Infrastructure portfolio

Budget Review 2020–21 Index

Liz Kenny and Rob Dossor

In response to the impact COVID-19 has had on the economy, the Government is set to make $48.7 billion of payments to the states for infrastructure spending over the forward estimates. As shown in Table 1 below, this includes $10.4 billion this year financial year. This represents an increase of more than $12.7 billion over the forward estimates, compared to the 2019–20 Budget.

Note that comparing information about multiple projects and measures across budget years can be challenging, so figures contained in this brief should be treated as the Library’s best estimates rather than conclusive. Infrastructure expenditure is presented in different ways across the budget which can make it difficult to validate overarching figures.

Table 1: total payments to the states for infrastructure projects over the forward estimates

$ million 2019–20 2020–21 2021–22 2022–23 2023–24 Total
2020–21 Budget(a) - 10 398.7 12 630.7 12 753.6 13 013.9 48 796.9
2019–20 Budget 6 527.8 6 822.2 7 341.2 8 842.7 - 29 533.9
Difference - 3 576.5 5 289.5 3 910.9 - 12 776.9

Source: Australian Government, Federal financial relations: budget paper no. 3: 2020–21, p. 44; Australian Government, Federal financial relations: budget paper no. 3: 2019–20, p. 44.

(a) The total payment figure to the states is different from the Budget, due to a mistake in the summing of the Drought and Communities Program—extension table on page 52 (Federal financial relations: budget paper no. 3: 2020–21).

New versus old

The Government says in Budget Strategy and Outlook: Budget Paper No. 1: 2020–21 (p. 1-17) that an additional $10 billion in funding has been allocated towards infrastructure projects over the next four years. It also says that this brings the total commitments for new and accelerated projects since the onset of COVID‑19 to $14 billion across the forward estimates (p. 1-17). A breakdown of these figures cannot be found in the budget papers. However, on the basis of information in the budget papers, it appears that the $14 billion figure probably comprises:

This suggests that an additional $9.7 billion of funding has been announced through the Budget and $14.1 billion over the forward estimates, including the infrastructure stimulus as announced in the July Economic and Fiscal Update.

Importantly, $2 billion for road safety projects will be provided to the state and territory governments in three six-month tranches with funding for each additional tranche contingent on the successful delivery of the previous tranche of projects. This approach to funding is presumably intended to encourage quick delivery over the two years of operation and encourage its use as a short-term stimulus. However, this approach may create the risk of a perverse impact on the delivery of these projects, with the incentive to ensure value for money (and minimise ‘gold plating’ of infrastructure) traded for the need to spend the money as quickly as possible. Furthermore, the 2019–20 Final Budget Outcome outlined (p. 7) that lower‑than‑estimated payments were made to the states and territories for road and rail infrastructure due to slower progress on projects as a result of the COVID-19 pandemic and 2019–20 bushfires. The impact of these delays may therefore signal the risk of a slow rollout of this program as jurisdictions continue to face COVID-19 restrictions.

It is also unclear whether there is sufficient capacity in the construction market to undertake these additional infrastructure investments in the current timeframes, which, according to Infrastructure Australia, ‘is already undertaking record levels of activity’.

According to the Budget, the majority of the $7.5 billion in new infrastructure spending will be spent over the forward estimates. The Government has also re-profiled $659 million (that is, where previously announced project funding schedules are adjusted) to be spent over the forward estimates (as shown in Table 2 below).

Table 2: new and re-profiled funding over the forward estimates and beyond

$ million 2020–21 2021–22 2022–23 2023–24 Total over the FE Total brought forward Total new over the FE Total new committed
NSW 220.8 561.6 640.4 554.7 1 977.5 - 1 977.5 2 700.0
Vic. 80.0 430.0 692.0 491.6 1 693.6 610.0 1 083.6 1 100.0
Qld 125.9 293.3 317.2 312.9 1 049.3 14.2 1 035.1 1 300.0
WA 94.8 314.4 421.3 223.7 1 054.2 - 1 054.2 1 100.0
SA 101.1 154.7 138.1 118.6 512.5 20.3 492.2 625.0
Tas. 12.2 31.9 66.5 124.0 234.6 15.0 219.6 360.0
NT 15.8 35.8 48.8 47.1 147.5 - 147.5 190.0
ACT 2.5 12.0 25.0 35.0 74.5 - 74.5 155.0
Total 653.1 1 833.7 2 349.3 1 907.6 6 743.7 659.5 6 084.2 7 530.0

Source: Australian Government, Budget measures: budget paper no. 2: 2020–21, pp. 130–39.

As seen in Table 2, while an additional $659.5 million is being added to the forward estimates, this is due to a re-profiling of the project expenditure and should not be considered ‘new money’; thus, it is not included in the ‘total new over the FE’ column.

State share of infrastructure spend

Table 3 shows the state/territory distribution of infrastructure expenditure over the forward estimates. Queensland receives over 25 per cent of the funding, with only around 20 per cent of the national population, which might be partly explained by Queensland’s more regionally dispersed population. NSW receives the next highest share at around 25 per cent, followed by Victoria, Western Australia and South Australia.

Of the smaller states/territories, the Northern Territory and Tasmania both receive more than their population share, unlike the ACT, which receives less than half of its population share.

Table 3: total infrastructure grants to states

$ million NSW Vic. Qld WA SA Tas. ACT NT Total
2020–21 3 134.4 1 870.6 2 756.1 1 229.9 757.0 275.7 61.4 296.5 10 381.6
2021–22 2 962.2 2 654.1 3 248.7 2 201.3 711.9 316.5 100.5 423.2 12 618.4
2022–23 3 119.7 3 061.5 3 298.5 1 974.4 501.2 429.9 92.1 276.8 12 754.1
2023–24 3 020.4 3 782.6 3 154.0 1 337.8 861.6 513.0 72.8 271.5 13 013.7
Total 12 236.7 11 368.8 12 457.3 6 743.4 2 831.7 1 535.1 326.8 1 268.0 48 767.8
Population at March 2020 8 157 735 6 689 377 5 160 023 2 656 156 1 767 247 539 590 429 834 245 353 25 649 985
Population as % of total 31.8 26.1 20.1 10.4 6.9 2.1 1.7 1.0 100.0
Share of spending % 25.1 23.3 25.5 13.8 5.8 3.1 0.7 2.6 100.0

Source: Australian Government, Federal financial relations: budget paper no. 3: 2020–21,pp. 44–55; Australian Bureau of Statistics, National state and territory population, March 2020.

Re-announcements and existing projects

While the Government has been accused of re-announcing previously funded projects, in several cases it has provided additional funding to previously funded projects. One such case, which the former MP Tony Windsor has criticised, is the Bolivia Hill upgrade project (p. 131). This project was originally announced in the 2013–14 Budget (p. 14) with a Commonwealth contribution of $80 million.

The Budget also provides funding to projects that state governments have already committed funding to. For example, NSW committed to build the Rankin Park to Jesmond section of the Newcastle Bypass as early as 2014, initially for $280 million. The 2020–21 Budget allocates $360 million to this project, which now has a total cost of $450 million, according to the website of the Department of Infrastructure, Transport, Regional Development and Communications (it is not apparent why the project costs have increased so significantly as the project scope does not appear to have changed).

A number of other previously announced projects (in all jurisdictions except the Northern Territory) received additional funding, including:

Other key infrastructure announcements

Equity injection—Australian Rail Track Corporation

An additional equity injection (p. 125) will be made to the Australian Rail Track Corporation (ARTC), primarily to deliver the Inland Rail. The funding amount has not been included due to commercial sensitivities. It is possible this may be published at a later stage (for example, in ARTC’s annual report).

National Water Infrastructure Development Fund

The National Water Infrastructure Loan Facility was established in the 2016–17 Budget (p. 64) with loans that were to be provided to the states and territories to support major water infrastructure projects. The cost of providing the concessional loans was to be offset over the life of the program by the interest revenue collected from loan recipients. The 2016–17 Budget also provided $9.5 million for the National Water Development Fund (p. 64).

Budget Paper No. 2 outlines that the Government will not proceed with the National Water Infrastructure Loan Facility (p. 140). Instead of providing this loan facility, the Budget now allocates $2 billion in grant funding to the National Water Infrastructure Development Fund, which will provide grants to the states and territories for the planning and construction of water infrastructure. This brings the total investment in this fund from $1.5 billion to $3.5 billion. Specific projects to be supported through the fund include:

  • an additional $162.5 million for the Wyangala Dam ($325.0 million in total) and
  • $121.0 million for the Dungowan Dam ($242.0 million in total).

This change to a grant program may allow increased scrutiny, as the grants will need to comply with the Commonwealth Grants Rules and Guidelines. However, it does raise the question of the viability of the investments, as previously it was expected that loans would be repaid using revenue generated by the project, while a grants program, by its nature, means the Government will not be repaid for this investment.

Northern Australia Infrastructure Facility—extension and enhancements

In November 2019 the Minister for Resources and Northern Australia, Matt Canavan, announced a review of the Northern Australia Infrastructure Facility (NAIF) to ensure the loan program can continue to support the development of Northern Australia. The final report is due to be tabled in parliament soon. Key changes to the NAIF include:

  • extending operations by five years to 30 June 2026
  • giving the NAIF the option to lend directly to project proponents (currently loans are made through the relevant state or territory jurisdiction)
  • expanding eligibility to make finance available to additional elements of infrastructure construction (such as equipment purchases or leases, training and the expansion of existing business operations), not only physical construction works
  • removing the prohibition against the Commonwealth assuming the majority of the project risk and
  • introducing governance changes, including appointing a Government representative to the NAIF Board and allowing the minister to overturn a NAIF investment decision to reject an investment earlier in the process.

Budget Paper No. 2 also includes $36.9 million over four years from 2020–21 (and an additional $25.2 million over the two years to 2025–26) to extend the NAIF’s investment window (p. 122).

This announcement represents a significant change to the direction of the policy, with the Government lending directly to project proponents, the minister being involved earlier in decisions, and the Government having the ability to assume the majority of the project risk. The extent of these changes and the impact this will have on investment decisions will be considered once legislation has been drafted and introduced. It should also be noted that to date, the NAIF is not included on the Statement of Risks.


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