Infrastructure expenditure over the next decade

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 202223. 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 infrastructuremost 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
  1. 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.
  2. Funding is allocated through rounds, and there is approximately $700m available to cover future rounds as well as exigencies in current projects.
  3. Funding is allocated through rounds, and there is approximately $500m available to cover future rounds as well as exigencies in current projects.
  4. 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.


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