Infrastructure

Budget Review 2009-10 Index

Budget 2009 10: Infrastructure

Overview

Richard Webb

A feature of the Budget was the announcement of the financing of investment in infrastructure. In the Budget speech, the Treasurer, Wayne Swan announced funding of $22 billion over four years for infrastructure.[1] The largest component is for transport (funding is also available for the Clean Energy Initiative, education and health). Of the 15 transport projects announced by the Minister for Infrastructure, Transport, Regional Development and Local Government, the Commonwealth’s total funding commitment amounts to $8.5 billion.[2] Of this, $8.1 billion will come from the Building Australia Fund.

The 15 projects include seven of the nine projects that Infrastructure Australia assessed as meeting its criteria (the seven projects are listed in Table 1).[3] The government also announced funding for six projects which, while on Infrastructure Australia’s list of 28 projects with ‘real potential’, have nonetheless not been fully assessed by Infrastructure Australia.[4] The basis on which the government selected the six projects is unclear. In addition, the government announced funding for two other projects. One was $618 million for the Kempsey bypass on the Pacific Highway in NSW. The other was $61 million for the O-Bahn track extension in South Australia.  

Table 1: Infrastructure Australia-approved projects funded in the 2009-10 Budget

Source: Minister for Infrastructure 2009–10 Budget media releases

Victoria emerges as the main beneficiary of the 15 projects, with $3.476 billion. This is followed by NSW with $2.209 billion, Queensland with $1.757 billion, South Australia with $644.7 million, Western Australia with $339 million, and the Northern Territory with $50 million. 

A feature of the announcement is the emphasis given to rail, with $4.6 billion of the $8.4 billion for rail. Most of this is for public transport, with the regional rail express project in Victoria the single largest project involving total Commonwealth funding of $3.2 billion. Two ports are also scheduled to be funded: $339 million for the Oakajee Port Common User Facilities in Geraldton WA, and $50 million for the expansion of Darwin Port. This is the first direct Commonwealth funding of ports for a long time. Ports have traditionally been the preserve of state governments and to a lesser extent, the private sector. The Commonwealth, has however, funded projects that indirectly affect ports. An example is access to Port Botany, which will be improved by the completion of the south Sydney dedicated rail freight line.

The funding of infrastructure is designed, in part, to help stimulate the economy. Some projects are scheduled to start in 2009 and so should provide relatively rapid stimulus. Ongoing spending on these projects together with the coming-on-stream of projects with later start dates will spread the stimulus over a number of years.

Future funding of the announced projects is likely to be a major issue. KPMG estimates that the total cost of the announced projects is possibly close to $80 billion.[5] With the Building Australia Fund depleted by the funding of roads, rail and ports of $7.7 billion and by funding of the National Broadband Network, and with the government having pledged to return the Budget to surplus over time, the government’s room for manoeuvre is limited. This suggests that it will have to look to state governments and the private sector to help fund projects. One estimate of the additional funding needed for the 15 projects is in the order of $27 billion.[6]

Budget announcements from different sources lead to some confusion about the level of funding. For example, the Minister for Infrastructure, Transport, Regional Development and Local Government announced road funding over the six years 2008–09 to 2013–14 will be $28 billion.[7] However, the Department of Infrastructure, Transport, Regional Development and Local Government (DITRDLG) website (dated 13 May 2009) shows land transport funding for the six years at $27 billion.[8] But land transport includes rail as well as road funding.

Nor is the funding for 2009–10 clear. In 2009-10, responsibility for funding land transport will be shared between DITRDLG and the Department of the Treasury under the revised arrangements for federal financial relations that came into effect on 1 January 2009. The DITRDLG Portfolio Budget Statements (PBS) show DITRDLG funding for infrastructure investment in 2009–10 under the Nation Building Program to be $892 million and for the Department of the Treasury, $3375 million amounting to a total of $4267 million.[9] However, the DITRDLG website shows land transport funding in 2009–10 as being $4427 million.[10] Further, the Department of the Treasury PBS shows Treasury as appropriating $3323 million on behalf of the DITRDLG for the Nation Building Program, a difference of $51 million compared with the $3375 million accounted for in the DITRDLG PBS.[11]

Still, it seems that land transport infrastructure funding in 2009–10 will be lower by about $455 million than in 2008–09 as shown in Table 2. This seems to be at odds with the government’s policy of providing fiscal stimulus to the economy during the recession.

Table 2: Land transport funding 2008-09 and 2009-10 ($ million)

a   Treasury payment in 2008-09 is a bring forward of funding from 2009–10 for a number of key projects
b   Accrual expenses relating to prepayments made in 2006 and 2007.
c   Includes equity payments in 2009–10
Sources: DITRDLG PBS 2009–10 pp. 20, 24, 34, 89 and 107 and DITRDLG website

The budget papers do not show funding for rail and road separately. Given that Members of Parliament frequently respond to public interest in road funding, it would be useful if this information were included in future budget papers. 

[1].    W Swan (Treasurer), Budget Speech 2009–10, Commonwealth of Australia, Canberra, 12 May 2009, viewed 18 May 2009, http://www.budget.gov.au/2009-10/content/speech/download/speech.pdf 

[2].    A Albanese (Minister for Infrastructure, Transport, Regional Development and Local Government), Investing in the nation’s infrastructure priorities, media release, 12 May 2009, viewed 18 May 2009, http://www.minister.infrastructure.gov.au/aa/releases/2009/May/budget-infra_01-2009.htm. This press release does not include $61 million for the O-Bahn track extension.

[3].    The nine projects can be found in: Infrastructure Australia, ‘Table 2’, National Infrastructure Priorities, Commonwealth of Australia, May 2009, pp. 10–11, viewed 18 May 2009, http://www.infrastructureaustralia.gov.au/files/National_Infrastructure_Priorities.pdf

[4].    The six projects are the Darwin Port expansion, Oakajee Port, the  Cooroy to Curra section of the Bruce Highway, the Brisbane Inner City rail Capacity project, the West metro in Sydney, and the Northbridge rail link.

[5].    KPMG Australia, 22 billion x 4 is the true picture for infrastructure, media release, KPMG Australia, 13 May 2009, viewed 18 May 2009, http://www.kpmg.com.au/Default.aspx?tabid=214&kpmgarticleitemid=3661&frompress=true

[6].    A Ferguson, ‘PM plan to raid super for projects’, Weekend Australian, 16 May 2009, p. 1.

[7].    A Albanese (Minister for Infrastructure, Transport, Regional Development and Local Government), Federal road investment program steps up a gear, media release, 12 May 2009, viewed 18 May 2009, http://www.minister.infrastructure.gov.au/aa/releases/2009/May/budget-infra_02-2009.htm

[8].    Australian Government, ‘Land transport funding allocations consolidated’, DITRDLG website, viewed 13 May 2009, http://www.nationbuildingprogram.gov.au/funding/allocations/
funding_allocations_consolidated.aspx#2008_to_09

[9].    Australian Government, Portfolio budget statements 2009–10: budget related paper no. 1.13: Infrastructure, Transport, Regional Development and Local Government portfolio, Commonwealth of Australia, Canberra, 2009, p. 34, viewed 18 May 2009,
http://www.infrastructure.gov.au/department/statements
/2009_2010/budget/files/DITRDLG_Budget_2009-10_PBS.pdf; Portfolio budget statements 2009–10: budget related paper no. 1.13, p. 24.

[10]. DITRDLG website, viewed 13 May 2009,
http://www.nationbuildingprogram.gov.au/funding/allocations/
funding_allocations_consolidated.aspx#2008_to_09

[11]. Australian Government, Portfolio budget statements 2009–10: budget related paper no. 1.17: Treasury portfolio, Commonwealth of Australia, Canberra, 2009, p. 31, viewed 18 May 2009, http://www.treasury.gov.au/documents/1539/PDF/
Treasury_portfolio_budget_statements_2009_10.pdf

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