Following an Infrastructure Australia call for governments to fund infrastructure through asset sales, the IPWEA has cautioned local government that this only one of many options available to them.
Infrastructure Australia has identified more than $100 billion worth of government-owned assets that could potentially go towards funding new infrastructure.
The organisation has called on all levels of government to consider selling their viable assets in a report released in late October, saying the cost of operating and maintaining many of these assets was outweighing any community benefits.
“Governments around Australia need to explore new methods of financing and developing the infrastructure needed to improve national productivity,” said Infrastructure Australia’s National Infrastructure Coordinator Michael Deegan.
“If we are to build on and sustain the living standards of all Australians, governments need to recognise that they cannot bridge the current funding gap.”
However, IPWEA CEO Chris Champion says that governments at all levels should consider all the options available to them – not only asset sales.
“Various financial sustainability inquiries have highlighted that local governments Australia-wide typically have very low levels of debt relative to the scale and nature of their responsibilities,” he said.
“Many may have the capacity to improve their service level performance by making better use of debt. However responsibility for the problem and its solution doesn’t rest only with local governments.”
“Legislative requirements and guidance material issued by some state departments responsible for administering local government sectors, auditors and consultants more familiar with private sector financial environments, have all helped create a perception within local government that it is best to minimise or even have zero debt.
“A downside of this can mean not renewing assets when affordable and optimal to do so.”
Champion said the IPWEA is working with the Australian Centre of Excellence for Local Government (ACELG) to commission a working paper on the appropriate use of debt by local governments to fund infrastructure. This will also explore legislative frameworks and guidance material that currently influences decisions and attitudes regarding debt.
Deegan also acknowledge that privatisation of public assets was often a controversial topic in the community.
“There is strong evidence that those concerns can be addressed through appropriate regulatory structures that maintain service levels, provide pricing protection to consumers and environmental standards,” he said.
“In addition, social objectives can be effectively and transparently provided for through community service obligations.”