Home' Future Building: The Australian Infrastructure Review : Volume 3 Number 2 Contents futurebuilding 23
Volume 3 Number 2
talking about over the next ve years is in the order
of 10 to 15 per cent; in 10 years, that will be 36 per
cent, and in 20 years it will be 84 per cent.
This is a real issue. That compounding effect is
very signi cant and has a real cost. Doing nothing
has a real cost. The McKinsey analysis was great in
terms of putting a number on that cost, so that when
you're framing the debate you can actually say there
is a genuine cost to not investing in infrastructure.
Looking at listed infrastructure, the market has
been very strong, with outperformance over 20 per
cent in the last 12 months. Interestingly, a number
of assets in the regulated asset base sector -- a well-
accepted delivery mechanism for infrastructure
-- are listed here in Australia, and are now trading
comparable to the unlisted infrastructure sector.
That's really the rst time we've had that
paradigm since the nancial crisis, and it's a very
positive development in terms of showing the listed
infrastructure market's ability to participate in these
projects. It underscores the point that we don't have
a shortage of capital.
Obviously, the unlisted market has been active
and continues to grow.
These are very clear and unambiguous facts.
So what's the problem? The problem is on
the supply side. The fundamental challenge we
have at the political level is this fiscal issue.
Governments need to get debt down, and they
need to generate surpluses.
When government spends on infrastructure,
unfortunately the way they generally account for it
is as a cost to their pro t and loss on their budget
surplus position. In a private business, that would
go onto your balance sheet as an investment, and
then the income or costs would go through the pro t
and loss. But we need to be clear. Unfortunately for
governments, that cost goes straight through to the
operating surplus, and therefore hits the budget.
We genuinely need the debate about infrastructure
being an investment, not a cost. It's a hard debate,
but unfortunately, unless we can start articulating that
debate better as an industry, we're going to continue
to see a lack of appropriate funding mechanisms for
The Federal Government is trying to get back
to surplus in the short term, but we've got a long-
term issue, and it's a demographic issue; we're not
able to change that. The de cit position is going to
signi cantly deteriorate as the ageing population
So this debate, again, is a really important debate
because this issue is certainly going to be around in
our lifetimes and beyond.
Looking at some of the solutions for governments,
obviously the good news is that patronage risk
models don't go on the government balance sheet,
at least in the short term. But there's the theory that
those models are dead. While we have seen the
The Federal Government is
trying to get back to surplus in
the short term, but we've got
a long-term issue, and it's a
demographic issue; we're not
able to change that
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