things for every resident, not just those with children. Local governments, especially at the sub-city level, know their districts inside out, and they’re best placed to decide what’s needed when.

To finance infrastructure projects like these, local governments need to be allowed to borrow more money, and they need access to an intermediary who could source a financier. They’d also need to develop their skills in this area, I think initially by employing experienced people from the private sector.

So what sort of funding mechanisms might work for something like a schools building programme? Much like Canada, Australia has a large superannuation pool. With the right intermediary, this could invest in infrastructure projects. The recent explosion in self-invested superannuation schemes means there are smaller funds to invest in local-level projects. 

I’d also propose a community infrastructure levy like the UK’s, where landowners and developers contribute to transport and infrastructure projects. Something like the EU’s Project Bonds scheme would be another option. 

For all this to happen, central government needs to let go of its responsibilities in this area. The old top-down approach is fast becoming outdated and I think we should let local governments get on with projects that will improve the lives of their residents.