The Turnbull Government appears to be planning to make its $5 billion contribution to the proposed Melbourne Airport rail link as an off-budget equity injection.
The controversial funding method, which is being used for the Inland Rail project, means the heavily-promoted mega-spend on the major Victorian infrastructure project would not have an impact on the Commonwealth’s debt levels in future budgets.
The downside of this tricky piece of accounting is it assumes the project will be able to eventually pay for itself, thus justifying its classification as an equity investment, rather than a simple piece of expenditure.
The Turnbull Government’s 2018/19 budget, released on Tuesday night, contains $24.5 billion in new infrastructure spending commitments, including $5 billion for a Melbourne airport rail link, $1.1 billion for Perth’s Metronet program and $400 million to duplicate the rail line to Port Botany.
$7.8 billion of that spending alone will go to Victoria, which along with the airport link funds, is to receive $475 million for a rail connection to the Monash University precinct, $225 million for a Frankston-Baxter rail line upgrade, and $50 million to duplicate the Geelong line.
However the Budget papers reveal only $250 million of the $5 billion for the Melbourne airport rail line will be available four-year forward estimates period, with the rest to be spent well into the 2020s.
Indeed, according to the Budget papers, “Specific funding arrangements, including an option for equity investment, [will be] settled at a later date and with an equivalent contribution to be provided by the Victorian government”.
The absence of an extensive funding plan based on capital grants for the airport link project, and the Commonwealth’s assertion that it be funded via equity, is likely to vex the Andrews Labor Government. As is another revelation from the papers: the Federal Government will also seek to exercise control over infrastructure projects into which it has invested funds for equity financing.
Federal Opposition infrastructure spokesman, Anthony Albanese, has laid into Morrison’s Budget, declaring that, despite what the government has said, “no new money for infrastructure” has been included.
“Every project announced in the Budget will be funded from previous allocations, putting the lie to weeks of pre-budget hyperbole in which the government pretended it planned to lift investment after years of cuts,” Albanese said in a statement.
“The infrastructure Budget is a triumph of spin over substance. It does not include one extra dollar of new investment over the Forward Estimates.”
One of the more vocal opponents of the Turnbull Government’s use of equity funding for infrastructure has been Infrastructure Partnerships Australia.
The peak body has repeatedly labelled equity as a fake funding method, and has called on the Commonwealth to commit “hard cash” to infrastructure.
IPA boss Adrian Dwyer slammed this week’s budget, saying real funding was reduced by $2 billion over the forward estimates.
“This will be disappointing to the states, because the warm infrastructure narrative pre-budget has not been met with cold hard cash in the budget papers,” he said.
“Infrastructure projects like metro in the major cities, better freight connections and safer roads will need much greater focus from all sides of politics in the run up to the next election.”
With David Loneragan