AUSTRALIA - Australian opposition Labor Party frontbenchers have defended last month's proposal to use money from the Future Fund to finance an $A4.7bn broadband network scheme.
They claimed it would be a “joint venture” with the private sector, with anticipated profits to be returned to the fund.
The members' plan would mean a roll-out of high-speed broadband across the country within five years.
Money would be drawn by selling some of the remaining government-owned Telstra shares, which the ruling Liberal coalition government placed with the Future Fund.
Lindsay Tanner MP, shadow finance secretary, said: "What we would be doing is transferring one government-owned telecommunications asst to another government-owned telecommunications asset."
The anticipated profits will be returned to the Future Fund, and dynamic gains in the economy from that investment in the long term will produce higher economic growth and higher government revenues
and higher surpluses to potentially be contributed tothe future fund.”
As a mandate, the Future Fund is specifically prohibited in its founding legislation from making direct investments in infrastructure, but is allowed to invest in vehicles such as joint ventures.
At the time it was announced, the ruling Liberal party called the proposal a “smash and grab raid”, but Tanner said that Labor was committed to ensuring that the fund would receive the full $140bn allocation by 2020, as stipulated in the Future Fund Act.
“The positions we’ve taken are premised on a commitment that we will guarantee the Future Fund will meet its targets,” Tanner said. “That won’t be jeopardised.”
Reaction from the finance community has been cautious thus far. The Future Fund itself refused to comment, with a spokeswoman saying the fund was carrying on, “business as usual”. Watson Wyatt, the investment consultant to the Future Fund also declined to comment.
David Holston, executive director of JANA Investment Advisers, who advises clients on infrastructure investments, said that should Labor be elected and go ahead with this policy, the price paid or cost of the investment in infrastructure projects would be key to its investment success.
“It all depends on the price paid for the project, in relation to what return can be generated,” he noted.
“A lot of players are going to buy infrastructure assets and pay too much given that many of these are underpinned by regulated or moderate yields. The underlying key is the purchase price.
“Governments need to build or support the building of infrastructure… Now, should the government directly be investors? Probably not – the tide has moved out from that, and governments are not necessarily going to have the expertise to build projects themselves.”
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