In Australia’s federal budget last month, infrastructure was one of the few areas where Commonwealth government committed to increasing spending instead of reducing it.
Part of the plan was a fund giving incentives for state governments to “recycle” infrastructure assets – by selling off things like ports and electricity plant, and using the money to build new roads. Under an agreement struck back in March but funded in the budget, the federal government will tip in 15% of the funding for those new projects, with the idea being that it will stimulate jobs growth over long periods.
The state governments have been quick to act on the signal that it’s time to start raising money for new infrastructure by selling the old stuff.
The NSW government is hoping to tip $20 billion into Treasury coffers by selling off half of the state’s electricity distribution network under a plan approved by the Coalition today.
Meanwhile, last week’s Queensland state budget put a $28 billion price tag on the sale of electricity generators, Stanwell and CS Energy, as well as the retail arm of Ergon, while allowing private investment into the state’s other power networks.
The Queensland plan is part of its “Strong Choices” blueprint to pay down government debt, with $25 billion going towards the $80 billion debt figure on the state’s balance sheet.
All up, the Queensland budget unveiled $33.6 billion in asset sales and leasing of state-owned infrastructure, including ports in Gladstone and Townsville.
Both states have offered infrastructure carrots to offset the political pain of the asset sales. Queensland Premier Campbell Newman plans to put $1 billion towards the $5 billion, 5.4km-long Brisbane Bus and Train Tunnel, a project he instigated as the city’s mayor.
In NSW, Premier Mike Baird announced a $20 billion infrastructure plan including a 30km underground rail tunnel as the sweetener for his electricity sales, but was still forced to compromise with his Nationals colleagues.
A joint-party meeting of NSW Coalition MPs today agreed to privatise 49 per cent of the poles and wires assets on 99-year leases, but the Nationals managed to ensure the regionally-based state-owned corporation Essential Energy was excluded from the privatisation plan.
Assets owned by Endeavour, Ausgrid and Transgrid will be sold in a deal the Premier described as an historic day for the state.
Last financial year, profits from the NSW distribution network almost doubled to $1.3 billion, increasing the dividend to the government from $494 million to $913 million.