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Federal Budget opens the door to private sector access to infrastructure investment

17/05/2010

Perhaps the most important news to come out of the Federal Government’s 2010 Budget papers was not the headline grabbing $1 billion for freight rail efficiency but the acknowledgement that private sector investment is required.

The statement by Infrastructure minister Anthony Albanese that Infrastructure Australia (IA) would be looking to the private sector opens a massive new opportunity for accelerating the redevelopment of our ageing rail infrastructure.

And a new twist has been placed on the resource super profits tax with it funding a $5.6 billion infrastructure fund – a sweetener for the mining sector and a potential major source of rail infrastructure funding in the medium term.

We also cannot forget the Federal Government has committed $37 billion to road, rail and port infrastructure to keep the economy moving through the mining boom – and last year $8.5 billion was allocated to IA’s critical list of projects.

While the Budget allocation of $1 billion to the Australian Rail and Track Corporation (ARTC), is still not enough, if the Government contribution combines with other initiatives it may boost the investment pool significantly in the future.

Unfortunately the super profits tax will not be here until 2012-2013 – starting with $700 million – so there is quite a wait for this money even if it manages to get through parliament. And while the private sector is being tempted by corporate bond interest tax discounts, designed to encourage pooled investments of the scale required, there is no way of knowing if and when the required flood of money will eventuate.

So, apart from the $1 billion funding for seven new projects across NSW, Victoria, South Australia and Western Australia, we are marginally better off as an economy or as an industry after this Budget.

ARTC has already identified the key projects which can be brought on-line quickly and provide productivity improvements for the economy in the transport sector and economic stimulus in 2010 and this should be applauded.

The projects that will be brought forward include:

The North-South Corridor (Brisbane to Melbourne), including a 44 minute transit time reduction northbound and a 35 minute reduction southbound between the two cities, and the rerailing of 239 kilometres of 47kg/m rail in new 60 kg/m rail and upgrading deficient bridges and turnouts on Albury-Melbourne-Geelong.
The East-West Corridor, which will enable a 35 minute reduction in transit time between Melbourne-Adelaide, reduce damage to goods in transit, and the resleepering of Broken Hill-Parkes.

It said that the $1 billion represents 13,135 months of employment (1500 jobs approximately) and will result in 218,257 tonnes of CO2 emissions saved as freight is shifted to the low-emission rail network compared to those of air and road.

However, if the Federal Government wants more private sector investment then it needs to make a decisive move to attract the capital to generate the long term investment required. The door has been opened little, it needs to be thrown open to make Australia a low CO2 country via a world standard rail industry.

Francis Dwornik is Rail Engineering Director of O’Donnell Griffin Rail. O’Donnell Griffin is part of the Norfolk Group (ASX:NFK) of companies and is a leading engineering company nationally with involvement also in major infrastructure projects.

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