Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 1 Contents futurebuilding 69
Volume 3 Number 1
Between a rock and a hard place
The 800-bed hospital -- which is being built by
the SA Health Partnership, comprising Leighton
Contractors, Macquarie Capital Group, Hansen
Yuncken and Spotless -- is scheduled for completion
Weatherill says the tighter balance sheet, coupled
with the government's determination to shield the
state from the ravages of a climbing dollar and other
external shocks, would inevitably mean a broader
role for the private sector in ful lling the state's
Additionally, ensuring maximum value for
money for taxpayers will be at the forefront of the
government's infrastructure strategy.
While none of the state's upcoming infrastructure
projects are currently slated for delivery through the
PPP model, Weatherill says that is not re ective of the
government's reluctance to embrace the model.
'We will choose the PPP model when they make
sense,' Weatherill says.
'It made sense to transfer the building and
maintenance of the [NRAH]. It transfers risk to the
Treasurer Jack Snelling says that PPPs like the
New Royal Adelaide Hospital are effective because
the state can transfer construction and maintenance
risk to the private sector, allowing it to focus on
delivering clinical services.
'PPPs enable the state to focus on what it should
be focusing on, which is the quality of its public
services, while the private sector can focus on
the quality of the infrastructure that houses those
services,' Snelling explains.
'With the split of that risk allocation, both the state
and the private sector bene t; the state through value
for money, and the private sector through return on
'The challenges for governments in the future will
be to ensure that the key criterion in tendering PPPs
remains value for money, and the process for doing
that remains very competitive.'
While Snelling says there will be many projects
over the forward estimates that 'will be built and
managed by the government', the private sector
will still be called on to play a signi cant role in the
delivery of major infrastructure.
'When value for money for government and the
South Australian taxpayer is competitive, we will
look at options as to how those projects could be
built under a public private partnership,' he says.
Snelling says PPPs deliver well maintained and
quality public infrastructure over the life of the
contracts so that current and future generations can
bene t from a state-of-the-art project.
'For the private sector, PPPs present a great
opportunity for return on capital if they do meet the
conditions of their contract.
'The private sector works very hard to meet
the standards in their contracts, so it continues to
receive the service fee revenue that comes with the
'We believe there are several opportunities where
those partnerships will serve South Australians well
today, but, just as importantly, serve South Australians
well into the future.'
Dealing with a dif cult budget
Snelling's second state budget, which he handed
down on 31 May 2012, forecasts an $867 million
de cit in the year ending June 2013. That will narrow
to $778 million the following year. The main culprits
are slumping budget, tax and GST revenues, which
have been written down by a further $2.8 billion
over the period 2011--12 to 2014--15, including a
$700-million reduction in 2012--13.
The pace at which the government reaps tax
will slow by 7.2 per cent in real terms during the 12
months ending June 2013. After that, tax revenue is
expected to recover and the government hopes to
return the budget to surplus by June 2016.
The combination of lower revenue and sustained
capital works spending will double the debt over the
next four years to $8.8 billion.
While Standard & Poor's reacted by lowering its
rating of the state government's ability to service its
debt from triple-A to double A-plus, Weatherill says
other states may also have to face up to a new reality.
'The global nancial crisis had a substantial
effect on revenue because global uncertainty drove
down demand for resources and their contribution to
revenue,' Weatherill says. 'Each state has to do it in
its own way.'
Forced to take drastic action, Snelling found
$430.7 million in new savings in the state budget.
Numerous projects were either deferred or
cancelled. A planned $500 million tram line for
Adelaide was cancelled, while the government
delayed electri cation work for some rail lines,
including the Gawler and Outer Harbour. That added
about $373 million to the state's balance sheet
through to June 2016.
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