Budget fails to capitalise on historic low borrowing rates

The federal budget has taken positive steps toward infrastructure commitment by the government, but it still is a missed opportunity to capitalise on low bond rates and a triple-A credit rating, according to a senior industry executive.

Megan Motto, chief executive of built-environment body Consult Australia, welcomed the direction of the 2017/2018 Federal Budget but declared it a missed opportunity to capitalise on historic low borrowing rates.

Consult Australia represents 49,000 consulting firms in the built environment.

The government plans to spend $75 billion on development and upgrade of infrastructure, which includes a potential buy-out of the Snowy Hydro scheme from the states. Also included is a $20 billion rail line upgrade.

Major projects like Snowy Hydro, Inland Rail, a National Rail Program, and Western Sydney Airport, all point to a government that understands the long-term nature of infrastructure projects. But real spend on infrastructure delivery would fall as share of GDP from 25.5% to 25.2% in 2020-21, Motto said. 

Yet, “historically low bond rates and a triple-A credit rating means it has never been a better time to borrow, to take on more good debt,” Motto said.

 “This is an Infrastructure Budget 1.0 that begs for an Infrastructure Budget 2.0 to better connect the strong sense of direction to implementation and the opportunity for Australia to maintain future economic growth,” said Motto.

“This was a budget big on planning for longer-term infrastructure dividends.” 

“It recognised infrastructure as a tool to increase productivity, the importance of business case development to get the right projects off the ground, and the role of government in being able to drive economic growth.

“Over $14 billion of direct government equity in major infrastructure delivery and financing agencies,” she said.

But Motto added that “in the short term there is a sense of missed opportunity”.

Motto also lamented the foreign worker levy for businesses that will make it harder for them to bring in skills needed to deliver Australia’s infrastructure agenda.