Malcolm Turnbull says his new Infrastructure Financing Unit will help deliver more developments in tighter financial times, which he blames on irrational overspending by Labor Governments.
In an opinion piece that took several shots at the Opposition’s infrastructure approach, the prime minister said the unit, announced in this year’s Budget, would help solve Australia’s infrastructure challenge, through both government grants, and private co-financing.
“It is clear our infrastructure needs have never been greater, but our fiscal circumstances have never been tighter,” Turnbull wrote in the AFR on Thursday, ahead of the COAG meeting in Hobart on Friday.
“The AAA credit rating is under threat following years of Labor first piling unsustainable spending onto the budget and then blocking Coalition attempts to rein it in. Our approach to managing this challenge is simple: reduce spending that is no longer fit for purpose so we can get back into surplus and create space for new spending that boosts our productivity and competitiveness.”
The Coalition is committed to working with state and local governments on the projects identified on Infrastructure Australia’s Priority List, he said, but not all those projects can receive government funding.
“It’s time for a smarter approach to infrastructure investment,” the PM wrote.
“Of course, there are projects where grant funding is the most appropriate funding mechanism. But where there is a project that generates a return for the taxpayer and for private investors, then we want to be a partner in that as well.”
Turnbull said the Commonwealth has committed to 15 out of 18 projects on the IA Priority List (split between High Priority and Priority projects), and criticised Labor for cancelling contracts for the Perth Freight Link and Melbourne’s East West Link, “costing taxpayers billions and delaying vital transport for these growing cities for years”.
Industry not convinced
The Infrastructure Financing Unit proposal has faced heavy criticism.
“Prime Minister Malcolm Turnbull continues to fail to match his rhetoric on infrastructure with actual investment in railways, roads and ports,” shadow infrastructure minister Anthony Albanese said earlier this year.
“There is a contradiction in the Government’s position on this fund. On one hand, it wants financing to be available where private financing is not. But on the other hand, it claims this unit would work on projects that would be taken off Budget as they would produce a return for government.”
Industry group Infrastructure Partnerships Australia has also dismissed Turnbull’s proposal, saying there is no shortage of private finance for projects that are appealing to the private sector.
“Beyond Western Sydney Airport and Inland Rail, Federal Government ‘equity’ and Federal Government project ‘loans’ can’t help, because they can never be repaid,” IPA boss Brendan Lyon said after the Budget announcement.
“Everyone from the Productivity Commission to Infrastructure Australia have found that public infrastructure like passenger railways, highways and most motorways need government budget grants or subsidies, because they cost more than they earn.
“If infrastructure projects were commercially feasible without government funding, they would already have been done by increasingly desperate state governments. The Federal Government has a hard job to balance its books and fix flagging productivity, but we need to be transparent about the problems and the solutions because Australia is fresh out of easy answers.”