National

Lowe wants Reserve Bank for infrastructure

GOVERNMENTS SHOULD TAKE advantage of low interest rates and boost infrastructure spending, but politicians should not have final say over which projects go ahead, Reserve Bank governor Philip Lowe has said.

Lowe on June 24 said governments should be spending more on infrastructure. “There tend to be quite high multipliers from public investment in infrastructure,” he told a Canberra forum.

“There’s a lot to be said for further spending on infrastructure. Governments here and right around the world should have their top drawers full of really good ideas that are shovel-ready, in case global growth slows.”

Lowe said economic conditions in Australia and abroad mean governments can borrow to build infrastructure at an interest rate of just 2 per cent.

“If the Government can build productive capacity while borrowing at low interest rates that seems like a good thing to do, as long as there are projects out there. Given how fast the population’s been growing over a long period of time, and chronic under-investment in infrastructure, I’d conjecture there are a lot of projects out there with a risk-return greater than 2 per cent.”

But Lowe believes politicians should not be making final decisions. Instead

those decisions should be transferred to an independent body, similar to how interest rate decisions were transferred from politicians to the RBA in the 1990s.

“If we don’t get [project selection] right the public doesn’t trust the government to build infrastructure, because they see it as being driven by political considerations,” he said.

“I think there’s a parallel with monetary policy. Thirty years ago, it was considered crazy to give people like me and my board the power to set interest rates. It was too important; it needed to be done by the government. But society correctly decided we got suboptimal outcomes by leaving those decisions to the politicians. You’re better off giving them to people like me and my board; you get better outcomes over time. I think the same logic can be used in infrastructure selection, finding a way that the public can have confidence that the right projects are selected.”

Talking bigger picture, Lowe, who recently attended a meeting of G20 finance and treasury leaders in Japan, said the global economy faces the risk of a slowdown in activity as a result of uncertainty due to the US-China trade and technology dispute, and Brexit.

“This uncertainty is now having a major effect on investment around the world: investment plans are weakening; RBA governor Philip Lowe says infrastructure spending can be an important fiscal lever.

capital spending is declining. In a way it’s not surprising, because uncertainty increases the option value of waiting, and what we’re seeing right around the world is firms wait before deciding to take on an investment.

“They’re sitting on their hands,” Lowe said. “If enough people sit on their hands then it’s going to have a major effect on the global economy.”

Coalition adds funds for Adelaide crossings

THE FEDERAL COALITION AND SOUTH Australia’s Liberal government have agreed to jointly fund $402 million in grade separation projects at Torrens Road (Ovingham) and Brighton Road (Hove) in Adelaide.

The funding will be delivered as part of the 2019/20 state budget and includes $231 million to fix the rail crossing at Torrens Road and $171 million for the crossing at Brighton Road.

The funding builds on the previously announced $305 million for intersection upgrades for a total of $707 million in congestion-related infrastructure spending

for the city.

South Australian premier Steven Marshall said that the changes would allow South Australians to spend less time stuck in traffic and more time with their loved ones at home.

“The State Liberal Government is building congestion busting infrastructure to cut travel times for motorists and improve safety on our roads,” Marshall said. “We are partnering with the Federal Liberal Government to deliver two grade separations and seven intersection upgrades in the upcoming state budget.”

The two projects are intended to remove the crossings along the busy Seaford and Gawler train lines in order to ease congestion and cut travel times, according to state transport minister Stephan Knoll. “The Seaford and Gawler train lines are our most heavily patronised train lines and when the boom gates come day, it frustrates motorists on their way to work or home,” Knoll said. “In fact, we know that during peak periods at the Brighton Road level crossing, the boom gates are down for about 20 per cent of the time – or about 25 minutes.”

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GrainCorp secures drought insurance plan

EAST COAST GRAIN HANDLER GrainCorp has outlined the terms of a ten-year insurance deal to smooth out its annual revenue figures and shield it from severe drought conditions like those seen during the most recent winter crop. GrainCorp on June 7 outlined the details of a new risk management agreement with White Rock Insurance, a subsidiary of Aon plc.

From FY20, GrainCorp will receive $15 from White Rock for every tonne its winter crop falls below a threshold of 15.3 million tonnes, up to an annual maximum of $80 million.

However, if GrainCorp’s winter crop exceeds an upper production threshold of 19.3 million tonnes, it would instead pay White Rock $15 per excess tonne, up to an annual maximum of $70 million.

In addition, the deal states that neither party would have to pay the other more than $270 million net, over the full tenyear term.

“The contract will smooth GrainCorp’s cash flow and allow for longer term capital allocation and business planning through the cycle,” GrainCorp CEO Mark Palmquist said.

Had the deal been in place, GrainCorp would have received a full $80 million

GrainCorp will have a more stable financial outlook with a new insurance deal.

payment from White Rock during the most recent 2018/19 grain crop, which was heavily impacted by drought.

However, the grain handler would have had to pay White Rock a full $70 million payment in both 2010/11 and 2016/17, years with strong harvests, along with $35 million in 2011/12 and $13

million in 2012/13.

The risk-balancing move comes after a takeover bid from Long Term Asset Partners fell through last month. That bid was largely based around a model whereby grain production would be underwritten by Allianz, making GrainCorp a more appealing asset for financial partners.

Tudge defends record as Labor pushes issue

IN RESPONSE TO LOWE’S PUSH, Labor urged the Coalition to boost its infrastructure spending to kick-start the economy.

“Infrastructure investment should be brought forward,” Labor leader Anthony Albanese told the media in Melbourne following Lowe’s comments. “We know that there are a range of road and rail packages that could be brought forward because they’re ready to go right now.

“The government could, of course, put money into a project like the Melbourne Metro, which is what we propose during the election campaign in order to speedup the delivery of that project. But we’re

prepared to sit down with the Government and identify projects, some of which were committed to by both sides of politics during the election campaign.”

Labor’s new shadow minister for transport, Catherine King, added: “The Liberals delivered $5.1 billion less for infrastructure than they promised over their first five budgets – and they have no plans to deliver more. The government must listen to the RBA, states and business and start taking infrastructure investment seriously.”

But Alan Tudge, minister for population, cities and urban infrastructure, said the Coalition’s $100 billion pipeline for

infrastructure – increased by $25 billion in the May 2019 budget – was enough proof it was investing in the sector.

“What the RBA governor is saying is that we need infrastructure investment as one tool to keep the economy strong, and it certainly is a very big component of our economic plan,” Tudge said on July 5.

“[The $100 billion pipeline] is a record amount and it means we have massive projects going on right across the country as we speak … inevitably as budgets roll on, we re-examine what our expenditure outlook is. But I emphasise this point: that we are at record levels of infrastructure investment.”

Brookfield, GIC to purchase Genesee & Wyoming in $12bn deal

BROOKFIELD ASSET MANAGEMENT and GIC are set to purchase freight rail major Genesee & Wyoming (G&W) in a deal worth around $US8.4 billion ($12 billion), including debts.

Canada-based Brookfield and Singapore-based GIC will offer $US112 for each G&W share, representing a 12 per cent premium on the company’s closing price on June 28, and a 39.5 per cent premium on the company’s $US80.28 closing price on March 8, the last day before media speculation regarding the transaction came about.

The transaction is expected to close by the end of 2019 or in early 2020, subject to certain conditions.

Brookfield chief executive officer Sam Pollock said that the deal represented a “rare opportunity” to acquire a large-scale transport infrastructure business in North America.

“G&W will be a significant addition to our global rail platform and will expand our presence in this sector to four continents,” Pollock said. “G&W provides critical transportation services to more than 3,000 customers, and its cash flows have proven to be highly resilient over many years.” G&W, which operates the

PHOTOGRAPHY CREDIT: SHUTTERSTOCK.COM 2240-kilometre Tarcoola-to-Darwin freight rail line through subsidiary G&W Australia, will become a privately-owned company as part of the deal.

G&W Australia is 51.1 per cent owned by G&W and 48.9 per cent owned by a consortium led by Macquarie.

“For our customers, employees, and Class I partners, the long-term investment horizon of Brookfield Infrastructure and GIC as seasoned infrastructure investors is perfectly aligned with the long lives of G&W railroad assets, which are integral to the local economies that we serve in North America and around the world,” said G&W chairman and chief executive officer Jack Hellman.

NT mine contract The takeover news came days after G&W Australia signed a binding heads of agreement to provide haulage services for mining company TNG.

On June 28 it was announced TNG will use G&W Australia’s freight line to run the roughly 1,100km journey from a rail siding near its Mount Peake mine to a processing facility in Darwin.

Mount Peake, located around 235 kilometres to the north of Alice Springs, is

still in development. The project is focused on the production of vanadium, titanium and iron and is expected to become one of the largest global vanadium projects once mining commences in 2020.

TNG’s concentrate will be loaded at a proposed rail siding at Adnera, on the Tarcoola-to-Darwin rail line around 85 kilometres from the Mount Peake site, for transportation to TNG’s Tivan facility. G&W Australia will also transport the final product from the Tivan facility to Darwin Port for unloading. The company will also supply all necessary locomotives, wagons, vans and fuelling equipment to accommodate the process.

“We are delighted to have engaged G&W Australia as Mount Peake’s rail haulage service provider,” said TNG managing director and CEO Paul Burton. “G&W Australia’s presence and expertise in logistics and transportation further strengthens TNG’s global network of high-quality partners assigned for the development and operation of Mount Peake.”

G&W Australia CEO Luke Anderson added that the company’s rail haulage solutions would ensure a successful logistics supply chain for the burgeoning project.

Genesee & Wyoming Australia will be involved in a global takeover deal.

Melbourne is Tudge’s main congestion concern

ALAN TUDGE SAYS MELBOURNE is his biggest concern when it comes to fulfilling his role as Australia’s minister for ‘congestion busting’, and has again criticised the Victorian Government for its infrastructure record.

Addressing the National Infrastructure Summit in Melbourne, Tudge, minister for cities, urban infrastructure and population, described the Victorian capital as his “main concern over the medium term”. “The Victorian Government has initiated many large-scale projects that will help transform the city, but most are still five, ten or more years away from completion,” he said.

“Metro Rail [the Metro Tunnel], which is critical to enable more train capacity on the entire network, for example, won’t be finished until 2025; Melbourne Airport Rail, which we kicked off with our $5 billion commitment, will commence construction in 2022; North East Link, another great project of which we have allocated $1.75 billion will open in 2027; and of course, the Suburban Rail Link will take decades.” The minister’s comments are in line with his speech to the Property Council of Australia at the end of May, when he pinned congestion woes in major cities on alleged failures by past and current Labor Governments.

“Of course, the East West Link would have been finished this year (creating a ring-road for Melbourne) had it not been cancelled,” Tudge told the Infrastructure Summit on Wednesday.

“It still needs to be built and we are willing to fund the entire government requirement.

“We are in this situation in Melbourne in part because the population growth well outstripped expectations. In 2004, for example, it was projected that Melbourne would grow by 500,000 by 2017; it in fact grew by 1.2 million.

“Given the time schedules involved in the larger scale projects, it means it is even more essential to get fast traction on the smaller ones. It will also mean continued monitoring of population growth into the city through our new population planning framework.” Construction underway in Melbourne’s CBD on the Metro Tunnel project.

Tudge says the Coalition’s framework looks to strongly link population growth to infrastructure, service and housing approval capacity, while working with each state and territory to establish their own population plans, guided by their capacity and planned infrastructure spending.

ACT transport minister Fitzharris steps down

ACT MINISTER FOR HEALTH AND transport Meegan Fitzharris resigned from her role on July 1, citing a desire to better balance her family life and spend more time with her children.

She said late in June she planned on leaving the ACT Legislative Assembly entirely, clearing the way ahead of the territory’s next election late next year. “I hope to continue to make a contribution to our amazing city in life after politics. I will continue to be a working mum, something my husband and I have balanced since each of our children were born,” Fitzharris said. “Now is the time for a new balance and new opportunities.”

Fitzharris added that she hoped other

“working mums and dads” of all ages and backgrounds would consider running for public office. She cited as a proud achievement the construction and opening of Canberra’s first light rail line, from Gungahlin to Civic, during her time as transport minister.

She thanked Chief Minister Andrew Barr for his support, as well as members of the community for sharing their “views, ideas and encouragement”.

Fitzharris has been succeeded by Chris Steel as transport minister, and by Rachel Stephen-Smith as health minister

Stephen-Smith referred to Fitzharris on Twitter as “an outstanding Minister, representative and colleague [who] will be greatly missed by Cabinet and Caucus”.