The Federal Budget handed down last night (Tuesday 9 May) is a very exciting one for infrastructure spend and should create numerous opportunities for investors over the next few years and indeed decades, says Greg Goodsell, global equity strategist at 4D Infrastructure.
“The pipeline of new projects that may find their way to private investors in the future just got even bigger, and the boost they create for the economy should not be underestimated.
“Any sensible infrastructure investment, particularly in road or rail such as those announced by the Government, is going to be good for business productivity as it improves the essential ‘arteries’ of the economy, allowing business, and the economy more generally, to operate more smoothly, efficiently and productively.
“In addition, it creates strong investment opportunities as private sector funding will also be required to complete the projects. Listed infrastructure companies, which investors can hold in their portfolio, are set to benefit from these major projects.
“For instance, the $5.3 billion investment in Badgerys Creek Airport is great news for private infrastructure investors and potentially a fantastic project.
“Given the rate at which Sydney and Australia is growing there is no doubt this project is needed, and the scale of the project is enormous.
“By taking on the development and initial traffic risk, we believe the Government is performing exactly the role it should be in developing infrastructure projects that will be crucial to economic growth over the next 50 years.
“Ultimately we would expect ownership of this asset to find its way to the private infrastructure market just as all the other major airports in Australia have.
“When you include the new infrastructure that will be needed to service the airport (rail/road links) and the scope for those to be privately developed and or owned, the opportunity becomes even clearer.
“It will be a clear positive for business productivity, especially in terms of air freight services. Not only will the new airport be an important new export hub, conveniently located in western Sydney, it will also provide competition for Sydney Airport which essentially has a monopoly position on international air freight export from Sydney at present. A clear and direct competitor for Sydney Airport which is all good for cost competitiveness and improving business productivity.
“Another massive project, which will include private financing, is the inland rail connecting Brisbane with Melbourne, Adelaide and Perth, with $4.8 billion to be put forward by the government.
“When completed it would be truly nation building, completely reshaping towns en-route.
“A massive project like this would have a huge impact on the regions in touches because it will provide a new, close and cost effective gateway to market for goods produced in those regions.
“It would be expected that a project like the inland rail will see new business regions develop and evolve along the route which will be great for regional employment,” Mr Goodsell said.
4D Infrastructure is a boutique asset manager investing in listed infrastructure companies, globally. 4D aims to identify quality infrastructure companies, trading at or below fair value with sustainable, growing earnings combined with sustainable, growing dividends. The Fund is index agnostic as 4D look for the best opportunities globally in regions including North America, Europe, developed Asia and emerging markets.