Australia Infrastructure Report Q4 2008

The first Australian federal budget (20082009) that the new government of Prime Minister Kevin Rudd will submit to the parliament allocates AUD41bn (US$38.2bn) for infrastructure spending on transport, utilities, telecoms, healthcare and education infrastructure.

Under the Auslink programme, the Australian government is planning to embark on the second stage of an infrastructure upgrade. According to a white paper detailing the program, the government announced that AUD12.7bn worth of road and rail projects would be funded between 2004 and 2009 in the first stage of Auslink. In the second stage of the program, scheduled for 2009 to 2014, AUD22.2bn has been budgeted for the improvements.

The failure of Australia's New South Wales government to reach a consensus on the divestment of the state's power assets has led to the indefinite postponement of the muchanticipated privatisation.

Although the provincial government announced a watereddown version of the divestment, excluding the most valuable assets, we do not think this will entice investors (August 2008).

Infrastructure Australia, the advisory council set up by the government to coordinate infrastructure development in the country, has reportedly received draft new guidelines by the Council of Australian Governments (CoAG) for a review and update of the PublicPrivate Partnership (PPP) regime. The guidelines submitted for discussion include a clause for a preferred risk sharing agreement and the simplification of procurement processes (August 2008).

In BMI's Q308 Australia Infrastructure Report we forecast that the construction sector real growth will be 2.07% in 2008 and will average 1.19% annually over the period 2008 and 2012.

Also this quarter, we introduce two new company profiles. We take a look at WorleyParsons, an Australiadomiciled multinational that specialises in infrastructure projects in the water, transport, power and hydrocarbon sectors. The company generated a net profit of AUD343.9mn/US$282mn in the 12 months to the end of June 2008 (a rise of 53% yearonyear (yoy) in local currency terms) and it expects a further increase earnings in 08/09. We also profile Maunsell ANZA, which operates under the US engineering giant AECOM and maintains infrastructure capabilities in transport construction, buildings, power and mineral projects.