Labor faces state revolt over infrastructure funding changes
Federal Labor faces a backlash from the states over plans to reduce the share of major road and rail projects it intends to fund, with NSW, Western Australia and Queensland raising concerns that they are already out of pocket.
Infrastructure Minister Catherine King, as first reported by The Australian Financial Review, said the federal government would move to “a preference of 50/50” funding of major projects with states and away from picking up all or most of the cost.
Catherine King says expanding heavy rail is closely tied to building more housing. Michael Quelch
On Tuesday, NSW Premier Chris Minns said he was “very concerned” to hear Ms King’s proposal. “I’m not going to gild the lily here – that’s a major concern for the NSW government,” Mr Minns said, adding that he thought agreements in health and the split of GST revenues had already disadvantaged the state.
In WA, Treasurer Rita Saffioti said she was deeply disappointed by the federal government’s new approach to national significant infrastructure funding. The longstanding 80-20 funding split had been used on scores of projects that were not deemed critical infrastructure in other states.
“We have almost 30 per cent of the national highway network and almost all our major regional road projects are on this network,” she told the Financial Review. “We are deeply disappointed with the approach being put forward by the federal government.”
The changes come as the government is preparing to release a review into a $120 billion infrastructure pipeline that has already found the cost of $80 billion of road and rail projects had blown out by $33 billion. The government wants to stick to the $120 billion budget for the infrastructure pipeline, requiring some projects to be cut.
“Many of the projects currently in the [pipeline] will never be built and can never be built,” Ms King told The Australian Financial Review Infrastructure Summit on Tuesday. “All they are doing is sucking valuable money, time and energy from somewhere else, denying investment in projects that are genuinely important.”
Along with the review, Ms King will reveal billions of dollars worth of projects to be axed or delayed to help alleviate inflation pressures. Led by former Infrastructure Department secretary Mike Mrdak, the review split existing projects into four categories: those to be cut, those to be delayed or consolidated and those that should proceed.
It also recommended future projects be split into two distinct stages.
The government should commit money only for the planning stage of projects and then further funds once the final cost and timeline of the project were known, it found.
Along with the 50:50 Commonwealth contribution, Ms King has flagged the federal government is likely to only consider projects where its share will be $250 million or more. However, there will be exemptions to both rules, especially where projects are of national importance, relate to housing or critical resource developments.
It would also be unlikely to be applied to smaller states and the territories, such as South Australia and the Northern Territory, where there are large road networks but comparatively small populations.
SA’s Infrastructure Minister Tom Koutsantonis said he wanted to see the full details of the infrastructure review so he could “properly assess the impact to South Australian taxpayers of any change to the existing funding split”.
Global supply chains
The proposed changes to the federal government’s infrastructure funding policy was also met with a lukewarm reception in Queensland and Victoria. Queensland Treasurer Cameron Dick said while project costs had grown since the COVID-19 pandemic, it was not a reason for the federal government to scrap road and rail infrastructure.
“The reality is that infrastructure is costing more than ever, because of global supply chains and labour shortages,” Mr Dick said. “That means, in many cases, it costs more money to deliver the same amount of infrastructure. But that’s not a reason to cut projects. It’s the reason why we need more funding, not less.”
Mr Dick said the Palaszczuk government said it supported “sensible approaches” to infrastructure funding and the need to curb inflation.
“Queensland has already endured cuts to infrastructure, with the federal government cutting $5.7 billion to Queensland water projects in its first budget, and making major reductions in inland rail in Queensland. No other state has suffered that level of reduction,” he said.
One project that has come under intense scrutiny is Melbourne’s controversial suburban rail loop, which has been criticised by the Victorian Auditor-General for having a poor business case. The Victorian government has committed $11 billion for the first stage of the project, while the federal government will fund $2.2 billion of work.
On Tuesday, Ms King told the Summit that some projects could proceed even if the cost-benefit analysis did not stack up.
“We will certainly take [Infrastructure Australia] advice into consideration,” she said of the suburban rail loop, adding the $125 billion project was part of the government’s plan to build more than 1 million new houses.
“We don’t want to see our cities just continue to sprawl out as they have done, where there is poor infrastructure on greenfield sites,” she said. “Whilst it’s a public transport project, it’s actually also about housing.”
The suburban rail loop is a 90-kilometre rail line circling the Melbourne metropolitan area, which will connect all the existing lines that run into the central city.
With Tom Rabe, Patrick Durkin, Samantha Hutchinson and Simon Evans
Introducing your Newsfeed
Follow the topics, people and companies that matter to you.
Find out moreRead More
Latest In Federal
Fetching latest articles