Senate debates

Thursday, 17 July 2014


Asset Recycling Fund Bill 2014, Asset Recycling Fund (Consequential Amendments) Bill 2014; Second Reading

12:45 pm

Photo of Nova PerisNova Peris (NT, Australian Labor Party) Share this | | Hansard source

I continue to talk to the Asset Recycling Fund Bill 2014 and related bill. If I can go back to where I was before the debate was interrupted. The people of the Northern Territory know that selling Power and Water will guarantee two things; higher prices and longer, more frequent blackouts. So I am very concerned that Power and Water will be sold off under the scheme if this bill is passed.

I am also concerned that the people of the Northern Territory will get no say. It will just be announced one day and that is the way the Northern Territory government currently operates. We will wake up one morning and there will be an article on the front page of the Northern Territory News telling us that Power and Water will be sold. A deal has been done with the Abbott government and it will be sold. The Territory Insurance Office, TIO, is the only remaining government-owned insurance and banking institution in the country. There has been much talk about the potential sale of Power and Water over many years. As the only remaining financial institution in government ownership, it can be seen by some as an obvious candidate for sale. But let me tell you that people in the Northern Territory do not want it sold.

Living in a cyclone-prone area we have an extra interest in home and contents insurance. It is already expensive and people simply do not want TIO sold. Again, from their public comments, the Northern Territory government are clearly looking at selling TIO. They refuse to rule it out.

The next candidate is the Port of Darwin. The port is less visible in the day-to-day lives of people in the Northern Territory than Power and Water, and TIO. But it is still extremely important to Territorians. Private investment in the port and its operations should be encouraged but, in an underdeveloped economy, we should not be selling off the assets that are so crucial to our plans to develop the north. Again, it would be outrageous if funds for our roads, to get cattle and minerals to the port, depended on the sale of our port. Those are my concerns about what the Northern Territory government would do with this fund.

That is why I support Labor's position on any potential sale that it be subject to a disallowable instrument. If the CLP government sell off any of our assets without proper consultation process or against the public interest, then we can block it from being eligible for sale under this scheme.

If a state or territory government go through the proper processes of selling an asset, if they undertake a full cost-benefit analysis and take their plans to an election and receive the endorsement of the community and the people of the Northern Territory, then and only then a contribution from the Commonwealth under this scheme will be warranted.

However if a government—and the CLP government in the Northern Territory are probably the most unlikely to do this—just suddenly announce a sale without any analysis and in complete opposition to community sentiment, then it is not appropriate that the Commonwealth support the sale through this scheme.

Finally, these are my main points. Our infrastructure spending should not be dependent on selling our infrastructure. In order to get our fair share of infrastructure funding, we should not be required to sell off our vital public assets. I am concerned that the Commonwealth government will use this fund to encourage the Northern Territory government to sell off our assets. I am also concerned that the Northern Territory government will use this fund to do what they want to do and that is to sell off our assets.

We are only getting less than one per cent of the Abbott government's infrastructure budget over the next seven years. Selling everything is not the solution.    The Commonwealth parliament should be allowed to block a sale through a disallowable instrument.

12:49 pm

Photo of Catryna BilykCatryna Bilyk (Tasmania, Australian Labor Party) Share this | | Hansard source

The Asset Recycling Fund Bill 2014 and the Asset Recycling Fund (Consequential Amendments) Bill 2014 are a desperate and belated attempt by the Abbott government to gain some credentials as an 'infrastructure government'. It is though infrastructure is an afterthought to them, not something they care a great deal about. The government do not even go close to matching the former Labor government's record investment in infrastructure.

After all, it was Labor that invested $16.2 billion during the height of the global financial crisis, through the BER program, Building the Education Revolution, to build the school infrastructure of the 21st century. This was investment which helped stimulate the economy. We saved hundreds of thousands of jobs during the GFC, opposed by those opposite who, had they got their way, would have seen Australia plunged into recession.

Our economic stimulus plan, including the BER program, was praised by Nobel prize winning economist Joseph Stiglitz as being well designed. In fact, Professor Stiglitz said that, had it not been for the economic stimulus package designed by Labor and opposed by the economic neophytes opposite, Australia's national debt would have been considerably larger.

It was a Labor government which initiated Australia's largest ever national infrastructure project. I am talking, of course, about the National Broadband Network. I cannot emphasise enough how people from my home state of Tasmania, who are now connected to the network, are describing to me the transformative effect it is having on their lives and businesses.

Infrastructure spending overall under Labor went up by 42 per cent since the last full year of the Howard government—a government which paid very little attention to building Australia's infrastructure. Labor lifted annual infrastructure spending in Australia, from $132 per person to $225. We upgraded 7,500 kilometres of Australia's road network and upgraded 4,000 kilometres of Australia's rail network. Road spending doubled under Labor and we invested $13.6 billion in urban rail—more than had been invested by all of our predecessors combined since Federation. We also invested a further $3.4 billion in rail freight, which has been of great benefit to my home state of Tasmania, which relies heavily on rail for the transportation of freight across the state.

When Labor took office, Australia ranked 20th in the OECD in infrastructure spending; because of Labor's record investment in infrastructure, Australia now ranks first. In my home state of Tasmania, we saw significant investment going into the south of the state for the first time in over a decade. While the Howard government had focused on projects in the marginal electorates of Bass and Braddon, Labor delivered hundreds of millions of dollars in funding to projects such as the Blundstone Arena upgrade; the Brighton bypass and transport hub; the Kingston bypass upgrades to the Brooker Highway; trade training centres and GP superclinics; the Huon Valley and south-east Tasmania water schemes; and several of the first rollout sites of Labor's National Broadband Network—that is, the real NBN, not the coalition's second-rate alternative. Under a Labor government, the annual infrastructure spending to Tasmania almost doubled—from $157 per Tasmanian to $264 per Tasmanian. Not only did Labor in government dramatically boost Australia's infrastructure investment, we implemented important reforms to make sure that we got the best value out of all our infrastructure spending.

Infrastructure Australia was established as an independent expert authority to advise the government—and, more importantly, the public—on Australia's infrastructure needs. One of Infrastructure Australia's roles is to evaluate the contribution of proposed infrastructure projects and rank them in order of their contribution to Australia's productivity. An important part of this reform was that Infrastructure Australia's advice be provided to the public. Part of the reason Infrastructure Australia was established with this function was to give the Australian government an incentive to invest in the infrastructure projects that provided the best outcomes for Australians, not the best outcomes for the government's political fortunes.

Unfortunately though, pork-barrelling to marginal electorates has been a longstanding practice of coalition governments—and one of the reasons why we need a national body to provide independent advice on infrastructure. Our reforms to infrastructure funding were implemented after the Australian National Audit Office released a damning report on the Howard government's Regional Partnerships program. The report said that the program had 'fallen short of an acceptable standard of public administration'. Grants had been provided for projects that had not been properly assessed, that government departments had advised against, and—listen to this—to groups that had not even applied for funding. You did not even have to apply for funding and you got some!

I am pleased that the government has not proceeded with its previous plans to gag Infrastructure Australia and take away its independence and has agreed to the Senate's amendments to its bill. It was completely bizarre that the government guillotined debate on that bill in the House back in December but did not bring it to the Senate until as late as June this year. Perhaps they finally succumbed to pressure from the business community, who supported Labor's call that infrastructure policy actually be made on the basis of what is in the national interest. The attacks by the Abbott government on the independence of Infrastructure Australia were just one part of the story of this government's poor record on infrastructure. The coalition has made various attempts to trumpet its achievements as 'an infrastructure government'—and all of them have fallen flat. After all, this is the government which has scrapped both the Regional Infrastructure Fund and the Regional Development Australia Fund. The government's decision to gut funding for regional Australia has been supported by, strangely, the Nationals, who continue their bizarre charade of pretending to stand up for regional Australia.

The Abbott government has claimed credit for various road and rail projects, worth more than $12 billion, despite these projects already being announced and funded by Labor. A great example of one of the road projects funded by Labor and then re-announced by the coalition is the Huon Highway-Summerleas Road intersection. This particular intersection is in the electorate of Franklin and just a stone's throw from my electorate office in Kingston. I stood at that intersection, with the federal member for Franklin, Julie Collins, in August when Labor announced a $17.5 million commitment to the intersection which had been funded in the 2013-14 federal budget. So I was quite amused to see a contribution from Senator Bushby in the local newspaper, the Kingborough Chronicle, in which he announced that the government was funding this project where Labor had 'failed to deliver on it'. Senator Bushby referred to years of inaction by state and federal Labor governments and said that the dangerous intersection was of great concern to him. It is interesting, therefore, that Senator Bushby was strangely silent on the intersection during the federal election. Maybe that is because the coalition failed to match Labor's $17.5 million commitment until February the following year, a full five months after the election, even though the upgrade had already been funded in the previous year's budget.

After failing to commit to this and several other funded infrastructure projects in the south of Tasmania, the Abbott government has now set about re-announcing them as if they were its own. These projects include the Huon Highway-Summerleas Road intersection;    upgrades to the Brooker Highway between Elwick Road and Howard Road; and Tasman Highway on and off ramps at the East Derwent Highway intersection. The Abbott Government has still failed to make up the $100 million shortfall in Labor's funding for the Midland Highway. While Labor had provided $500 million funding for upgrades to the highway, the Abbott government announced that it would provide $400 million for the full duplication of the highway to four lanes. Good luck with that! In reality, this project would cost about $2 billion, whereas $400 million would probably provide duplication as far as Bridgewater to Bagdad. Unfortunately, it took until after the election for the Prime Minister to belatedly admit that $400 million would not provide for full duplication.

As if they have not embarrassed themselves enough in Tasmania, in the last budget the Abbott government triumphantly announced infrastructure spending of more than $40 billion over the next six years. But many of those projects were also recycled Labor commitments. Prior to this budget, Labor had already approved projects worth $35 billion over the next six years, and several of the coalition's new road projects—$5 billion worth—have been funded by ripping money out of rail projects. In fact, by refusing to fund any new rail or other public transport projects, this government is creating a perverse incentive for state and territory governments to divert funding to road projects even if roads do not provide the greatest productivity gain.

This is a double whammy for commuters, who will be faced with fewer public transport options and slugged another $2 billion to $3 billion with the government's reintroduction of the petrol excise. The budget also rips funding out of public transport concessions. Perhaps the government has a secret agenda of trying to get more transport users on the roads so that they can collect more revenue from the fuel tax hike. If that is not the reason, then I fail to see the logic in determining, as this government has, that roads are the responsibility of the Commonwealth but rail infrastructure is not. I would be willing to bet that most Australians are with me on that one too.

Of course roads are an important part of our transport infrastructure, but so is public transport. In fact, investment in public transport helps reduce traffic congestion, provides a cost-effective alternative for many commuters, and is better for the environment than car transport. But, unfortunately, the Abbott government seem unable to see the bigger picture when it comes to transport infrastructure funding. Unfortunately, they have also gone back to their old practice of pork-barrelling—the old practice that the Howard government engaged in.

According to Fairfax Media analysis, as reported in the Sydney Morning Herald last month, the infrastructure projects that have received new funding favour coalition electorates by a ratio of three to one. The Herald also pointed out that the majority of projects the Abbott government had withdrawn Commonwealth funding from were in non-coalition electorates. The Herald article quotes Monash University Professor of Transport, Graham Currie, who said:

The question is whether they want to be a professional government or they want to pork-barrel, and whether we'll forge the idea of trying to be professional about how we manage resources or just do it on a political basis.

I don't think that's how a country should be run.

So that, in a nutshell, is the Abbott government's record on infrastructure investment so far—pork-barrelling, recycling old projects, attempting to deny proper public assessments of projects and having a bizarre bias against rail projects in favour of roads for no explicable reason. The two bills that are now before the Senate, regrettably, do not improve on this record.

The two bills we are currently debating form part of the Abbott government's infrastructure package announced in the 2014-15 federal budget. The key element of the bills is the Asset Recycling Initiative, which will be used to incentivise the states and territories to invest in new productive infrastructure by privatising existing assets. The Commonwealth will provide a contribution of 15 per cent of the reinvested sale proceeds to the cost of the project. This initiative is still subject to a national partnership agreement.

With these bills, the government are up to their old tricks again—trumpeting the investment they are making in infrastructure when they are actually just redirecting money that is already committed to other things. In the case of the Asset Recycling Fund, the government are doing some recycling of their own—taking $2.4 billion of uncommitted funds from the Building Australia Fund and $3.5 billion of uncommitted funds from the Education Infrastructure Fund—for an initial contribution of $5.9 billion. Like the EIF and the BAF, the Asset Recycling Fund will be managed as part of the Future Fund. Unlike the EIF and the BAF, projects to be funded by the portfolio ministers will not be subject to recommendations by an advisory board as to the merit of the projects. It begs the question: how does the government know that a project is going to be 'productivity enhancing' when it is put forward for a grant or payment? Is it just another case of the government picking winners, like they will with their Emissions Reduction Fund? The more important question is: how does the public know? How can the public have confidence that this fund is actually investing in projects that produce an economic gain for Australia? They have provided no independent mechanism for ensuring the project will actually have productivity gains or for comparing the productivity gains of different proposals.

Labor achieved record investment in infrastructure, and we did so during the largest global economic crisis since the Depression. We also achieved this by funding projects on a 50-50 basis and without the need for state and territory governments to sell public assets. Given Labor's record investments in infrastructure in partnership with the states and territories, we believe that replacing this support with a 15 per cent incentive payment is a backward step. This government is handballing its responsibility for real investment in infrastructure to the states and territories. Wouldn't it be better if the government would help the states to fund their infrastructure priorities regardless of where the funds come from? Why does the government see it as necessary to provide the states with an incentive—or a 'bribe' as it was described by Chris Aulich, Professor of Public Administration at the University of Canberra—to privatise their assets?

We on this side believe that the concept of asset recycling can have merit in some circumstances. For example, in 2007 in my home state of Tasmania, there was a very sensible instance of asset recycling when the Labor government sold the Hobart Airport site and invested the proceeds in the Brighton transport hub, the Royal Hobart Hospital and irrigation projects. However, we want to ensure that the money that is invested in new projects is invested wisely—that Australians get maximum bang for their buck. After all, when state and territory governments privatise their assets they can only sell them once.

Labor will be moving amendments to this bill. The amendments will require, as a precondition for spending Commonwealth funds on the Asset Recycling Initiative:    an assessment by Infrastructure Australia of the new infrastructure as 'productivity enhancing', including a published cost-benefit analysis; and tabling of a disallowable instrument for each privatisation and reinvestment transaction. I hope that the government senators and the crossbenchers will support our amendments to this bill. I am disappointed that the government did not support our amendments in the other place, as it was a good opportunity for them to demonstrate that they support transparency and due diligence. These amendments are about increasing the accountability and transparency of the Asset Recycling Initiative, to ensure that the projects funded through this initiative will genuinely enhance productivity.

Labor believes that Infrastructure Australia, an independent and expert body, is best placed to assess the contribution of new infrastructure projects to Australia's productivity. Strengthening the role of independent expert bodies to ensure good policy outcomes is a core belief of Labor, as distinct from a government that is working to dismantle independent advisory bodies such as the Climate Change Authority, the Immigration Health Advisory Group and others working on positive ageing, social inclusion, animal welfare, Indigenous leadership and a variety of other policy areas. It is vital that infrastructure decisions are made by this government with the national interest in mind, not their own political interests. We do not intend to allow the Asset Recycling Initiative to become a slush fund to allow state and territory governments to pork-barrel to marginal electorates.

These amendments are about taking an evidence based approach to decisions on infrastructure funding. Before the infrastructure minister makes a grant or payment to a state or territory, they must first receive an independent evaluation of the project which confirms that the project will actually have productivity gains. The requirement for the minister to approve grants via a disallowable instrument is to ensure that not only are quality decisions made on infrastructure investments but quality decisions are also made on privatisation of the assets sold to fund them.

Unlike those opposite, Labor is not of the view that all privatisation is necessarily good. These bills are providing the states and territories with an incentive to privatise assets, and the Commonwealth should not be rewarding them for engaging in a fire sale of assets or for selling assets without appropriate regulatory protections. The idea that privatisation is good in all circumstances is Tea Party thinking—the kind of attitude that the ideologues who have taken over the Liberal Party seem to be engaging in more and more. This is a flawed bill, but it can be improved with Labor's amendments, which I hope that the other side will agree to and which I commend to the Senate.

1:08 pm

Photo of Joe LudwigJoe Ludwig (Queensland, Australian Labor Party) Share this | | Hansard source

I rise to speak on the Asset Recycling Fund Bill 2014. Australia's infrastructure is too important to be left to pork-barrelling and the whims of the political cycle, especially the whims of this government. In the committee stage, Labor will seek to pass two amendments. We will look for crossbench support, because it is about ensuring that there is transparency and openness of the process for approving infrastructure projects. All Australians would want that, to ensure that there is scrutiny of those infrastructure projects. The coalition's plan for asset recycling has three major flaws. Firstly, it does not allow for independent scrutiny of the infrastructure projects. Secondly, it distorts the state government's decisions on asset sales, promoting the ill-thought-through selling of assets for short-term gains. Thirdly, it does not guarantee any new money for investment in infrastructure.

Infrastructure spending under Labor rose to record levels. We went from being 20th in the OECD, in terms of spending on infrastructure as a proportion of GDP, to first, under Labor's watch. Labor lifted funding for infrastructure from about $130 for each Australian to about $220. Labor doubled the roads budget, to $46.6 billion, and upgraded 7,500 kilometres of road. But we also recognise that it is not enough just to increase funding. The money has to be spent on worthwhile infrastructure that will create not only returns for Australians but productivity increases into the future. Labor created Infrastructure Australia to research and rank proposed infrastructure projects based on their potential to add economic productivity. Infrastructure Australia introduced independent advice and the opportunity to add transparency and openness into the process for planning for infrastructure in Australia. Labor also planned for the future. The National Ports Strategy and National Land Freight Strategy meant that informed decisions could be made about infrastructure investment in the context of a broader plan for ports and freight. Infrastructure, without this sort of strategic plan, is just a recipe for expensive white elephants. This government wants to throw up plenty of those.

We on this side of the chamber are proud of Labor's achievement in infrastructure. Indeed, this government seems proud of Labor's achievements too. Almost all of the coalition's announced infrastructure projects are re-announcements of Labor funded projects. Take one example. Take the Bruce Highway. During Senate estimates, we learnt there was no new money. Mr Truss uses the terms 'locked in', 'confirmed', 'affirmed', 'reconfirmed' or 'recommitted', but what he really should say is simply 're-announced'. Labor invested $5.7 billion in the Bruce Highway, dwarfing the $1.3 billion spent by the previous Howard government. For all their rhetoric, under the Howard regime they did not spend on infrastructure. Labor delivered four times the funding in half the time. Labor remains committed to improving the Bruce Highway, fixing up the area that the Howard government failed to act in and this government is also ignoring.

The coalition has failed to follow Labor's lead in investing in important Queensland infrastructure. The Cross River Rail project is a good example of a coalition failure. Infrastructure Australia said the Cross River Rail project was a strategic priority for Australia's infrastructure, and it judged the project as passing the cost-benefit test and ready to proceed. The Liberals have pulled $700 million out of the project. It defies good decision making and shows that this government is focused on pet projects and not projects which can drive productivity or develop infrastructure from the best business case. The federal government already provided the bulk of funding for large infrastructure projects, so this needs to be protected and not raided by this government to pay for the Asset Recycling Fund. This Asset Recycling Fund must provide funds in addition to existing federal commitments. There must be new nation-building projects in road, rail and other nationally significant infrastructure, otherwise it is just recycling in truth.

We know we cannot trust the government on this. We have seen already the twisted priorities of the coalition government—the way they try to hide their cruel cuts to pensioners and ordinary Australians, pretending that taxes are not taxes really and that cuts to education and health are not truly cuts. They use miserable words to describe their short-sightedness, but the country cannot afford those cuts and cannot afford cuts to infrastructure. As a start, they are taking $2.4 billion from the Building Australia Fund and $3.5 billion from the Education Investment Fund for the Asset Recycling Fund. What they effectively are doing is shuffling the money out of one area into another, claiming that it is new money. It is not new money from infrastructure; it is already there.

On top of that, they are also taking cuts from local government which are going to hurt local infrastructure. I know in Queensland lots of local councils are going to be affected. Recently, I visited Councillor Jim Madden of Somerset Regional Council to highlight this fact because they face a stark choice: either they have to raise rates or they have to cut their budget, cut roads spending and cut infrastructure spending. What sort of choice is that? It is not only blame shifting; it is also show cost shifting coming out of a hard budget. The Abbott government has broken its promise to regional Australia. Mr Warren Truss said before the budget:

To ignore regional Australia’s need for investment and growth is to turn our backs on the opportunities for the future.

In just two weeks, the Abbott government have savaged local government by ripping a billion in funding from local government, cutting into the financial assistance grants. Local governments rely on those grants to fund local roads and infrastructure. The government have created an Asset Recycling Fund. They want to gold plate highways but they will end up with broken roads because councils will be starved of funds to meet their obligations in investing in a road network. It is about a road network not about a gold plated highway. If it fails at the last mile, at the shopfront, at the small business or at the home, it is not a road network. These cuts will disproportionately affect rural communities, pushing some of them to the brink. These cruel cuts will mean more roads that go nowhere and bridges to nowhere as real communities suffer. These are contradictory forces at play and it is not surprising when you look at the twisted priorities the government have.

The decision to sell assets needs to be made by the state government after sober analysis. Liberal state governments have been seduced by the short-term incentives of the political cycle to sell assets. The additional 15 per cent proposed by the federal government does skew the incentives of the state governments and encourage sales of assets. It pushes the sale of assets in the short-term interest without looking at the longer term national interest. The federal government needs to play—and it has been absent from the field—a leading role with states the territories to encourage decisions to be made in the national interest. Although asset recycling is not without its merits, in some cases it is not always the answer. The answer for many state-owned assets is better and more transparent management. The erosion of freedom of information under this government and cuts to information-gathering organisations which make proper decision-making possible are working against these outcomes of openness and transparency.

This government hugs the dark. It prefers the shadows. It does not like transparency. Why? Because it does not like the truth about its decisions to be exposed. They are bad decisions by a government which wants to take cruel cuts. It takes cruel cuts to the Australian Bureau of Statistics. These are also quite concerning. This government does not want to know about that state of its books. It does not suit its ideological views. ABS cuts hurt private businesses just as much, especially small business which does not have the resources to forecast or run surveys and the lack of information means that when you remove information from the availability of the pool, where do get decision making? You end up with poor decision making without the charter and all you get is it—cash created by the federal government for the states. The government seems to be wilfully blind to this prospect. That is the kindest I could say about it. I could say it is deliberately doing it but I think ultimately it is literally blind to the consequences.

We have seen the forecasts and estimates for asset sales and infrastructure projects. Again, they seem to be very overly optimistic. We will get an opportunity in the Senate to hold this government to account on their forecasts. Let us not hear from those on the other side that, 'We didn't quite get that right. Our methodology was flawed. We missed some opportunity.' In this instance they own these figures. An article in the Oxford Review of Economic Policy found that 50 per cent of traffic forecasts in infrastructure projects were wrong by at least 20 per cent. If we further reduce the quality of data and research, those estimates are going to get more and more difficult. We need to consider the facts of asset sales and not some ideological driven crusade by those opposite—although they do seem to like Don Quixote.

The Australian Competition and Consumer Commission is warning the government that it needs to be wary of asset sales. Speaking to the Committee for Economic Development of Australia conference, Rod Sims, the chair of the ACCC, warns about privatisation and the perverse incentives present for the state governments. He said:

Short-term gains of maximising the up-front price received by the government is short-term gain increased and encouraged by the federal government and will have long-term costs in reduced competition and higher costs to consumers and damage to Australian businesses.

I think the quote from Mr Sims says it all:

The ACCC is becoming aware of an increasing level of concern among businesses that are most directly affected by the sale of upstream monopoly assets to downstream competitors. The trade-off here is short-sighted and the costs in terms of productivity and investment are likely to be significant

He also said:

Privatising in ways that limit competition in order to maximise the sale proceeds is the wrong way.

The government's rush to sell off assets without examining the long-term consequences means that we pay a high price for this asset fire sale, and businesses and ordinary consumers footing the bill will suffer. Instead of investing in infrastructure with a strong business case, the states and federal government are investing in public relations. You do not have to look far to find a good example: the Queensland government has spent $6 million on an advertising campaign instead of investing in the analysis necessary for the business case for asset recycling. Instead of showing the business case for asset sales, they are being offered websites, TV ads and glib one-liners to support why they should sell assets. This shows utter contempt for Queenslanders. If there is a business case, which includes the long-term impacts of asset sales, show it to the people, be transparent about it, demonstrate why it is necessary rather than a one-word slogan.

Labor is seeking, as I indicated earlier, two amendments to improve this bill and increase the transparency and openness of the process of approving infrastructure projects. The first of our amendments allows for the tabling of a disallowable instrument for each privatisation reinvestment transaction so that, if the government is not going to cast light on their projects, then the Senate can have a look at the projects. They can be properly scrutinised by parliament.

Second, our amendments would require projects to be assessed by Infrastructure Australia and be deemed productivity enhancing. That is what infrastructure, building for the future, is all about: making sure we have got assets that will increase our productivity now and into the future. Projects, including an estimate of the productivity gain from the project, should also be published.

This cost-benefit analysis must include the true cost of these sales. What are the lost revenues to government? What is the effect on competition? What is the effect on consumers? What is the effect on jobs? What is the effect for rural communities? Is the sale just short-term political expediency or is it in the nation's interest?

You have to ask: why is the federal government afraid of these questions? They want to hide scrutiny. They don't want these questions answered, and it leaves a huge question mark about the motives of this government when it turns to asset sales.

The threat to assets is most grave in Queensland. The debt and deficit falsehood set by Canberra has spread to governments like the Newman government but sometimes it gets lost in translation. The Newman government has been witless enough to take up the Abbott government's debt rhetoric at face value. They have promised that asset sales will be used to reduce debts and not to recycle assets. The combined ineptness of the Abbott and Newman governments means Queenslanders will suffer twice. Queenslanders will be paying their taxes to provide a bounty, effectively, to the ideologically driven sale of other state assets while Queensland stock of infrastructure will deteriorate and not be replaced.

The Toowoomba Second Range Crossing Project I have taken a very special interest in—there are many in Queensland, who live on the other side of the range, who also follow this with a passion. I hope that some of the light I have attempted to shine on this project will mean an end to the waste and prevarication from the Abbott government on this project. I am concerned that this three-year project as detailed in their own documents has been pushed out to five years. Every year's delay costs $100 million, but don't take my word for it; take Mr Truss's own figures. These accounting tricks, costs pushed out beyond the budget forward estimates, have real costs for ordinary Australians.

This is infrastructure on the never-never by a government that is using all the tricks in the book to try to achieve a smoke and mirrors on infrastructure.

1:28 pm

Photo of Anne McEwenAnne McEwen (SA, Australian Labor Party) Share this | | Hansard source

On behalf of Senator Xenophon, I seek leave to incorporate his speech on this bill.

Leave granted.

The speeches read as follows—

I take this opportunity to express my serious concerns about the impact and long-term consequences of the privatisation of state assets.

I acknowledge the intent of this bill is to encourage states to invest in infrastructure projects by way of incentive payments from the Commonwealth upon the sale of state assets. I question whether this plan is short sighted and not in the interests of Australia's competition policy.

In June this year Mr Rod Sims, Chairman of the Australian Competition and Consumer Commission expressed concerns that competition has taken a back seat in the recent wave of state-owned asset sales.

He pointed to the ACCC's recent rejection of AGL's application to acquire Macquarie Generation, Australia's largest electricity generator, as an example. In a media release dated 4 March 2014, Mr Sims said:

The proposed acquisition would result in the largest source of generation capacity in NSW being owned by one of the three largest retailers in NSW. Indeed, with this acquisition, the three largest retailers in NSW would own a combined share of 70 to 80 per cent of electricity generation capacity or output. This is likely to raise barriers to entry and expansion for other electricity retailers in NSW and therefore reduce competition compared to the situation if the proposed acquisition does not proceed.

The Australian Competition Tribunal approved AGL's application to acquire Macquarie Generation's assets, despite the ACCC's warnings that 'the proposed acquisition is likely to mean that consumers will ultimately pay more for electricity, receive lower quality service and be offered less choice.'

Time will tell whether the ACCC's warnings should have been heeded. Unfortunately it will be consumers who will be the first to feel the pain if the ACCC's predictions about electricity price rises are correct.

Mr Sims has also stressed that it is vital state governments must be 'vigilant in setting up competitive structures when they privatise their assets.' The recent sales of some ports have seen the ACCC receive complaints that these ports have been privatised without appropriate open access regimes.

As a member of the South Australian parliament in the late 1990s, I vehemently opposed the privatisation of the then Electricity Trust of South Australia (ETSA). Not only because it was a broken promise of the then Olsen government but because it was also a bad deal for consumers.

I believe the privatisation of ETSA was structured in such a way as to maximise value of the state's assets, thereby reducing a greater amount of state debt (a legacy of the former Labor State Government), but by doing so it shifted the burden onto households and businesses with dramatically higher power prices post-privatisation. I received very sound advice back in the late 1990s from Danny Price, then at London Economics, who is now Managing Director of Frontier Economics. He was vilified by the state Liberal government at the time for his modelling and predictions of power price rises with the privatisation model adopted, and sadly his predictions were uncannily accurate. I should add, the accuracy of his modelling and predictions has not changed over the years given his concerns over the carbon tax and the CPRS legislation introduced by the former government.

If all the privatisation is doing is shifting public debt onto households and businesses then it seems to be a foolish and counterproductive exercise.

However, in the event that this bill does pass, I would like to see it passed with material improvements and for that reason I put on notice I support the amendments proposed by the opposition in this regard.

If taxpayer money is being used to encourage the privatisation of state assets, we have a duty to ensure the public—especially, families and small businesses—do not end up footing the bill by way of higher prices.

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

I thank all senators who have contributed to this debate, in particular, Senator Conroy, for his very constructive contribution. The Asset Recycling Fund Bill 2014 and consequential amendments establish a new fund as a vehicle for providing financial assistance and incentives to states and territories to invest in infrastructure. A new fund is necessary to support the government's asset recycling initiative, a key initiative, that will encourage the states and territories to sell existing assets and reinvest in new infrastructure that contributes to a more prosperous economy.

Payments from the Asset Recycling Fund will also be used to fund nation-building infrastructure and other National Partnership agreements payments to other bodies will be administered by the Department of Infrastructure and Regional Development and will support important local initiatives such as the Roads to Recovery program in the usual way.

Establishing a new fund to support the government's infrastructure package is sound economic policy. It allows funds being committed now to be invested so that more is available when payments become due. Entrusting the Asset Recycling Fund to the Future Fund Board of Guardians will maximise the growth of assets. The board has a proven track record in managing assets on behalf of the taxpayer. It has grown the Future Fund from around $64 billion in 2006, when the previous government invested budget surpluses into the Future Fund, to over $97 billion by the end of March—in fact, at last count, it had exceeded $100 billion.

The government is committed to the new fund, which will be established with $5.9 billion funded by an amount of uncommitted funds from the Education Investment Fund and the Building Australia Fund that have not been allocated to approved projects. The government will make further contributions following the successful privatisation of Medibank Private; it has also said that it is open to committing proceeds from other future asset sales. Finally, the Asset Recycling Fund is an essential element of the government's infrastructure package announced in the 2014-15 budget to support economic growth. I recommend that it be supported by the Senate.

Question agreed to.

Bill read a second time.