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Urban rail news in brief - July 2015
Inland rail a trifecta for Toowoomba region: mayor
A $10 billion inland railway from Melbourne to Brisbane could not pay for itself without government funding in the first 50 years of operation, according to a feasibility study undertaken in 2015.
As the Turnbull government prepares to sign off on the mega-rail project in next week's budget, there have been growing concerns about using taxpayer funds to back a project which could turn into a "white elephant".
It comes as IFM Investors chief executive Brett Himbury, whose company controls $75 billion in funds under management, backed increased borrowing to build new infrastructure, but warned taxpayers would still have to pay back new debt, regardless of whether it was "good or bad debt".
"On the one hand it's a good thing because they are well placed to borrow but on the other hand it will understandably create concerns because regardless of whether you classify it as good or bad debt it has to be repaid," Mr Himbury said in an interview with The Australian Financial Review.
"There is that issue about what's the country's long-term capacity to repay the debt regardless of how we classify it. Having said that, it makes sense for the government to play somewhat more of an active role in the funding of infrastructure."
With the Turnbull government set to make infrastructure a centrepiece of the May budget, Mr Himbury called on the Turnbull government to embark on another round of the asset-recycling fund to kickstart the infrastructure sector in next week's budget.
"I would like to see another round of the asset-recycling initiative. It was good for investors, it was good for jobs and it was good for growth," he said.
Opposed asset sales
The federal government allocated only $3.3 billion from its planned $4.3 billion asset recycling fund – which rewarded states for selling public assets – before it expired last June. The bulk of the money went to NSW ($2.19 billion) after the sale of its electricity businesses, but Queensland and now Western Australia were ineligible because they opposed asset sales.
The Melbourne to Brisbane railway has been championed by successive federal governments since the late 1990s, especially the Coalition, with the project heading through National Party heartland.
Prime Minister Malcolm Turnbull last week said the rail link was "a very high priority" and is likely to be backed up with a big capital injection in next week's budget as part of Treasurer Scott Morrison's push to leverage "good debt" to build key infrastructure priorities.
But a feasibility study by former Nationals leader and deputy prime minister John Anderson in 2015 warned the Commonwealth would have to fund most if not all of the rail link because the private sector would not go near it.
"Inland rail will require significant, if not total, funding by Australian governments as it will not generate the financial returns required to make the project attractive to the private sector without a significant risk transfer to the Commonwealth that would come at a cost to the taxpayer well beyond the government funding inland rail from its balance sheet," the study found.
Cheaper freight costs
Mr Anderson recommended the federal government give the green light to build the inland rail project – which would take 10 years to build – saying the new freight route would deliver a net economic benefit of $13.9 billion, including lower costs to consumers because of cheaper freight costs to move goods interstate.
But the $10 billion price tag would make a significant impact on the government's balance sheet.
"While the economic analysis indicates that inland rail will deliver a net economic benefit to Australia, the expected operating revenue over 50 years will not cover the initial capital investment required to build the railway – hence, a substantial public funding combination is required to deliver inland rail," the feasibility study said.
"However, the business case demonstrates the operating revenues would cover operating costs [including maintenance] meaning that once delivered, inland rail would not require ongoing taxpayers support."
Federal Resources and Northern Australia Minister Matt Canavan, who has been backing the opening up of the Galilee coal basin including Adani's controversial $16.5 billion Carmichael mine, said the big-ticket infrastructure projects would benefit the nation.
"We'll continue to invest in infrastructure. We'll continue to support projects like the inland rail, which we've backed already. It's a very important project for the whole country," Mr Canavan told Sky News on Sunday.
This article first appeared on www.afr.com
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