Is Victoria spending more on infrastructure than the entire Commonwealth?

RMIT ABC Fact Check


June 20, 2019 16:36:04

The claim

Victoria has long complained that the state is being short-changed by the Commonwealth on infrastructure funding, despite facing the strongest population growth in the nation.

In the recent state budget, the Andrews Government ratcheted up infrastructure spending to a level it said was almost triple the long-term average.

Treasurer Tim Pallas said the State Government was spending more money on Victorian infrastructure than the Morrison Government was planning to spend across the entire nation over the next decade.

“In fact, $107 billion of state capital projects are commencing or underway,” Mr Pallas said in his budget speech.

“Remarkably, we are currently investing more in Victoria than the Commonwealth plans to spend across the entire nation over the next decade.”

Is it correct that Victoria is spending more on infrastructure projects than the Morrison Government is planning to spend across Australia over 10 years? RMIT ABC Fact Check investigates.

The verdict

Mr Pallas is comparing apples and oranges.

The April 2, 2019 federal budget refers to Commonwealth spending of $100 billion on transport infrastructure over the next decade.

The budget does not provide a complete breakdown of how the spending will be spread across individual years or specific projects.

This federal figure is not comparable to the $107 billion of spending on state infrastructure referred to by Mr Pallas, for a number of reasons.

First, the 10-year, $100 billion federal infrastructure spend relates only to land transport infrastructure projects.

It does not include infrastructure spending by the Commonwealth in areas such as defence, nor does it include infrastructure spending undertaken by federal government corporations like the National Broadband Network.

On the other hand, the $107 billion Victorian infrastructure agenda referred to by Mr Pallas covers infrastructure projects across all areas of the State Government, including transport, the environment, law and order, health, education, and government corporations such as Victoria’s various water authorities.

Second, the timeframes used are not comparable. The $107 billion figure referred to by Mr Pallas covers the total value of all projects that are currently underway and planned.

Some projects on the list have been underway for several years. According to the May budget papers, Victoria’s $107 billion infrastructure program includes spending of almost $29 billion that was to be undertaken before June 30, 2019.

Other projects are not due to be completed for many years, including one that is not expected to be finished until 2053.

In contrast, the federal infrastructure spending referred to by Mr Pallas is limited to grants for land transport projects over the ten years from July 1, 2019.

Third, many of the projects that make up Victoria’s $107 billion infrastructure program involve a contribution from the Commonwealth. These federal contributions — worth almost $7 billion according to analysis by Fact Check — have been included in the Victorian total.

The comparison used by Mr Pallas therefore involves a degree of double counting.

These significant problems aside, Mr Pallas accurately points out that infrastructure spending in Victoria has increased dramatically in recent years. This, however, is a separate issue, and not the subject of this fact check.

Victoria’s infrastructure agenda

The state’s infrastructure agenda, or “capital program”, as it is formally known, is detailed in Budget Paper Number 4 of the May 27 state budget.

As the Department of Treasury and Finance explains, this provides an estimate of the value of all newly-announced infrastructure projects, as well as projects already underway.

The budget paper lists projects administered by government departments, including transport, health and education, and projects run by “public non-financial corporations”, including 19 water companies, Victorian Rail Track and Victorian Ports Corporation.

In this year’s budget, government departments listed $28.9 billion in new infrastructure projects and $32.7 billion in existing projects, a total of $61.7 billion.

Public non-financial corporations listed $10.3 billion in new projects and $35.2 billion in existing projects, a total of $45.5 billion.

All up, these projects are worth $107 billion.

Almost $47 billion is being spent under the auspices of the Department of Transport, including $13.3 billion for the removal of rail level crossings, $15.6 billion for the North East Link road project and $6.3 billion for West Gate Tunnel project.

A further $27.4 billion is being spent by Victorian Rail Track. That includes $10.9 billion for the Melbourne Metro Tunnel and $2.2 billion for high-capacity trains.

The Department of Health and Human Services is investing $5.6 billion, the Department of Justice and Community Safety $3.6 billion and the Department of Education and Training $3.5 billion.

What about the Commonwealth?

In his budget speech, Federal Treasurer Josh Frydenberg announced that “the Coalition Government is boosting our infrastructure spending to $100 billion over the decade”.

The budget document, Building Our Future: Delivering the Right Infrastructure for a Growing Nation, refers specifically to “transport infrastructure” in relation to the $100 billion figure.

“The Australian Government is investing $100 billion over 10 years from 2019-20 in transport infrastructure across Australia to manage our growing population and get Australians home sooner and safer,” it says.

“This includes an additional $23 billion for new projects and initiatives through the 2019-20 Budget to bust congestion, better connect our regions, improve safety on our roads, and meet our national freight challenge.”

It remains unclear how the $100 billion will be spread across individual years and projects across the decade, given the budget generally uses a four-year rather than 10-year time frame.

A spokesman for Federal Infrastructure Minister Michael McCormack confirmed that the $100 million figure relates to infrastructure payments to the states for land transport projects over 10 years.

“The Commonwealth Government’s infrastructure package is a rolling pipeline of $100 billion for land transport infrastructure over ten years,” the spokesman said.

“Discussions are entered into on specific funding allocations for individual projects and payments are made on milestones.”

The budget does, however, outline $28.3 billion worth of “new priorities for the infrastructure investment pipeline”.

Included is $4 billion for a national urban congestion fund, $4.5 billion for roads of strategic importance, $3.5 billion for stage 1 of the North-South rail link in NSW and $2 billion for Victoria’s Melbourne to Geelong Fast Rail.

A further $22.1 billion of spending from 2019-20 onwards on “current major projects” is also set out, including $5 billion for the Melbourne Airport Rail Link and $1.75 billion for Melbourne’s North East Rail Link.

Apples and apples?

As previously noted, the infrastructure spending referred to by Mr Pallas represents the total value of capital projects that are underway or planned for the future.

Included are hundreds of transport, hospital, school, environment, water, and law and order projects being managed by various government departments, authorities and publicly-owned corporations such as various water authorities and VicTrack (which owns Victoria’s transport land, assets and infrastructure).

Some of the projects included have been underway for many years. Some will be finished in the relatively near future. Others involve long timelines.

Melbourne’s $15.6 billion North East Link road project is not expected to be completed until 2027.

The project with the longest timeline, known as the “Melbourne Strategic Assessment”, is designed to manage the impact on Melbourne’s suburban growth on plants and animals. It is not due to be completed for 34 years, until 2053.

Mr Pallas referred to infrastructure spending by the Commonwealth over the next decade. The federal budget papers do not provide sufficient detail to verify the Coalition’s claim that it is “investing $100 billion over 10 years” on transport infrastructure from 2019-20.

This aside, Victoria’s entire capital program is not directly comparable. Unlike the federal spending figure, it is not confined to spending on transport infrastructure over a decade.

As one expert, Grattan Institute researcher James Ha, put it, “We are comparing spending on different baskets of projects, transport versus all capital works. That is a problem. We are looking at totally different timelines that are not sensible to compare.”

RMIT Emeritus Professor David Hayward told Fact Check: “The Commonwealth spend that is referred to by the Victorian Treasurer is for Commonwealth grants to the states for infrastructure, not their total capital spending including on assets the Commonwealth will own in areas like defence, which is particularly important for states like South Australia.

“It also excludes spending by Commonwealth Government non-financial corporations like the National Broadband Network. The Victorian figures include the equivalent spend in Victoria by agencies like water corporations.”

According to the 2019-20 Budget Paper Number 1, Commonwealth capital investment in defence assets is expected to amount to $34.4 billion over the four-year budget period.

Capital spending such as this not included in the $100 billion figure used as a basis for comparison by Mr Pallas.

Double counting?

As Victoria’s Department of Treasury and Finance explained in the budget, the state’s capital program is funded from a number of sources, including from Commonwealth grants, the private sector, public borrowing and Victoria’s “Delivering for All Victorians Infrastructure Fund”, which was established using contributions from state insurers such as the Transport Accident Commission and WorkSafe.

The total also includes some local government funding and contributions from fund-raising activities (for example through schools), and (sometimes substantial) private sector contributions made through, for example, public private partnerships.

The figure of $107 billion cited by Mr Pallas includes substantial contributions from the Commonwealth.

For example, Melbourne’s North East Link, connecting Melbourne’s Eastern Freeway to the M80 ring road, is expected to involve a capital investment of $15.6 billion (with total costs of $15.8 billion).

In the 2018-19 federal budget, the Commonwealth allocated $1.75 billion towards the project, which is currently seeking tenders for early construction works.

The two governments have also announced they will jointly fund another big project, the railway from Melbourne’s central business district to the airport. The state and federal governments have committed up to $5 billion each for the project, which is still in the planning phase.

The full anticipated cost is not included in the Victorian budget’s $107 billion figure.

Fact Check undertook an analysis of the state’s capital program. It found the Commonwealth is contributing at least $5 billion towards Victoria’s $107 billion infrastructure agenda, or almost $7 billion including the North East Link commitment.

The following graph shows projects identified in this year’s Victorian budget that involve a contribution from the Commonwealth.

What the experts say

Professor Hayward said the claim was misleading as it was comparing different timeframes, did not include all federal infrastructure spending and involved some double counting as the Victorian figures “include Commonwealth capital grants”.

However, he pointed out federal capital grants to Victoria were a relatively small proportion of the total.

“These (federal capital grants) account for only a small proportion of total Victorian infrastructure spending,” Professor Hayward said.

“In 2019-20, they will only be $567 million out of a total capital spend in the budget of $9.3 billion. This compares to over $5 billion of capital spending in Victoria that will come from private companies contracted to do public private partnerships.”

The Grattan Institute’s Mr Ha said the claim did not involve a like-for-like comparison between federal and state infrastructure spending.

“The $100 billion the Commonwealth has announced is specifically for transport infrastructure,” Mr Ha said.

“Transport is the biggest component of state capital projects in Victoria but … there is (also) a lot of other infrastructure being built that is not transport. That is probably the most serious and obvious way that the claim is misleading.”

Lowy Institute Senior Fellow John Edwards said a better comparison might be to a comparable jurisdiction, for example NSW.

“Infrastructure spending is mostly executed by the states, especially for roads and rail etcetera, which are under state control, sometimes with explicit and tied Commonwealth funding and sometimes without.”

Principal researcher: Josh Gordon, economics and finance editor








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June 20, 2019 16:17:05

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