Budget Review 2020–21 Index
Liz Kenny and Rob Dossor
In response to the impact COVID-19 has had on the economy,
the Government is set to make $48.7 billion of payments to the states for infrastructure
spending over the forward estimates. As shown in Table 1 below, this includes
$10.4 billion this year financial year. This represents an increase of more
than $12.7 billion over the forward estimates, compared to the 2019–20
Budget.
Note that comparing
information about multiple projects and measures across budget years can be
challenging, so figures contained in this brief should be treated as the
Library’s best estimates rather than conclusive. Infrastructure expenditure is
presented in different ways across the budget which can make it difficult to
validate overarching figures.
Table 1: total payments to the states for infrastructure projects over the
forward estimates
| $ million |
2019–20 |
2020–21 |
2021–22 |
2022–23 |
2023–24 |
Total |
| 2020–21 Budget(a) |
- |
10 398.7 |
12 630.7 |
12 753.6 |
13 013.9 |
48 796.9 |
| 2019–20 Budget |
6 527.8 |
6 822.2 |
7 341.2 |
8 842.7 |
- |
29 533.9 |
| Difference |
- |
3 576.5 |
5 289.5 |
3 910.9 |
- |
12 776.9 |
Source:
Australian Government, Federal financial relations: budget paper
no. 3: 2020–21,
p. 44; Australian
Government, Federal financial relations: budget
paper no. 3: 2019–20, p. 44.
(a) The total payment figure to the states is
different from the Budget, due to a mistake in the summing of the Drought and
Communities Program—extension table on page 52 (Federal financial relations: budget paper
no. 3: 2020–21).
New versus old
The Government says in Budget Strategy and Outlook: Budget Paper No. 1: 2020–21
(p. 1-17) that an additional $10 billion in funding has been allocated towards infrastructure
projects over the next four years. It also says that this brings the total
commitments for new and accelerated projects since the onset of COVID‑19
to $14
billion across the forward estimates (p. 1-17). A breakdown of these
figures cannot be found in the budget papers. However, on the basis of
information in the budget papers, it appears that the $14 billion figure
probably comprises:
This suggests that an additional $9.7 billion of funding has
been announced through the Budget and $14.1 billion over the forward estimates,
including the infrastructure stimulus as announced in the July Economic and
Fiscal Update.
Importantly, $2 billion for road safety projects will be
provided to the state and territory governments in three six-month tranches
with funding for each additional tranche contingent on the successful delivery of
the previous tranche of projects. This approach to funding is presumably
intended to encourage quick delivery over the two years of operation and
encourage its use as a short-term stimulus. However, this approach may create
the risk of a perverse impact on the delivery of these projects, with the
incentive to ensure value for money (and minimise ‘gold plating’ of
infrastructure) traded for the need to spend the money as quickly as possible. Furthermore,
the 2019–20
Final Budget Outcome outlined (p. 7) that lower‑than‑estimated
payments were made to the states and territories for road and rail
infrastructure due to slower progress on projects as a result of the COVID-19
pandemic and 2019–20 bushfires. The impact of these delays may therefore signal
the risk of a slow rollout of this program as jurisdictions continue to face
COVID-19 restrictions.
It is also unclear whether there is sufficient capacity in
the construction market to undertake these additional infrastructure
investments in the current timeframes, which, according to Infrastructure
Australia, ‘is
already undertaking record levels of activity’.
According to the Budget, the majority of the $7.5 billion in
new infrastructure spending will be spent over the forward estimates. The Government
has also re-profiled $659 million (that is, where previously announced project
funding schedules are adjusted) to be spent over the forward estimates (as shown
in Table 2 below).
Table 2: new and re-profiled funding over the forward estimates and beyond
| $ million |
2020–21 |
2021–22 |
2022–23 |
2023–24 |
Total over the FE |
Total brought forward |
Total new over the FE |
Total new committed |
| NSW |
220.8 |
561.6 |
640.4 |
554.7 |
1 977.5 |
- |
1 977.5 |
2 700.0 |
| Vic. |
80.0 |
430.0 |
692.0 |
491.6 |
1 693.6 |
610.0 |
1 083.6 |
1 100.0 |
| Qld |
125.9 |
293.3 |
317.2 |
312.9 |
1 049.3 |
14.2 |
1 035.1 |
1 300.0 |
| WA |
94.8 |
314.4 |
421.3 |
223.7 |
1 054.2 |
- |
1 054.2 |
1 100.0 |
| SA |
101.1 |
154.7 |
138.1 |
118.6 |
512.5 |
20.3 |
492.2 |
625.0 |
| Tas. |
12.2 |
31.9 |
66.5 |
124.0 |
234.6 |
15.0 |
219.6 |
360.0 |
| NT |
15.8 |
35.8 |
48.8 |
47.1 |
147.5 |
- |
147.5 |
190.0 |
| ACT |
2.5 |
12.0 |
25.0 |
35.0 |
74.5 |
- |
74.5 |
155.0 |
| Total |
653.1 |
1 833.7 |
2 349.3 |
1 907.6 |
6 743.7 |
659.5 |
6 084.2 |
7 530.0 |
Source: Australian Government,
Budget measures: budget paper no. 2: 2020–21, pp. 130–39.
As seen in Table 2, while an additional $659.5 million is
being added to the forward estimates, this is due to a re-profiling of the
project expenditure and should not be considered ‘new money’; thus, it is not
included in the ‘total new over the FE’ column.
State share of infrastructure spend
Table 3 shows the state/territory distribution of
infrastructure expenditure over the forward estimates. Queensland receives over
25 per cent of the funding, with only around 20 per cent of the national population,
which might be partly explained by Queensland’s more regionally dispersed
population. NSW receives the next highest share at around 25 per cent, followed
by Victoria, Western Australia and South Australia.
Of the smaller states/territories, the Northern Territory
and Tasmania both receive more than their population share, unlike the ACT,
which receives less than half of its population share.
Table 3: total infrastructure grants to states
| $ million |
NSW |
Vic. |
Qld |
WA |
SA |
Tas. |
ACT |
NT |
Total |
| 2020–21 |
3 134.4 |
1 870.6 |
2 756.1 |
1 229.9 |
757.0 |
275.7 |
61.4 |
296.5 |
10 381.6 |
| 2021–22 |
2 962.2 |
2 654.1 |
3 248.7 |
2 201.3 |
711.9 |
316.5 |
100.5 |
423.2 |
12 618.4 |
| 2022–23 |
3 119.7 |
3 061.5 |
3 298.5 |
1 974.4 |
501.2 |
429.9 |
92.1 |
276.8 |
12 754.1 |
| 2023–24 |
3 020.4 |
3 782.6 |
3 154.0 |
1 337.8 |
861.6 |
513.0 |
72.8 |
271.5 |
13 013.7 |
| Total |
12 236.7 |
11 368.8 |
12 457.3 |
6 743.4 |
2 831.7 |
1 535.1 |
326.8 |
1 268.0 |
48 767.8 |
| Population at March 2020 |
8 157 735 |
6 689 377 |
5 160 023 |
2 656 156 |
1 767 247 |
539 590 |
429 834 |
245 353 |
25 649 985 |
| Population as % of total |
31.8 |
26.1 |
20.1 |
10.4 |
6.9 |
2.1 |
1.7 |
1.0 |
100.0 |
| Share of spending % |
25.1 |
23.3 |
25.5 |
13.8 |
5.8 |
3.1 |
0.7 |
2.6 |
100.0 |
Source: Australian Government,
Federal financial relations: budget paper no. 3: 2020–21,pp. 44–55;
Australian Bureau of Statistics, National state and territory population, March 2020.
Re-announcements and existing projects
While the Government has been accused
of re-announcing previously funded projects, in several cases it has
provided additional funding to previously funded projects. One such case, which
the former MP Tony Windsor has criticised, is the Bolivia
Hill upgrade project (p. 131). This project was originally announced in the
2013–14
Budget (p. 14) with a Commonwealth contribution of $80 million.
The Budget also provides funding to projects that state
governments have already committed funding to. For example, NSW
committed to build the Rankin Park to Jesmond section of the Newcastle
Bypass as early as 2014, initially
for $280 million. The 2020–21 Budget allocates $360 million to this
project, which now has a total cost of $450 million, according
to the website of the Department of Infrastructure, Transport, Regional
Development and Communications (it is not apparent why the project costs have
increased so significantly as the project scope does not appear to have
changed).
A number of other previously announced projects (in all
jurisdictions except the
Northern Territory) received additional funding, including:
Other key infrastructure announcements
Equity injection—Australian Rail Track Corporation
An
additional equity injection (p. 125) will be made to the Australian Rail
Track Corporation (ARTC), primarily to deliver the Inland Rail. The funding
amount has not been included due to commercial sensitivities. It is possible
this may be published at a later stage (for example, in ARTC’s annual report).
National Water Infrastructure Development Fund
The National Water Infrastructure Loan Facility was
established in the 2016–17
Budget (p. 64) with loans that were to be provided to the states and territories
to support major water infrastructure projects. The cost of providing the
concessional loans was to be offset over the life of the program by the
interest revenue collected from loan recipients. The 2016–17 Budget also
provided $9.5 million for the National Water Development Fund (p. 64).
Budget Paper No. 2 outlines that the Government will
not proceed with the National Water Infrastructure Loan Facility (p. 140).
Instead of providing this loan facility, the Budget now allocates $2 billion
in grant funding to the National Water Infrastructure Development Fund, which
will provide grants to the states and territories for the planning and
construction of water infrastructure. This brings the total investment in this fund
from $1.5
billion to $3.5 billion. Specific projects to be supported through the fund
include:
- an additional $162.5 million for the Wyangala Dam ($325.0 million
in total) and
- $121.0 million for the Dungowan Dam ($242.0 million in total).
This change to a grant program may allow increased scrutiny,
as the grants will need to comply with the Commonwealth
Grants Rules and Guidelines. However, it does raise the question of the
viability of the investments, as previously it was expected that loans would be
repaid using revenue generated by the project, while a grants program, by its
nature, means the Government will not be repaid for this investment.
Northern Australia Infrastructure Facility—extension and enhancements
In November 2019 the Minister for Resources and Northern
Australia, Matt Canavan, announced
a review of the Northern Australia Infrastructure Facility (NAIF) to ensure
the loan program can continue to support the development of Northern Australia.
The final report is due to be tabled in parliament soon. Key
changes to the NAIF include:
- extending operations by five years to 30 June 2026
- giving the NAIF the option to lend directly to project proponents
(currently loans are made through the relevant state or territory jurisdiction)
- expanding eligibility to make finance available to additional
elements of infrastructure construction (such as equipment purchases or leases,
training and the expansion of existing business operations), not only physical
construction works
- removing the prohibition against the Commonwealth assuming the
majority of the project risk and
- introducing governance changes, including appointing a Government
representative to the NAIF Board and allowing the minister to overturn a NAIF
investment decision to reject an investment earlier in the process.
Budget Paper No. 2 also
includes $36.9 million over four years from 2020–21 (and an additional
$25.2 million over the two years to 2025–26) to extend the NAIF’s
investment window (p. 122).
This announcement represents a significant change to the
direction of the policy, with the Government lending directly to project
proponents, the minister being involved earlier in decisions, and the Government
having the ability to assume the majority of the project risk. The extent of
these changes and the impact this will have on investment decisions will be
considered once
legislation has been drafted and introduced. It should also be noted that
to date, the NAIF is not included on the Statement
of Risks.
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