The federal government will give the states a substantial financial incentive to sell assets and recycle the funds into new infrastructure, as part of its effort to boost jobs and productivity.
A fund will be set up – with a dollar figure announced in the May budget – to grant a state 15% of the assessed value of the asset being sold for capital recycling.
A state would be allowed to semi-privatise an asset if it wished, receiving the incentive for the part that was sold. But it would not receive the payment if it used the funds to pay down debt.
The Commonwealth plan, endorsed at a meeting of federal and state treasurers today, will only be available for transactions the Commonwealth agrees to before June 30, 2016. The incentive payments will be available only up to June 30, 2019.
Federal treasurer Joe Hockey, who described the agreement as “historic”, said the initiative aimed “to remove debilitating infrastructure bottlenecks, stimulate construction and drive real activity in the economy when it is most needed, as investment in the resources sector declines”.
“Infrastructure Australia estimates that at least $100 billion in commercial infrastructure assets are currently tied up on government balance sheets and could be sold,” Hockey said.
The recycling initiative is in addition to the Commonwealth’s existing commitments to infrastructure spending.
State treasurers joined Hockey in a “statement of shared intent”, saying the partnership could help overcome budgetary constraints that governments face to increase the pipeline of projects.
It would also give superannuation funds an opportunity to buy Australian assets.
Recognising the political sensitivities that can surround privatising state assets, the governments said: “This will require building community understanding of the benefits of recycling assets and support for the initiative, particularly in light of electoral commitments made in some states and territories”.
NSW and Queensland face elections next year and Victoria this year.
Hockey acknowledged some states would have more scope to benefit from the plan than others. Victoria, for example, has substantially privatised its assets.
The treasurers are still discussing the issue of lowering the A$1000 threshold for the payment of GST on goods bought from overseas on the internet. More work is to be done but Hockey said he wanted to bring the matter to a head this year.