Federal budget 2022: opportunities for infrastructure

It’s always interesting to read the commentary that circulates after Budget night.

For those who work in the infrastructure space, discussion abounds about what the Budget means for the project pipeline that stretches ahead of us. And usually it’s a conversation about ‘what’s in, what’s out?’

The Federal Government has pitched this Budget as ‘solid and sensible…[and] suited to the times we are in and the conditions we confront.’

The subtext is clear. Economic conditions are shifting and that will certainly mean change for project funding and prioritisation.

It’s easy to get caught up in the negative portents of programs cut and a foot coming off the investment accelerator, but it’s important to look at the bigger picture. There are opportunities on the horizon for infrastructure, even if the headwinds are a little stronger than we’ve been used to.

Here are my thoughts on the positives that the infrastructure sector can draw from the latest Budget.

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Where housing comes, infrastructure always follows

The Budget Overview notes that:

‘Australia is facing acute housing pressures and too many Australians do not have access to affordable housing. At the same time Australia has a low level of institutional housing investment and the world’s third largest pool of capital in our superannuation system which is hungry for investments that will deliver stable returns over the long term.’

In response to the growing issue of housing accessibility, the Government is establishing a new National Housing Accord to address the shortage and deliver new affordable homes. A target of ‘one million new, well-located homes [is] to be delivered over 5 years from mid-2024 as capacity constraints are expected to ease’.

One million homes is a lot. And housing can’t be built in isolation. Huge investment will need to be made in complementary infrastructure assets to support this growth, both close to the homes themselves and further afield across our energy, transport, water and telecommunications networks.

A commitment to strong investment in housing is a good sign.

Investment beyond transport

We’ve been living through the age of the transport ‘mega project’ in recent years. Australian capitals have seen the positive impacts through projects that are literally transforming the form and function of our cities like Sydney Metro, Cross River Rail, and the Metro Tunnel Project.

The Budget makes commitments for transport infrastructure projects worth $120 billion over the next ten years, including major funding investments for the Western Sydney Roads Package ($300 million), upgrades to the Bruce Highway in Queensland ($586.4 million), and planning for a high-speed rail connection between Sydney and Newcastle ($500 million) to name just a few.

The Budget signals that there is no stop to transport, but it also points to some important shifts in focus. Significant commitments are being made to social infrastructure, like the $50 million allocated for a TAFE Technology Fund to modernise facilities, or the $270.8 million assigned for improvements to public schools via the Schools Upgrade Fund.

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Clean energy is also high on the priority list with the Government committing to major investments in the transmission infrastructure needed to meet renewable energy targets.

Nearly $2 billion is being devoted to the Powering the Regions Fund, $300 million has been set aside for community batteries and solar bank projects, while Rewiring the Nation will:

‘Use $20 billion of low-cost finance to make much-needed upgrades to our outdated electricity grid. This includes investing in Marinus Link to connect Tasmania's Battery of the Nation pumped hydro and renewables to the East Coast transmission network.’

In the same way that the Budget Overview points to an untapped well of capital that could be used to address the housing crisis, there are also big opportunities to accelerate clean energy infrastructure by unlocking super fund capital and other private equity.

These types of funding commitments in the Budget, combined with legislative changes that are adding more investment certainty to emerging renewable asset classes like offshore wind are a good signal for investors, and for our infrastructure pipeline, too.

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Training and skills for the future of delivery

A final positive that stuck out for me is the focus on addressing workforce shortages and building capacity in priority sectors.

Labour is a huge problem facing our industry and gender equity is an ongoing issue. The Budget has allocated funding for skills development and signalled that it will create an Australian Skills Guarantee under which ‘one in 10 workers on major federally funded projects must be an apprentice, trainee or paid cadet, with specific targets for women.’

It’s a longer play, sure. But if COVID-19 taught us one thing, it’s that the infrastructure sector is both resilient, and vitally important. Infrastructure was the lever we pulled to keep our economic wheels turning in a pandemic. To keep up the pipeline pace, we absolutely need to invest in the people that will deliver it.

 

While the headlines might be less than positive right now, reading between the lines of this year’s Budget just shows that infrastructure will continue to play a leading role in Australia’s wealth and prosperity into 2023, and beyond.

Arthur Stamatoudis

Executive Director - Advisory, Australia Asia Pacific

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