NSW stake in WestConnex toll road to seed new state ‘Future Fund’

New South Wales’ stake in the $16.8bn WestConnex toll road will be used to help set up a new Generations Fund.

An aerial view of work on Homebush Bay Drive where it meets the WestConnex M4 East.

NSW’s stake in the $16.8 billion WestConnex toll road will be placed in a new sovereign wealth fund to secure a financial legacy from the country’s biggest single infrastructure project.

Treasurer Dominic Perrottet is setting up a NSW Generations Fund, doubling down after his predecessor’s 2016 Infrastructure Future Fund helped keep the state in surplus in the face of falling stamp duty transfers.

A NSW Generations Fund will be seeded with $3bn in state reserves and the minority stake in Sydney Motorway Corporation — the company building WestConnex, with the Government banking on an increase in earnings and asset values in the fund to counter any future rise in state debt.

But, in what Treasurer Dominic Perrottet described as a world first, $27.5 million of annual earnings from the NGF will also be set aside to fund community projects worth about $300,000 to each NSW electorate via a program called My Community Dividend.

The program will allow community’s to nominate and vote on projects worth between $20,000 and $200,000 to be funded by the NGF.

The Berejiklian Government is expected to announce the sale of a 51 per cent stake in WestConnex shortly, with proceeds from the sale earmarked to finance construction of the final stage of the project, linking Sydney’s M4 and M5 toll roads.

The creation of the fund highlights parallels with the Howard government, which set up the Future Fund from the proceeds of budget surpluses and the last of its Telstra share sales.

But while the Federal Government used the proceeds of asset sales to retire debt, NSW has recycled the proceeds of port, desalination plant, electricity network and toll road sales into further infrastructure projects.

Mr Perrottet said the NGF used the state’s “unprecedented strength” to guard against intergenerational budgetary pressures that would see an ageing population put increasing demands on the state’s finances.

Growth in the NGF — from investment earnings and future contributions — would offset future borrowing increases and help the Government to maintain sustainable debt levels consistent with a triple-A credit rating.

That mirror’s a decision last year by the Federal Government to extend the payout date from the Future Fund, which was set up as an investment pool to meet federal public servants unfunded superannuation liabilities. The Government has extended the first drawdown on the fund by ten years in a move that will allow the fund to grow further and bring the Federal Budget back into surplus sooner than it would otherwise