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Are Building & Operating Projects ‘A Big Risk’ For The 2017 Budget?

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An infrastructure adviser for the federal government expressed a warning about the ability of the commonwealth to successfully take on the risk of building and operating projects, according to The Australian.

As Australia's government gears up to allocate billions of dollars for rail, airport and hydro power construction, Infrastructure Australia Chairman Mark Birrell said he was concerned about the federal government’s track ­record in providing equity to and procuring major projects.

His trepidation came after Scott Morrison's first comments vowed to use “good debt’’ in the budget to build productivity enhancing infrastructure.

According to The Australian, Mr Birrell admitted in a pre-budget infrastructure round table forum that he welcomed the new classification but also said the history of the commonwealth on procurement has generally not been a happy one.

"For the commonwealth to open itself up on infrastructure projects to be taking both construction and ­operator risk means that everyone should straighten their back and keep a close eye on it,’’ he told The Australian.

“So the step in the budget ­papers towards identifying good and bad debt is a welcome one and I look forward to those papers putting detail into that.

“So that for the first time we can see debt going towards identified productivity ­enhancing infrastructure projects. But it is only going to be good debt if expended on a good project and well delivered," he said.

Infrastructure Australia reportedly delivered an unprecedented $60 billion wish-list of 100 national priority projects to the Turnbull government, including the M4 and WestConnex motorways in Sydney, Melbourne’s metro rail and M80 ring road, the South Brisbane-Ipswich road network, Perth freight rail and the delivery of the western Sydney airport.

Mr Birrell told The Australian the federal government should focus on providing grants for projects that would struggle to generate an acceptable return to private sector investors rather than taking equity stakes or seeking to operating them.

“If there are any projects the government thinks should be supported that won’t attract private ­finance and won’t otherwise proceed, they should do it through an identifiable and highly visible grant,’’ he said.

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Article originally posted at: https://theurbandeveloper.com/articles/building-operating-projects-big-risk-2017-budget