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Victoria Budget confirms government commitment to infrastructure

ANALYSIS: The Victorian Budget for 2018/19 confirms the commitment of the state's Labor government to infrastructure, with overall investment in infrastructure over the next four years forecast at an average of AU$10.1 billion (€6.3bn) per year.03 May 2018

The solid and broad investments in both transport and social infrastructure contained in the budget are being seen by many in the Australian infrastructure sector as an indication of what we might expect to see in other state budgets, as they get announced in the lead up to elections.

The Victorian government has been able to make funding allocations to infrastructure that might not otherwise have been available, thanks to a combination of Commonwealth government contributions and effective use of the proceeds from asset management sales, including the proceeds of the Snowy Hydro sale and the commercialisation of Land Use Victoria's land titles and registry functions.

Renewed interest in PPPs

The budget indicates a renewed interest in public-private partnerships (PPPs), after few greenfield PPP projects came to market in 2017.

Of particular significance are:

  • the confirmation of a AU$2.2bn budgetary allocation for the next two phases of the Suburban Roads Upgrade for the duplication and/or upgrade of 13 arterial roads in north and south-east Melbourne by way of two availability-based PPPs (the North and South East Roads packages), to be overseen by the newly-established Major Road Projects Authority;
  • the announcement of the delivery of the North East Link tunnel under the Yarra River by way of an availability-based PPP, with tolling revenue to go to the government and AU$100 million allocated to the planning and detailed design phase; and
  • the allocation of AU$461.6m for the expansion and redevelopment of Ballarat Base Hospital, which may be considered for a PPP.

There may also be the opportunity for other healthcare PPPs in addition to the above. For example, although funding has not yet been confirmed for Footscray Hospital, the project appears to have been accounted for in the budget estimates.

The expansion and redevelopment of the Ballarat Base Hospital and the Footscray Hospital could be opportunities for the Victorian government to 'road test' its newly-released Partnerships Victoria PPP project documents for social infrastructure and see if they deliver on their objectives of reducing bid costs, improving services and promoting innovative and value for money solutions.

In another innovative move, the Western package of the Suburban Roads Upgrade project, procured in 2017, is the first time that an availability charge system has been used for artillery roads PPP in Australia.

Investment in transport and social infrastructure

In addition to the Suburban Roads Upgrade packages and North East Link, significant transportation investments include:

  • AU$941m for maintenance of Victoria's regional road network, to be managed by Regional Roads Victoria;
  • AU$572m towards the upgrade of the Cranbourne-Pakenham and Sunbury lines, which is necessary given the introduction of High Capacity Metro Trains in 2019;
  • AU$313m towards stage 2 of the Shepparton Line Upgrade and the provision of funding for the stage 3 business case;
  • AU$926m towards the level crossing removal program; and
  • AU$100m towards stage 2 of the upgrade to Monash Freeway, to complement anticipated Commonwealth funding for the project and savings made from stage 1.

The budget's commitment to social infrastructure is clear from its investments in health, justice and education. AU$1.3bn has been committed to each of the health and education sectors, and AU$769m has been committed to investment in the justice sector.

In addition to the Ballarat Base Hospital development, significant social infrastructure investments include:

  • AU$689m for the expansion of Lara Prison Precinct, a project which involves the construction of a new 700 bed maximum security prison which will be double the size of the existing Barwon Prison;
  • the allocation of funding to the Victorian Heart Hospital, Wonthaggi Hospital, the Alfred Hospital, the Regional Health Infrastructure Fun and the Sunshine Hospital; and
  • AU$482.8m for school upgrades and AU$273.4m for the construction of new schools.

Melanie Harwood is an infrastructure law expert at Pinsent Masons, the law firm behind Out-Law.com.

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