Mixed response to Queensland Budget asset-for-infrastructure swap
An $8.6 billion infrastructure spending spree highlighted in yesterday’s 2014-15 Queensland Budget will be funded by the sale and lease of a number of assets, including the Gladstone and Townsville ports — the latter bundled with the Mount Isa rail line — power companies Stanwell and CS Energy and water company SunWater Industrial Pipelines.
In some cases, such as electricity distribution and transmission businesses Powerlink, Energex and Ergon, the Government "will propose an innovative option of private sector participation, where the Government will retain 100 percent ownership of the ordinary shares, with private sector investors funding future capital expenditure," Queensland Treasurer and Minister for Trade Tim Nicholls says.
At their current book value, the Government says, "the proposed asset transactions could potentially reduce debt and deliver proceeds to a value of $33.6 billion. Three quarters of this would be applied to reduce the State’s debt by $25 billion to $55 billion. This new debt level would mean Queensland’s annual interest bill would drop from $4 billion to $2.7 billion."
Nicholls says the Government will not dispose of any assets until the next state election in March.
On the infrastructure side, the Government has made the following allocations:
- Rural and Regional Roads fund — $1.5 billion
- South East Queensland Roads fund — $1.5 billion
- Public Transport Rail infrastructure Fund — $1 billion
- Bus and Train project — $1 billion
Projects to be funded include:
- The 41km Toowoomba Second Range Crossing toll road — $321 million
- Upgrades to sections of the Bruce Highway — $768 million
- Moreton Bay Rail Link — $374 million
- Six lanes for Centenary Motorway — $41.4 million
- Toowoomba Second Range Crossing — $30.4 million
- Upgrading the Warrego Highway between Toowoomba and Miles — $18.6 million
Just under $500 million will be allocated for infrastructure improvements under the ‘Royalties for the Regions’ program for communities that support resource projects.
"This is a good infrastructure budget, because it transparently links the sale of existing assets to Queensland’s ability to fund new infrastructure," says Brendan Lyon, Chief Executive of the peak body Infrastructure Partnerships Australia. "The Budget shows that asset sales are the only option to fund new infrastructure. Without asset sales, Queensland gets no new infrastructure.
"Selling these two ports is smart, and should deliver substantially more than the baseline estimates in the Budget," Lyon says, adding: "We would reasonably expect Gladstone to reflect the sort of pricing on other recent transactions, which would deliver a return to taxpayers of between $2.8 billion and $3.8 billion.
"It’s also smart to offer the Mount Isa rail connection with the smaller Townsville Port, in effect offering an integrated port and rail supply chain to cashed-up investors."
He says that putting these assets to the market makes real sense given the high prices achieved in other states, and the presence of major consortia geared up to bid for the long pipeline of port assets being offered around the country.
"The Budget’s asset sales will fund a $1 billion initial investment in the new bus and train tunnel, a critical investment to ease crush loads on the SEQ rail network," Lyon says. "It’s also welcome that the Toowoomba Second Range Crossing PPP will move to immediate procurement. This road project will deliver real efficiencies in terms of the freight network and make journeys safer for motorists, and there is substantial interest from the private sector in this project.
"The commitment to take asset sales to the election next year is logical, because it’s the only option to break the back of the state’s infrastructure requirements and to repair the budget."
However, speaking to the Brisbane Times, Opposition Treasury spokesman Curtis Pitt says "the Premier’s answer is to sell off everything he can get his hands on, but that will only lead to more job cuts and higher power prices. Queenslanders don’t want more asset sales and they don’t want even higher electricity prices. Labor stands with the people of Queensland in their opposition to Campbell Newman’s asset sales."
Nine News has quoted the Electrical Trades Union's Stuart Traill as saying "the announcement of the sale of the power generators ... and ports will lead to a significant impact on broader Queensland as profits from those assets disappear for future generations", while Queensland Council of Unions assistant general secretary Ros McLennan says unions are vowing to campaign against the government: "Union members don't want it, Queenslanders don't want it and once you sell their public-owned assets you can never get them back."
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