National road prospects are looking good...

National road prospects are looking good - transport projects get major boost

Tenders for road and rail projects should get a major boost in the 2004-05 Federal Budget, when the first five year AusLink National Land Transport Plan is unveiled, accompanied by an AusLink white paper.

This follows the formation of the National Transport Commission, announced on January 15, 2004 as the successor body to the roads-only National Road Transport Commission. The advent of the NTC is the end result of a sustained hand-to-hand political battle between the road and rail lobbies. It represents a victory for those who argue that road and rail spending should be considered together.

For construction groups, whether specific projects are for export roads, highway widening or under city tunnels, or for sections of dedicated freight rail line to relieve inner city bottlenecks, it will all translate to more construction tenders.

As a tantalising hors d'oeuvre to the main event, the Federal Government on January 22 decided to extend its Roads for Recovery program for a further four years, ensuring a decentralised flow of mostly smaller road-building projects around the nation.

Local councils, which benefited heavily from the earlier Roads to Recovery funding, were starting to get toey at the prospect of the revenue flow running out by June this year. So the extension announcement went down well in the offices of local government mayors and council managers.

Rolling over Roads to Recovery means the Federal Government will provide local councils with $1.2 billion over four years, a useful $300 million a year to be widely distributed around local roads, as distinct from the big one-off national highway jobs.

Of the total $300 million, $200 million will be distributed under the current formula, for the time being at least. The remaining $100 million will be distributed at the discretion of John Anderson, Minister for Transport and Regional Services, and Senator Ian Campbell, Minister for Local Government, Territories and Roads.

This will be for strategic projects councils can't manage on their own, such as fixing up a tourist road running through several council areas, or upgrading roads for a developing timber plantation which will bring more timber trucks onto local roads.

In a related move, the Federal Government has canned its ineffectual Fuel Sales Grants Scheme, which was basically disappearing into the cash accounts of country fuel sale operators, and redirected the funds directly into roads construction. This will further increase the flow of forthcoming tender opportunities.

The fuel subsidy, designed to mitigate the impact of introduction of GST taxes in rural and regional areas, was an effort to cut petrol pump prices outside the big cities. The benefits, if any, were all but invisible. This broke the cardinal rule of government price subsidies, that the effects of any payment should be clearly apparent to a grateful electorate.

The Federal Government has now obviously calculated that it will generate more political goodwill by putting the money straight into a series of visible road extensions, widenings and carriageway improvements in the bush. The savings from terminating the Fuel Sales Grants Scheme from July 1st next year, $265 million in the first year, will be diverted into transport infrastructure for outer metropolitan, rural and remote areas.

Add in about $460 million earmarked for roads from general Federal grants of $1.5 billion given annually to states and territories, for on-passing to local government, and the support for local council road expenditures is not far short of the $2 billion mark.

In addition, there are some tantalising big road construction projects coming up. Bids for Melbourne's $1.8 billion Mitcham-Frankston Freeway are expected to close in late April, with Sydney's M4 East Leichhardt to Homebush link in the offing. In Brisbane a proposal is for a toll road tunnel passing under the Storey Bridge, to bypass the central city area.

It looks like 2004 should be a good year for tenders for freeways, national highways, local government links and roads in general.


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Christopher Jay is a writer for the Australian Financial Review. He is a regular contributor to its Tenderwatch column in the Friday Government & Business Section.

As published in TenderSearch Magazine - Autumn/Winter 04 Issue