The government is counting on a big boost infrastructure spending to shore up its political stocks, keep the Nationals happy and, maybe, provide the kind of “pipeline” of projects that the Reserve Bank, the IMF and many economists have been calling for to keep growth ticking along.
The centrepiece is the inland rail line, a link between Melbourne and Brisbane through central NSW using upgraded existing lines and hundreds of kilometres of new track to avoid sending freight through Sydney. The government has committed $8.4 billion over seven years to the project, which is to commence construction in the coming year.
Bizarrely, however, the government is insisting on treating the money as an “equity investment” — meaning that the money will sit in the capital budget and notionally earn a return in the future. It’s nonsensical — the only thing the inland rail route will do is rust; it will not even go close to recouping the $10 billion cost of construction.
But treating it that way allows the government to avoid the funding contributing to the budget deficit.
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That approach makes far more sense with the government’s $5.3 billion spending on Badgerys Creek Airport in Sydney, which will create a potentially highly lucrative asset that a future government can sell, particularly given the possibility for the purchaser to undercut the monopoly rents enjoyed by the Sydney Airport Corporation (the gouging, rapacious SAC passed on the opportunity to build the airport, to the obvious non-disappointment of the government).
There’s another big-ticket item, but one that is far more nebulous. There’s to be a $10 billion “National Rail Program”, although precisely what the timeframe or spending criteria are isn’t clear — the fund doesn’t start until 2019, when an initial contribution of $200 million will be made, followed by a $400 million contribution the following year. What will it fund? That, apparently, depends on the states bringing forward proposals that will require a “proven business case”; in his budget speech, the Treasurer name-checked the rail link to Badgerys Creek, Cross River Rail in Brisbane, the rail line to Tullamarine Airport, the Brisbane Metro and AdeLINK as possible recipients.
But vagueness aside, it allows the government to avoid the embarrassment that last year’s budget, in the breakdown of Transport and Communications spending, had, literally, a big fat zero for rail spending in 2019; the same entry for this year now boasts half a billion dollars and more that a billion in 2020.
But for a minority of people who actually thought Turnbull was serious with his “game changer” Snowy Hydro 2 announcement a couple of months back, no joy.
There is literally not a cent allocated to it — only a commitment from Morrison to pay NSW and Victoria to buy the whole project, if the price is right.
Victoria, which has endured a drought of federal funding under the Coalition, has finally done a little better, with a billion dollars for regional rail (i.e. projects that go through Liberal and National MPs’ electorates) and some money for a study for the rail line to Tullamarine.
But NSW is where the infrastructure action is, for better or, in the case of a ribbon of steel running to nowhere in inland NSW, worse.