oakajee overlooked in state budget, page-10

Billions provided to clear way for more trade

Eric Johnston

May 14, 2009

EXPANDING Australia's ports to prevent bottlenecks in iron ore and bulk commodity exports has gained priority in the Federal Government's $8.5 billion infrastructure plan.

The move is part of a Government push to use its own balance sheet to help industries most affected by the global economic downturn.

"What we are doing is investing in projects to create jobs today to build the infrastructure Australia needs for tomorrow," Infrastructure Minister Anthony Albanese said.

"It will lead to an increase in productivity."

The program, which also extends to road and rail development, represents a boom for financiers such as Macquarie Group and public-private partnership specialist Royal Bank of Scotland - previously known as ABN Amro Australia. But one notable absence from any list of potential financiers for infrastructure was funds manager Babcock & Brown, which was placed into administration late last year.

The program, which includes $4.6 billion in rail spending and $3.4 billion in roadworks will back building and engineering groups such as Leighton Holdings and Downer EDI and basic materials suppliers including BlueScope Steel, helping offset a sharp slowdown in their forward books from the private sector.

Even with the prospect of a flood of government money, the initiatives come amid a backdrop of limited investor appetite for infrastructure financing.

Mr Albanese said last year's budget had set in place "a coherent process with integrity attached to it to identify priority projects".

"We've taken that advice from Infrastructure Australia and we've acted."

Other winners include the building materials companies, including Boral, CSR and Orica, which continued to receive direct benefit from the extension of the first home owners grant.

While the financial crisis has dampened the pace of global trade, the Government is pushing ahead with plans to boost capacity across key export sites, including providing federal backing for the development of Oakajee deepwater port near Geraldton in Western Australia to add export capacity for iron ore producers.

The budget sets aside $339 million in seed funding for development of Oakajee. Combined with existing West Australia Government commitments, total public investment in the project is now in excess of $1 billion. But the Government is betting on substantial private sector backing for the project, which is estimated to cost $4 billion.

A private joint venture between Perth's Murchison Metals and Japan's Mitsubishi has already been awarded a tender to develop the project.

The planned port is expected to provide a boost for junior and mid-sized iron ore producers in the region, allowing them to get their product to export markets. Miners in the region include Murchison Metals, Sinosteel's Midwest Corporation and Gindablie, which is planning the $1.8 billion Karara iron ore project 225 kilometres east of Geraldton.

Construction for Oakajee is expected to start from next year. Other big-ticket projects include $50 million expanding Darwin's port to take larger ships and extra rail infrastructure. This comes on top of $450 million already committed under the Infrastructure Australia fund to improve road access for Sydney export facilities, including Port Botany.

Other changes set to boost the resource sector include the extension by a year of the 150 per cent tax deduction for frontier offshore exploration.

This measure is aimed at encouraging exploration in areas where chances of finding large oilfields are higher, to offset maturing domestic fields.