User pays and private investment needed for infrastructure: Sir Rod

State governments should build more user pays roads and keep tolls to encourage capital investment and maintenance of infrastructure in Australia according to Infrastructure Australia Chairman Sir Rod Eddington.

Speaking at a CEDA event in Melbourne, Sir Rod said removing user pay charges on roads such as the Westgate Bridge was a poor decision because the money raised from these tolls could have been used for building new infrastructure.

"I shudder when I see existing infrastructure that carries a user charge and that user charge is removed," he said.

"It might be politically popular but my own view is that it's economic nonsense."

Sir Rod said the issue of user pays is back on the agenda and will be important if the population's needs are to be met in the future.

On the subject of capital he said governments are limited in their ability to invest in new infrastructure and don't have the resources to own and run road, rail, port, airport and utilities networks.

"Governments simply don't have the capacity to do that any more, it's one of the reasons they privatise these things," he said.  

Sir Rod said it is important that governments use their resources carefully and build projects that matter to the economy and community rather than roads to nowhere.

"Governments in my view still have the ability to capitalise on big infrastructure projects," he said.

"It's increasingly important that the capital that governments do have, they use wisely."  

Foreign and private investment is also an important source of capital, Sir Rod said.

"Australia has always been resource rich and capital poor," he said.

"The bottom line is unless we can find ways to get more private sector capital into infrastructure, it simply won't get built."

Sir Rod also said long term investors such as superannuation funds can act as an important source of capital if the projects are properly designed and managed.

"Increasingly if we have the right projects which are constructed in the right way, they will be attractive to capital in Australia, but offshore capital as well," he said.

He also said demands and problems associated with infrastructure are substantial but only gradually develop.

"The problem is substantial in an incremental way, that is congestion gets worse every year, incrementally," he said.

While the Federal Government does play a critical role in these areas, at the end of the day it is the responsibility of the states to create the environment to develop infrastructure, he said.

"It's the way in which the states put these projects forward, the way in which the states construct them, that  will decide whether or not they're attractive to private sector capital," he said.