Infrastructure funding alternatives canvassed
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A reluctance to commit to infrastructure investment may prompt the Federal Government to look to alternatives such as bonds to fund future projects.
According to James Lonie, partner at Henry Davis York Lawyers, the Government seems more likely to introduce infrastructure bonds to plug the gap than mandate investment from superannuation funds.
“I think they’ll make treasury bonds or infrastructure bonds more readily available to individuals (instead of just for institutions) and make the terms so attractive (Government backed) that, one, people will want to invest in them and, two, advisers will have to recommend diversification into them for at least part of the portfolio of a superannuant,” Lonie said.
He noted that while the Government would probably wish to mandate such investment, “politically it would be seen as too left wing and create a ‘moral hazard’”.
“We might see the Federal Government being more creative with the types of instruments they offer, especially bonds with a fixed return but linked to changes in the consumer price index,” Lonie said.
The suggestion of compulsory investment from superannuation funds into infrastructure canvassed by the Cooper Review was universally condemned in industry submissions.
However, the Minister for Infrastructure, Anthony Albanese, said the Government had not canvassed the possibility of a mandate, but it did not rule out other policy mechanisms to attract greater involvement in infrastructure from the private sector.
“We await the advice in terms of the approach to the Henry Review and other future financing options,” he said. “But it is important, I think, that we look at all of the mechanisms available to encourage future investment given the constraints which are there on the public sector.”
Earlier this year the Government flagged the use of infrastructure bonds to finance a large portion of the national broadband network, but it has not indicated whether this is the first of many such ventures.
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