Sir Rod Eddington has delivered an emphatic message to business and government to press on with major projects, despite the economic gloom.

Sir Rod, who also chairs Infrastructure Australia, addressed more than 400 CEDA guests in Melbourne, in a wide-ranging presentation that touched on public transport, infrastructure and the liveability of cities -  in his view, all underscored by a carbon-constrained future.

The former British Airways chief has taken on several influential roles in Australia, and his responsibility as transport adviser to the Victorian Government was one of the more high-profile.

With the Brumby government's transport plan due in the upcoming weeks, CEDA's attendees were given a glimpse into the thinking behind Sir Rod's recommendations for the state.

While he had specifically studied Melbourne's east-west corridor, he had advised the government to examine all other major transport challenges, amid a public consultation process for Victorians.

"I was very keen in the report not to be bogged down in a debate around the relative merits of trams, trains, bicycles and motor vehicles, because they all have an important role to play in meeting a city's transport needs," he said.

Sir Rod said that during work on the East West Link Needs Assessment, he had met many stakeholders, from local councils to truck drivers. They had expressed various concerns about congestion, and truck movements close to schools and childcare centres.

"It was clear to me to that, particularly in the west and the north-west, in areas which I'm old enough to remember were once farmland and defence territory, we now have large numbers of people living in the newer suburbs, but they don't have anything like the transport infrastructure that the older parts of the city of Melbourne have. Effectively the tram network pretty much stops at the Maribyrnong, so there are some real challenges there…Unless we're careful, we'll be living in a city of two halves, and that can't be right."

From ship to shop

In Sir Rod's view, the more obvious aspects of Melbourne's changing urban landscape - the proliferation of inner-city apartment blocks, and docklands developments - were highly visible, and increasing congestion on roads and public transport was widely acknowledged.

Yet other aspects of the city were "not on people's radar", he observed.

"We tend not to think about the freight part of the jigsaw. The logistics industry in Victoria is a mature industry, and they have to deal with congestion and its impact on their ability to do their job. We tend not to think of freight and its role when we go into supermarkets and shops, and we should," Sir Rod said.

"We also tend not to think about things like ports, but our international gateways are very important to us. I try and get a sense of what it all looks like in 10, 20 or 30 years time. That has real implications for the infrastructure we need.

"The Australian economy is increasingly a service economy. This is not  in any way to diminish the role of agriculture and precision engineering in our economy -  they are both significant employers of people - but services employ over three quarters of the population and are responsible for over three quarters of GDP. Cities have a particularly important role in service industries.

"One of Melbourne's great strengths is it has critical mass, and you have co-location in the inner city of financial services, media, educational institutions, the big accountancy and law firms, and the engineering consultancy firms.

"It's an inner city that's no longer constrained by what I would call the Hoddle Street grid, but now includes Southbank, Docklands, and the north, where the new hospitals are being built in Parkville."

Carbon price

Sir Rod broadened the discussion to comment on the role carbon might play in the planning of cities and infrastructure in future.

Describing himself as "not a climate change sceptic" - he has worked closely with Nicholas Sterne in UK- he now accepts the link between human activity and climate change.

"The real question is, what does living in a carbon-constrained world mean? My own personal sense is there are three quick pieces to the jigsaw: Governments will increasingly find a way to put a price on carbon, whether it's through a carbon tax or an emissions trading scheme.

"They will almost certainly also put in regulation. One of the things we recommended in the east-west study was that the government consider mandating carbon footprints on motor vehicles out into the future. We know motor companies are doing a lot to produce motor cars with much lower carbon signatures.

"Governments will inevitably look to encourage alternative technologies. The trick here is to make sure they do it intelligently.

"If you assume all that is right, what does it mean? We'll look at not just the economic cost of moving from A to B, but the carbon implications of moving from A to B. The debate around that for me is only just beginning."

The car still has a real future, in Sir Rod's view. "There are some people in this state who didn't like the fact I recommended we should build a road tunnel because they take the view the motor car is the devil incarnate. Talk to Toyota and Nissan, and look at the terrific work they're doing on the motor car of the future. Hybrid and electric motor cars will be the cars our children will drive."

Far horizons

Perhaps unavoidably at the end of a turbulent 2008, Sir Rod turned his attention to the global financial crisis. He argued a long-term commitment was required for building projects in this climate.

"When the east-west study started in '07 we were enjoying a period of unprecedented economic expansion… Now we're living in a very different economic world. I've never seen credit markets close and come to a stop in the way they did in the past 12 months."

The crisis had moved from Wall Street to Main Street, he said. "That will have implications for infrastructure, because the availability of private sector capital to invest in infrastructure projects, and the availability of state capital to invest in infrastructure projects is going to be constrained; but in my view that should not stop us taking a long, hard and dispassionate look at what we need, because when we talk about infrastructure, we're talking about 10, 15, 20 year horizons at least…History suggests that the current global financial crisis, as substantial as it is, is more likely to be a one, two or three year affair, than a one or two decade affair.

"I would encourage all of you in the infrastructure space to continue to get on with the work you're doing, and look for imaginative ways to allow it to happen.

"We have to think hard about what the PPP of tomorrow is going to look like. Where are PPPs appropriate, where are they not, and what sort of risk management mechanisms are we going to put in place so private and public sectors can work together?"

Mass transit

Returning to the specific state transport context, Sir Rod said Victoria had been well served over a 15 year period. Now, however, infrastructure was showing signs of strain at the edges - in particular the Westgate Bridge, the rail network, and some freight terminals at peak time.

"Yet when you compare our infrastructure with many cities in the world, we are in good shape. But we will only enjoy the title of the world's most liveable city if we continue to make smart investments in infrastructure."

Responding to questions, Sir Rod noted that Australian cities were largely defined by urban sprawl. The higher density of cities like Tokyo and Hong Kong enabled their mass transit rail systems to develop, while Australians still relied heavily on cars.

Melbourne would only reach a figure close to 20 per cent of the population using public transport by 2020 if there was substantial investment between now and then. "That should be a priority," he said.

"The physical and economic geography of our cities in a sense define them. You need to build a transport network that's fit for purpose. If we change our view about urban densities, if we have more people living in the inner city, more people in high rises, then clearly it will be easier to get many more people into public transport; but we'd need to build that public transport network first."

In Europe he noted different national approaches. "The Dutch are very careful and clinical, they don't allow urban housing development to go ahead until they're absolutely clear about the transport infrastructure that's going to support it - public and private."

Only an elected government could make the hard decisions about where the priorities lay in buses, trams and rail, he said. Also, transport inevitably competed with health, education and law and order projects for the government's attention.

In other broad comments about the nation, Sir Rod revealed the infrastructure audit reinforced his view that our international gateways faced major challenges.

"I think the fact there can be 30 ships off Newcastle waiting to load coke and coal to our North Asian customers in China, Japan and Korea is a very poor reflection on the nation, not just on that part of the nation."

In Victoria, a long-term strategy was required for the ports of Melbourne, Hastings and Geelong. "You ignore your international gateways at your peril."