Australia

Details

  • Service: Topics, Infrastructure, Federal Budget
  • Type: Business and industry issue
  • Date: 13/05/2014

Tax Insights

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Paul Foxlee

Paul Foxlee
National Sector Leader, Transport & Infrastructure

+61 2 9335 7438

pfoxlee@kpmg.com.au

Federal Budget 2014: Infrastructure 

by Paul Foxlee, National Head of Transport & Infrastructure

 

Living up to Tony Abbott’s aspiration of being known as the ‘infrastructure prime minister’, infrastructure is the cornerstone of this budget. The $11.6 billion Infrastructure Growth Package together with existing announced projects provides a total of $50 billion federal funding infrastructure commitment over the next 6 years. This funding, combined with state and private sector, is expected to generate a total of $125 billion investment in infrastructure across the nation. This substantial infrastructure investment will help support Australia’s productivity in the long term and will be important in the short term in generating economic activity as the economy transitions from resource investment led growth.

The following table details the three components of the Infrastructure Growth Package and major new infrastructure project announcements:

 

The Infrastructure Growth Package

 

Project

New Federal Contribution

Western Sydney Infrastructure

$2.9 billion

New Infrastructure Investments

$3.7 billion

Asset Recycling Initiative

$5.0 billion

Total

$11.6 billion

 

 

Major announced funding projects

 

Project

State

Western Sydney Infrastructure Plan

NSW

Westconnex – Stage 2

NSW

East West Link – Stage 2

VIC

North South Road

SA

Toowoomba Second Range Crossing

QLD

Perth Freight Link

WA


 

In July 2014, with $5.9 billion of seed funding and managed by the Future Fund Board of Guardians, the Asset Recycling Fund (ARF) will be established.  The ARF will be a dedicated vehicle for providing funding and financial incentives primarily to the States and Territories to invest in infrastructure.


Under the Asset Recycling Initiative the Commonwealth has agreed to provide a pool of capital (initially $5 billion) which the States can draw 15% of the value of their privatised assets. There are several conditions to access the capital, including proceeds be used for the construction of new “productive” infrastructure, above what state governments have already committed. The 2 year Asset Recycling Initiative directs states and the Commonwealth to create bilateral agreements setting out what assets will be sold and what projects will be funded from proceeds over a 5 year period. Funding will be allocated to specific projects on a first-come, first-served basis, as projects are agreed between the Commonwealth and individual states.


In addition to existing Infrastructure Funding commitments the Infrastructure Growth Package will provide significant opportunities for the public sector, construction sector, financial institutions nd funds, and private sector operators and create significant competition for scarce resources (capital and labour). Furthermore the activity will create strong competition between jurisdictions in getting assets and projects to market whilst ensuring appropriate pricing tension. Finally, the infrastructure project activity will pick up slack in the construction labour market created by the maturing mining and resource sector investment cycle.

 

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Federal Budget 2014

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