From an industry perspective, the budget has provided some consistency in relation to infrastructure spending with the government re-emphasising the $50 billion package of infrastructure spending announced in last year's budget. Australia has traditionally been regarded as a market with low sovereign risk in respect of infrastructure spending however recent announcements by some state governments have cast a shadow over this reputation.
As industry searches for deal flow and decision making consistency to support further investment, the federal government's approach to infrastructure spending is welcomed.
The continued focus in spending on economic infrastructure is consistent with the government's long term intention to grow the revenue base which over time should have a positive impact on the budget's bottom line.
The main new announcement of interest in the budget from an infrastructure perspective is the establishment of the $5 billion Northern Australia fund to assist with unlocking the potential in Australia's northern regions. What will be interesting is how the funding will be administered, allocated and spent in remote areas spanning Australia's two largest states – Queensland and Western Australia and the vastness of the Northern Territory.
In the past, there has been confusion as to how money provided by similar funds was to be characterised and managed - grant, equity or loan? One size won't fit all with the raft of ports, rail, pipeline and power projects across WA, QLD and the NT that will be vying for funding from the fund.
Early clarity on issues such as these and a pragmatic approach to considering the medium and long term region building benefits of key projects and not just the project specific business cases and returns on investment should form part of the government's process for determining how the fund should be allocated. Infrastructure spending in remote areas can attract a price premium or may not deliver required returns on a standalone project basis. Factors such as these should not on their own prevent projects from proceeding if utilisation of fund moneys will help to unlock demonstrable and significant incidental benefits to development in the northern region.
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