When I asked Infrastructure Minister Anthony Albanese a few weeks ago what infrastructure spending might look like, hypothetically, under a Coalition government, his reply was full of that Albo chutzpah – “Well it’s a redundant question. They’re not going to win, and even if they did there wouldn’t be any...”
What a brave chap. But he has a right to do a little chest beating – with this budget Albo has put one small measure in place to ensure that Labor is remembered for having turned around infrastructure spending in Australia.
In its budget documents, Labor claims to have increased combined public and private spending on infrastructure – roads, railways, electricity generators and water storage – by 42 per cent in real terms between the last year of the Howard government and the current year.
Okay, that’s impressive. But even Albanese knows that’s not enough. Every year the infrastructure deficit in Australia grows, and badly needed productivity gains are not realised.
As described in April (Abbott’s do or die infrastructure play) the groundbreaking body Infrastructure Australia, set up early in the Rudd government, has merrily compiled its list of urgently needed projects each year, but has not had any money to help fund them.
The $12 billion IA started with was soon gone, and Labor’s spending, though largely directed towards IA-vetted projects, has included a few blatant pork-barrel projects too.
But a measly $3 million line in this year’s budget raises the hope that more projects on the IA list will be built.
The $3 million measure is a top-up to IA’s current budget of $9 million a year, and is earmarked for specific work – namely, working out which projects can be officially designated for tax concessions under the ‘Infrastructure Finance Reform’ program.
This program allows losses in the early years of a project to be brought forward to be claimed during the construction phase, rather than waiting for the asset to be fully built.
Treasury officials in this year’s budget lock-up told Business Spectator that this measure should probably have been put in place years ago. No government can fund the backlog of projects solely from the public purse (though many projects are still all-public funded), and attracting private sector funds is only way Australia will start to catch up.
The big source of money that is not yet tapped is in superannuation funds. And why don’t they pile into infrastructure? Because public-private partnerships have a very mixed track record – in too many cases, private investors have lost their shirts because of foggy thinking on the risk/return environment their capital is being poured into.
Bringing forward tax write-offs is one way of making PPP infrastructure projects more attractive. But Treasury also says it is, itself, being called on to assess (in many cases via private sector consultancies) the real risk profiles of projects.
When IA gets its $3 million more in 2013-14, it will largely fund teams of consultants and lawyers to hammer out the liabilities, risks and returns that might just start to attract all that lovely super money.
And this more robust process of assessing the tax status of projects will be needed just as much by a Coalition government, should one be formed after September.
In essence, an Abbott government faces the dangerous prospect of not having a dime for public investment in infrastructure, thereby forcing it into risky PPP-style investments that bring more financial disasters like the Brisconnections and Lane Cove Tunnel projects.
So upping IA’s budget from $9 million to $12 million is only a little thing. But it’s an overdue measure from which big things can grow.
Over five years in government, Labor has outlaid $60 billion as part of its ‘Nation Building’ program – a massive public spend. Part two of that program is supposed to roll out from next year.
Of course, all the polls say it’s unlikely that Labor will get to roll out anything for many years to come. That’s why the beefing up of IA should be left alone if an Abbott government is formed – Tony Abbott, and likely infrastructure minister Warren Truss, will need all the help they can get to unlock super money, and start chipping away at Australia’s infrastructure deficit.