Time to attract infrastructure investment to
Infrastructure Australia is ripe for increased
infrastructure investment. We need to do more to maximise
investment and successful implementation of infrastructure
projects, write Alen Pazin and Hannah Logan.
Australia – a stable, developed, AAA-rated, vast country
with a growing population and hitherto resource-reliant economy
– is a country ripe for increased infrastructure
The Federal government is committed to supporting key
infrastructure projects, including dedicating a landmark $50
billion sum to infrastructure in the 2014 national budget, at least
$15 billion in the government's Asset Recycling Initiative and
a $5 billion infrastructure fund to stimulate investment in
Northern Australia in the 2015 budget.
This coincides with the opportunity for increased trade flows
for Australia by way of greater investment in infrastructure
projects across Asia through the new Asian Infrastructure
Investment Bank, in which we will have a prominent role as the
Despite this, Australia needs to do more to maximise investment
and successful implementation of infrastructure projects in the
face of highly competitive global markets.
There is no shortage of investment capital and financing.
Domestic and foreign banks are keen to fund.
Our own Asian investor clients are looking to diversify abroad
and for higher returns, and we know there is a deep pool of
Japanese, Korean, Chinese and other Asian capital ready to
Our US colleagues report that US funds are increasing their
focus on Australian infrastructure and are keen to invest alongside
local infrastructure and pension funds.
Still, Australia must do more.
East West Link Cancellation Factors Linger
Sovereign risk is an issue that has been playing on foreign
investors' minds – from France and Spain through to Japan
and Korea – since the Victorian government cancelled the East
West Link project last year.
The cancellation of the project sits uncomfortably with
Australia's reputation as an otherwise stable investment
Industry players have also emphasised the need for Australian
political parties to rise above political posturing and party
squabbles to ensure bipartisan support for projects and improve
investor certainty. Independent bodies such as Infrastructure
Australia and Infrastructure NSW are important and should help
de-politicise projects, but an ongoing need for a long-term,
consistent policy focus remains a critical issue.
NSW Premier Mike Baird has been at pains to emphasise the
stability of infrastructure investment in NSW and the pipeline of
funding from his $20 billion privatisation programme.
Western Australia is now looking to NSW's example for a
potential future privatisation programme to bring in much-needed
cash to fill a hole in the state's budget caused by falling
iron ore prices, but the question remains whether WA's plans go
far enough to address the state's fiscal ailments.
Convergence is another issue we are seeing in the market.
Projects are competing for capital – both financial and
human. Federal and state governments need to co-ordinate to ensure
better planning of bid time frames and bid processes. Big-ticket
infrastructure such as Victoria's $11 billion Metro Rail
project and the $10 billion Sydney Metro project need to be
prioritised across the board.
An interesting opportunity for the Australian infrastructure
market is the growing need for infrastructure pipelines to develop
in parallel with innovations in technology and environmental
sustainability. Smart cars, smart roads, satellite monitoring of
road use and real-time forecasting estimates are growing trends
that can all help to improve costs, pricing and efficiency,
encourage tech-savvy investment and distinguish the Australian
market from competitors.
It's clear infrastructure offers huge potential for
Australia's economy. For Australia to truly ride the wave of
this potential, all tiers of government across the political divide
need to work together to make the infrastructure pipeline as clear,
certain and friendly as possible to investors in order to maximise
Australia's attractiveness in global markets.
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