Private cash will ‘back big projects’

The federal government is under pressure to step up infrastructure spending in next week’s budget.

The federal government is under pressure to step up infrastructure spending in next week’s budget. Picture: Ian Currie

The federal government is under pressure to step up infrastructure spending in next week’s budget, with private sector capital ready to co-invest to help get projects off the ground.

“The federal budget provides the platform for a bold infrastructure program to reset the course of the Australian economy,” the chief executive of Infrastructure Partnerships Australia, Adrian Dwyer, told The Australian on Wednesday.

“In last year’s federal budget, the commonwealth lifted total infrastructure funding to $29.5bn over the forward estimates, with an additional $8bn investment.

“This year, we’ll need to see a much bigger infrastructure funding commitment from the federal government to help drag the economy out of recession and get people back into work.”

Mr Dwyer said the federal government needed to “move decisively” to provide funding for the states and local governments to push ahead with “high-velocity, labour-intensive projects”.

He said these included investments in road and rail maintenance, small capital upgrades at schools and hospitals, social housing renewal, and improved public transport accessibility.

“Over the medium and longer term, the focus will need to shift to prioritising strategic projects that respond to population growth and sectoral transformations that can boost the productive capacity of the economy,” he said.

“(Reserve Bank governor) Philip Lowe has called for an additional $40bn infrastructure investment across the country,” he said. “But the states can’t hit that target on their own.

“The commonwealth will need to move decisively in this budget to substantially back in the states with a big lift in infrastructure funding.”

Mr Dwyer said projects which could be backed as part of a federal government infrastructure spending program could include the priority list of projects already outlined by Infrastructure Australia.

These include the $10bn inland rail project from Melbourne to Brisbane, some 31 metro rail stations in Sydney, the first stage of the Western Sydney Airport, the $15bn North East Link and the $6.7bn West Gate Tunnel in Melbourne, the $5bn Melbourne Airport Rail Link and the Snowy Hydro expansion program.

Mr Dwyer said the commonwealth should encourage state governments to draw on private sector expertise and capital to “accelerate the rollout of the infrastructure stimulus”.

He called on the federal government to restart the Asset Recycling Initiative to encourage states to raise money for new infrastructure projects by selling off existing assets.

“A program like the ARI is a perfect way to help relieve state balance sheets, stimulate the economy through construction, and underpin improvements in productivity through operation,” he said.

Wide spectrum

Ross Israel, the head of global infrastructure for the Queensland Investment Corporation, said there was a “wide spectrum of institutional investors” which would “welcome the opportunity of the fiscal stimulus in the budget for the government to lay down a long-term plan to invest in more sustainable, more resilient infrastructure”.

In an interview with The Australian, Mr Israel, who manages some $14bn in infrastructure assets, mainly in the transport and energy sectors, said COVID-19 provided “a unique opportunity” for the federal government to encourage investments in areas to improve Australia’s resilience, including in renewable energy and battery storage.

“Energy is a hot bed of potential opportunity for investors,” he said.

He said there was also a need for further investments in the rollout of 5G data infrastructure.

Mr Israel said the government’s focus should not be on “shovel ready” investment projects, but on projects which were “shovel worthy” and would contribute to the long-term development of the economy.

He said there was strong interest among institutional investors in backing “green energy” projects. “Sustainable investing is one of the big megatrends in funds management,” he said.

He said Australia was in a good position to step up its investment in renewable energy projects because its public debt was a lot lower than many other countries.

“We have a unique opportunity to leverage that into projects which can help built greater climate resilience,” he said.