28 March 2014
Media Release - #2014010, 2014

Treasurers agree to boost infrastructure

Today, I agreed with State and Territory Treasurers to discuss a critical driver of the country’s future prosperity – the need to increase the stock of productivity-enhancing infrastructure to boost economic growth and create jobs.

I proposed an asset recycling initiative, which could see the Commonwealth offer substantial financial incentives to States and Territories that sell assets and recycle the proceeds of these sales into new productive infrastructure.

I am pleased that my colleagues endorsed the proposal in-principle, as reflected in our Statement of Shared Intent (attached), and we will now seek agreement on the details of the partnership.

This partnership would only be available for agreed, bilateral transactions with the Commonwealth through until 30 June 2016. Incentive payments will only be available for five years through to 30 June 2019.

The Commonwealth’s incentive will be 15 per cent of the assessed value of the proposed asset being sold for capital recycling. If proceeds are used by the States and Territories for the retirement of debt or other purposes, rather than for agreed, new productive infrastructure, they will not be eligible to receive payments under the initiative.

This is an important initiative to remove debilitating infrastructure bottlenecks, stimulate construction and drive real activity in the economy when it is most needed, as investment in the resources sector declines.

Infrastructure Australia estimates that at least $100 billion in commercial infrastructure assets are currently tied up on government balance sheets and could be sold.

The partnerships could overcome the fiscal constraints Governments face to increase the pipeline of projects and improve Australians’ quality of life, tackle congestion, reduce business costs and help firms better link with their employees and customers.

Today, I also agreed to a request from the States collectively to further explore options around lowering the value at which GST is applied to the importation of goods into Australia. Currently the threshold is $1,000.

I also consulted with my colleagues today on the split of GST revenue across the States that will apply for 2014-15.

Following our discussion, I have followed the tradition of endorsing the work of the Commonwealth Grants Commission, which provided a recommendation to me in February this year.  The Commission’s report is now available on the Commonwealth Grants Commisions website.

Treasurers also noted that the Commission will release a further report in February 2015 considering the methodology by which State shares of GST revenue will be calculated from 2015-16.  Treasurers will consider a draft report from the Commission in the second half of the year.

The meeting also discussed the economic and fiscal outlooks for the Commonwealth and the States and the importance of having a collaborative approach to the challenges.

Labor left a Commonwealth Budget with deficits of $123 billion over the next four years and debt projected to rise to $667 billion unless action is taken.

The Coalition has a plan to clean up the mess to create a strong economy and a safe and prosperous Australia.


Statement of Shared Intent

Commonwealth, State and Territory Treasurers met in Canberra today to progress a plan to significantly boost the stock of productive infrastructure in Australia.

Treasurers recognised the need for expanded private sector investment and better targeted public infrastructure funding, including by unlocking funds from existing assets.

The focus of discussions was an asset recycling partnership between the Commonwealth and States that will make better use of existing government-owned infrastructure assets and recycle the much
needed capital from these assets to deliver new productivity-enhancing infrastructure.

The new projects will drive real activity in the economy when it is most needed, as investment in the
resources sector declines, and will increase Australia’s productive capacity and growth prospects
throughout the decade and beyond.

Plan Ahead

Treasurers today made a strong commitment towards a new partnership between the Commonwealth and the States to increase funding through asset recycling.

Under the partnership, the Commonwealth could offer substantial financial incentives to States and Territories that sell assets and reinvest the proceeds of these sales into new productive infrastructure.

This Initiative is in addition to the Commonwealth’s existing commitments to infrastructure funding.

Infrastructure Australia estimates that at least $100 billion in commercial infrastructure assets are currently tied up on government balance sheets and could be sold.

This partnership could help overcome the fiscal constraints governments face to increase the pipeline of projects that would improve Australians’ quality of life. It would also provide an opportunity for Australian superannuation funds to buy Australian assets.

This will require building community understanding of the benefits of recycling assets and support for the initiative, particularly in light of electoral commitments made in some States and Territories.

The Commonwealth, States and Territories will now seek agreement on the details of the partnership.

Importance of Increased Infrastructure

As the G20 Finance Ministers and Central Bank Governors in Sydney outlined last month, the
Council on Federal Financial Relations agreed that productive infrastructure is critical to Australia’s
future competitiveness and economic growth.

It is imperative that Australia invests in infrastructure projects that address debilitating bottlenecks and build the capacity Australia needs for the 21st Century.

Infrastructure spending can provide a short term economic boost by stimulating construction activity, and ensure long term prosperity by increasing the productive capacity of the Australian economy.

Investing in the right infrastructure can also boost Australian incomes by increasing productivity, including by tackling congestion, reducing business input costs and by helping firms better link with their employees and customers.

Seizing the Opportunity

As Australia’s historic investment boom in the mining sector slows, there is an imperative to support
investment and real activity across the country.

The acceleration of infrastructure expenditure is a challenge, given that the fiscal positions of both Commonwealth and State Governments remain constrained. All levels of government are therefore looking at ways to address funding constraints.

Council on Federal Financial Relations
28 March 2014