Infrastructure budget delivers for Western Sydney

Infrastructure budget delivers for Western Sydney
Infrastructure budget delivers for Western Sydney

OK, let's see how short I can keep this post, rather than duplicate some excellent summaries of last night's budget which have already been well covered elsewhere.

In short, what I was expecting to see was tax levies to fund some hefty infrastructure spending, and that didn't prove to be wildly wide of the mark.

The budget now forecasts the deficit to be shifted back to surplus over the coming few years ahead, ongoing steady economic growth and a moderate rise in unemployment.

One of the big reasons for the expected infrastructure spend is explained by this chart of actual versus expected mining capital expenditure from the ABS:

Chart: Financial year actual and expected expenditure- Mining Capital Expenditure
Source: ABS

Note how mining investment is expected to fall by a punchy 25% this year from around $100 billion to $75 billion, a fall of about $25 billion in just one financial year.

That's a fairly hefty hole in economic activity which needs to be plugged.

And Hockey's budget has delivered, creating an $11.6 billion infrastructure growth package  to boost total infrastructure investment by Commonwealth, state and local governments as well as the private sector, to over $125 billion by 2019-20.

This is expected to see trucks moving in a matter of months.


"The Infrastructure Growth Package provides an additional $11.6 billion for infrastructure. This will bring the government’s investment to $50 billion by 2019-20 which, combined with State and private sector funding, will catalyse over $125 billion of additional infrastructure investment nationwide. 

"The government has committed an additional $3.7 billion to upgrade national highways and other key roads and is delivering vital infrastructure through the Western Sydney. 

"The Badgerys Creek airport development is expected to create 35,000 jobs by 2035, increasing to 60,000 jobs over time. By 2060, the new airport has the potential to drive an increase in Australia’s economic output to almost $24 billion."

There's some big stuff in here for roads, rail and ports, so transport and construction stocks are some to look at in the month ahead (particularly for me, since I am entering the infamous Sydney Morning Herald shares race later today).

Western Sydney will be a huge beneficiary of the budget with the Connex project, a second airport and a huge expenditure on road upgrades.

As to how it will all be paid for, there are plenty of cutbacks to welfare which will be unpopular, to foreign aid which will be ignored and to medical benefits (possible a negative for some healthcare stocks, particularly PRY which benefits from government revenue streams).

Most notably tax payers who earn $180,000 will now pay an extra two cents in the dollar on their top marginal rate bringing the top rate to an eye-watering 48.5%.

I doubt this will do much to discourage top-bracket taxpayers from looking towards negatively gearing investment property as a means of reducing their tax bill, the negative gearing rules of course once again remaining utterly unmentioned in the budget.

You can visit AllenWargent property buyers (London, Sydney) or Pete's blog.

His new book 'Four Green Houses and a Red Hotel' is out now.

Photo courtesy of Flickr/Creative Commons.

An original version of this article stated the mining investment figures in millions instead of billions.

Pete Wargent

Pete Wargent

Pete Wargent is the co-founder of, offering affordable homebuying assistance to all Australians, and a best-selling author and blogger.

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