Another “sugar-hit” for the Australian economy was the expectation for this year’s Federal Budget and the Treasurer has delivered again in terms of big spending commitments. These include commitments to further major spending on infrastructure and infrastructure related measures.
In terms of major infrastructure projects, key projects to be funded by the Federal Government include:
- $2 billion of initial investment for a new Melbourne Intermodal Terminal;
- $2.03 billion for Great Western Highway Upgrade – Katoomba to Lithgow – Construction of East and West Sections in New South Wales;
- $400 million for Inland Freight Route (Mungindi to Charters Towers) Upgrades in Queensland;
- $161.6 million for the Truro Bypass in South Australia;
- $160 million for Agricultural Supply Chain Improvements – Package 1 in Western Australia;
- $150 million for National Network Highway Upgrades (Phase 2) in the Northern Territory;
- $80 million for Bass Highway Safety and Freight Efficiency Upgrades in Tasmania; and
- $26.5 million for William Hovell Drive Duplication in the Australian Capital Territory.
The Budget contains a number of other infrastructure related measures and extension of tax incentives as outlined in the article below.
Overview of the Australian Federal Budget
- notes that the Australian economy is strengthening and, combined with good health and labour market outcomes, the Government’s temporary and targeted Covid-19 support has been effective in protecting the economy; and
- provides for a “record” investment in infrastructure by way of an additional $15.2 billion in new commitments to infrastructure projects (supporting an estimated 30,000 jobs across Australia).
Deputy Prime Minister and Minister for Infrastructure, Transport and Regional Development Michael McCormack said the substantial new funding delivered in this year’s Budget was a key plank of the Federal Government’s plan to help Australia bounce back stronger than ever from the COVID-19 pandemic. In a Media Release issued on 11 May, the Minister commented that:
“The $110 billion, 10-year infrastructure pipeline forms part of the Federal Government’s Economic Recovery Plan and with the objective of securing Australia’s economic recovery by delivering nation-building infrastructure projects, water security to inland Australia, meeting the national freight challenge and getting Australians home sooner and safer”.
An analysis of the additional spending commitment from the Federal Government for each state and territory is set out below. These measures build on the 2020-21 Budget measures for infrastructure investment in each state and territory. The focus again is on major road and rail (including light rail) projects.
An additional $3.3 billion from 2021-22 for priority road projects in New South Wales.
- $2.0 billion for the Great Western Highway Upgrade — Katoomba to Lithgow — Construction of East and West Sections;
- $500.0 million for the Princes Highway Corridor, including the Jervis Bay Road Intersection and Jervis Bay to Sussex Inlet Stage 1;
- $240.0 million for the Mount Ousley Interchange;
- $229.4 million for the M12 Motorway;
- $87.5 million for the M5 Motorway — Moorebank Avenue and Hume Highway Intersection Upgrade;
- $52.8 million for the Manns Road — Intersection Upgrades at Narara Creek Road and Stockyard Place;
- $48.0 million for the Pacific Highway — Harrington Road Intersection Upgrade, Coopernook;
- $32.0 million for the Toowoomba to Seymour — Upgrades to Hargraves Lane and Federation Street;
- $25.0 million for Stacey St, Bankstown — Planning;
- $19.0 million for the Far North Collector Road Network, Nowra; and
- $18.0 million for Appin Road.
This increases the Federal Government's total commitment to transport infrastructure in New South Wales to $43.5 billion.
Note that the NSW Government has already committed funding of $2.5 billon to the Great Western Highway Upgrade project and is currently investigating the construction of an 11-kilometre tunnel (connecting a 4.5-kilometre tunnel to bypass Blackheath and a 4-kilometre tunnel underneath Victoria Pass into one longer tunnel) which would be the longest road tunnel in Australia.
An additional $3.0 billion from 2021-22 for priority road and rail projects in Victoria.
- up to $2.0 billion for the Melbourne Intermodal Terminal, with specific funding arrangements, including an option for equity investment, to be settled at a later date, with an equivalent contribution to be provided by the Victorian Government. This is intended to meet the country’s future freight needs and to link up to the inland rail project (thereby taking up to 5,500 trucks off Melbourne’s roads every day);
- $380.0 million for the Pakenham Roads Upgrade;
- $250.0 million for the Monash Roads Upgrade;
- $92.8 million for the Commuter Car Park Upgrades including Berwick Railway Station, Frankston Railway Station, and Ringwood Railway Station;
- $56.8 million for the Hall Road Upgrade;
- $51.1 million for the Princes Highway East, between Rosedale and the New South Wales border;
- $30.4 million for the Western Port Highway Upgrade;
- $20.7 million for the Princes Highway West between Colac and the South Australian border;
- $17.5 million for the Dairy Supply Chain Road Upgrades;
- $15.0 million for Melbourne to Mildura — Future Priorities;
- $10.0 million for the Outer Metropolitan Ring/E6 Corridor Detailed Business Case; and
- $10.0 million for the Mallacoota-Genoa Road Upgrade.
This increases the Federal Government's total commitment to transport infrastructure in Victoria to $35.5 billion.
An additional $1.6 billion from 2021-22 for priority regional and urban road and rail infrastructure projects in Queensland.
- $400.0 million for Bruce Highway Additional Funding;
- $400.0 million for the Inland Freight Route (Mungindi to Charters Towers) Upgrades;
- $240.0 million for the Cairns Western Arterial Road Duplication;
- $178.1 million for the Gold Coast Rail Line Capacity Improvement (Kuraby to Beenleigh) — Preconstruction;
- $160.0 million for the Mooloolah River Interchange Upgrade (packages 1 and 2);
- $126.6 million for Gold Coast Light Rail — Stage 3;
- $35.3 million for the Maryborough-Hervey Bay Road and Pialba-Burrum Heads Road Intersection Upgrade;
- $10.0 million for the Caboolture — Bribie Island Road (Hickey Road — King John Creek) upgrade;
- $5.0 million for the Beerburrum to Nambour Duplication Study; and
- $4.0 million for the Warrego Highway — Mt Crosby Road Interchange.
This increases the Federal Government's total commitment to transport infrastructure in Queensland to over $31.0 billion.
An additional $3.2 billion from 2021-22 for priority road and rail projects in South Australia.
- $2.6 billion for the North-South Corridor — Darlington to Anzac Highway;
- $161.6 million for the Truro Bypass;
- $148.0 million for the Augusta Highway Duplication — Stage 2;
- $64.0 million for the Strzelecki Track Update — Sealing;
- $60.0 million for the Gawler Rail Line Electrification;
- $48.0 million for the Heysen Tunnel Refit and Upgrade — Stage 2;
- $32.0 million for the Kangaroo Island Road Safety and Bushfire Resilience Package;
- $27.6 million for the Overpass at Port Wakefield and Township Duplication;
- $22.5 million for the Marion Road and Sir Donald Bradman Drive Intersection Upgrade;
- $12.0 million for the Anangu Pitjantjatjara Yankunytjatjara Lands — Main Access Road Upgrade — Stuart Highway to Pukatja;
- $5.0 million for the Greater Adelaide Freight Bypass Planning Study;
- $3.1 million for the Goodwood and Torrens Rail Junctions Project;
- $3.0 million for the North East Road and Nottage Terrace Intersection Upgrade
- $2.5 million for the Murray Bridge to South East Links Planning Study; and
- $1.0 million for the Eyre Highway Widening and Upgrade Planning Study.
The Federal Government will also provide $40.0 million over two years from 2021-22 to continue supplementary local roads funding in South Australia.
This increases the Federal Government's total commitment to transport infrastructure in South Australia to $10.7 billion.
An additional $1.3 billion from 2021-22 for priority road and rail projects in Western Australia.
- $237.5 million for the METRONET: Hamilton Street/Wharf Street Grade Separations and Elevation of Associated Stations;
- $200.0 million for the Great Eastern Highway Upgrades — Coates Gully, Walgoolan to Southern Cross and Ghooli to Benari;
- $160.0 million for the WA Agricultural Supply Chain Improvements — Package 1;
- $112.5 million for the Reid Highway — Altone Road and Daviot Road/Drumpellier Drive — Grade Separated Intersections;
- $110.0 million for the METRONET: Byford Extension;
- $85.0 million for the Perth Airport Precinct — Northern Access;
- $64.0 million for the Toodyay Road Upgrade — Dryandra to Toodyay; and
- $55.0 million for the Mandurah Estuary Bridge Duplication.
This increases the Federal Government’s total commitment to transport infrastructure in Western Australia to $17.3 billion.
An additional $322.6 million from 2021-22 for priority road projects in Tasmania.
- $113.4 million for the Midland Highway Upgrades, including Campbell Town North (Campbell Town to Epping Forest), Oatlands (Jericho to South of York Plains), Ross (Mona Vale Road to Campbell Town), and preconstruction works;
- $80.0 million for the Tasmanian Roads Package—Bass Highway Safety and Freight Efficiency Upgrades Package—Future Priorities;
- $48.0 million for the Algona Road Grade Separated Interchange and Duplication of the Kingston Bypass ;
- $44.0 million for the Rokeby Road — South Arm Road Upgrades;
- $24.0 million for the Tasmanian Freight Rail Revitalisation — Tranche 3 — Port of Burnie Shiploader Upgrade; and
- $13.2 million for Huon Link Road.
This increases the Federal Government's total commitment to transport infrastructure in Tasmania to over $3.6 billion.
An additional $167.3 million from 2020-21 for priority road and rail projects in the ACT.
- $132.5 million for Canberra Light Rail — Stage 2A;
- $26.5 million for the William Hovell Drive Duplication;
- $5.0 million for the Gundaroo Drive Duplication (formerly William Slim Drive Duplication); and
- $2.5 million for Beltana Road Improvements.
This increases the Federal Government's total commitment to transport infrastructure in the ACT to over $1.2 billion.
An additional $323.9 million from 2021-22 for priority road and rail projects in the Northern Territory.
- $173.6 million for the Northern Territory Gas Industry Roads Upgrades; and
- $150.0 million for the Northern Territory National Network Highway Upgrades (Phase 2).
This increases the Federal Government's total commitment to transport infrastructure in the Northern Territory to $3.2 billion.
Other infrastructure related measures
The Budget also provides for a number of other infrastructure related measures as follows:
- Delivery of Local Councils’ infrastructure needs: an additional $1.0 billion over two years from 2021-22 to extend the Local Roads and Community Infrastructure Program to support local councils to maintain and deliver social infrastructure, improve road safety and bolster the resilience of Australia's local road network. This measure is intended to allow local councils to further engage local businesses and workforces to deliver priority projects and support economic recovery post-COVID-19. This investment increases the total funding provided for the Local Roads and Community Infrastructure Program to $2.5 billion.
- National freight and supply chain: an additional $28.6 million over four years from 2021-22 to deliver initiatives as part of the National Freight and Supply Chain Strategy. Funding includes $16.5 million over four years from 2021-22 (including $6.5 million in capital funding over two years from 2021-22) to establish a National Freight Data Hub to enhance the collection and access to freight data across all modes to support day-to-day operations, improve infrastructure and transport network investment and other decisions, enable end-to-end performance evaluation for Australia's freight system and $12.1 million over three years from 2021-22 for the National Heavy Vehicle Regulator to fund engineering assessments for local government owned road networks.
- National Water Grid: up to $160.0 million over two years from 2021-22 to establish the National Water Grid Connections funding pathway to deliver small scale water infrastructure projects and provide short-term economic stimulus. The water infrastructure projects will be identified and delivered by jurisdictions over the two-year period to support primary industries, increase water security and build resilience while stimulating regional economies. Also, a further $98.0 million over three years for National Water Grid projects including $51.2 million for Eurobodalla Southern Storage, New South Wales; $11.1 million for Lostock Dam to Glennies Creek Dam Pipeline, New South Wales; $11.0 million for Werribee Irrigation District Modernisation (Stage 4 and 5), Victoria ;an additional $7.5 million for Rookwood Weir, Queensland ($183.6 million in total) and $5.5 million for Recycled Water on the Bellarine, Victoria).
- Office of Road Safety: an additional $5.1 million over four years from 2021-22 (and $1.2 million per year ongoing) for the Office of Road Safety (which provides national leadership and coordination to improve road safety outcomes) including the finalisation of the National Road Safety Strategy 2021-30.
- Road Safety program: an additional $1.0 billion in 2022-23 for the Road Safety Program to support the National Road Safety Strategy 2021-30 and provide economic stimulus. Small-scale road safety projects such as road widening, audio tactile line marking and barriers will be identified and delivered by jurisdictions in six-month tranches to improve safety on Australian roads while stimulating local economies. Funding for each tranche will be contingent on delivery success by state and territory governments.
- Supporting regional Australia: $348.0 million over four years from 2021-22 (and $0.1 million in 2025-26) for a package of measures to support regional Australia’s sustainability, resilience and job creation. Funding includes $256.5 million over four years from 2021-22 (and $0.1 million in 2025-26) for round six of the Building Better Regions Fund to support investment in community infrastructure and capacity building projects in regional areas; $84.8 million over two years from 2021-22 to the Regional Connectivity Program to support the delivery of reliable, affordable and innovative digital services and technologies in regional and remote Australia and support to undertake an independent study to identify the regulatory barriers to business relocating to regional Australia.
- Security of Critical Infrastructure: $42.4 million over two years from 2021-22 to improve security arrangements for critical infrastructure assets, including those designated as Systems of National Significance, in accordance with the Security Legislation Amendment (Critical Infrastructure) Bill 2020 (currently before the Parliament) and to assist critical infrastructure owners and operators to respond to significant cyber-attacks.
- Murray-Darling Basin: $1.5 billion over four years from 2020-21 for a package of measures to continue efforts to achieve a sustainable and certain future for the Murray-Darling Basin (Basin), its people, industries and the environment. This includes redirecting funding of $1.5 billion from the Water Efficiency Program to water saving initiatives including $1.3 billion for projects to modernise irrigation infrastructure networks through state-led off-farm water savings projects, $150.0 million for grants to support off-farm water saving projects and $60.0 million to enable those states who wish to pursue on-farm water efficiency to continue to do so, providing the strict social and economic neutrality test set by the Murray-Darling Basin Ministerial Council is met.
- Reliable energy supply: a package of measures including $49.3 million for battery and microgrid projects; $24.9 million to assist new gas generators become hydrogen ready; $30 million for early works on Australian Industrial Power’s Port Kembla gas generator project and a further $74.3 million to help accelerate priority gas supply projects identified in the Interim National Gas Infrastructure Plan and help realise the opportunities in the North Bowen and Galilee Strategic Basins. The Government is also introducing a production payment to support local refineries and upgrade infrastructure to continue operating in Australia. This follows on from the six-month interim production payment provided in the 2020-21 MYEFO.
- Newcastle airport: $66.1 million over two years from 2021-22 to upgrade the Newcastle Airport runway to accommodate long range aircraft and facilitate international flights, as part of planned upgrades to the airport.
- Services to Territories: $79.6 million over four years from 2021-22 (including $45.6 million in capital funding) to support the delivery of essential services and infrastructure to the Indian Ocean Territories, Jervis Bay Territory and Norfolk Island.
Support for infrastructure investment
The Budget contains several measures which will support infrastructure investment more broadly. These include:
- Infrastructure delivery capability: $141.6 million over three years from 2021-22 to the Department of Infrastructure, Transport, Regional Development and Communications to undertake new activities which support the future of the aviation industry and improve the Commonwealth's capability to deliver infrastructure investments. Funding includes $130.5 million over three years from 2021-22 to undertake investigations at Australian civilian airports to understand the risks and develop corresponding management plans for any identified per- and polyfluoroalkyl substances contamination and $11.1 million in 2021-22 to support the delivery of nationally significant infrastructure projects through the Significant Projects Investment Delivery Office.
- Supply chain resilience: $107.2 million to examine supply chain vulnerabilities for critical products, starting with personal protective equipment (PPE), medical products and agricultural production chemicals and $98.8 million over four years from 2021-22 (and $4.9 million ongoing per year from 2025-26) to establish an Office of Supply Chain Resilience – the establishment of this office will provide ongoing capacity to monitor and coordinate the Government's efforts to boost supply chain resilience and also to support the implementation of other Government policy priorities, including its COVID-19 response and continuing Australian Public Service reforms.
- Reinsurance pool for cyclone and related flood damage: a reinsurance pool to cover cyclone and related flood damage in Northern Australia will be established to commence from 1 July 2022. The reinsurance pool will be backed by a $10 billion government guarantee. The Government will provide $2.4 million in 2021-22 to the Department of the Treasury to establish a taskforce to consult industry and experts on the design and implementation of the reinsurance pool for cyclone and related flood damage across Australia to reduce the rising cost of insurance premiums associated with cyclone damage.
Support for construction activity in other industries and sectors
The Budget also provides support for programmes, industries and sectors which generate or contribute to construction activity including:
- Communities Programme: support for the Stronger Communities Programme which provides funding of between $2,500 and $20,000 for small capital projects that deliver social benefits for local communities across Australia;
- Public housing stock and workers: funding to states and territories under the National Housing and Homelessness Agreement to assist them to bolster public housing stocks, or to meet wage requirements under the 2011 Fair Work Australia decision on social and community services wages, where that requirement has not already been met for relevant affected workers;
- Housing industry: support for the housing industry including establishing the Family Home Guarantee with 10,000 places from 2021-22 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of as little as 2% and extending the First Home Loan Deposit Scheme to provide an additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home sooner with a deposit of as little as 5%;
- Technology funding: the establishment of a $1.2 billion Technology Co-Investment Facility to invest in priority technologies and practical project-based international partnerships. This includes $539.2 million for hydrogen and carbon capture use and storage projects; $565.8 million to establish international partnerships on practical low emissions projects and $316.7 million to help industry and businesses reduce their emissions through voluntary action and adopting low emissions technology; and
- Waste industry: support for the Government’s National Waste Policy Action Plan (which aims to reduce waste generation, increase waste recovery rates and regulate waste exports) including $11.0 million to support Australia’s recycling industry and $67.0 million to enhance organic waste facilities and support community education to reduce the amount of food waste going to landfill.
Extension of 2020 – 2021 Budget tax incentives
The Budget also extends the following tax incentive measures which were announced in the 2020-2021 Budget:
- temporary full expensing: the temporary full expensing measure will be extended for 12 months until 30 June 2023 thereby providing eligible businesses with additional time to access the incentive. The measure will be extended to allow eligible businesses with aggregated annual turnover or total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023. All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses. From 1 July 2023, normal depreciation arrangements will apply; and
- temporary loss carry-back: the temporary loss carry-back measure (which provides eligible companies earlier access to the tax value of losses generated by full expensing deductions) will be extended so as to allow eligible companies to utilise tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year when they lodge their 2022-23 tax return. Companies with aggregated turnover of less than $5 billion are eligible for temporary loss carry-back. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry-back does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.
While the spending Federal Government’s spending commitments are significant, in an interesting piece in the Australian Financial Review published on 11 May, Jacob Greber points out that the Budget papers show that the Federal Government consistently falls short of spending the money it announces that it will spend on infrastructure.
According to the article, figures compiled by the Australian Automobile Association show that over the past 5 Federal Budgets, there has been a total shortfall of $4.4 billion in terms of announced spending on road projects alone. One of the reasons for this is that the Federal Government only pays when states deliver the projects. If projects are delayed, the under-spend compounds year on year and there are no catch-up payments – the timing of projects simply get pushed out.
The question raised by this article is what needs to be done to remove roadblocks to the states’ ability to deliver their infrastructure needs in a timely manner– for example, are there labour supply issues and skills shortages, are there regulatory hurdles, do states have sufficient focus on, and resources committed, to project delivery?
In a related article in the Australian Financial Review published on 11 May, Matthew Cranston notes comments that “Businesses are knocking back orders and competing with each other for workers and materials in an attempt to keep up with a furious economic comeback that has led to all-time highs in business confidence and conditions”.
A more regular and ongoing dialogue between Federal and state governments and their infrastructure agencies may be needed to assist the states in addressing some of these challenges in project delivery so that taxpayers get maximum value for these spending commitments.