The 2019 Audit found Australians benefit unequally from infrastructure investments and services.123 This lens provides an alternative view for all levels of government to consider how infrastructure should be funded and financed well into the future.
The Australian Government has a range of mechanisms for investing in infrastructure projects, including traditional and conditional grants and commercial and concessional debt, equity and guarantees. Additionally, government should actively review and consider the recycling of capital in established assets, particularly with stable revenue generation, into new assets that meet emerging community needs.
" Additionally, government should actively review and consider the recycling of capital in established assets, particularly with stable revenue generation, into new assets that meet emerging community needs. "
Using these different mechanisms effectively can ultimately increase and maximise the value realised from infrastructure investments, particularly in response to growing and sometimes competing community needs.124
Government decisions about how best to invest in infrastructure should be informed by a clear understanding of project objectives and risk appetite.
To determine the most appropriate investment mechanism for a project, the Australian Government should develop a strategic infrastructure investment framework to guide decision-making processes. This would complement the existing Commonwealth Procurement Guidelines by providing an infrastructure-specific 'decision tree' for recommending appropriate and more advanced funding and financing vehicles.125
This should be complemented by investing in capability within the Australian Government to understand, execute and oversee more complex commercial and financial agreements with the states and territories and the private sector.
The opportunities and challenges associated with private sector involvement in financing and delivery through the PPP model should also be carefully considered as they continue to evolve. As discussed in Reform 3.2, the use of privately funded PPPs is beginning to decline locally and internationally. This trend highlights the importance of careful contract design, a clear understanding of how risk is being managed and shared, and the need for a renewed focus on the partnership aspect of PPP.
Governments should also renew efforts to pursue opportunities that expand the base of investable capital, such as value capture, user pays and asset recycling.
Creating an Australian Government market-led proposals assessment framework that is integrated with existing Jurisdictional approaches would provide an additional mechanism for attracting new proposals and investment from the private sector. For example (as discussed in Reform 3.3), there are immediate digital asset recycling opportunities for governments to progress.
To increase the likelihood of private sector financing being involved, the review and pursuit of these opportunities needs to be integrated into project decision-making at the earliest stages.
For more information about pricing equality across key areas of Australian infrastructure, see the Transport, Energy and Water chapters.