What does the Federal Budget really mean for infrastructure? 10 key takeaways

Infrastructure
23 May 2018

The Federal Government will invest over $75bn in nationally significant transport infrastructure projects over the next 10 years. The investment aims to reduce congestion to get commuters home sooner and safer, move freight more efficiently to ports and market, better connect regions, grow the economy and create local jobs. 

Here we summarise the major projects before offering 10 key takeaways. 

The projects include:

  • New major rail and public transport infrastructure, including up to $5bn for a rail link to Melbourne Airport, $1.1bn for further components of Perth’s METRONET, $400m to duplicate a section of the Port Botany Rail Line and construct the Cabramatta passing loop; $390m for the upgrade of the Beerburrum to Nambour Line on the Sunshine Coast, $300 m for Brisbane Metro and $220m for the electrification of the Gawler Line in northern Adelaide.
  • Major urban and regional road projects, including $1bn for the M1 Motorway corridor; $3.3bn for the Bruce Highway in Queensland; $1.4bn for Adelaide’s North-South Corridor; $971m to build the Coffs Harbour Bypass on the Pacific Highway in NSW, $1.75bn for the new North East Link in Melbourne, $560m to deliver Stages 2 and 3 of the Bunbury Outer Ring Road in WA, $280m for regional road works in the NT, $461m to build a new Bridgewater Bridge to reduce travel times and improve traffic flow into Hobart; and a $200 m investment in the Barton and Monaro Highway corridors linking the ACT to NSW.
  • New Urban Congestion Fund, with $1bn funding to invest in projects in urban areas that address pinch points and last-mile access to ports, airports and freight hubs.
  • New Roads of Strategic Importance Initiative, with $3.5bn to upgrade key freight corridors in regional Australia and increase productivity by connecting major agricultural and resource areas with our cities and ports. There will also be a focus on urban areas, with last-mile access to ports, markets, airports and intermodal facilities. This includes $1.5bn to deliver better access in Northern Australia and $400m to upgrade regional highways in Tasmania.
  • New Major Project Business Case Fund with $250m to enable the Commonwealth to work in partnership with State and Territory Governments to develop business cases for major projects, to plan for the next phase of Government investment. The first cases funded will include $15m to support planning for a passenger rail service between Toowomba and Brisbane and $10m for Eastlink WA (Orange Route).
  • Continued funding of the Black Spot Program and Roads to Recovery Program.
  • Continued funding for the Building Better Regions Fund and Stronger Communities Programme to invest in economic and social infrastructure which creates jobs and builds stronger regional communities.  This includes further decentralisation with six Government entities moving out of Canberra, Melbourne and Sydney.
  • Extension of the Remote Airstrip Upgrade program by providing $23.8m to ensure continued access to healthcare, fresh food, mail, employment and education opportunities.
  • Financial Assistance Grant program to provide local councils with more than $1.2bn to start work immediately on new projects and benefit from additional interest on cash in the bank.                                  

So, how does all of this impact on the industry? 10 key takeaways are:

  1. Infrastructure funding is reduced overall by $2bn over the forward estimates. An additional $10.7bn would be needed over the next four years to meet the decade average investment level, according to Infrastructure Partnerships Australia. This means the private sector has a role to play.
  2. Continued scope for direct user-charges to meet the infrastructure shortfall. Government has historically taken a conservative approach to user charging systems, which is partly a cultural issue in Australia due to some high-profile failures in the toll road sector during the GFC. The timing is right for innovative funding approaches such as HOT (high-occupancy toll) networks which permit faster transport in dedicated lanes for commuters sharing vehicles, FAST (fast and sensible toll) lanes which apply tolls to lanes rather than roads, and trucking lanes.
  3. No visibility around Commonwealth equity stakes in major projects, such as the $5bn for the rail link to Melbourne Airport. The commitment does not appear to hit the Budget in the four year forward estimates, as a grant or equity, but the Commonwealth has indicated “an option for equity investment, to be settled at a later date”. We have already seen the Commonwealth is prepared to outright purchase an asset (in the case of Snowy Hydro). We have also seen the Commonwealth (via its project entity, WSA Co) taking on the delivery of the Western Sydney Airport. It is unclear whether this new funding would be provided on the usual basis and therefore how industry would be required to collaborate with the Commonwealth on these projects.
  4. Potential uncertainty regarding reporting. The National Partnership Agreements with state and territory governments have not been renewed, for the first time since commencement in July 2014. This means that a tool for assessing and documenting Commonwealth spend on land transport infrastructure projects has been removed. It is yet to be seen whether this will be replaced by another system.
  5. Industry will ultimately need to look to State and Territory Governments for the green-light for most projects to proceed. The Federal Government has restated its commitment to East West Link ($3bn) and the Perth Freight Link ($1.2bn) and that it is “ready to deliver the project” should the Victorian and WA Governments (respectively) decide to proceed.
  6. There is a real opportunity to show initiative in planning to grow our cities and regions. It is essential to address issues which affect the productivity and liveability of Australians, including affordable housing. The Budget was silent on support for the “build to rent” sector. However there are hopes that infrastructure upgrades will unlock cheaper housing in further-flung regional areas by making them more accessible, according to realestate.com.au chief economist Nerida Conisbee. This includes the funding of the first stage of the North South Rail Link in Western Sydney.
  7. An estimated 50,000 additional direct and indirect jobs over the next decade. This will accentuate current job shortages in engineering, construction, building services and material supply. The increasing emphasis on regional projects provides opportunities for local businesses, services and contractors.  
  8. Increased dialogue with Infrastructure Australia. The statutory authority’s new priorities in 2018-2019 will include engagement with industry to facilitate the continual evolution of planning and procurement practices, and establishing and maintaining productive working relationships with industry, including investors in restructure and owners of infrastructure.
  9. Increased role for land transport technology suppliers, including vehicle automation, vehicle connectivity (C-ITS, V2V, V21 and V2P), smart infrastructure, the sharing economy and zero emission vehicles. The Federal Government’s National Transport Technology Action Plan is due for renewal in 2020, and it will no doubt rely heavily upon the private sector to bring new technologies to market to meet community expectations of safety, security and privacy.
  10. More scope for Market Led Proposals (MLPs) to build or finance non-infrastructure projects. The massive Budget spend in relation to infrastructure has not translated to the critical areas of education and healthcare. Most States and Territories have an MLP policy. Any MLP must demonstrate value for money and align with or otherwise meet a government policy objective. A critical component is uniqueness, which can be achieved by an innovative idea or some other way.  An MLP will not progress if procurement for the project in question is otherwise already underway. 




The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


Related Content

Key Contact

Jane Hider

Partner. Melbourne
+61 3 9672 3218

Profile

Contacts

Celeste Koravos

Senior Associate. Melbourne
+61 3 9672 3092

Email