The Reserve Bank has urged governments to increase spending on infrastructure to help the economy out of the recession. The Morrison government has already increased funding for local councils to spend on small-scale projects while signalling it will engage in a major expansion of infrastructure expenditure in its October budget.
IA chief executive Romilly Madew said every meeting of the agency’s board was now “live” as they vetted proposals that could get underway following the COVID-19 pandemic.
“The priority list is a critical tool in recovery as it directs investment to the infrastructure projects that will kick-start economic growth and have the greatest returns for all Australians,” she said. “We want to highlight the most recent priority proposals at a time when our infrastructure investment needs to progress quickly, without jeopardising the quality of those investments.”
The agency now has 155 projects worth more than $64 billion on its priority list. The M12, the only “high-priority” project added, has a benefit-cost ratio of 1.8 and is expected to be built within the next five years.
The Queensland road projects, which include safety upgrades and upgraded capacity on the M1 between Eight Mile Plains and Tugun, will take five years once construction starts.
All of the projects vetted by the agency are assumed to face a hurdle rate of return of at least 7 per cent. That’s despite global interest rates falling sharply over the past year, with Australian 10-year interest rates below 1 per cent.
Ms Madew said while the agency was keen to examine as many projects as possible to establish a long pipeline of high-value infrastructure, the stage four restrictions in Melbourne would affect “mega-projects” underway in the city and create supply chain issues across the rest of the country.
But she said vetting the projects now would help in the post-recession recovery. “We have to be able to deliver them,” she said.
The agency has also updated a proposal put up earlier this year to start work on improving the east coast’s deepwater ports in Brisbane, Sydney and Melbourne.
It believes this project, which may not be finished until the mid-2030s if started straight away, is vital given the increasing size of global container ships and the large investment required to improve the three key ports.
Projects and initiatives added to IA’s priority list in mid-year update
- Queensland regional road network safety improvements
- Brisbane northern suburbs corridor capacity
- Browns Plains to South East Busway public transport connectivity
- Queensland inland freight route capacity and safety
- Browns Plains to Beaudesert road capacity and safety
- Mooloolah River Interchange capacity and safety
- Australian Institute of Sport modernisation
- M12 Motorway
- More Trains, More Services Stage 2
- Port Botany Rail Line Duplication and Cabramatta Passing Loop
- METRONET: Morley-Ellenbrook Line
- METRONET: High Capacity Signalling Project
“Given the preference of cargo ships to make multiple stops on a route, a network of deepwater ports will likely be required rather than a single port at a given location,” it said. “This incentivises shipping lines to provide larger vessels to service Australia, which may generate economic efficiencies subject to the investment costs required to service these larger vessels.”
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.