Federal government plans to boost infrastructure spending are expected to generate widespread benefits, construction sector participants and analysts say.
The Abbott government outlined $11.6 billion in new infrastructure funding, much of it for roads, in Tuesday’s federal budget.
The $11.6 billion in new money will lift total infrastructure spending to $50 billion by the end of the decade.
“The building and construction industry particularly welcomes the government’s $50 billion infrastructure package, which will support $125 billion in construction work (federal, state and private sector funding),” Master Builders Australia chief executive Wilhelm Harnisch said.
“But roads are not everything, and the government will need to focus on broadening infrastructure investment to include urban infrastructure in the post-budget period.”
Property development industry group Urban Taskforce said the additional $11.6 billion for infrastructure, including $2.9 billion for major road upgrades in western Sydney, would help future growth across Australia.
“The commitment of $5 billion for an asset recycling fund to provide financial incentives to the states and territories to sell assets to the private sector and then reinvest the sale proceeds into new infrastructure that supports new urban development is a positive move,” Urban Taskforce chief executive Chris Johnson said.
Building products group CSR’s managing director, Rob Sindel, said the infrastructure spending should lead to more land releases, more housing construction and more opportunities for people living further away from major cities.
“We (CSR) don’t directly benefit, but everyone benefits indirectly,” Mr Sindel said.
AMP Capital’s head of infrastructure for Australia and New Zealand, Paul Foster, said the federal government’s focus on infrastructure would provide the private sector with a pipeline of investment opportunities.
“This is an important development in addressing the inertia and logjam evident in infrastructure planning and development over much of the last decade,” Mr Foster said.
Credit Suisse said government plans to spend $11 billion on road and rail infrastructure over the next five years were expected to have a multiplier effect of up to five times because of the attraction of private investment.
But most of the spending would occur after the 2015 financial year.
The government would spend an extra $1.6 billion on road and rail infrastructure in 2014/15, which represented 0.1 per cent of GDP.
“It is a marginal positive for infrastructure companies,” Credit Suisse said in an analysis of Tuesday night’s federal budget.
“However, it is not enough to offset the impact of the mining capex (capital expenditure) cliff.”