The federal government began setting the stage for next Tuesday’s Budget today with prime minister Malcolm Turnbull floating the “Smart Cities” project, which he hopes will reduce commuting in any Australian city to just half an hour.
Turnbull says the Smart Cities Plan will deliver jobs closer to homes, more affordable housing, better transport connections and healthy environments.
Thus far, the policy detail and funding is modest, with just $50 million committed to assist with planning and development on major infrastructure projects. But Turnbull is picking up where his predecessor, Tony Abbott, left off, after saying he wanted to be known as the infrastructure prime minister.
But in a big shift in the government’s rhetoric on debt, Turnbull is looking at long-dated bonds as part of the funding mix for projects, increasing the repayment time from the current maximum of 22 years to 30.
Abbott’s funding focus was on “asset recycling”, with the Commonwealth contributing funds when states and territories sold off existing assets and reinvested the funds in building new infrastructure. Turnbull wants to create an infrastructure financing unit to develop “innovative financing solutions” with the private sector. Cities minister Angus Taylor said the days of “blank cheques” for the states are over.
Turnbull also flagged “value capture” again, an idea he flagged a fortnight ago to fund a high-speed rail link between Melbourne and Sydney. The idea is essentially a tax based on the rising value of properties that benefit from an infrastructure project.
The idea is already being implemented in Queensland where ratepayers along the Gold Coast light rail link pay a $111 annual levy.
The list of major works needing funding include the Badgerys Creek airport in western Sydney and Victoria’s $10.9 billion Melbourne Metro Rail and states such as New South Wales already have a long and expensive list of infrastructure works in the pipeline, including NSW premier Mike Baird.
On Wednesday, Victorian treasurer Tim Pallas took a swipe at the Turnbull government for dragging its feet on the project and accused them of pork-barrelling infrastructure funds, claiming the state got just 9% of the national funding pie.
“I’m not sure the federal government knows where Victoria is, certainly their allocations don’t seem to give much confidence that they do,” he said.
Pallas announced in the Victorian budget that the state will completely fund the Melbourne Metro project and plans to spend $46 billion on in major works in the coming decade, partly funded by an $18 billion increase in debt.
But the change of heart by the Turnbull government over raising funds provoked concerns about the resulting size of the Commonwealth debt, especially with nearly $90 billion already earmarked for naval defence spending over the next few decades. Under Turnbull’s plan, he wants to sell the completed projects to reduce debt.
Forecasters say the underlying cash deficit in this federal budget will be about $41.7 billion for 2015-16, $4.3 billion worse than projected at MYEFO, as well as the recent allocation of funds towards the $50 billion submarine fleet being built in Adelaide.
Former Labor leader turned commentator Mark Latham called Smart Cities “laughable”.
“The whole idea of 30-minute travelling time in Sydney is laughable, I mean people are rolling around laughing about it, you would have to give everyone a helicopter in Sydney to meet that target of 30 minute travelling time,” he said on Sunrise today.
However, Business Council of Australia CEO Jennifer Westacott lauded the PM’s plan, saying the nation already has some of the most liveable in the world.
“We welcome the government’s commitment to think of technology solutions first, which will improve the technological readiness of our cities and improve the efficiency of existing infrastructure,” she said.
“The implementation of City Deals will need to consider a fresh approach to planning instruments that encourage the co-design of cities between different levels of government and the private sector.
“The use of productivity payments from the Commonwealth to states and territories is a compelling way to encourage necessary regulation reform, including for planning systems.”
More details on the Smart Cities Plan will be revealed in the federal budget next Tuesday.