Don’t expect a revolution: What the new Albanese Labor Government means for the infrastructure sector
Australia had a change of federal government in May, with the election of the Anthony Albanese led Labor Government. What will this change of government mean for Australia’s infrastructure sector?
The Commonweath Government is not as influential as may be imagined
As a result of the division of powers under Australia’s constitution, most infrastructure is delivered and operated by the states and territories. Federal power with respect to infrastructure is generally limited to defence infrastructure, telecommunications infrastructure, and the interstate rail network. Accordingly, the changes to Australia’s Federal Government is unlikely to result in significant changes to the ways by which infrastructure is delivered and operated. The Federal Government does, however, fund around $1 of every $10 dollars spent on infrastructure by the states and territories, and so is in a position to influence how the state procures infrastructure by attaching conditions to the infrastructure funding that it provides to states and territories. Indeed, its infrastructure advisory authority, Infrastructure Australia, has encouraged successive past federal governments to lead infrastructure procurement reform by attaching conditions to its grant funding, but with little take up.
Infrastructure which challenges Labor’s social values may have less priority
The Australian Labor Party is more left leaning than the Liberal and National Party Coalition that it replaces. Although the new Prime Minister mostly worked in the Infrastructure portfolio, both as minister during the Rudd and Gillard Labor Governments and as shadow minister for infrastructure during the Abbott and Turnbull Coalition Governments, and is clearly very familiar with that topic, he is likely to come under pressure from others in the Australian Labor Party to prioritise spending on health, education, welfare over infrastructure spending. “The needy should be prioritised over Infrastructure barons” is what many in the Labor Party will say. Labor committed to match the same substantial infrastructure spend that the Coalition promised over the 4 year forward estimates, so the impact of this pressure will be felt over the longer term. Reigning in government debt, which is set to reach $865 billion (about one third of GDP) by the end of the 4 year forward estimates, will also be a key challenge for the new Federal Government, if it is to maintain its AAA credit rating.
Labor will also be under pressure from the Greens and independents
The Labor Party has committed to reduce emissions more quickly than the Previous Morrison Government. A significant number of independent candidates took seats in Sydney and Melbourne electorates that have been long been held by the Liberal Party, on a platform to reduce emissions even more quickly than the Labor Party has committed to. Votes are still being counted, but it is expected that the Labor Party will secure a majority in the lower house of parliament without needing to commit to faster reductions in order to obtain the support of the lower house independents. Even so, the Labour Party will need the support of the cross bench in the upper house to pass legislation, so it can be expected that the Albanese Government will wish to direct a higher proportion of its infrastructure spend away towards ‘green’ projects that will accelerate the pathway to net zero, which will reduce the proportion (currently 90%) directed to transport infrastructure.
The balance of pork barrelling may change
Federal Government infrastructure spend has traditionally been directed to ‘marginal’ (swinging) electorates, which has resulted in Queensland and Western Australian receiving a higher spend, per capita, than New South Wales and Victoria. The conversion of numerous electorates in Sydney and Melbourne from Liberal to independent means Australia now has more marginal electorates in its two most significant metropolitan cities, which is likely to see an increase in the per capita spend in New South Wales and Victoria, to the detriment of Queensland and Western Australia.
Privately funded PPP’s will continue, but may have some reservations
The Labor Party is just as open to the use privately financed PPPs as the Coalition, but less open to the outsourcing of core government services such as clinical hospital services and prison/custodial services. Much of the Labor Party’s funding comes from trade unions.
“Buy Australian” may be a more important factor
The Labor Party believes too many Australian businesses are missing out on billions of dollars of Government contracts that are going to international competitors. The Albanese Government has promised to maximise the use of Australian-made goods, products and materials in Commonwealth contracts. More specifically, the Albanese Government has promised to maximise opportunities for Aussie businesses in major infrastructure projects. There is also pressure from Australian owned contractors for the Federal Government to attach conditions to Federal funding for State delivered infrastructure projects requiring the State procuring agency to do the same.
Strong emphasis on rail
The Albanese Government has committed to undertake a national audit of the adequacy, capacity and condition of passenger trains and develop train priority plans, including a proposed delivery schedule for the next ten years. It will then develop a National Rail Procurement and Manufacturing Strategy in consultation state governments, rail transport operators, rail unions and manufacturers, to deliver the required trains . Future Commonwealth grant funding for infrastructure projects will be contingent on the states and territories agreeing to implement the National Rail Procurement and Manufacturing Strategy.
Labor may be more courageous in terms of corridor acquisition
An Albanese Labor Government has promised to progress high speed rail by firstly acquiring a corridor of land that would accommodate either an initial fast rail line that could eventually be upgraded to high-speed rail, or moving directly to build high-speed rail itself. It has committed $500 million to begin corridor acquisition, planning and early works. It has also promised to work closely, through its new High-Speed Rail Authority, with the NSW Government on a Sydney-Newcastle fast rail corridor as the first stage of the eventual Sydney to Brisbane line.
The electricity grid will receive higher priority
Labor will also establish a $20 billion fund to be administered by a new Rewiring the Nation Corporation that will provide concessional finance to industry to expand and upgrade the electricity grid, and connect it to new renewable power sources.
Some delivery and regulatory agencies may be reviewed
The Labor party has committed to deliver a National Anti-Corruption Commission, to stamp out ‘pork barreling’ and lift trust in government. It has also commenced a review the management and functions of Infrastructure Australia, the agency established to independently advise the Federal Government on Australia’s infrastructure needs and priorities, with a view to increasing the influence it has on Federal infrastructure spending decisions.
The ABCC to be abolished
The Labor Party is following through on its commitment to abolish the Australian Building and Construction Commission. The ABCC has performed an important policing role in enforcing industrial relations laws and keeping trade unions in check. Many contractors in the sector are hoping that the ABCC will be replaced with a body that continues to have sufficient powers to be an effective policeman for the sector.
Labor may be more receptive to filling labor shortages with immigration
Skilled labour shortages are expected in the infrastructure sector. The Albanese Government will need to lift immigration levels beyond those discussed during the election campaign to meet labour demand.
Don’t expect a revolution
Although Labor may have some new preferences, the Government will face the same challenges and established solutions as the previous administration. Much of Australia’s infrastructure spend over the next few years is also committed to projects which are already underway. In combination with the division of powers with the states, the ship will not change course dramatically.
