Statement of Shared Intent

Commonwealth, State and Territory Treasurers met in Canberra today to progress a plan to significantly boost the stock of productive infrastructure in Australia. Treasurers recognised the need for expanded private sector investment and better targeted public infrastructure funding, including by unlocking funds from existing assets. The focus of discussions was an asset recycling partnership between the Commonwealth and States that will make better use of existing government-owned infrastructure assets and recycle the much needed capital from these assets to deliver new productivity-enhancing infrastructure. The new projects will drive real activity in the economy when it is most needed, as investment in the resources sector declines, and will increase Australias productive capacity and growth prospects throughout the decade and beyond.

Plan Ahead
Treasurers today made a strong commitment towards a new partnership between the Commonwealth and the States to increase funding through asset recycling. Under the partnership, the Commonwealth could offer substantial financial incentives to States and Territories that sell assets and reinvest the proceeds of these sales into new productive infrastructure. This Initiative is in addition to the Commonwealths existing commitments to infrastructure funding. Infrastructure Australia estimates that at least $100 billion in commercial infrastructure assets are currently tied up on government balance sheets and could be sold. This partnership could help overcome the fiscal constraints governments face to increase the pipeline of projects that would improve Australians quality of life. It would also provide an opportunity for Australian superannuation funds to buy Australian assets. This will require building community understanding of the benefits of recycling assets and support for the initiative, particularly in light of electoral commitments made in some States and Territories. The Commonwealth, States and Territories will now seek agreement on the details of the partnership.

Importance of Increased Infrastructure

As the G20 Finance Ministers and Central Bank Governors in Sydney outlined last month, the Council on Federal Financial Relations agreed that productive infrastructure is critical to Australias future competitiveness and economic growth. It is imperative that Australia invests in infrastructure projects that address debilitating bottlenecks and build the capacity Australia needs for the 21st Century. Infrastructure spending can provide a short term economic boost by stimulating construction activity, and ensure long term prosperity by increasing the productive capacity of the Australian economy.

Investing in the right infrastructure can also boost Australian incomes by increasing productivity, including by tackling congestion, reducing business input costs and by helping firms better link with their employees and customers.

Seizing the Opportunity

As Australias historic investment boom in the mining sector slows, there is an imperative to support investment and real activity across the country. The acceleration of infrastructure expenditure is a challenge, given that the fiscal positions of both Commonwealth and State Governments remain constrained. All levels of government are therefore looking at ways to address funding constraints.

Council on Federal Financial Relations 28 March 2014