The level of infrastructure investment planned or underway
throughout Australia, particularly in the resource-rich states, is
huge. According to a recent Business Council of Australia study
Pipeline or Pipe Dream? Securing Australia's Investment
Future, there is an investment pipeline of more than $920
billion in major projects underway, being planned or under
consideration. Projects in the resources and infrastructure sectors
comprise the bulk of this, with the average project now costing
about $1.5 billion.
In Queensland, the story is no less impressive, with projects
ranging from huge liqueified natural gas developments at Gladstone,
new coal mines in the Galilee Basin, heavy haul rail lines to Abbot
Point and various port developments. Add to this requirements for
power, communications and water and you begin to appreciate the
scale of activity - and money - involved.
While a number of resource projects have recently been deferred
or are being reconsidered in the current market, the question that
is now receiving considerable attention is how to fund those that
do. The ability of governments to pay for infrastructure - whether
ports for the resources sector or roads, tunnels and hospitals for
the general public - is being tested both by the sheer cost of the
projects as well as current budgetary constraints, given moves to
reign in debt and maintain or regain credit ratings. Funding
options involving higher taxes, user charges such as tolls or the
sale of assets to raise money present their own obvious
In an environment characterised by more limited 'paying'
capacity of governments, it is accepted that the private sector
will need to play a greater role in financing and delivering
infrastructure. In the resources sector, much of the essential
infrastructure, such as ports and railways, is already being
delivered and paid for by the mining and gas companies themselves.
In any case, those companies would ultimately always fund the
assets, in the sense that the costs incurred by government in
developing them would be recouped through user charges.
Increasingly, however, the resource companies are by necessity
taking the lead in financing, building and operating railways,
ports and other infrastructure essential for operations and
exporting their products. The budgetary constraints facing
governments may also make it more likely that, even when they take
on the role of building and delivering infrastructure, they will
look to the resource companies to pay some of the upfront capital
The trend towards private sector financing and delivery of both
resource-related and public infrastructure is likely to continue.
With the private sector assuming more of this role, it is incumbent
on governments to help pave the way for projects to be delivered.
Faster and more streamlined approvals processes and increased
flexibility in the labour market are two obvious examples of where
governments can and should help. The resources sector is being hit
by challenges on many fronts and stifled approvals processes and
labour shortages/costs are two of the most significant.
Much of the current debate has naturally centred around where
the money is going to come from and how the pool of funds available
can be increased. A number of reviews and reports are underway or
have been undertaken in order to formulate strategies for
attracting additional investment in infrastructure. Various funding
reforms have been proposed, ranging from greater use of user pays
structures, more targeted investment in infrastructure that
generates productivity increases and the sale of existing
government-owned assets in order to 'recycle' funds to pay
for new projects. As a country, we have a significant pool of
superannuation funds so, not surprisingly, reforms are also being
considered to encourage and facilitate greater investment by those
Importantly, there is a recognition of the need for improved
investment planning by governments. Not all infrastructure on the
drawing boards can be built. Infrastructure pressures are likely to
become more rather than less pronounced in the future and there
must be greater emphasis on building those things that improve
productivity and generate wealth. The private sector will need to
play an increasing role in financing and delivering much of our
infrastructure, be it roads or railways, hospitals or ports. The
challenge is how we achieve this.
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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