The vertical tax imbalance combined with State governments that don't want to undertake any large capital works has contributed to the increase in public-private transport infrastructure. Australia has led the world here. This has given Australian based businesses an advantages overseas in this area. The Macquarie Infrastructure Group [MIG] recently bought the Chicago Skyway for 3.8 Billion .

The New Infrastructure Ownership and Management Companies

MIG is no real newcomer, the investing entities that make up MIG are managed by Macquarie Infrastructure Investment Management who itself is a wholly owned subsidiary of Macquarie Bank . Infrastructure management is not new either, it is surprising how much infrastructure a big steel smelter for instance needs: roads, rail, etc etc.

What is new is the partial privatization of roads and tollways that NSW has been at the forefront of. MIG's Australian asset portfolio includes; the Eastern Distributor, M4, M5 and the new M7.

MIG has also starting making inroads into US infrastructure ownership and management. In the last year they have gathered up the Dulles Greenway in North Virginia and the Chicago Skyway in Illinois.

MIG only took a controlling interest (86.7%) in the company which manages the Dulles Greenway last year. The Greenway is a pretty good stretch of road leading to the Beltway and Rt.66 though it fills up in rush-hour to the point of paralysis. The road is currently going through upgrades to expand it to three lanes both ways. North Virginia is starved for decent transport infrastructure and the Greenway is providing a good service that is helping to fill that hole.

The article claims that VDOT is selling off the Dulles Greenway in total, rather than just a lease to manage the road, in order to raise money for rail transport in the region;

And Macquarie is part of one of the rival groups bidding $1 billion to take over the Dulles Toll Road for 50 years, with the money expected to underwrite Metrorail's extension to Dulles.

The Toll Road is public, while the Greenway is purely private. I recall, but cannot find the site now, that there was an agreement with VDOT and KBR that parts of Route 7 would have their lights changed so that traffic was forced to flow into the Greenway. Mimicking some of the problems Australia has seen with the PPP agreements. There is no reason that government should agree to such practices.

How Much Will The Market Bear

Consumers of road services are not as tolerant of cost to travel roads as they are in other areas, especially if travelling toll roads is twice a day affair and congestion still occurs. There is also the problem of transportation being a public good that enables commerce as well as social and cultural aspects of modern society. And finally, why should people pay for what they are already paying for in taxes? I do not know of any private road which has led to a reduction in taxes.

My sister is a good anecdotal example. She lives out in Sydney north-west and commutes into Sydney each day down the M2. With the opening of the M7, traffic is now backed up from Seven Hills all the way into the city. The traffic had become so bad, the costs so heavy with petrol and tolls, and the huge loss of their potentially productive and leisure time, that my sister and her partner rented their suburban house out and moved to the inner-city within walking distance of their place of work.

Was that a failing of infrastructure, or the costs of travelling privatized roads? The constant cost of tolls certainly contributed to their decision that commuting was no longer cost-effective and that they should give up their large suburban house for a small and thin terrace house.

But that is not the point I want to make. What we are seeing with MIG is that Australia was at the forefront of PPP infrastructure. As a result Australian companies were able to work out efficient and profitable; investment techniques, business models and management processes. This knowledge is being exported to the world.

That is a good thing.

The US economy is at the forefront of global dominance for many reasons, but one of them is - stuff happens first in the US. American businesses work out what it takes to be successful in a market and when the world cottons on, American companies are able to export that knowledge by expanding into overseas markets.

Australia should be looking for ways to make the Australian economy unique, so it leads globally. A good start would be deregulating parts of the spectrum rather than auctioning it.

More Reading on Tollways

• Tollways
• Private Roads
• Transport Infrastructure
• Roads, Tollways and Privatization