On May 12, the Australian government announced a stimulus plan for the spending AU$22 billion (US$17 billion) on major infrastructure works across the nation, as part of its latest efforts to pump prime demand in the domestic economy.
The stimulus package, issued alongside the annual budget, is the third set of measures unleashed by the federal government since October 2008, and forms part of the government party's long-standing pledge to upgrade key infrastructure projects.
At the center of the new package will be road, rail and ports in Australia's principal cities of Melbourne, Sydney, Brisbane, Adelaide, Perth and the Gold Coast. The government also plans to spend money on clean energy, universities, and hospitals and the previously announced national broadband network.
The spending list gives priority of AU$8.5 billion for rail and roads, AU$3.5 billion for clean energy, AU$2.6 billion for universities, AU$3.2 billion for hospitals and AU$4.7 billion for the broadband network.
In addition, the new package also covers 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 AU$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 AU$1 billion. But the government is betting on substantial private sector backing for the project, which is estimated to cost AU$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 AU$1.8 billion Karara iron ore project 225 kilometers east of Geraldton.
Construction for Oakajee is expected to start from next year. Other big-ticket projects include the AU$50 million expansion of Darwin port to take larger ships and extra rail infrastructure. This comes on top of AU$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 percent 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.
US$1 = AU$1.30061