Mega transport underpins pipeline

In its 2019 audit, Infrastructure Australia argued record levels of infrastructure investment need to become the “new normal” to avoid increased congestion and reduced living standards and productivity.

"Debt is cheap and will likely stay cheap for a long time but asset recycling offers a means to fund projects while limiting increases to government debt.”

ANZ Research’s Australian Major Projects report looks at public, private, and public-private partnership (PPP) projects worth $A100 million or more across sectors including road, rail, mining, electricity, hospitals, offices, retail, and hotels. Transport infrastructure projects are a key driver of New South Wales’ overall major project pipeline. 

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But there is a dip in the investment profile of these projects in 2019-20 and 2020-21 – largely reflecting timing lags between the completion of projects and the substantive phase of new ones – before road and rail activity ramps up again.

While record infrastructure investment in New South Wales becomes the “new normal”, this raises questions over how projects will be funded, particularly given the recent plunge in stamp duty revenue. Debt is cheap and will likely stay cheap for a long time but asset recycling offers a means to fund projects while limiting increases to government debt.

New South Wales Premier Gladys Berejiklian has flagged the possibility of selling the remaining half of WestConnex to help fund projects including Sydney Metro West and the Western Harbour Tunnel and Beaches Link.

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Renewables powering public transport

As major public-sector-backed transport infrastructure activity falls in New South Wales in 2019-20 and 2020-21, public investment in hospitals and renewables is expected to fill some of the gap.

$A11 billion worth of major hospital projects are underway or likely to commence soon and Snowy Hydro 2.0 (currently estimated at more than $A5 billion) is scheduled to start major construction works in 2020.

The New South Wales Government has also begun sourcing renewable power for the state’s public transport network, contributing to its goal of net zero emissions by 2050. Operational electricity requirements of Sydney Metro Northwest are fully offset under a 15-year Green Products Purchase Agreement to procure large-scale generation certificates from the Beryl Solar Farm, located in the Central Tablelands of New South Wales.

The New South Wales Government has also announced a plan to switch to electric-powered buses which could be charged using renewable energy.

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Capacity constraints

With several states rolling out record transport infrastructure programs at the same time, reports of capacity constraints are on the rise, particularly in Sydney and Melbourne. Without effective policy action, capacity constraints pose a material risk to the delivery of necessary infrastructure in New South Wales.

In a 2019 survey, international commercial law firm Allens found 43 per cent of infrastructure leaders in Australia believed the industry’s biggest concern was the inability to deliver the current project pipeline. They also considered tunnels and rail to be the highest risk projects. The survey identified the large volume of projects in Sydney and Melbourne as a contributing factor.

Moreover, with the Cross River Rail in Brisbane and Stage 2 of Canberra Light Rail both expected to commence shortly, constraints could continue to spread.

Catherine Birch is Senior Economist at ANZ