Infrastructure: Just take the money and run

IT’S clear for Malcolm Turnbull that Baird’s promises — possible because of the sale of the electricity industry — could help return him to power.

WHEN Mike Baird was treasurer trying to sell the state’s electricity assets, he realised that as well as foregoing dividends, the state government would also be losing out on “tax equivalent payments”.

These were payments worth hundreds of millions that the public electricity companies paid the state government “in lieu of corporate tax”. Strange old system, isn’t it? Lose them and suddenly the sale just didn’t look so good.

So Baird went to then federal treasurer Joe Hockey in 2013 and argued that, because the federal government was going to get corporate tax from the new privatised companies, it should hand this back to the states. This would mean more money to spend on infrastructure and the federal government would ultimately not be losing any money.

Hockey did not agree to this but, incredibly, did agree to handing over the equivalent of 15 per cent of what the states got from any sale.

He called it the “asset recycling fund” and put it in the now infamous 2014 Budget.

The setting up of the fund gave an incentive to states to sell off their assets to pay for infrastructure. Thanks to Queensland and Victorian Labor governments not selling things, NSW has the lion’s share of the money — 70 per cent doled out so far, to be precise. What a masterstroke by Baird.

So when Malcolm Turnbull announced last week he was pegging $1.69 billion to the metro project, $78 million to Parramatta Light Rail and tens of millions to regional highways it was the culmination of Baird’s efforts three years ago.

This is just the first in a ­series of big wins for Baird. Transgrid has been sold off for $10 billion but the partial leases of Endeavour Energy and Ausgrid are yet to come and could easily reap another $10 billion.

Artist’s impression of a train on the $8.3 billion Sydney Metro Northwest project / Supplied

The fuss at the last election over whether the government would reap $20 billion now looks crazy. That figure could well be an ­underestimation.

As congestion worsens in Sydney, you realise just how important those metro projects are.

With population expected to grow massively in Sydney, and particularly Western Sydney, the success of the metro line from Rouse Hill to Chatswood, under the harbour and out to Bankstown is key to ensuring Sydney does not succumb to Los Angeles-style gridlock.

There are further plans to extend that line to Liverpool and hopefully, in time, to the airport at Badgerys Creek.

The fervent hope is that Baird and Treasurer Gladys Berejiklian have done their homework and the projects are in the right places.

As Berejiklian notes, if people are travelling the metros, that will free up the current Western rail line, which is now operating at 90 per cent capacity.

In the end, the Coalition plan is not much different from Morris Iemma’s 2008 proposal for five metro lines, which Liberals laughed at. Labor could not deliver on the asset sales at the time ­because of the unions.

But Baird can.

It is clear for Malcolm Turnbull, as he switches priorities to public transport and the cities, that Baird’s performances and promises — possible because of the sale of the electricity industry — could help return him to power.

Before the 2015 state election, 38 per cent agreed with electricity privatisation and 53 per cent opposed. But sometimes you need to look at the depth of feeling against a policy, not the breadth. And clearly the depth was not enough to see Baird voted out of office.

Baird privately believes that Turnbull could have won an election based on ­increasing the GST to 15 per cent. But Turnbull did not have the stomach for a fight he might have lost.

I also have my doubts. I suspect an increase in GST would yield a deeper feeling against Turnbull, partly ­because the public believe governments should target spending more before reaching for the tax lever.

So what we end up with is a Liberal Premier and a Liberal Prime Minister in elections just 15 months apart with the Premier winning on a bold but unpopular policy and the PM hoping to win with a cautious defensive game.

On July 2, I expect Malcolm Turnbull to win but his reformist abilities from then on in to be hamstrung by his small target approach. Small targets can’t sell big ideas.