Boomtime for Australian Infrastructure Investors
The Australian Government intends to invest AUD$100 billion over ten years from 2019-2020 in Australian Infrastructure around the nation. Both major parties, Labour and the Coalition, promise to spend billions on new rail and road projects and improvements to hospitals and schools. Transport and infrastructure companies should be well positioned to capitalise on these projects since they are likely to benefit no matter which party wins the election.
The Coalition preferred the road to rail projects several years ago. There has been a shift in their position and now both parties are devoted to reducing congestion by improving public transport, helpings citizens’ travel more conveniently and reducing the number of cars on the roads. To accomplish this, they plan to fund more rail lines throughout Australia.
Nevertheless, both parties have different views on realising their plans. The Coalition plans to invest funds into faster regional rail links. They want the trains to run at around 160 kilometres per hour. They also plan to make a “National Faster Rail Agency” and a tunnel through the Blue Mountains from Sydney to Parkes. The Coalition does not have completed cost estimates yet which has raised some concerns about their intention to complete the proposed plans.
The Labour party disagrees with the faster rail plan. They want to invest their funds in a “High-Speed Rail Authority” and build faster trains, planned to run at speeds of about 350 kilometres per hour. The rail is planned to link Melbourne to Brisbane via Canberra and Sydney. The estimated cost of this plan is AUD$114 billion. The problem is, Australia does not have experience in building a high-speed rail network and therefore, if Labour wins the election, companies from Japan, China, Spain, or France may benefit the most.
If Australian parties decide to construct a heavy rail network or even a new light, they will create a lot of work for rail experts such as UGL and Downer EDI. The company Downer EDI is owned by CIMIC, which is under Group ASC, based in Madrid, Spain.
In addition, the John Holland Group could also be a big winner with rail, tunnelling, and construction experience, helping in the construction of the Melbourne Metro Tunnel. This company is a 100% owned subsidiary of China Communications Construction Company and it will potential be involved in rail projects.
Under the Coalition, Sydney Airport has benefited from the regulatory environment. They received a review that does not recommend changing the current system of “light touch” regulation. Anthony Albanese, the infrastructure minister, has not declared a position on airport regulation. If elected, Albanese is likely to inspect the commission’s last report, which is due in June.
Anthony Albanese also backs the Inland Rail project from which will profit freight logistics groups. This rail project is financed through an $8.4 billion investment into the Australian Rail Track Corporation.
The global equity policymaker with fund manager 4D Infrastructures, Greg Goodsell, is in favour of investing in infrastructure. He believes investors will benefit from the projects and it will create opportunities for privatisation in the future.
The projects that investors can buy into include the $10 billion Inland Rail line, running from Melbourne to Brisbane, $5.3 billion Western Sydney Airport, the $800 million Gateway motorway expansion in Brisbane, and the $2 billion fast rail, running from Geelong to Melbourne (proposition from the Coalition party in the 2019-2020 budgets). Finally, Transurban, the Tollroad group, paid $9.3 billion for a consortium to create a 51% stake in Sydney Tollroad WestConnex the previous year. The outlook for Australian Infrastructure in general, is promising for the savvy investor!