Australian Federal Budget 2020-21: The Infrastructure Package

The expectation heading into the 2020-21 Federal Budget was that Treasurer Josh Frydenberg would hand out billions of dollars in use-it-or-lose-it infrastructure payments designed to encourage the states and territories to spend by providing more funding for those who get the money out the door quickest. Reserve Bank of Australia Governor Philip Lowe also seemed to be on the same page when it came to kick-starting growth through infrastructure investment.

The 2020-21 Federal Budget has delivered:

• significant infrastructure spending across all states and territories in relation to major transport infrastructure (road and rail);

• some targeted infrastructure investments to support specific Government policies and objectives; and

• a number of important tax and business measures which will assist companies generally.

Overview

The Budget implements the Government’s COVID19 Economic Recovery Plan by:

• supporting Australians with additional COVID19 response measures; and

• driving job creation through the JobMaker Plan.

The Government’s fiveyear JobMaker Plan involves expenditure of $74 billion and is focused on driving sustainable, private sectorled growth and job creation. The main infrastructure related measures included as part of the JobMaker Plan are:

• an increase in the Government’s infrastructure investment pipeline by $10 billion to $110 billion over ten years; and

• temporary investment tax incentives worth $26.7 billion for temporary full expensing and $4.9 billion for temporary loss carryback, and by improving the ease of doing business by reducing regulatory burdens.  These incentives are not confined to infrastructure investment.

Infrastructure pipeline

In terms of the infrastructure pipeline:

• the Government is increasing spending on its infrastructure pipeline from $100 billion to $110 billion over the next 10 years with a COVID19 infrastructure package that will provide significant nearterm investments in major road and rail projects, road safety and community infrastructure.  In particular, the Government will provide an additional $10.0 billion in funding towards projects over the next four years bringing total commitments for new and accelerated projects since the onset of the COVID19 pandemic to $14.0 billion across the forward estimates; and

• over the next two years, the Government will provide significant stimulus through the new $2 billion Road Safety Program, and an additional $1 billion of funding for the recently established Local Roads and Community Infrastructure Program taking the size of the program to $1.5 billion. These stimulus programs will support over 10,000 direct and indirect jobs across all states and territories with the funding to be made available under a ‘use it or lose it’ mechanism to incentivise states and territories to prioritise funding which can be delivered in the short term. The Road Safety Program will reallocate funding to those states and territories that have fully used their previous allocations while local governments under the Local Roads and Community governments under the Local Roads and Community Infrastructure Program will have until 31 December 2021 to spend their allocation. The intent is to ensure that the benefits of the economic stimulus are maximised.

The Budget notes that projects currently under construction are supporting around 100,000 direct and indirect jobs over their construction periods, with the Government’s additional investments since the onset of COVID19 supporting a further 40,000 direct and indirect jobs.

Transport infrastructure

The Government is making additional funding commitments for new transport (i.e. road and rail) projects in each of the states and territories.  The Government will contribute $7.5 billion towards new investment in national transport infrastructure. 

A detailed breakdown appears at this end of this article, but in summary:

New South Wales: Total federal funding contribution of $2.7 billion . Key investments include:

• $603 million for the Singleton Bypass on the New England Highway and Bolivia Hill Upgrade;

• $360 million for the Newcastle Inner City Bypass between Rankin Park and Jesmond;

• $120 million for the Prospect Highway Upgrade; and

• an additional $491 million for the Coffs Harbour Bypass.  

Victoria : Total federal funding contribution of $1.1 billion . Key investments include:

• $320 million for the Shepparton Rail Line Upgrade;

• $208 million for Stage 2 of the Warrnambool Rail Line Upgrade;

• $292 million for the Barwon Heads Road Upgrade; 

• $85 million to upgrade Hall Road in Cranbourne; and

• Work on Stages 2 and 3 of the South Geelong to Waurn Ponds Rail Upgrade will also be accelerated with $605 million brought forward into the forward estimates.  

Queensland : Total federal funding contribution of $1.3 billion . Key investments include:

• $750 million for Stage 1 of the Coomera Connector (Coomera to Nerang);

• $112 million for the Centenary Bridge Upgrade in Brisbane;

• $76 million for Stage 2 of the Riverway Drive Upgrade between Allambie Lane and Dunlop Street in Townsville; and

• $42 million for the Mt Lindesay Highway Upgrade between Johanna Street and South Street in Jimboomba.  

Western Australia : Total federal funding contribution of $1.1 billion . Key investments include:

• $227 million for METRONET — High Capacity Signalling and Morley Ellenbrook Line; and

• $87.5 million for the Reid Highway Interchange with West Swan Road in Western Australia.  

South Australia : Total federal funding contribution of $625 million .  Key investments include:

• $200 million for the Hahndorf Township Improvements and Access Upgrade;

• $136 million for Stage 2 of the Main South Road Duplication between Aldinga and Sellicks Beach; and

• $100 million for the Strzelecki Track Upgrade.  

Tasmania : Total federal funding contribution of $360 million .  Key investments include:

• $150 million for the Midway Point Causeway (including McGees Bridge) and Sorell Causeway as part of the Hobart to Sorell Roads of Strategic Importance corridor; and

• $65 million to upgrade the Tasman Bridge.  

Northern Territory : Total federal funding contribution of $167 million .  Key investments include:

• $120 million to upgrade the Carpentaria Highway; and

• $46.6 million for National Network Highway Upgrades across the Territory.  

Australian Capital Territory : Total federal funding contribution of $155 million : Key investments include:

• $87.5 million for the Molonglo River Bridge; and

• $50 million for a South West Corridor upgrade package

Opportunities for Australian businesses

Key matters of note relevant to infrastructure are:

Defence economic support - the Government is bringing forward $1 billion in projects to support jobs for Australians in the Australian defence industry sector. This includes accelerating investments in important Australian Defence Force (ADF) capability development projects, infrastructure and national estate works programs.  

Fuel security - the Government’s $250.7 million fuel security plan is intended to increase the resilience of the Australian economy to international fuel supply shocks and help secure jobs in fuelcentric industries. Onshore diesel storage, essential for critical services, will be increased by 40 per cent and the Government will contribute $203.7 million to support the construction of new diesel fuel storage.  

Gas-fired recovery - the Government will provide $52.9 million to support a gasfired recovery. To unlock Australia’s gas reserves, $28.3 million will be invested in five strategic basin plans to help the manufacturing sector and ensure affordable and reliable gas. The first National Gas Infrastructure Plan will identify priority projects and critical infrastructure needs, ensuring gas is delivered where it is needed. Key reforms are aimed at creating a more competitive and transparent east coast gas market, delivering an efficient pipeline and transportation market and empowering gas customers.

Other infrastructure measures

Other infrastructure related measures in the Budget include:

• Investing in long term resilience of water supply - the Government is building water infrastructure for the 21st Century through the National Water Grid with the objective of helping secure reliable supplies of water in rural and regional Australia. The Government has increased its commitment to building water infrastructure across Australia with an additional investment of $2 billion in the National Water Infrastructure Development Fund, more than doubling the fund to a total of $3.5 billion. The Fund will become a 10year rolling program of priority water infrastructure investments. Through the National Water Grid Authority and in conjunction with the States and Territories, the Government will build dams, weirs and pipelines to boost agricultural production in Regional Australia. The Government is also committing a further $50 million to help farmers upgrade their onfarm water infrastructure.  

NAIF - the Northern Australia Infrastructure Facility will be extended for five years and its lending criteria expanded with the aim of ensuring northern Australia economic recovery by supporting job creation and economic development.  

Recycling initiatives - Australia is committed to phasing out the export of waste, plastic, paper, tyres and glass waste to protect the oceans and create jobs in the recycling industry. The Government will invest $249.6 million over four years to modernise recycling infrastructure, reduce waste and recycle more within Australia. This includes $190 million for a new Recycling Modernisation Fund that will drive $600 million of investment in new infrastructure to sort, process and remanufacture waste. The package also includes $35 million to implement the Government’s commitments under the National Waste Policy Action Plan and $24.6 million to improve waste data in order to measure recycling and track progress on waste targets.  

Improving services in the Territories - the Budget provides $84.7 million to improve services in the Territories, including $28.9 million for Christmas Island stormwater, landslide and rock fall mitigation works and $55.8 million for essential services for Norfolk Island and Jervis Bay.

Tax incentives

The key measures introduced are:

• temporary full expensing; and

• temporary loss carry-back.

Together these measures are estimated to deliver $31.6 billion in tax relief to businesses over the forward estimates, by bringing forward tax deductions or the utilisation of losses from future years. Treasury estimates that these measures will boost GDP by around $2 billion over 202021 and $10 billion over 202122 and create an additional 50,000 jobs by the end of 202122. 

Temporary full expensing

The Government is introducing temporary full expensing of depreciable assets for businesses with turnover below $5 billion. Full expensing reduces the aftertax cost of new investment and provides a cashflow benefit for businesses that acquire eligible assets. The timelimited nature of the measure is intended to provide a strong incentive for businesses to bring forward investment projects before it expires. The measure is estimated to apply to around $200 billion worth of investment.  Around 3.5 million businesses (over 99 per cent of businesses employing around 11.5 million workers) will be eligible for this measure. 

Key matters of note are:

• there is no limit on the value of assets eligible for full expensing;

• the measure will apply to eligible assets purchased from 7:30pm (AEDT) on 6 October 2020 and first used or installed by 30 June 2022; and

• the cost of improvements to existing eligible depreciable assets made during this period can also be deducted in full.

This builds upon the enhanced $150,000 instant asset writeoff and the Backing Business Investment measures introduced on 12 March 2020 as part of the Government’s response to COVID19.

Temporary loss carry-back

To complement the full expensing measure, companies with turnover up to $5 billion will also be able to temporarily offset tax losses against previous profits and tax paid.  This will help companies that were profitable and taxpaying but now find themselves in a loss position due to the COVID19 pandemic. By allowing them to access their losses earlier, by way of a cash refund, it will provide a cash flow boost to keep their business running, retain their workers and invest with confidence.

• companies with turnover up to $5 billion can apply tax losses incurred during the 201920, 202021 and/or 202122 income years to offset tax paid in 201819 or later income years; and

• the tax refund will be available for eligible businesses when they lodge their 202021 and 202122 tax returns - the objective is to help increase cash flow for businesses in future years and enable more businesses to take advantage of full expensing while it is available, to encourage more investment and further support economic recovery.

Improving the ease of doing business

The Government is also undertaking a comprehensive deregulation agenda to improve the ease of doing business. 

Measures relevant to infrastructure investment include:

reducing regulatory costs - the Government is giving businesses greater flexibility in how they comply with regulations and reducing the cost of compliance; and

accelerating digital transformation - the Government is introducing a number of measures to support businesses to survive and grow, and new businesses to emerge as the economy recovers from the effects of COVID19. This includes the accelerated adoption of digital technologies to increase productivity and jobs growth and bring Australia closer to its goal of being a leading digital economy by 2030.

The below tables are from The Hon Josh Frydenberg MP media releases of 5 October 2020.

New South Wales - 2020-21 Budget Projects

New projects

Project

Federal funding

Total cost

Ettamogah Rail Hub (ERH)

$2.6 million

$12.2 million

Grade separating road interfaces with Inland Rail

$150 million

$187.5 million

Heathcote Road Upgrade, Hammondville to Voyager Point

$94 million

$188 million

Hogbin Drive, Coffs Harbour Airport Freight Access

$3 million

$6 million

M1 North Smart Motorway - ANZAC Bridge to Warringah Freeway

$60 million

$120 million

New England Highway - Singleton Bypass

$560 million

$700 million

Newcastle Inner City Bypass, Rankin Park to Jesmond

$360 million

$450 million

Newell Highway Upgrade - Dubbo Bridge

$176.2 million

$220.2 million

Newell Highway Upgrade - Heavy Duty Pavement Upgrades

$205.7 million

$257.2 million

Newell Highway Upgrade - Overtaking Lanes

$60 million

$72 million

Newell Highway Upgrade - Parkes Bypass

$149.7 million

$187.2 million

Northern NSW Inland Port - Narrabri

$7.8 million

Pooncarie Road (Wentworth Shire)

$4.6 million

$9.2 million

Prospect Highway Upgrade

$120 million

$240 million

Sydney to Newcastle Faster Rail - Planning

$15 million

Subtotal

$1968.6 million

$2672.2 million

Additional funding

Project

Additional Federal Funding

Total Federal Funding

Central Coast Roads Package

$16.7 million

$86.5 million

Coffs Harbour Bypass

$490.6 million

$1461.6 million

Commuter Car Park Upgrade - T1 North Shore, Northern and Western Line - St Marys

$13.8 million

$33.8 million

Commuter Car Park Upgrade - T8 East Hills Line - Campbelltown

$7.1 million

$22.1 million

Commuter Car Park Upgrade - T8 East Hills Line - Revesby

$3 million

$12.5 million

Commuter Car Park Upgrade - T8 East Hills Line - Riverwood

$1 million

$10.5 million

Dixons Long Point Crossing

$9.8 million

$29.8 million

Dunheved Road Upgrade, Penrith

$63.5 million

$127 million

Jane Street and Mulgoa Road Infrastructure Upgrade

$37.5 million

$72.5 million

Mulgoa Road Upgrade

$46.4 million

$126.4 million

New England Highway - Bolivia Hill Upgrade

$43 million

$98 million

Subtotal

$732.3 million

$1994.1 million

Victoria - 2020-21 Budget Projects

Arthurs Seat Pedestrian Improvements

$0.3 million

Barwon Heads Road Upgrade

$292 million

$365 million

Hall Road Upgrade

$84.5 million

$169 million

Improving connectivity to Port of Melbourne - Business Case

$7.5 million

$15 million

Improving Passenger Rail Services from Northern Victoria to Melbourne

$7.5 million

$15 million

Narre Warren North Road Upgrade

$31 million

$62 million

Shepparton Rail Line Upgrade - Stage 3

$320 million

$400 million

South Road Upgrade

$22.5 million

$45 million

Warrnambool Rail Line Upgrade - Stage 2

$208 million

$260 million

Western Port Highway Upgrade

$27.2 million

$54.3 million

Western Rail Plan - Further Planning

$30 million

$60 million

Subtotal

$1030.5 million

$1445.6 million

Bonang Road Upgrade, Bonang

$7 million

$9 million

McKoy Street - Hume Freeway Intersection Upgrade

$104 million

$168 million

Subtotal

$111 million

$177 million

Queensland - 2020-21 Budget Projects

BeamsRoad Open Level Crossing

$50million

$248million

BruceHighway Upgrade Strategy

$20million

CentenaryBridge Upgrade

$112million

$224million

CoomeraConnector Stage 1 (Coomera to Nerang)

$750million

$1500million

CurrumbinCreek Road-Bienvenue Drive Intersection Upgrade

$2million

$4million

M1Pacific Motorway Upgrade Program - Exit 45

$10million

$20million

MtLindesay Highway - Johanna Street to South Street

$42.4million

$53million

RiverwayDrive Stage 2 (Allambie Lane - Dunlop Street)

$76million

$95million

Roads of Strategic Importance (ROSI) Funding Allocations

Cooktownto Weipa Corridor Upgrade - Cape York Community Access Roads

$38million

$47.5million

Cairnsto Northern Territory Border Upgrade - Gulf Developmental Road - PavementStrengthening and Widening

$17.2million

$21.5million

Townsvilleto Roma Corridor Upgrade - Dawson Highway (Banana - Rolleston) - RoundstoneCreek Bridge Overflow Upgrade

$4.8million

$6million

Subtotal

$1122.4 million

$2239 million

BruceHighway - Babinda Intersection Upgrade

$2.6million

$5.8million

BruceHighway - Cairns Southern Access Corridor - Stage 4 - Kate to Aumuller

$15.7million

$99million

BruceHighway - Caloundra Road to Sunshine Motorway

$95.2million

$745.6million

BruceHighway - Rockhampton Northern Access Upgrade

$29.6million

$126.4million

BruceHighway - Burdekin Bridge upgrade

$38million

$64.7million

CunninghamHighway - Eight Mile Intersection Upgrade

$2.4million

$20million

SecondM1 (Coomera Connector) Business Case

$5.3million

$15.3million

Subtotal

$188.8 million

$1076.8 million

South Australia - 2020-21 Budget Projects

Hahndorf Township Improvements and Access Upgrade

$200 million

$250 million

Main South Road Duplication Stage 2 - Aldinga to Sellicks Beach

$136 million

$170 million

South Eastern Freeway Safety Upgrade

$28 million

$35 million

Strzelecki Track Upgrade

$100 million

$125 million

Victor Harbor Road Upgrade

$12 million

Princes Highway Corridor Funding Allocations

Princes Highway Corridor - Intersection Improvements

$40 million

$50 million

Princes Highway Corridor - Overtaking Lanes

$28.8 million

$36 million

Princes Highway Corridor - Pavement Works

$45.6 million

$57 million

Princes Highway Corridor - Rest Areas

$4 million

$5 million

Princes Highway Corridor - Safety and Signage Improvements

$10.4 million

$13 million

Princes Highway Corridor - Shoulder Sealing

$7.2 million

$9 million

Subtotal

$612 million

$762 million

Goodwood and Torrens Junctions

$13.2 million

$202.6 million

Subtotal

$13.2 million

$202.6 million

Tasmania - 2020-21 Budget Projects

Freight Bridge Upgrades

$12 million

$15 million

Hobart to Sorell Corridor - Midway Point Causeway (including McGees Bridge) and Sorell Causeway

$150 million

$187 million

Midland Highway Safety Works Package - Powranna Road to South of Symmons Plains and Tunbridge

$7.1 million

$10.2 million

Tasman Bridge Upgrade

$65 million

$130 million

Tasmanian Roads Package - Bass Highway targeted upgrades between Deloraine and Devonport

$40 million

$50 million

Tasmanian Roads Package - Bridport Road freight efficiency and safety upgrades

$16 million

$20 million

Tasmanian Roads Package - West Tamar Highway targeted upgrades between Exeter and Launceston

$16 million

$20 million

Subtotal

$306.1 million

$432.2 million

Tasman Highway Intelligent Transport Solutions

$1.5 million

$11.5 million

Tasmanian Midland Highway Upgrade - Future Priorities

$52 million

$113.9 million

Subtotal

$53.5 million

$125.4 million

Australian Capital Territory - 2020-21 Budget Projects

Canberra - South West Corridor upgrade package

$50 million

$100 million

Molonglo River Bridge

$87.5 million

$175 million

Parkes Way Upgrade - Planning and Design

$2.5 million

$5 million

Subtotal

$140 million

$280 million

Monaro Highway Upgrade

$15.25 million

$115.3 million

Subtotal