On The Road to Infrastructure Certainty

Thursday, March 26th, 2015
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When it comes to Australia’s current infrastructure landscape, there is a lot of uncertainty about what’s next.

An unexpected change of Government in Queensland has brought into question the future of a number of major projects, and the sudden stop to the Asset Leasing Program proposed by the previous government has compounded the uncertainty. The funds from asset leasing were not only going to be used to pay down debt, but to fund a program of significant projects. With the program now scrapped, it’s not clear what alternative funding arrangements will be used and what infrastructure can be developed.

In Victoria, meanwhile, the new government’s decision to cancel contracts on the East West Link project has raised concerns in the infrastructure sector about sovereign risk and the potential damage to investor confidence, which some believe will jeopardise private sector investment in other important infrastructure projects.

To the west, in the once booming state of Western Australia, the continuing downturn in the resources sector is seeing business confidence decline in line with the price of iron ore, coal, and oil, and increased uncertainty about a number of important infrastructure projects.

Everyone involved in the planning, designing, facilitating, funding and construction of major infrastructure closely watched the recent New South Wales state election campaign, and with the Coalition government returned to office, Premier Mike Baird now has a mandate to privatise the state’s poles and wires network to fund critically-needed infrastructure.

Amid the uncertainty in some states, however, and beyond the short-term anxiety created by a changing landscape, there are some very good signs for the future stability of the sector, both nationally and in the States.

Infrastructure Australia has been relaunched as an independent statutory body with a mandate to prioritise and progress nationally significant infrastructure. It will focus on Australia’s current and future infrastructure needs, will bring an apolitical perspective, look more creatively at models for financing and delivering infrastructure, and facilitate better planning and use of existing infrastructure.

In Victoria, the Government is changing its approach to managing the state’s infrastructure programme with the anticipated establishment of Infrastructure Victoria, which is designed to provide the State with independent advice on infrastructure strategies, as well as reviewing and determining project priorities.

Similarly, Queensland’s proposed Building Queensland will provide independent advice to government on the value infrastructure projects contribute to the state, which will assist in prioritising spending while assisting in engaging the community to more easily see and understand the benefits. This will help depoliticise infrastructure planning and assist in facilitating more confident private sector investment.

In New South Wales, Infrastructure NSW – an independent statutory agency established in July 2011 – has been successfully assisting the NSW Government to identify and prioritise the delivery of critical public infrastructure for some years now.

The key to moving forward, of course, is the ability to attract finance from the private sector, given the current financial constraints that most of our governments are working under. The frameworks being put in place nationally and around the country now will provide much more certainty for investors.

While Public Private Partnerships (PPP) will be the go-to-financing model,  having the right structures in place to prioritise infrastructure projects will allow us to then focus on “the other PPP” – Planning, Program and Procurement. When done well, this too will add to investment confidence, encourage political bi-partisan support and reduce timing delays in easing Australia’s infrastructure backlog.

Yes, there is uncertainty, but there are things to be confident about, too. The road to certainty might have a few bends along the way, but at least we’re on it.

This article was written in collaboration with AECOM’s Geoff Hardy, Director, Infrastructure Advisory – ANZ
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