by Anthony Albanese
When it comes to infrastructure, budget 2018 was a triumph of spin over substance.
In the lead-up to the budget’s delivery, the Turnbull government pretended it was about to deliver “an infrastructure budget“, telling journalists it would fund projects like Western Sydney Rail and Melbourne Airport Rail.
While the “leaks” attracted front-page newspaper coverage in Sydney and Melbourne, the actual budget included no money for construction of either project.
In fact, the budget did not include a dollar of new infrastructure funding anywhere, simply allocating money already in the budget to new projects.
But most of this spending won’t happen for years. Only 1 per cent of this year’s allocations will be spent in 2018-19. Three quarters won’t be invested until beyond the forward estimates.
This means that Australians will have to re-elect the Coalition not once, but twice, before the bulk of the money will appear.
Put simply, the government has sought public praise by pretending it is committed to building new railways and roads, but has pushed their delivery off into the never-never.
In the meantime, actual federal infrastructure grants to states and territories are falling off a cliff.
In 2017-18 the government promised to distribute $8 billion in infrastructure grants to the states.
But the budget documents show grants will fall year on year to $4.5 billion by 2021-22.
Across the four- year forward estimates, this year’s budget is more than $2 billion less than last year’s projections.
It’s even worse than a year ago, when the independent Parliamentary Budget Office calculated that over the next decade, federal infrastructure investment as a proportion of GDP will halve from 0.4 per cent to 0.2 per cent.
Australia needs an increase in infrastructure investment now, not four to eight years from now.
Investing in the right projects now will boost economic activity and create jobs in the short-term, while lifting productivity and economic growth in the medium to long term.
As cover for its cuts, the government is continuing to promote its attempts to attract more private investment to deliver public infrastructure as a viable alternative.
Must provide a return
While private investment is welcome, the government’s endeavours in this area have yielded little.
Its push began three years ago with the creation of the Northern Australia Infrastructure Financing Facility. It has failed to deliver a major new infrastructure project.
Then there was last year’s new idea – the Infrastructure Financing Unit, which was designed to use “innovative financing” mechanisms like value capture to secure private investment.
After a year of operation, the IFU has not produced a project.
Undeterred, the government used this budget to resort to complete fantasy by claiming it will provide $5 billion in off-budget funding via an equity investment for the aforementioned Melbourne Airport Rail Link.
Off-budget funding can work for some projects. Indeed, the former Labor government used an equity funding model to deliver the Moorebank Intermodal Terminal.
But the golden rule for projects to be taken off-budget is that they must be able to provide a return to the budget. That return must cover not only operating expenses, but also a commercial return on the capital investment.
There is no doubt that the right public transport projects can boost productivity and generate economic growth. However, they do not produce revenue streams sufficient to cover the cost of their operation, let alone the cost of construction.
There’s an old saying to the effect that if something sounds too good to be true, it probably is.
The idea that infrastructure like the Melbourne Airport Link will somehow build itself without any taxpayer funding is too good to be true.
This is sham funding. It is a funny-money political narrative, not a genuine plan to deliver productivity-enhancing, congestion-relieving infrastructure.
This is why independent experts have questioned the government’s approach.
For example, the Grattan Institute’s Marion Terrill has warned: “If infrastructure projects are never going to make a commercial return, the government should stop pretending they will. And if they are worth building at all, the government should fund them transparently on-budget.”
Adrian Dwyer, the head of peak industry group Infrastructure Partnerships Australia, has a similar view: “There are only two ways to pay for infrastructure – tickets and taxes. We can’t finance our way out of a funding problem.”
During its five years in office, the Coalition has cut infrastructure investment across the nation, particularly for public transport.
In budget 2018, it sought to shift its rhetoric to pretend it was ready to reverse its cuts. But once you get beyond the spin, nothing has changed.
Anthony Albanese is the Shadow Minister for Infrastructure, Transport, Regional Development and Cities.