The New South Wales government must consider increasing its use of public-private partnerships and asset recycling to help fund new infrastructure projects in the Australian state, according to a Sydney-based think tank.
The Committee for Sydney, whose membership comprises more than 150 companies, universities, government departments and cultural bodies, said it was “becoming clear that the next set of projects are stalled” following the development of the Sydney Metro, Sydney Light Rail and Parramatta Light Rail schemes.
The think tank pointed to the fact that there have been “no significant new tenders” in the market since the end of 2018. This was despite the NSW government having been re-elected in March on the back of pledges to spend around A$70 billion ($47.7 billion; €43.3 billion) on transport projects.
Promised projects included Sydney Metro West, which would connect the city centre with Parramatta to the west, and the Western Harbour Tunnel road scheme, on which the authorities were rumoured to have been launching market soundings in recent months. However, little visible progress has been made on either scheme since the election.
Speaking to Infrastructure Investor, Committee for Sydney chief executive Gabriel Metcalf said NSW had been a leader on infrastructure spending not just in Australia, but the world.
“The government has a lot to be proud of,” he said. “We want to make sure the programme keeps going, and we want to [make sure] that this is not a one-time infrastructure boom.
“They are going to have to make some hard choices, there’s no way around that. But we think that investments in transport should be in a different category than a lot of other public services, because they are investments that will generate returns in the long run.”
Metcalf said he believed there was still appetite among “most” in the NSW government to procure projects using availability public-private partnerships: “It makes sense – we acknowledge that PPPs are functionally the same as borrowing to the Treasury balance books, but it is the more effective delivery method [than standard borrowing] in most cases and it does shift some of the risk on to the private sector. As a form of borrowing, it is probably the most effective in most cases.”
The Committee for Sydney argued that the state should consider recycling more infrastructure assets to help fund new development, including the remaining 49 percent stake it holds in the WestConnex road development. The state raised A$9.26 billion last year from the sale of a 51 percent stake in the asset to a consortium led by ASX-listed Transurban, with the concession lasting 42 years.
“Asset recycling was one source of funding that enabled the current infrastructure boom, but it wasn’t the primary source of funding,” said Metcalf. “Most of the funding doesn’t come from a specific, identifiable source – it comes from discipline in the general budget. There may be some more asset recycling where it makes sense, but government will have to build infrastructure long after it has run out of assets to recycle.”
Reinforcing this, the Committee for Sydney said in its statement: “It’s worth remembering that the majority of A$93 billion being spent on infrastructure over the next four years [is] coming from general government revenue (A$64.1 billion) and that a relatively small amount is funded by federal government (A$6.3 billion) and asset recycling proceeds (A$11.2 billion).”
The think tank also urged the government to consider taking advantage of record low interest rates by increasing conventional borrowing to fund projects, as well as by increasing user charges on existing assets and exploring the merits of a land tax.