Queensland Economic Advocacy Solutions

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Clever usage of a PPP to fund Brisbane's Cross River Rail

Confirmation that Brisbane's Cross River Rail will use a Public Private Partnership (PPP) is a timely reminder that there are alternative funding options on the table for infrastructure projects in Queensland outside of Government pockets. 

The announcement that a PPP with availability payments will be used to construct the underground elements of CRR including the tunnel and stations should be welcomed. This option is an internationally proven means of delivering large greenfield projects that are unable to directly collect revenue from the public.

The PPP to be used is anticipated to be a long-term contract (DBFOM: design, build, finance, operate and maintain) between the State Government and a private sector consortium whereby the State makes annual payments across the project’s lifecycle for the ‘availability’ of the underground elements as delivered by the consortium.

The beauty about this arrangement is that the State Government’s payment not only provides for the tunnel’s physical availability but also other elements including performance, safety and quality of the CRR’s five stations for example.

The State Government has highlighted that it will shift risk to the private sector which is indeed correct but it is really a solution offering cashflow.  Payments typically only begin at the start of the project’s operation incentivising the consortium to provide faster delivery.  In short, the State Government gets the tunnel and stations built for them and taxpayers pay for this into the longer term.

However, the one thing that may still stymie this project is the sovereign risk associated around whether it has bi-partisan support from the Opposition and indeed if the State Government can follow through with its strong intent.  The fact is major projects in Queensland have got a bad rap at present and we only need to look at the ASF proposal for the Gold Coast as an example.

I hope this project does get built as its economic contribution will be defining with 1,500 jobs created and a net economic contribution (NPV) of nearly $1.9 billion. However my previous views regarding CRR crowding out the bigger picture remain.   Please see my editorial in the Couriermail CRR: Clouding the bigger picture or a glowing example?

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