Budget delivers big win for infrastructure

Budget delivers big win for infrastructure

5 April 2019

Infrastructure is the big winner in Treasurer Josh Frydenberg’s first budget, with the government splurging on roads, regional airports, and railways to fight congestion and prop up a lethargic economy, reports The Urban Developer.

Just weeks out from an election, the Coalition government has allocated a total of $100 billion to infrastructure funding over the next decade.

The infrastructure splash, in turn, is expected to drive investment and growth in commercial real estate, especially in regional areas.

Victoria gets particularly big-ticket items in this budget, totalling $6.2 billion, and somewhat more of it within the next four years than other states.

Geelong, one of the big winners, is set to receive $2 billion from 2021-22 for the delivery of fast rail between Melbourne to Geelong.

The rail link will build upon the Geelong City Deal, continual investment in the road infrastructure between Geelong and Melbourne, and upgrades to nearby Avalon airport.

These improvements will attract more people to the region and lift demand for shopping centres, retail outlets, as well as provide more workers for industrial and office markets.

Another $40 million has been set aside to investigate the viability of fast rail links from Sydney to Wollongong, Sydney to Parkes, Melbourne to Albury Wodonga, Melbourne to Traralgon, and Brisbane to Gold Coast.

In New South Wales, the longer-term package totals $7.3 billion, including $3.5 billion for the Western Sydney north-south rail link as well as a $1.6 billion upgrade to the M1 Pacific Motorway extension to Raymond Terrace.

Other positives for regional Australia include $100 million for regional airports, more money for farming communities and $220 million in improved internet and mobile service.

The cash injection for regional airports is aimed at upgrading runways and attracting commercial flights into country areas. The funding will allow regional airport operators to apply for grants to improve runways, taxiways and provide better fencing.

The infrastructure upgrades would make it safer for big passenger planes to land on runways in cities such as Cairns, Newcastle, Launceston, Alice Springs, Coffs Harbour and Mildura.

Better transport infrastructure is good news for industrial property and it is no surprise to see the government allocate $100 billion over the next 10 years from next financial year in transport infrastructure.

This includes $1 billion to improve freight access to ports, increasing the Urban Congestion Fund from $1 billion to $4 billion and a range of major road initiatives, including $800 million over forward estimates for programs like Black Spot Program, Roads to Recover, and Bridges Renewal and $450 million over forward estimates (for a projected $1 billion total) in additional funding for the Roads of Strategic Importance initiative.

The Property Council welcomed the big increase in infrastructure spending announced in the budget.

“The Budget delivers a $100 billion investment over the decade to meet the needs of our growing cities and regions, including projects to break urban congestion and improve regional connections,” Mr Morrison said.

“The personal income tax cuts targeted at low to middle income earners should provide some relief from cost of living increases.

Some of the tax cuts for businesses with turnover less than $50 million may flow through to shopping centres but the expansion of the instant asset write off to $30,000 will provide another boost.

“The measures targeted at small to medium size businesses will also provide some much-needed confidence,” Mr Morrison said.

While the treasurer mentioned the $300 million raised by the National Housing Finance and Investment Corporation first social bond, the budget offered no new housing affordability initiatives.

No mention, however, was made of build-to-rent, despite the opposition’s recent proposal to halve the 30 per cent withholding tax rate on managed investment trusts.

Industry group the Property Council of Australia said that budget papers highlighted the downside risk of further house price falls.

“Australia’s housing sector is worth $7 trillion – more than twice the size of the share market – so treasury are right to flag the risks for the economy,” Property Council chief executive Ken Morrison said.

“The headlines of surplus, infrastructure and tax relief are welcome, but falling house prices are clearly treasury’s economic wildcard.”