The Gillard Government will implement a reform package to strengthen Infrastructure Australia (IA) and drive lasting improvements to the way our nation plans, finances and builds the infrastructure it needs to compete in the 21st century.
The package improves the governance structure of IA, encourages private investment in infrastructure, and improves transparency in the national infrastructure market.
In just over three years, the Labor Government has reversed more than a decade of neglect and underinvestment in Australia's infrastructure.
IA has achieved significant productivity reform outcomes, including:
Spending on the nation's roads, railways, power stations and water storage facilities is now nearly 40 per cent higher in real terms than it was during the last full year of the Howard Government.
10 May 2011
As part of its comprehensive package of investment and financing reforms the Government has taken steps to renew and strengthen the Infrastructure Australia Council.
I welcome Ms Elana Rubin, Cr Nicole Lockwood and Dr Martin Parkinson, the three new members of the Council.
New and reappointed Council members are:
Sir Rod Eddington
GPO Box 594
Canberra ACT 2601
Dear Sir Rod
I am writing to record my appreciation for Infrastructure Australia's (IA) work to date under your Chairmanship and to outline for you the Gillard Government's forward agenda for infrastructure.
Since IA was established in 2008 it has transformed the approach to national infrastructure policy in Australia. Groundbreaking work has been done to develop an annual Priority List of infrastructure projects, conduct the first ever national audit of infrastructure, establish a national Public-Private Partnership policy and guidelines, and develop landmark national port and freight strategies. These are worthy policy achievements that will build economic productivity and wellbeing in Australia.
Through this work, and in the context of the global financial crisis, IA has established itself as an important source of advice for all levels of government, industry and the private sector, and has helped deliver important outcomes across the transport, water, energy and communication sectors.
The Government believes the work of IA must continue, and its capacity should be enhanced. I am pleased to inform you that the Government will boost the budget of IA by nearly 40 per cent over the next four years, to $9 million each year. In addition to this increase, we will provide IA with greater financial independence and accountability commensurate with its independent advisory status enshrined in the Infrastructure Australia Act 2008.
With increased capacity comes a renewed mandate to lead on national infrastructure reform and to modernise Australia's infrastructure. It is my expectation that Infrastructure Australia will continue developing a strategic view of the nation's immediate and long term infrastructure needs.
The Building Australia Fund will continue as an investment fund for major projects. However, as the global economy emerges from the global financial crisis and the Government's fiscal settings tighten, a renewed emphasis on private sector investment is important, and our focus ought to be on ensuring government policy settings promote competitive and efficient investment across both the private and public sectors.
This Statement is the second that I have issued for IA and is intended to guide the Council's deliberations through the next period of funding. Infrastructure Australia will work with states and the private sector to develop a forward program that takes into account:
A key challenge facing Australia is the imperative to lift economic productivity to ensure Australia's economy remains globally competitive and builds wealth and quality of life for all Australians. Economic infrastructure is a vital enabler of a strong and productive economy.
The Government established Infrastructure Australia to bring national leadership to infrastructure development and a strategic approach to planning and financing that enhances value-for-money offerings of Australia's infrastructure assets.
This should remain at the heart of IA's responsibilities. Looking ahead, the Government expects that IA will develop a greater 'top-down' approach, developing a deeper National Priority List that looks beyond individual proposals from jurisdictions. To underscore this strategic role, the Council should consider projects above a threshold of $100 million except in relation to Regional Infrastructure Fund projects and projects that are flagship or demonstrate unique national interest qualities.
As a first step, it would be timely for IA to update its analysis in 2011 of the nation's infrastructure priorities against the seven priorities identified in the 2008 audit. These priorities are a national broadband network, creation of a true national energy market, competitive international gateways, a national rail freight network, adaptable and secure water supplies, transforming our cities and providing essential indigenous services. It is important that these priorities are informed by future forecasts and would ideally flow from a biennial audit of the nation's infrastructure needs and gaps.
IA should work closely with states and territories and the private sector to promote opportunities for private sector participation, including options to encourage long-term equity partners such as superannuation funds, encourage best practice PPP procurement, and advise on risk allocation.
To support these goals, IA should develop transparency and investor confidence in the infrastructure market by publishing project assessments and cost-benefit analyses, except where project information is commercially sensitive or confidential.
The Government's Regional Infrastructure Fund (RIF) is a major new initiative that will provide an ongoing funding stream for economic infrastructure, subject to the passage of the Minerals Resource Rent Tax legislation. The Government has made commitments to progress eight important infrastructure projects from an initial funding injection in the RIF.
IA has an important role in shaping this initiative. Specifically, I ask that IA work with governments, communities and the resources sector to identify long-term infrastructure needs and to assess economic infrastructure projects against RIF criteria and having regard to IA's Reform and Investment Framework which provides for assessments and cost benefit analyses. The $100 million threshold for consideration of projects does not apply to the RIF Program.
In the 2011 Budget, the Government has announced the Infrastructure Investment Incentive Package, to encourage private sector investment in the IA Priority List.
Specifically, the package removes the application of the Continuity of Ownership Test and the Same Business Test and uplifts early stage losses by the government bond rate for priority projects assessed as 'ready to proceed' or 'threshold'. The package is designed to encourage private investment in up to $25 billion of projects designated from the time of Royal Assent to 30 June 2017.
The Government will undertake detailed consultations with industry over the next few months to finalise the package, including the development of appropriate legislation and governance arrangements. I ask that IA be closely involved in this process.
I also welcome the establishment by Infrastructure Australia of an Infrastructure Financing Group of senior private and public infrastructure finance decision-makers to identify further areas for work on private financing reforms.
It would further enhance IA's national priority list if IA were to identify where projects could be privately financed, where user charges might be considered as a means of project funding, and where alternative financing models are appropriate.
The following matters are of particular importance to IA's development of a long term, integrated approach to infrastructure investment:
IA's ability to work across governments is central to its promotion of national infrastructure priorities.
IA should continue to provide an annual report to the Council of Australian Governments (COAG) on its work, or as requested by COAG or the Commonwealth Minister for Infrastructure and Transport. IA's reports to COAG will continue to be conveyed through the Commonwealth Minister for Infrastructure and Transport, who will be the Chair of the new Standing Council on Transport and Infrastructure (SCOTI).
I have asked the Secretary of my Department to continue engaging closely with the Council on key national projects, including the delivery of the Nation Building program and the planning studies underway on High Speed Rail and the Sydney Aviation Strategy.
I would appreciate a statement from the Council in due course of Infrastructure Australia's priorities moving forward, including your delivery and performance milestones.
Once again, I congratulate you and the Members of the IA Council on your appointments and thank you for your ongoing commitment. I look forward to working with you as the Council continues its vital contribution to the development of Australia's infrastructure.
The Gillard Labor Government will introduce a new tax incentive designed to remove impediments in the tax system that discourage private investment in infrastructure projects.
This targets the concerns raised by investors that early stage tax deductions might never be used due to changes of ownership, or if used will have declined in value due to inflation and the time value of money.
The Government will establish special tax provisions for infrastructure projects designated to be of national significance. Losses generated by designated infrastructure projects will be exempt from the Continuity of Ownership Test and the Same Business Test and will be uplifted at the government bond rate.
A decision maker will be empowered to confer designated infrastructure project status on privately financed public infrastructure of national significance based on a range of criteria, including a global capital expenditure cap of $25 billion over the period from Royal Assent of the enabling legislation to 30 June 2017.
The selection criteria to be applied by the decision maker, and other design issues, will be the subject of further consultation.
This measure will ensure that access to losses within a designated infrastructure project is certain and that the value of those losses is maintained.