2018-05-29
Senator RICE: I want to go to the Commonwealth spending on capital spending—in particular, table 1 on page 411 of Budget Paper No. 1. Thanks for that table, it’s a very useful guide to the Commonwealth's capital investment; and I also note the encouraging words there about the importance of government investment in infrastructure and the desirability of investing in productive infrastructure. I wanted to first get clarity about what the department classifies as productive infrastructure.
Mr Brennan: Yes—I might even ask Mr McKissack to come to the table. What is outlined in table 1 is, essentially, three categories of capital spending, which might be a bit broader than infrastructure per se. There are three categories: direct capital investment, which is, effectively, asset investment which will appear on the government's balance sheet; that would include ICT and investments by government departments, for example, but it would also include defence equipment and the like—things that the Commonwealth will own. The second category is capital grants. We may even need to take on notice precisely which capital grants we've taken account of in this but they are, essentially, things like the Infrastructure Investment Program, payments to the states for things like road and rail—but I'd just have to check on what other categories are in there. And the third is financial asset investment, which is, essentially—for want of a better term—the use of the Commonwealth's balance sheet. So that is instances where the government might borrow to fund, via an equity investment or a concessional loan, assets which—again—will sit, potentially, on the Commonwealth's broader balance sheet, or someone else's. That would include things like Western Sydney Airport, the NBN and the like. But it's broader, probably, than just infrastructure, so it would also include those investments in financial assets for policy purposes—which is the element in the cash flow statement from which this is derived—and would include things like HELP loans and the like as well. So it's a broad conception of capital investment, if you like, or asset investment as distinct necessarily from infrastructure. But I will check, if that's all right, what we have got included in the second category.
Senator RICE: Yes, I wanted to go to that. The other preliminary question I have is about the conclusion on page 415, where it says:
Commonwealth borrowing is funding investments that add to the productive capacity of the economy.
That is in contrast to recurrent spending being funded through the current revenue. I just wanted to check: does that mean that all of that capital spending—or what proportion of that capital spending—is being funded through borrowing?
Mr Brennan: Not absolutely all of the capital spend is funded through borrowing over the forward estimates. The budget is returning to surplus by 2021, for example, which implies that recurrent cash is effectively more than covering the recurrent spend, and it's fully funding the capital spend as well.
Senator RICE: Can you take on notice what proportion of that capital spending in that table is funded through borrowing and what is covered through the cash surplus?
Mr Brennan: Sure.
Senator RICE: I did want to go to what proportion of this capital spending is in fact on infrastructure. I tabled a document that you should have, which was tabled in the Department of Infrastructure estimates last week, that showed that the Commonwealth investment in transport infrastructure per year was around $8.5 billion.
CHAIR: Senator Rice, can I just clarify that the committee is happy to table that document.
Senator RICE: Thank you, Chair. It showed that the level of investment in transport infrastructure is rounding off at $8.6 billion, $8.7 billion, $8.2 billion and $8.5 billion per year over the forwards. I want to compare that with what is shown in table 1, which, over the forwards, has the total investment in capacity spending of between $46 billion and $40 billion, which is only 20 per cent, on average, of the government's capital spending. I wanted to tease out, basically, what the rest is. Am I right—and from your description of those columns, I think I am—that the transport infrastructure spend is included under capital grants and financial asset investment?
Mr Brennan: Yes, predominantly in the capital grants. The financial asset investment would include things like the Melbourne to Brisbane Inland Rail, for instance. But the vast bulk would be in the capital grants component.
Senator RICE: So there wouldn't be any of it in the direct capital investment? Direct capital investment, as you said, is military and government.
Mr Brennan: Yes; in the transport space, if you regard Western Sydney airport, for example, as a transport project. Sorry, that's a financial asset investment as well. The direct capital investment is not a lot of transport infrastructure, it's fair to say.
Senator RICE: So it's included in the capital grants and financial asset management?
Mr Brennan: Yes.
Senator RICE: But, even then, it's still a relatively small proportion of those. So I did want to explore what the rest of those programs are.
Mr Brennan: We'll take that on notice, if that's alright. For example, in 2018-19, your total is around $8.6 billion for things like the Infrastructure Investment Program, financial assistance grants and the like, as compared with our capital grants line, which is more like $11.5 billion.
Senator RICE: That's right. But some of that $8.6 billion is also equity investment—approximately $8 billion. So it's included in both. So, there's quite a bit of unknown.
Mr Brennan: Sure.
Senator RICE: Could you provide for me a breakdown of those three capital streams, according to program and portfolio?
Mr Brennan: We can do our best. I think we can certainly put a bit more detail on the capital grants, because they're really coming out of Budget Paper No. 3. They're payments typically to the states that are of a capital nature and they are just a little bit broader than the—
Senator RICE: I'm also interested in the direct capital investment and what proportion of that is military spending compared with the other investment and the financial asset management by program and portfolio, to account for that other 80 per cent. I think when people think of capital spending, they will think of the spending on transport infrastructure—that's what everyone's mind goes to—yet it's pretty clear that it's only 20 per cent of that capital spending.
Mr Brennan: That's right. Particularly in 2018-19 there will be some significant things like the NBN, because there's a significant debt facility going to the NBN in the 2018-19 year, and a couple of other significant things like that. But we'll see what we can put together.
Senator RICE: Thank you.
Estimates & Committees Transport and Infrastructure