Home' Future Building Australian Infrastructure Review : December 2011 Contents The infrastructure backlog –
who is going to pay?
There is no easy answer to financing Australia’s
infrastructure backlog. But commentators agree
on one point: more debate on selecting and
funding the best projects is needed.
Tony Featherstone reports.
Infrastructure Australia’s Chairman’s report to
the Council of Australian Governments in mid-2011
made a critical point: ‘The need for a new funding
paradigm [for infrastructure projects] is especially
critical. Without change in this area, Australia will
not secure the infrastructure it needs. There will be
a long list of ideas that cannot be delivered, leading
to community frustration.’
And Sir Rod Eddington’s point is well made.
Demand growth for additional capacity on transport,
utilities and social infrastructure networks are
increasing public awareness of the cost and impact
of Australia’s mounting infrastructure backlog. The
public debate has increasingly embraced the need
for change and reform in the way governments
select and prioritise new infrastructure projects. But
there is now a need for an informed public debate
about how these projects are funded and delivered.
Infrastructure funding is complex, especially
with the ongoing effects of global financial
turmoil. Governments have scant capacity to
fund infrastructure within the confines of AAA
credit ratings, and there are likely to be limited
opportunities for full economic PPPs – which don’t
impact public balance sheets or credit ratings – in
the short term.
Infrastructure Australia said in its most recent
report: ‘As a country and community, we are
reluctant to increase government debt; we baulk
at raising taxes to pay for better infrastructure and
services; we are uncomfortable with the “user pays”
model; and we are against recycling capital, such as
selling poorly performing infrastructure assets that
could be better managed by the private sector, and
using the proceeds to fund other infrastructure.’
Something has to give, to ensure a more optimal
financing paradigm for Australian infrastructure that
better links the private and goverment sectors, and
has more public acceptance.
Future Building spoke to prominent public and
private sector infrastructure leaders on the most
optimal way to finance infrastructure, and the
Important themes emerged. Governments
simply cannot finance all the infrastructure needed
and are unlikely to take on more debt to do so.
The private sector has its own challenges, such
as costlier funding for infrastructure projects.
Some interviewed for this feature felt that greater
superannuation investment in infrastructure,
especially in new developments, was not an easy
solution either. And asset privatisations in key
Volume 2 Number 2
Future Building spoke to Queensland Treasury Corporation Chairman, Stephen Rochester; and
John Fitzgerald, a KPMG adviser and, until recently, the Deputy Secretary of the Victorian
Department of Treasury and Finance. Also included in this article are comments from a speech
given by Jim Murphy, Executive Director, Markets Group, Federal Treasury in late 2011.
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