Badgerys seals record infrastructure drive

The Turnbull government will deliver record infrastructure spending in the budget.

Urban Infrastructure Minister Paul Fletcher at the site of Badgerys Creek airport. Picture: Renee Nowytarger

The Turnbull government will deliver record infrastructure spending in next week’s budget, following confirmation it will go it alone and build Sydney’s $6 billion second airport with a promise to have construction tenders ­finalised by the end of the year.

Sydney Airport Group yesterday rejected the offer to take on the project, under its first right of refusal, claiming it could not make the project fly financially.

Urban Infrastructure Minister Paul ­Fletcher confirmed the ­federal government would take control of delivering the nation-building project.

Construction of the airport, after 30 years of indecision, will be delivered through a government-owned corporation, as revealed in The Australian last month. It will be separated from normal budget expenditure in the same way as the NBN Co.

Scott Morrison will release details of the funding model in next Tuesday’s budget, which is expected to be delivered through debt but eventually offset by the value of the assets, a ­nationally significant piece of productive infrastructure.

The airport package will be on top of what was already a $9bn infrastructure allocation this year and a similar funding package for last financial year, which combined represent a ramp-up phase of the ­Coalition’s 10-year $50bn ­infrastructure plan. The Treasurer told The Australian: “Investing into economic infrastructure is one of the most important drivers for national productivity. The Turnbull government is committed to rolling out our $50bn infrastructure investment that will support stronger growth and more and better paid jobs.”

It is understood tenders for construction of the new Badgerys Creek airport in western Sydney, will be put before the end of the year. Work on what will ­be one of the largest earthmoving projects since the Snowy hydro scheme is expected to start next year to meet the 2026 deadline for the start of air operations.

Lendlease chief executive Steve McCann said he looked forward to “supporting” the government’s efforts. “Sydney is a growing city and a strong focus of both the federal and state governments to drive critical infrastructure investment ... is essential for Sydney to maintain its standard of living and importance as a global city,” he said.

Sydney airport chief executive Kerrie Mather said yesterday the investment needed to build Badgerys Creek could not be justified considering the long time-frame for commercial returns. “The risks associated with the development and operation of WSA are considerable and endure for many decades without commensurate returns for our investors,” she said.

Mr Fletcher said negotiations with nine of the country’s major construction companies had been held over the past two months in anticipation of Sydney Airport Group declining the offer, written into the sale contract of Kingsford Smith Airport in 2001, to build the new airport.

Business groups welcomed the government’s move, which ensured Sydney Airport Group would no longer command a monopoly on air travel in and out of Sydney. Forced sales of monopoly-owned airports in London led to savings to passengers of up to 30 per cent. It is expected competition for traffic in Sydney will also lead to lower ticket prices.

Following the announcement, Qantas chief executive Alan Joyce said the company’s low-cost carrier Jetstar could be based at the new airport. A taxi fare from western Sydney to the airport at Mascot often was more expensive than the price of a low-cost flight.

In a speech to the Macquarie Conference in Sydney, Mr Joyce said the long-flagged Badgerys Creek development should be based on London. “There’s nothing stopping the Sydney basin having two airports working similar to what happens in Tokyo and what happens in London,” he said.

Former treasurer Joe Hockey had proposed a tax of up to $10 a passenger in and out of Kingsford Smith to help fund construction of a second airport at Badgerys Creek when it became clear that private funding would be lacking. Sydney Airport Corporation baulked at contributing even the $1bn then thought to be a minimum share.

Treasury had modelled the levy and legislation was in the process of being drafted before Tony Abbott lost the prime ministership.

The government will be under significant pressure to deliver the project by its deadline of 2026, with all Sydney airport flight slots forecast to be completely allocated by 2027.

The 2012 Joint Study into Aviation Capacity in the Sydney ­Region warned that the current Sydney airport would not be able to cope with the expected 76 million passengers forecast by 2035.

It also warned that failure to deliver the airport would be a handbrake to national productivity, job growth in Sydney and the loss of $34 billion of economic growth.

Mr Fletcher said yesterday that 9000 jobs would be created in western Sydney in the construction, operation and local associated businesses. “This is a very important milestone. We’ve been planning for this contingency and we’ve got a clear plan to move forward,” he said.

Sydney Business Chamber, Western Sydney, director David Borger said the federal and state governments needed to establish an independent authority to operate the airport.

Bill Shorten would not commit to supporting the government’s plans to build the airport, having said the opposition backed the airport in principle and despite Labor’s infrastructure spokesman, Anthony Albanese, having been one of its strongest advocates.