Budget Review 2014–15 Index

Rob Dossor

The language used within the infrastructure expenditure section of the 2014–15 Budget may be confusing. To clarify:

• Infrastructure Growth Package: a series of new measures
• Asset Recycling Fund: a new fund which will replace the Building Australia Fund and will fund the Infrastructure Growth Package and other programmes, and
• Asset Recycling Initiative: a new measure which provides states and territories with a financial incentive to sell assets and use the proceeds to fund infrastructure investment.

In the 2014–15 Budget, the Australian Government has committed to spend over $5.7 billion in 2014–15 on infrastructure, and a total of $28.5 billion over the forward estimates.[1] Of this, an additional $2.7 billion will supplement the Infrastructure Investment Program. Another $1 billion is allocated to the Infrastructure Investment Program in 2013–14 i.e. in the current financial year. [2] This brings the total new infrastructure expenditure in this budget (for five years from 2013–14) to $29.5 billion.  The Treasurer stated in his Budget Speech that the Australian Government’s ‘Growth Package will take the Government’s total investment to $50 billion by the end of the decade – the largest on record … [and] drive over $125 billion of spending on new infrastructure across the continent.’[3] Of this $29.5 billion (allocated from 2013–14 to 2017–18) over $7.8 billion is funded through a new fund, the Asset Recycling Fund (ARF).

Asset Recycling Fund

The Asset Recycling Fund (ARF) will be created on 1 July 2014.[4] The initial size of the ARF at approximately $5.9 billion is made up entirely of the uncommitted funds from the Building Australia Fund ($2.4 billion) and the Education Investment Fund ($3.5 billion). Subsequent funds will come from the privatisation of Commonwealth assets, the first of which will be Medibank Private.[5]

The ARF will primarily fund the new Infrastructure Growth Package (IGP). In addition to the IGP the ARF will contribute to elements of the Infrastructure Investment Program, such as Black Spot Projects, road investment projects and the Roads to Recovery Programme.[6] According to Minister Truss’s media release, the ARF will also make contributions of $229 million to national highway upgrades.[7]  

Infrastructure Growth Package

The IGP is a key component of the infrastructure expenditure in the 2014–15 Budget. In total the IGP is budgeted to spend $11.6 billion over ten years (from 2013–14), of which $6.8 billion is over the forward estimates and $1 billion in 2013–14.

The IGP is made up of three measures, the Asset Recycling Initiative, new investments, and the Western Sydney Infrastructure Plan.

Asset Recycling Initiative

The Asset Recycling Initiative, the largest of the IGP measures, will provide an incentive to States and Territories to privatise assets and use the proceeds to fund infrastructure.[8] The federal government will provide the incentive in the form of a financial contribution of 15 per cent of the assessed sale value of the asset used to fund infrastructure.[9] The States and Territories agreed to this initiative on 2 May 2014.[10] This measure is budgeted at $5 billion over five years with $3.9 billion available over the forward estimates.

New investments

The new investments measure of the IGP will provide $3.7 billion ($2.7 billion over the forward estimates and $1 billion in 2013–14) to expedite investment in ‘high quality’ economic infrastructure.[11] It will accelerate work on major projects such as Melbourne’s East West Link – stage 2, Adelaide’s North South Corridor and the Perth Freight Link.[12] This measure includes additional funding for national highway upgrades ($229 million), Black Spot Programme ($200 million) and Roads to Recovery Programme ($350 million).[13] The new investments measures will be administered under the existing Infrastructure Investment Programme.

Western Sydney Infrastructure Plan

The final measure in the IGP is the Western Sydney Infrastructure Plan. This involves the building of road infrastructure in preparation for the Badgerys Creek airport.[14] This plan includes upgrading the Northern Road to a minimum of four lanes from Narellan to the M4 Motorway, the construction of a new four-lane motorway between the M7 Motorway and the Northern Road, upgrading Bringelly Road to a minimum of four lanes from Camden Valley Way to the Northern Road, improving interchanges that connect the Northern Road and the new motorway, as well as a $200 million local roads package.[15] The plan is budgeted at $2.9 billion over ten years, with $1.2 billion available over the forward estimates.

A Western Sydney Infrastructure Unit will be established within the Department of Infrastructure and Regional Development and will be responsible for the development of detailed airport design concepts, conducting environment assessments and engaging with potential private sector operators. The Department has been allocated $77.8 million over four years to establish this Unit.[16]

Legislation required

For the ARF to be established legislation is required.[17]

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