Budget Review 2022–23 Index
Rodney Bogaards
In a pre-Budget media
release the Prime Minister stated the Government was investing a further
$17.9 billion in new and existing infrastructure projects in the 2022–23 Budget. In 2022–23
Budget Paper no.1: Statement 1 the Government states the funding contributed
towards a ‘… record $120 billion 10-year infrastructure investment pipeline’
(p. 9). The funding is predominantly for transport infrastructure over the 10
years from 2022–23. While
much of the media discussion focused on the overarching $120 billion investment,
the Prime Minister’s pre-budget release identified only $11 billion as spending
on new projects, with the remaining $6.9 billion committed to existing projects.
This article outlines some of the funding mechanisms for
infrastructure; in particular, payments to the states and the use of alternative
funding arrangements and discusses how the Government’s $120 billion rolling
10-year infrastructure spend is constituted.
Payments to the states and
territories
Traditionally, the primary mechanism for Commonwealth support
for infrastructure—most notably transport
infrastructure—has been the outlays of grants to other government sectors, primarily
the states and territories.
The Commonwealth makes grants to the states through the Federal Financial Relations
(FFR) system. It includes Commonwealth–state funding agreements for jointly
funded government services such as infrastructure
services, and the more recent sectoral Federation
Funding Agreements for infrastructure.
Payments under these agreements are summarised annually in the budget, for
example in Federal
Financial Relations: Budget Paper no. 3: 2022–23 (pp. 56–57).
The Commonwealth payments to the states are funnelled mainly
through key programs, which for 2022–23 include:
- Infrastructure
Investment Program, including the
sub-programs:
- Black
Spot Projects
- Bridges
Renewal Program
- Developing
Northern Australia through improving cattle supply chains and Northern Australian
Roads
- Heavy
Vehicle Safety and Productivity Program
- Major
Projects Business Case Fund
- Rail
Investment for nationally significant rail projects
- Road
investment for nationally significant rail projects
- Roads
of Strategic Importance
- Roads
to Recovery and the
- Urban
Congestion Fund.
- Infrastructure Growth Package which includes ‘new investments’
and the Western Sydney Infrastructure Plan.
- A range of other infrastructure payments, including for example, city
deals, regional deals, Local Roads and Community Infrastructure, the
National Water Grid Fund, Drought Communities Programme and WiFi and mobile
coverage on trains.
The summary of these programs in Table
2.8 in Budget Paper no. 3 identifies that some of the funding is targeted
directly at local government, although paid through the states. These amounts
are additional to the financial assistance grants outlined in the ‘other
payments’ category of Budget Paper no.3. The local roads component of the
local government financial assistance grants are also typically captured in the
governments infrastructure spending claims.
Other funding mechanisms
Over time other funding mechanisms have been used by the
Commonwealth to support infrastructure projects, beyond traditional payments to
the states. These mechanisms include:
- Equity investments: akin to buying shares in a business, this
provides direct control over a project’s delivery and financing risks and
allows for potential future returns for profitable investments. For example, Budget
Strategy and Outlook: Budget Paper No. 1: 2022–23 (pp. 254–255)
indicates the Government has committed up to $14.5 billion in equity for the
Australian Rail Track Corporation (ARTC), to deliver the Inland Rail project which is
intending to provide an improved direct freight rail corridor between Melbourne
and Brisbane and a new freight corridor between Brisbane and Perth (via
Parkes).
- Concessional loans: which provide a financing option to projects
based on a lower interest rate or longer time frame than might be available in the
private markets. For example, Budget
Strategy and Outlook: Budget Paper No. 1: 2022–23 (pp. 273, 280–281)
discusses a $1.75 billion loan facility to deliver WestConnex
Stage 2. The concessional loan is at an interest rate of 3.36% and
commenced in November 2015 and must be repaid between September 2029 and July
2034.
- Guarantees: where the Commonwealth accepts responsibility for
defined risk events that might otherwise provide a disincentive for private
investors to invest. For example, Budget
Strategy and Outlook: Budget Paper No. 1: 2022–23 (p. 255) states the
Government has provided an indemnity to cover all costs and liabilities that
may be incurred by the National
Intermodal Corporation Limited in the event that the Commonwealth
terminates the Equity Funding Agreement between the Commonwealth and National
Intermodal (prior to February 2022 known as the Moorebank Intermodal Company
Limited, a public non-financial corporation)
- Creating funding pools: attributing a pool of resources that can
be drawn upon for a range of related purposes. For example, Budget
Strategy and Outlook: Budget Paper No. 1: 2022–23
(p. 280) describes the Northern Australian
Infrastructure Facility (NAIF) as a lending facility established by the
Government to provide loans or alternative financing mechanisms to
infrastructure projects. In addition, since its establishment the NAIF has been
amended to allow equity investments subject to a cap of $50 million and a
minimum $5 million spend per investment. Budget
Measures: Budget Paper No. 2 2022–23 (p.
149) also indicates the Government will provide a further $2.0 billion to the
NAIF bringing total Commonwealth funding to $7.0 billion.
Other mechanisms do not involve any immediate commitments. For
example, Budget
Strategy and Outlook: Budget Paper No. 1: 2022–23 (pp. 260–261) identifies
‘quantifiable contingent liabilities’ pertaining to infrastructure. These
include a $4 billion commitment for the East-West
Link Project in Victoria and a $1.2 billion commitment to the extension of
Roe Highway in Western Australia (previously known as the Perth
Freight Link Project). These projects are conditional on the relevant state
governments committing funding. Both projects have been included in each Budget
since 2014–15; however, neither state government has currently agreed to fund
these projects.
Components of the $120 billion
commitment
The specific components of the $120 billion funding commitment
are not included in the published budget papers, due in part to the long time
frames and various funding mechanisms outlined above.
Table 1 identifies $67.7 billion in transfer payments to
other governments for infrastructure for the Budget year and the forward
estimates (that is, from 2022–23 to 2025–26). This is 55% of the total $120
billion funding commitment.
The figures in Table 1 do not include funding information beyond
the forward estimates, beyond 2025–26, where some announced expenditure would
be allocated.
Table 1 Payments to support state
infrastructure services
| $ million |
2022–23 |
2023–24 |
2024–25 |
2025–26 |
Total |
| Infrastructure Investment Program |
15,588.0 |
17,549.0 |
15,072.3 |
10,040.8 |
58,250.1 |
| Infrastructure Growth Package |
147.9 |
338.7 |
402.4 |
123.2 |
1,012.2 |
| Other payments (including those direct
to local governments) |
1,993.0 |
2,190.8 |
2,294.1 |
1,948.8 |
8,426.7 |
| Total |
17,728.9 |
20,078.5 |
17,768.8 |
12,112.8 |
67,689.0 |
Some of the columns may not add up due to rounding error.
Source: Australian Government, Federal
Financial Relations: Budget Paper No. 3: 2022–23, p. 56 and
p. 97.
Beyond budget papers it appears that the components in Budget
Paper no.3 are combined with other administrative data and other financing
mechanisms to account for the $120 billon.
In the 2021–22
Supplementary Budget Estimates proceedings tabled
documents provided by the Department of Infrastructure, Transport, Regional
Development and Communications included the data in Table 2, which shows that
as at the 2021–22 Budget, $57 billion of the $111 billion of the 10-year total
was in the forward estimates ($16,541.8m, $15,015.1m and $11,979.1m), $18.6
billion is in unconventional financing and $5.2 billion is in contingent
liabilities
There is no similar table from the 2022–23 Budget estimates
hearings for the Rural
and Regional Affairs and Transport Legislation Committee, so it is not
possible to confirm if the same method has been used.
If so, the Government’s $120 billion figure for the ten
years from 2022–23 can be assumed to include a combination of the payments to
the states and commitments made using other funding mechanisms.
The Parliament may wish to seek further detail into the
composition and phasing of the rolling 10 year infrastructure investment plans.
Table 2 Total infrastructure expenditure including
payments for specific purposes to support state infrastructure services in
budget and payments to non-state services, equity and loans. (Figures as
provided in the 2021–22 Budget)
| Financial Year $ million |
2021–22 |
2022–23 |
2023–24 |
2024–25 |
Budget
Year plus Forward Estimates Total |
10
Year Total |
Unallocated* |
| Infrastructure Investment
Program |
|
|
|
|
|
|
|
| - Black Spot Projects |
137.0 |
117.8 |
110.0 |
110.0 |
474.9 |
1,134.9 |
0.0(a) |
| - Bridges Renewal Program |
88.5 |
121.1 |
121.1 |
91.1 |
421.9 |
974.8 |
0.0(b) |
| - Developing Northern Australia |
|
|
|
|
|
|
|
| - Improving cattle supply
chains |
0.1 |
3.7 |
1.3 |
0.0 |
5.1 |
5.4 |
0.3 |
| - Northern Australian Roads |
54.8 |
6.9 |
7.6 |
4.6 |
73.9 |
99.8 |
12.2 |
| - Heavy vehicle safety and
productivity |
67.2 |
67.2 |
101.6 |
69.3 |
305.4 |
725.7 |
0.0(c) |
| - Major Projects Business Case
Fund |
98.8 |
60.3 |
26.3 |
12.6 |
197.9 |
223.7 |
20.8 |
| - Rail investment component |
2,321.5 |
3,211.1 |
3,425.1 |
3,096.9 |
12,054.6 |
17,391.7 |
0.0 |
| - Road investment component |
5,447.8 |
7,986.4 |
7,684.3 |
5,851.0 |
29,969.4 |
40,356.7 |
20.5 |
| - Roads of Strategic Importance |
794.2 |
1,082.1 |
898.6 |
670.9 |
3,445.8 |
4,470.3 |
0.0(d) |
| - Roads to Recovery^ |
499.5 |
499.5 |
476.7 |
499.5 |
1,975.2 |
4,972.3 |
0.0 |
| - Urban Congestion Fund |
775.6 |
1,360.9 |
797.8 |
256.4 |
3,190.6 |
4,301.6 |
890.4 |
| Infrastructure Growth Package |
|
|
|
|
|
|
|
| - Western Sydney Infrastructure
Plan |
254.9 |
167.0 |
346.7 |
350.4 |
1,119.0 |
1,354.8 |
0.0 |
| Drought Communities Program |
23.1 |
0.0 |
0.0 |
0.0 |
23.1 |
23.1 |
0.0 |
| Local Roads and Community
Infrastructure |
974.2 |
599.3 |
0.0 |
0.0 |
1,573.6 |
1,573.6 |
0.0 |
| Other infrastructure investments
including City and Regional Deals** |
879.6 |
428.4 |
168.8 |
89.4 |
1,566.2 |
1,671.8 |
0.0 |
| Financial Assistance Grants
(untied local road grants) |
407.6 |
830.0 |
849.3 |
876.9 |
2,963.8 |
8,225.5 |
0.0 |
| Equity and Loan Investments
(including Inland Rail, Moorebank Intermodal, Western Sydney Airport) |
|
13,855.8 |
18,663.9 |
0.0 |
| East-West Link contingent
liability |
|
4,000.0 |
|
| Perth Freight Link contingent
liability |
|
1,160.0 |
|
| Total |
12,824.3 |
16,541.8 |
15,015.1 |
11,979.1 |
70,216.1 |
111,329.5 |
944.2 |
- Annual allocations for the Black Spot Program from 2019–20
onwards have been determined based on population, the number of fatal crashes
and vehicle kilometres travelled per jurisdiction.
- Funding is allocated through rounds, and there is
approximately $700m available to cover future rounds as well as exigencies in
current projects.
- Funding is allocated through rounds, and there is
approximately $500m available to cover future rounds as well as exigencies in
current projects.
- All funds are allocated to corridors.
* No unallocated funding is profiled within the forward
estimates period.
^ Roads to Recovery funding is provided to councils directly
but is categorised as payments to support state infrastructure services.
Includes an amount each year for payments to non-state entities (Norfolk Island
and Indian Ocean Territories).
** Includes components of the Adelaide City Deal, Albury
Wodonga Regional Deal, Barkly Regional Deal (to States), Darwin City Deal, Geelong
City Deal, Hinkler Regional Deal (to States), Launceston City Deal, Townsville
City Deal (to States), and Western Sydney City Deal.
Source: Department of Infrastructure, Transport, Regional
Development and Communications, Documents
tabled in response to a request from Senator Sterle, 2021–22 Supplementary
Budget Estimates, 25 October 2021, p. 767.
All online articles accessed April 2022
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