The other story is the so-called ‘innovative financing’—a ticking time bomb for this government; a fiscal time bomb. The fact is that you can’t fund public transport like Melbourne airport rail off-budget, because, to fund something with equity funding off-budget, you need to achieve two primary things: firstly, the revenue for that particular piece of infrastructure has to be higher than the ongoing maintenance and operating costs; secondly, you have to have a return on capital. No public transport project in Australia currently has income—fares paid—that is more than the operating cost. The average is around 20 to 25 per cent. That’s why this is fake funding of a project, just like the north-south rail link through Badgerys Creek airport is fake funding.
This is what Infrastructure Partnerships Australia’s CEO, Adrian Dwyer, said:
Ultimately there are only two ways to pay for infrastructure—tickets and taxes …
We can’t finance our way out of a funding problem.
Marion Terrill from the Grattan Institute said:
… there’s a real risk that these equity investments will end up not even making a positive rate of return, never mind a commercial rate.
… … …
If infrastructure projects are never going to make a commercial return, the government should stop pretending they will.
Steven Anthony from Industry Super Australia said:
We’re opening up the potential for more unfunded liabilities but we don’t need more time bombs.
Garry Bowditch from the University of Sydney said:
Prospects of commerciality and off-budget financing delivering good long-term outcomes do seem fanciful.
Over and over again—any expert. The tragedy here is that Mathias Cormann, the finance minister, knows that. That is why he opposed it. That’s why he won’t defend these projects being regarded as off-budget. It’s simply a con. A future government will have to deal with this, just like it’ll have to deal with the real economics of the Inland Rail project and whether, as John Anderson said in a report to the government, it will not produce a return on capital in 50 years. Budgets should be about real investment and real expenditure and real commitments and real rail lines and real roads. This budget is anything but that.