Victoria will continue to use PPPs to finance new infrastructure, but new models will need to be devised, Premier Daniel Andrews said on Wednesday (15 August).
He said he would announce a big transport building program from now until the 24 November state election, but it appears privatisations are not on the agenda to fund it.
“Labor will undertake an investment in road and rail the likes of which has never been seen in the history of our state and our nation,” he told a lunchtime address to the Committee for Economic Development in Australia in Melbourne. “A building program that will stretch over decades and create new industries.”
But he singled out privatised electricity networks as the cause of a 20% rise in electricity tariffs to consumers in the past year. “Privatisation and deregulation has gone too far. We will tip the scales back in favour of the consumer, not the corporation,” he said, pointing to big profit announcements at AGL and EnergyAustralia over the past two weeks.
In response to later questions, however, he said partnerships with the private sector are the best way to get major projects built.
“If you want to get the biggest infrastructure agenda built than has ever been the case – in hospitals, in road, in rail and in the city, suburbs and into big regional centres and small country towns, you need partners to get that done,” he said.
However, he said the risk sharing arrangements in PPPs would need to change, in part due to new accounting standards coming in that will mean the state will need to recognise the debt in PPPs at the start of a project’s life rather than when it is handed back to the state.
“The notion that you could just wholesale, transfer risk off our balance sheet to someone else’s – that’s just not the world we are living in,” Andrews added.
“It is a different PPP product and market today than perhaps it has ever been. [But] that just means we have to respond to it. To be even more clever in the way that we develop those partnerships around debt and equity, funding and financing, and [being aware of] the difference between those.”
He said he will rely on advisers, financiers and construction companies to come up with “innovative” new approaches to PPPs. He would help by providing enough projects to justify that work.
“If you have got enough projects in the pipeline, if you have got a big order book then I am constantly pleased to note that industry will rise to that challenge – in terms of innovation in design, in how you procure in order to get the project done.”