News & Analysis

Trump administration exploring asset recycling model

Vice-President Mike Pence and others in the US administration have cited Australia’s initiative as a model for bringing private capital into the sector.

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Australia’s model of infrastructure asset recycling is drawing interest from the Trump administration.

In April, Steve Roth and Richard LeFrak, co-chairs of President Donald Trump’s infrastructure council, touted Australia’s initiative at an infrastructure forum and said the US administration is exploring a similar approach. During his visit to the country the same month, Vice-President Mike Pence also told business leaders that he was interested in importing the policy’s main tenets, according to a report in The Australian.

Some see the idea of emulating the programme, launched in 2014, as a creative solution to bring private sector capital into infrastructure. Ted Brooks, portfolio manager for globally listed infrastructure at CenterSquare, called asset recycling “exactly the kind of programme the US needs”.

But while the prospect excites investors, replicating Australia’s success is unlikely to be straightforward.

“There are clearly some structural and political nuances here in the US which differ from Australia,” explained Dylan Foo, the head of infrastructure equity for the Americas at Sydney-based AMP Capital.

Australia’s programme aims to incentivise states and territories to sell assets and reinvest the money into infrastructure, as the federal government provides states with 15 percent of the proceeds generated on divesting operating projects. An infrastructure outline released alongside the budget last month did not specifically mention the Australian model but recommended structuring federal funding to incentivise non-federal investment.

While there has been some support for public-private partnerships on both sides of the aisle, some Democrats and Republicans have resisted the prospect of relying on the private sector. A coalition of left-leaning Democrats has railed against the prospect of incentives for private investors, calling it a corporate giveaway. Republicans from rural districts, meanwhile, have also noted the need for direct federal spending.