29th March, 2022

Federal Budget 2022: Government spends on infrastructure, mining and regions

Tonight’s Budget included a record spend by the Federal Government on infrastructure, with an additional $17.9 billion committed to rail and road projects across the nation.

In his speech tonight, Treasurer Josh Frydenberg announced what he called an “unprecedented regional investment package that includes transformational investments in agriculture, infrastructure and energy.”

While every State and Territory in Australia will benefit from the cash splash, the Government has also attracted criticism for allocating the bulk of spending to seats with the smallest marginal majority rather than those endorsed as priorities by Infrastructure Australia.

3 key spending initiatives:

  • A new $7.4 billion investment in more dams and water projects to improve vital water security and expand irrigation.
  • A new $2 billion regional accelerator program to invest in skills, education infrastructure, export market development and supply chain resilience for our regions, and
  • A new $1.3 billion telecommunications package to expand mobile coverage across 8,000km of regional transport routes.

Government announcements not just for ‘big end of town’

While the work of improving these sectors does create jobs around the planning and implementation of those projects, the effectiveness of infrastructure spending on the economy on individual businesses’ bottom lines is often a little harder to measure; but usually has a flow on effect to local businesses and contractors in each area as tenders are won by local businesses.

To help smaller contractors compete against larger bidders for these tenders, it has been reported that government departments are being told to break up major projects into smaller, more manageable components for local trades.

The Finance Minister, Simon Birmingham, said earlier today that the Government was committed to giving Australian contractors “the maximum opportunity” to win work by “unbundling major projects in ways that maximise efficiency for taxpayers, local job opportunities and the potential growth of Aussie businesses.”

Transport and roads projects

We can see from the key commitments funded in the 2022–23 Budget that road and rail upgrades are a significant focus for the Government.

When it comes to business bottom lines, perhaps the most obvious potential of this type of infrastructure investment is that road links and improvements in transport connectivity across Australia have the potential to reduce business transport costs, thus lowering the overall costs of supply and production.

The big ticket items include:

  • $3.1 billion for the Melbourne Intermodal Terminals, to take trucks off the road and meet the freight task of the nation
  • $2.7 billion for Faster Rail projects from Brisbane to the Sunshine Coast and Brisbane to the Gold Coast in Queensland
  • $2.3 billion for the North-South Corridor in South Australia
  • $441.2 million for the METRONET in Western Australia

The Government’s investment in this Budget also includes more than $500 million going toward local councils to deliver priority projects, and $880 million to better connect regional Australia with ports, airports and other transport hubs.

Road building and maintenance can enable Australian businesses to operate more efficiently and withstand overall supply chain issues when it comes to internal moveability.

In a wider sense, access improvements and reduced travel costs may also lead to the potential employment catchment area for businesses being expanded, which could ease recruitment problems by expanding the potential labour pool.

$250 million for manufacturing over two years

In his budget speech, Treasurer Josh Frydenberg said that, “events in Ukraine have been a powerful reminder that we must increase our self-reliance,” and that a “modern resilient manufacturing sector is part of our plan for a stronger future.”

In line with this, the Federal Budget has allocated an extra $250 million over the next two years to boost the government’s existing Modern Manufacturing Initiative (MMI), designed to support “high-impact” projects and boost local manufacturing capabilities in six key industries: resources technology and critical minerals processing; food and beverage; medical products; recycling and clean energy; defence; and space.

$243 million across four key mining projects

A sector not really addressed in the Treasurer’s speech is Australia’s critical mineral sector, which has been a huge winner in this year’s federal budget with more than $200 million allocated for manufacturing projects.

The critical minerals projects will form part of the federal government’s $1.3 billion modern manufacturing initiative.

Critical minerals, such as nickel, magnesium, and other rare-earth elements, are heavily used in the manufacture of technology such as mobile phones, electric cars and solar panels.

The Government has allocated $243 million across four key projects, all designed to help address the current sector dominance of China, who are responsible for between 70 and 80 per cent of critical mineral production.

Farming investments to deliver $100 billion in production by 2030

The Government has committed to provide a further $600 million to help Australian farmers reach $100 billion in agricultural production by 2030, including a further $5.4 billion in funding to build the Hells Gates Dam, set to be Queensland’s largest dam, four times as big as Sydney Harbour.

Located 120 kilometres north-west of Townsville, it is predicted that the dam will boost economic growth across the region and open up new agricultural export opportunities as well as safeguard the region’s long term water security.

In addition to the dam investment, funding will be available for new and upgraded infrastructure to help farmers secure their business and reach new export markets, including:

  • $27.3 million for agricultural biodiversity stewardship
  • $27.4 million for agricultural shows and support of large trade events that promote agribusiness
  • $20.1 million to strengthen on-farm biosecurity through livestock traceability
  • $61.6 million to improve biosecurity capabilities, infrastructure and risk management across Northern Australia

Trade and export opportunities

When it comes to international trading with Asia and the North, the Northern Territory’s proximity to natural resources and transport lines to Asia means it has the potential to be an industrial and energy export powerhouse.

Centered around the industrial precinct of Darwin’s Middle Arm, the Government will provide $2.6 billion for transformative infrastructure across the Northern Territory, which they hope will unlock new economic opportunities and position the region to be a top exporter to Asia.

Overall the 2022-2023 budget announcement has shown quite a shift in focus to bettering key supply chains across the country and enhancing export infrastructure which were both hit hard with the COVID-19 pandemic.

In addition, the critical minerals industry boost and the push towards modern manufacturing show fundamental changes in the strategic environment and the way the Government sees Australia’s approach to infrastructure moving forward.

Join She’s on the Money’s Victoria Devine in unpacking key announcements from this year’s Federal Budget with the help of ASBFEO’s Bruce Billson, MYOB’s Helen Lea and Madebox’s Samantha Finnegan in a webinar scheduled to occur at 3pm AEDT, Thursday 31 March. Hosted by MYOB, you can register to attend the webinar here.