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Thu May 23 2024

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Australia explores options to get infrastructure moving

21 Jun 12 Australia’s minister for infrastructure and transport Anthony Albanese has released a report calling for wide-ranging reforms to how essential infrastructure is paid for.

The report, Infrastructure Finance and Funding Reform, was prepared by industry and public sector representatives. They argue that the private sector is a willing infrastructure partner but a lack of projects is impeding greater private sector involvement in infrastructure investment. They point to the need for a sustained period of reform by all levels of government to get the market moving.

Over the six years to 2013–14, the Australian Government committed an unprecedented AU$36bn (£23.3bn) to Australia's transport infrastructure. However, population growth and change and the ageing nature of many assets are seeing infrastructure needs rise dramatically.

The report calls for a three-pronged approach: major reform of infrastructure funding, improved infrastructure planning to provide a deep pipeline of projects that give industry certainty, and steps to encourage more flexible and efficient markets that attract private investment.

While user charges are one approach discussed, the authors go further, calling for a reform of government balance sheets to create the capacity to invest in new infrastructure assets. They point to opportunities to augment the traditional grant-based approach to infrastructure funding with co-funding between the commonwealth, states and private sector on nationally significant public-private partnership (PPP) projects, to get these to market more quickly.

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They also identify the need for regulatory reform to decrease the costs involved in bidding for PPP projects, both to reduce overall project costs and remove barriers to entry for new players. Bid costs in Australia are typically 0.5–1.2% of project value - anywhere between 25% and 45% higher than in the comparable Canadian market.

"A deep pipeline of infrastructure projects will provide industry with certainty and create the conditions for private investment in projects," said infrastructure coordinator Michael Deegan.

The authors also call for the identification of alternative sources of finance, such as superannuation funds, to build on the already strong interest from this segment of the investor market in established "brownfield" assets.

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