Australian State Governments Are Gearing Up For A Massive $160 Billion Spend On Infrastructure

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Australia’s state governments are gearing up to turn themselves into infrastructure princes, filling the gap created by a wind-down in construction by mining companies.

Deloitte Access Economics says there are signs investment may lift over the coming year as the Australian economy continues its transition away from growth led by investment in the resources sector.

Data from the Deloitte Access Economics’ Investment Monitor database shows that the value of major projects is currently in a holding pattern.

The total value of all projects has barely budged since June 2013, mainly due to the static value of resources projects under construction.

The resources sector share of the value of projects under construction slipped above 50% at the end of 2011 and, on current trends, could be back below 50% within the next year.

However, the value of transport projects under consideration increased by more than $16 billion in the June quarter, mainly due to state government investment plans.

State budgets which have been released in recent months contained notable capital expenditure plans.

New South Wales has announced infrastructure spending of more than $61 billion over the next four years.

In total across state governments, capital expenditure of around $40 billion a year is expected over the next four years.

The Federal Government is encouraging states and territories to use funds from asset sales on new infrastructure spending. The government’s $5 billion Assets Recycling Fund, still to be approved by parliament, offers the states an extra 15% of the funds raised from asset sales if the money is used for new and approved projects.

Some 81 new projects announced in the recent state budgets have been added to Investment Monitor in the last quarter, contributing more than $21 billion to the total value of projects in the database.

The June 2014 issue of Investment Monitor saw the value of projects in the database fall to $875.4 billion, representing a 0.4% decrease from the March quarter of 2014, and a smaller 0.2% fall below the level recorded a year earlier.

The value of definite projects in the database (those under construction or committed) decreased by almost $13.5 billion over the June quarter of 2014 to be more than $39 billion lower over the last year.

The decrease in the value of definite projects in the quarter was driven by falls in the value of projects both under construction and committed.

The value of planned projects in the database (those under consideration or possible) continues to increase, rising by a further $10 billion in the June quarter.

The value of planned projects is now more than $37.5 billion higher than in the June quarter of 2013. A $16 billion increase in the value of projects under consideration was partly offset by a $6.7 billion fall in the value of projects classified as possible.

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