Other infrastructure related measures

The Budget also provides for a number of other infrastructure related measures as follows:

• Delivery of Local Councils’ infrastructure needs: an additional $1.0 billion over two years from 2021-22 to extend the Local Roads and Community Infrastructure Program to support local councils to maintain and deliver social infrastructure, improve road safety and bolster the resilience of Australia's local road network. This measure is intended to allow local councils to further engage local businesses and workforces to deliver priority projects and support economic recovery post-COVID-19. This investment increases the total funding provided for the Local Roads and Community Infrastructure Program to $2.5 billion.
• National freight and supply chain: an additional $28.6 million over four years from 2021-22 to deliver initiatives as part of the National Freight and Supply Chain Strategy. Funding includes $16.5 million over four years from 2021-22 (including $6.5 million in capital funding over two years from 2021-22) to establish a National Freight Data Hub to enhance the collection and access to freight data across all modes to support day-to-day operations, improve infrastructure and transport network investment and other decisions, enable end-to-end performance evaluation for Australia's freight system and $12.1 million over three years from 2021-22 for the National Heavy Vehicle Regulator to fund engineering assessments for local government owned road networks.
• National Water Grid: up to $160.0 million over two years from 2021-22 to establish the National Water Grid Connections funding pathway to deliver small scale water infrastructure projects and provide short-term economic stimulus. The water infrastructure projects will be identified and delivered by jurisdictions over the two-year period to support primary industries, increase water security and build resilience while stimulating regional economies. Also, a further $98.0 million over three years for National Water Grid projects including $51.2 million for Eurobodalla Southern Storage, New South Wales; $11.1 million for Lostock Dam to Glennies Creek Dam Pipeline, New South Wales; $11.0 million for Werribee Irrigation District Modernisation (Stage 4 and 5), Victoria ;an additional $7.5 million for Rookwood Weir, Queensland ($183.6 million in total) and  $5.5 million for Recycled Water on the Bellarine, Victoria).
• Office of Road Safety: an additional $5.1 million over four years from 2021-22 (and $1.2 million per year ongoing) for the Office of Road Safety (which provides national leadership and coordination to improve road safety outcomes) including the finalisation of the National Road Safety Strategy 2021-30.
• Road Safety program: an additional $1.0 billion in 2022-23 for the Road Safety Program to support the National Road Safety Strategy 2021-30 and provide economic stimulus. Small-scale road safety projects such as road widening, audio tactile line marking and barriers will be identified and delivered by jurisdictions in six-month tranches to improve safety on Australian roads while stimulating local economies. Funding for each tranche will be contingent on delivery success by state and territory governments.
• Supporting regional Australia: $348.0 million over four years from 2021-22 (and $0.1 million in 2025-26) for a package of measures to support regional Australia’s sustainability, resilience and job creation. Funding includes $256.5 million over four years from 2021-22 (and $0.1 million in 2025-26) for round six of the Building Better Regions Fund to support investment in community infrastructure and capacity building projects in regional areas; $84.8 million over two years from 2021-22 to the Regional Connectivity Program to support the delivery of reliable, affordable and innovative digital services and technologies in regional and remote Australia and support to undertake an independent study to identify the regulatory barriers to business relocating to regional Australia.
• Security of Critical Infrastructure: $42.4 million over two years from 2021-22 to improve security arrangements for critical infrastructure assets, including those designated as Systems of National Significance, in accordance with the Security Legislation Amendment (Critical Infrastructure) Bill 2020 (currently before the Parliament) and to assist critical infrastructure owners and operators to respond to significant cyber-attacks.
• Murray-Darling Basin:  $1.5 billion over four years from 2020-21 for a package of measures to continue efforts to achieve a sustainable and certain future for the Murray-Darling Basin (Basin), its people, industries and the environment.  This includes redirecting funding of $1.5 billion from the Water Efficiency Program to water saving initiatives including $1.3 billion for projects to modernise irrigation infrastructure networks through state-led off-farm water savings projects, $150.0 million for grants to support off-farm water saving projects and $60.0 million to enable those states who wish to pursue on-farm water efficiency to continue to do so, providing the strict social and economic neutrality test set by the Murray-Darling Basin Ministerial Council is met.
• Reliable energy supply: a package of measures including $49.3 million for battery and microgrid projects; $24.9 million to assist new gas generators become hydrogen ready; $30 million for early works on Australian Industrial Power’s Port Kembla gas generator project and a further $74.3 million to help accelerate priority gas supply projects identified in the Interim National Gas Infrastructure Plan and help realise the opportunities in the North Bowen and Galilee Strategic Basins. The Government is also introducing a production payment to support local refineries and upgrade infrastructure to continue operating in Australia. This follows on from the six-month interim production payment provided in the 2020-21 MYEFO.
• Newcastle airport: $66.1 million over two years from 2021-22 to upgrade the Newcastle Airport runway to accommodate long range aircraft and facilitate international flights, as part of planned upgrades to the airport.
• Services to Territories: $79.6 million over four years from 2021-22 (including $45.6 million in capital funding) to support the delivery of essential services and infrastructure to the Indian Ocean Territories, Jervis Bay Territory and Norfolk Island.

Support for infrastructure investment

The Budget contains several measures which will support infrastructure investment more broadly. These include:

• Infrastructure delivery capability: $141.6 million over three years from 2021-22 to the Department of Infrastructure, Transport, Regional Development and Communications to undertake new activities which support the future of the aviation industry and improve the Commonwealth's capability to deliver infrastructure investments. Funding includes $130.5 million over three years from 2021-22 to undertake investigations at Australian civilian airports to understand the risks and develop corresponding management plans for any identified per- and polyfluoroalkyl substances contamination and $11.1 million in 2021-22 to support the delivery of nationally significant infrastructure projects through the Significant Projects Investment Delivery Office.
• Supply chain resilience: $107.2 million to examine supply chain vulnerabilities for critical products, starting with personal protective equipment (PPE), medical products and agricultural production chemicals and $98.8 million over four years from 2021-22 (and $4.9 million ongoing per year from 2025-26) to establish an Office of Supply Chain Resilience – the establishment of this office will provide ongoing capacity to monitor and coordinate the Government's efforts to boost supply chain resilience and also to support the implementation of other Government policy priorities, including its COVID-19 response and continuing Australian Public Service reforms.
• Reinsurance pool for cyclone and related flood damage: a reinsurance pool to cover cyclone and related flood damage in Northern Australia will be established to commence from 1 July 2022. The reinsurance pool will be backed by a $10 billion government guarantee. The Government will provide $2.4 million in 2021-22 to the Department of the Treasury to establish a taskforce to consult industry and experts on the design and implementation of the reinsurance pool for cyclone and related flood damage across Australia to reduce the rising cost of insurance premiums associated with cyclone damage.

Support for construction activity in other industries and sectors

The Budget also provides support for programmes, industries and sectors which generate or contribute to construction activity including:

• Communities Programme: support for the Stronger Communities Programme which provides funding of between $2,500 and $20,000 for small capital projects that deliver social benefits for local communities across Australia;
• Public housing stock and workers: funding to states and territories under the National Housing and Homelessness Agreement to assist them to bolster public housing stocks, or to meet wage requirements under the 2011 Fair Work Australia decision on social and community services wages, where that requirement has not already been met for relevant affected workers;
• Housing industry: support for the housing industry including establishing the Family Home Guarantee with 10,000 places from 2021-22 to support single parents with dependants to enter, or re-enter, the housing market with a deposit of as little as 2% and extending the First Home Loan Deposit Scheme to provide an additional 10,000 New Home Guarantees in 2021-22 to allow eligible first home buyers to build a new home or purchase a newly constructed home sooner with a deposit of as little as 5%;
• Technology funding: the establishment of a $1.2 billion Technology Co-Investment Facility to invest in priority technologies and practical project-based international partnerships. This includes $539.2 million for hydrogen and carbon capture use and storage projects; $565.8 million to establish international partnerships on practical low emissions projects and $316.7 million to help industry and businesses reduce their emissions through voluntary action and adopting low emissions technology; and
• Waste industry: support for the Government’s National Waste Policy Action Plan (which aims to reduce waste generation, increase waste recovery rates and regulate waste exports) including $11.0 million to support Australia’s recycling industry and $67.0 million to enhance organic waste facilities and support community education to reduce the amount of food waste going to landfill.

Extension of 2020 – 2021 Budget tax incentives

The Budget also extends the following tax incentive measures which were announced in the 2020-2021 Budget:

• temporary full expensing: the temporary full expensing measure will be extended for 12 months until 30 June 2023 thereby providing eligible businesses with additional time to access the incentive. The measure will be extended to allow eligible businesses with aggregated annual turnover or total income of less than $5 billion to deduct the full cost of eligible depreciable assets of any value, acquired from 7:30pm AEDT on 6 October 2020 and first used or installed ready for use by 30 June 2023.  All other elements of temporary full expensing will remain unchanged, including the alternative eligibility test based on total income, which will continue to be available to businesses. From 1 July 2023, normal depreciation arrangements will apply; and
• temporary loss carry-back: the temporary loss carry-back measure (which provides eligible companies earlier access to the tax value of losses generated by full expensing deductions) will be extended so as to allow eligible companies to utilise tax losses from the 2022-23 income year to offset previously taxed profits as far back as the 2018-19 income year when they lodge their 2022-23 tax return. Companies with aggregated turnover of less than $5 billion are eligible for temporary loss carry-back. The tax refund is limited by requiring that the amount carried back is not more than the earlier taxed profits and that the carry-back does not generate a franking account deficit. Companies that do not elect to carry back losses under this measure can still carry losses forward as normal.

Media commentary

While the spending Federal Government’s spending commitments are significant, in an interesting piece in the Australian Financial Review published on 11 May, Jacob Greber points out that the Budget papers show that the Federal Government consistently falls short of spending the money it announces that it will spend on infrastructure.

According to the article, figures compiled by the Australian Automobile Association show that over the past 5 Federal Budgets, there has been a total shortfall of $4.4 billion in terms of announced spending on road projects alone. One of the reasons for this is that the Federal Government only pays when states deliver the projects. If projects are delayed, the under-spend compounds year on year and there are no catch-up payments – the timing of projects simply get pushed out.

The question raised by this article is what needs to be done to remove roadblocks to the states’ ability to deliver their infrastructure needs in a timely manner– for example, are there labour supply issues and skills shortages, are there regulatory hurdles, do states have sufficient focus on, and resources committed, to project delivery?

In a related article in the Australian Financial Review published on 11 May, Matthew Cranston notes comments that “Businesses are knocking back orders and competing with each other for workers and materials in an attempt to keep up with a furious economic comeback that has led to all-time highs in business confidence and conditions”.

A more regular and ongoing dialogue between Federal and state governments and their infrastructure agencies may be needed to assist the states in addressing some of these challenges in project delivery so that taxpayers get maximum value for these spending commitments.