PPP and Tolls

Tolls on and for the people
Sydney Morning Herald (5 Jan 2009)

Large corporations are not to be trusted with public assets, at least not as much as they used to be. This is one of the harsh lessons of the global credit crisis. It is one of the byproducts of a sequences of disasters and excess by the private infrastructure sector.

First, we had the financial collapse of the Sydney Airport rail link. Then the bankruptcy of Sydney's Cross City Tunnel. Then the virtual bankruptcy of Babcock & Brown. Then the debacle of Macquarie Bank's public float of the Brisbane toll road company, Brisconnections. Then the plunge in the market value, and reputation, of Macquarie Bank itself. Then the cost blow-out in the State Government's toll rebate scheme. Now comes the news that by the time the Sydney Harbour Tunnel reverts to state ownership in 2022, NSW taxpayers will have paid about $1.8 billion for an asset that cost $550 million to build.

This is but a partial list of problems. It is time to reconsider whether the financing and ownership of such public assets should return to state control, a model that worked well for two centuries. In the past, the Herald has supported the growth of infrastructure projects funded and owned by public-private partnerships, or PPPs as they have come to be known. It is a field in which Australia led the world, and was in the large part successful. But the world has changed. Would the state be better off returning to building public infrastructure with public financing, so that when the public pays for using toll roads at least they are paying tolls that are for the people and by the people?

With the federal Labor Government about to finance an ambitious national infrastructure program, and the NSW Labor Government in financial straits, this question has urgency. Several factors suggest that reliance on private funding is no longer as necessary as it once was. The Federal Government is intent on upgrading Australia's infrastructure and stimulating the economy in the process. There is an enormous pool of superannuation savings looking for safe havens. The cost of government borrowing is lower than the cost of private borrowing. These elements could be harnessed in common cause by the creation of infrastructure bonds, issued by the government, backed by the assets they fund.

This is not an original suggestion, yet it barely rates a mention in public policy.