It's time South Australia had a meaningful conversation about how we fund new major productivity-enhancing infrastructure projects.

Opinion Piece


20 June 2014

Adelaide Advertiser

This week the South Australian Government delivered a budget deep in the red.

With projected net debt to rise to over $14 billion and an annual interest bill of $1 billion, Premier Weatherill's pre-election mantra to ‘keep building South Australia’ will be almost impossible to deliver.

This unfortunate reality will endure unless the South Australian Government can step away from its stubborn ideologies and instead consider new and innovative ways to finance world class infrastructure.

In this year's federal Budget, the Australian Government made a record $50 billion investment in economically productive infrastructure across Australia, including an $11.6 billion Growth Package, which will leverage greater co-contributions from the state governments and the private sector, and through a $5 billion Asset Recycling Initiative, free up billions of dollars for extra investments that are needed today.

Through our Asset Recycling Initiative the Australian Government will pay to the states and territories a 15 per cent premium on any revenue earned from selling existing assets that is reinvested into new productivity-enhancing infrastructure, including public transport.

This is already proving to be hugely successful with the NSW, Victorian and Queensland governments already nominating the sale of mature assets and seeking to reinvest the proceeds into billions of dollars’ worth of new, transformational infrastructure projects.

In SA, we are spending a record $2 billion on infrastructure including almost $1 billion to build both the Darlington Interchange and Torrens-to-Torrens projects on South Rd.

However, it should be noted that SA is the only mainland state yet to involve the private sector in new infrastructure projects.

But with long term economic changes buffeting the South Australian economy, we need to invest in new productive infrastructure to make more of our opportunities.

SA has always been blessed with a rich endowment of natural resources, whether it is mineral or agricultural, and at a time of massive growth throughout the Asia-Pacific region, we must make more of our strengths.

We will never be prosperous only selling to ourselves, but to allow our world class farmers and miners to make the most this unique time in world history, governments need to invest in infrastructure to facilitate greater access to markets and global growth opportunities.

But with high amounts of government debt at both federal and state level, we must increasingly engage with the private sector to deliver new infrastructure that will lift our economic performance, create jobs and make Australia stronger.

That is why Premier Weatherill and his transport Minister Stephen Mullighan must seriously consider new options to utilise the Australian Government's Asset Recycling Initiative and alternative financing to fund major infrastructure projects.

A good starting point would be the $1.1 billion Northern Connector project, identified by the SA Government in 2011 as one of its key infrastructure priorities.

The proposed Northern Connector would be a 15.6 km nonstop six lane motorway connecting the Northern Expressway with Port Adelaide, providing a new freight corridor for heavy vehicles, slashing transport costs and linking the port to employment hubs and the resource production regions of SA.

When completed it would alleviate congestion and remove freight vehicles from the existing Port Wakefield Road which is forecast to reach capacity in several years.

The latest modelling submitted to Infrastructure Australia estimates that the project would deliver significant economic gains with a rate of return of $8.50 for every $1 invested.

This investment would play to the great commodity strengths of our state.

Similar to the $1.6 billion Perth Freight Link, the Northern Connector is a freight corridor which could be jointly funded by the Australian and South Australian Governments in partnership with the private sector.

The scope of the project and the mechanism by which the private sector generates a revenue stream from this investment could take the form of an industry specific user-charge model.

This type of infrastructure financing can deliver significant benefits for industry with the cost of a user-charge being outweighed by the benefits received from faster travel times, reduced fuel consumption and lower vehicle maintenance costs.

In essence, it will be a toll for trucks, not cars, meaning thousands of heavy vehicles off suburban roads, making our streets safer while at the same time delivering a stronger economy

I want to discuss with Minister Mullighan just how we can get on with building the Northern Connector.

The Australian Government would consider funding the necessary work to develop a plan for the Northern Connector with private sector involvement.

With a massive debt burden and a looming shortfall in its infrastructure pipeline, the SA Government lacks the capacity to fund this project through grants alone.

The Australian Government is committed to building the infrastructure for the 21st century and we're ready to look at new ways to do more in SA.

The time for ideology has passed; the time for action has arrived.