Government collaboration needed for infrastructure pipeline

25 March 2013
| By Staff |
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Federal and state governments need to work together to provide more clarity around Australia's infrastructure project pipeline, a Centre for Economic Development (CEDA) forum has been told in Sydney.

Australia needed to prioritise investment in infrastructure projects that increased productivity and international competitiveness, Westpac managing director of economics Bill Evans said, but responsibility of funding infrastructure projects currently sat with the states which were in a poor fiscal position.

"At the moment we are relying upon infrastructure investment, putting that responsibility onto very weak government balance sheets — being the states — when we have a very strong federal government balance sheet that could absorb a lot more government debt and could really kick the infrastructure process off," he said.

"We should be taking advantage of the relative borrowing strength and the substantial strength of the balance sheet of the Commonwealth (government) to make direct investments in infrastructure.

Association of Super Funds of Australia (ASFA) chief executive Pauline Vamos agreed, saying the first hurdle was getting all levels of government to work together to provide certainty and clarity over which assets to build, which assets to sell and who would cover the risk.

"Why I think some countries and some states get into trouble when it comes to infrastructure spend [is that] there is a concern that it's for shorter-term political needs rather than long-term economic needs," she said.

Investment from super funds was also limited due to liquidity requirements, Vamos said, although many funds were looking at opportunities within local councils in terms of greenfield assets.

Evans said a perceptional shift regarding debt was also needed.

"What I would argue is that $50 billion would be around about 3 per cent of GDP, and I wouldn't be uncomfortable if Australia's net [debt] to GDP was derived to that degree — if the money was being used to invest in infrastructure projects that have been appropriately analysed in a sensible cost-benefit analysis on an arm's length basis," he said.

But Queensland Investment Corporation director Dr Maurice Newman said although debt wasn't always a bad thing, it could be — and pointed to the National Broadband Network as how governments should not invest in infrastructure.

He said as long as funding was coming from taxpayers, infrastructure financing could not be divorced from political reality.

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