NSW urged to borrow amid fears of stalled infrastructure boom
Source: Australian Financial Review
Author: Jenny Wiggins
3 September, 2019
The NSW government should borrow money at record low interest rates or sell off more assets like the WestConnex motorway to build more transport networks amid concerns projects are stalling because they can’t be funded, the Committee for Sydney says.
“Sydney has outgrown the ability to be so reliant on just a car-based transport system,” Committee of Sydney’s chief executive Gabriel Metcalf told The Australian Financial Review. “Sydney is becoming a major world city and it is now big enough that it needs a sophisticated mass transport system more like what you would see in London.”
While the NSW government had done “incredible things” on infrastructure, it needed to keep going if it was going to provide a mass transport system for a population forecast to hit 8 million by 2040, Mr Metcalf said.
“We’re only part way into what needs to be a multi-decade period of infrastructure building. There are options. The options include further asset recycling, further borrowing or potentially other new sources of funding.”
The Committee for Sydney, a think tank whose members include government departments, companies and universities, is worried that the NSW government is struggling to find money for the next round of transport projects, including the Metro West rail link between Sydney’s CBD and Parramatta; the second stage of the Parramatta light rail line, the proposed Western Harbour Tunnel; and a proposed North South rail line.
The committee says the NSW government, which has projected a surplus of $802 million for 2018-19, could take more advantage of record low interest rates to borrow money to pay for more public transport, and sell its remaining 49 per cent stake in Sydney tollroad WestConnex or other assets.
Other financing options open to the NSW government include introducing more “value capture” taxes, which seek to tap into rising land prices near infrastructure projects; striking more public-private partnerships; and raising fares on public transport.
NSW Treasurer Dominic Perrottet said the state’s approach to asset recycling was to put all options on the table. “Last week we announced a scoping study for the long-term lease of the state’s commercial softwood plantation business, but we need to await the results of the study before deciding on what options to take,” the Treasurer said. “This is the extent of our plans at this time.”
But the Treasurer said NSW would welcome more funding from the Commonwealth for big new infrastructure projects including the Metro West and the F6 motorway extension.
“I know the Commonwealth has locked in a commitment to returning their budget to black, but with the trade balance looking better thanks to a lower Australian dollar and higher-than-anticipated iron ore prices, this may give the Commonwealth more flexibility in this area,” the Treasurer said.
The Treasurer noted that low interest rates made borrowing “more attractive” and said NSW would have some $38 billion of debt by 2022-23.
The NSW government is devoting most of its capital spending in 2019-20 to transport, and is putting $13.4 billion towards delivering the final stages of WestConnex; building the city and southwest stages of the Sydney Metro; upgrading motorways such as the Pacific Highway and Princes Highway; and finishing the troubled CBD and south east light rail project, which is $1 billion over its initial budget and expected to open a year late.
It has also set aside money for future projects, including $6.4 billion for Metro West over four years, although the total cost of the rail line is estimated at around $20 billion.
But the NSW government’s tenders website does not show any tenders underway for design or construction on future big transport projects. The government has said it expected to start building Metro West next year but is still doing geotechnical analysis and hasn’t yet released a detailed route, a final business case or a construction schedule.
The Western Sydney Business Chamber is among the groups that have publicly expressed concerns the second stage of the Parramatta light rail project, which hasn’t been funded, is losing momentum and has urged the NSW government to release a business case and a construction schedule for the project.
The government raised $9.3 billion by selling a majority stake in WestConnex to Transurban last year, and the tollroad company has signalled interest in buying the remaining stake.