The claim

Adelaide is experiencing growing pains, and ahead of the March 17 state election both sides are promising to tackle congestion. But how will they pay for it? And what role should the Commonwealth play?



Labor's federal infrastructure spokesman Anthony Albanese has weighed in, accusing the Turnbull Government of "ripping off" South Australia on infrastructure by shifting funding to other states.



Mr Albanese said the Commonwealth should be investing in public transport to stop traffic congestion in Adelaide acting as a hand brake on growth and eroding the city's quality of life.



"The Turnbull Government will slash South Australia's share of its infrastructure grants to a paltry 2 per cent in coming years, despite the state being home to 7 per cent of the national population," Mr Albanese said in a press release.



Is South Australia set to get just 2 cents out of every $1 of federal infrastructure funding? RMIT ABC Fact Check investigates.



The verdict

Yes, South Australia's share of infrastructure funding is forecast to be around 2 per cent in 2020-21, but there's more to it.

There is no doubt, as experts contacted by Fact Check noted, that federal infrastructure spending has been skewed towards some jurisdictions, in particular Queensland and New South Wales.

On the current funding allocation South Australia is set to receive 2.4 per cent of the total in 2020-21, the final year of the four-year budget period.

This figure broadly concurs with Mr Albanese's assertion that funding will fall to 2 per cent — well below South Australia's current 7 per cent population share.

However, an analysis of federal budget documents by Fact Check shows that South Australia is set to receive an annual average of 7.1 per cent of federal infrastructure grants over the four-year budget period, including a disproportionately large 11.6 per cent share of the total in 2017-18, and roughly proportionate 7.4 per cent and 7 per cent shares 2018-19 and 2019-20.

Mr Albanese uses the plural, "in coming years". This suggests South Australia's funding allocation will be 2 per cent in at least two years.

However, the budget predictions indicate funding will only be as low as 2 per cent in only one year — the final year of the four year budget period.

In the other three years, South Australia's current share is forecast to be considerably higher.

And as experts contacted by Fact Check noted, it is important to recognise that the figures merely represent the latest predictions.

As new funding announcements are made, the carve-up of infrastructure grants among the states and territories will inevitably change.



Context to the claim

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In his press release, titled "Feds rip off South Australia on infrastructure investment", Mr Albanese talks of the federal budget's "forward estimates", Treasury's economic and financial predictions over four financial years.



Mr Albanese says Commonwealth infrastructure grants allocated to South Australia will drop from $921 million 2017-18, to $474 million in 2018-19, $349.5 million in 2019-20 and $95 million in 2020-21.



"This represents a 90 per cent decline over four years as the Turnbull Government shifts its funding focus to other states at South Australia's expense," he said.



Federal infrastructure grants to the states

Commonwealth infrastructure spending agreements with the states are outlined in Federal Budget Paper No. 3: Federal Financial Relations: 2017-18.



In total, the budget allocates $23.3 billion to the states through a variety of infrastructure funding agreements over the four years to 2020-21.

This spending, which includes some money allocated directly to local government, is detailed in 19 tables contained in the budget.

In addition, Fact Check added $461.2 million for Victorian infrastructure projects ($201.5 million in 2018-19, $110.7 million in 2019-20 and $149.0 million in 2020-21) being funded from the contingency reserve, a pool of money in the budget normally used to cover unforeseen expenses.



The budget also allocates $600 million for the national rail program ($200 million in 2019-20 and $400 million in 2020-21).

However, because the budget does not detail how this funding is divided among the states and territories, Fact Check has not included this amount in the total.

A summary showing total spending for each state and territory is provided in the two charts below.



As can be seen, on the current allocation, infrastructure grants to South Australia are expected to fall from $921.4 million in 2017-18 to $474 million in 2018-19, $349.5 million in 2019-20 and then $95.2 million in 2020-21.

This represents a drop of 89.7 per cent over the forward estimates.



Although the predicted fall for South Australia is particularly steep, it is not unusual for infrastructure grants to fall over the course of the forward estimates, with spending announcements typically front-loaded to the first half of the political cycle.

For example, over the forward estimates, federal infrastructure funding is expected to drop by 71.9 per cent in NSW; 45.8 per cent in Victoria; and 19.3 per cent in Queensland. In total Commonwealth spending in 2020-21 will be half of the level of 2017-18 spending.



As experts contacted by Fact Check pointed out, infrastructure funding is, by its nature, often "lumpy", meaning it can quickly drop away once large projects are completed, or rise sharply as new projects are announced.

The latest funding allocations will almost certainly change as new spending decisions are made.



Is South Australia being ripped off?

The following table shows the allocation of infrastructure funding, expressed as a percentage of the total.

This is also compared to each jurisdiction's share of the national population, based on the latest estimates from the Australian Bureau of Statistics for the end of June, 2017.

A graph comparing Commonwealth funding percentages and 2017 population by state



Over the course of the forward estimates, South Australia's population share is expected to fall slightly as other jurisdictions, particularly Victoria, bear the brunt of Australia's population surge. According to projections in the federal budget, South Australia's population share will fall from 7.0 per cent in 2017-18, to 6.96 per cent in 2018-19, 6.91 per cent in 2019-20 and 6.87 per cent in 2020-21.



Mr Albanese talks of South Australia's share of infrastructure grants falling to 2 per cent "in coming years".

While this figure is broadly correct, the analysis shows South Australia is set to get an annual average of 7.1 per cent of the total over the four years, which matches the state's share of the national population, as at June 2017.

This is because South Australia is expected to receive a disproportionately large 11.6 per cent share in 2017-18, and roughly proportionate 7.4 per cent and 7 per cent shares in 2018-19 and 2019-20 respectively.

South Australia's funding share then falls to 2.4 per cent of the total in 2020-21.

Hugh Batrouney, an economist and infrastructure specialist from the Grattan Institute, said the relationship between infrastructure spending and population size was a rough, albeit practical, guide to a state's actual infrastructure needs.



However, he said there was "no strict reason" for the population shares of jurisdictions to match their share of the federal funding.



"Different projections for each state's population and economic growth, differing total volume and quality of existing infrastructure, the role of the Commonwealth in providing incentive-based payments, and the sometimes different types of infrastructure needs in different cities (for example, cities that need tunnels) are factors that suggest that divergence of expenditure shares from population shares is reasonable and to be expected," Mr Batrouney said.



Some states appear to be getting a consistently larger share. The standout is Queensland. On the current expected spending carve-up, Queensland is set to receive an annual average of 33.5 per cent — well above its 20 per cent share of the national population.

NSW has also typically received a disproportionately large share, although over the next four years it is expected to receive an amount roughly in line with its population share.

Victoria is the most disadvantaged state, having been allocated an annual average of 11.8 per cent of the total, compared to its 25.7 per cent share of the national population.



A June 2017 submission to the Productivity Commission by the Grattan Institute found "clear evidence" of biased Commonwealth decisions relating to infrastructure funding.

In particular, it said the Commonwealth had "consistently spent more of its transport infrastructure dollar in New South Wales and Queensland".

"The significance of these states is that recent federal elections have been won and lost because a sizeable number of New South Wales and Queensland seats changed hands," the submission says.



What the experts say

David Hayward, a budget and political specialist from RMIT's School of Global, Urban and Social Studies, said the process for awarding federal infrastructure funding was currently the most politicised he had seen.



Professor Hayward noted that while South Australia's share did fall over the forward estimates, its annual average level of funding over the four years was broadly in line with its population share.



"South Australia's average over the period is broadly in line with its population share and the drop only happens in the out years, which haven't happened yet," Professor Hayward said.

"It wouldn't take much to correct it (with new spending announcements), in which case the average will go up."



The Grattan Institute's Mr Batrouney said focusing on a single year's allocation risked taking the longer term trend out of context, for example when a state had previously received a larger than average share.



"However, our analysis shows that, over the years 2005-06 to 2016-17, South Australia in most years received less than its population share," Mr Batrouney said.



Mr Batrouney also said the claim that the Commonwealth is shifting its focus to other states at the expense of South Australia misses the often overlooked but important role that the Commonwealth Grants Commission plays in determining shares for the allocation of the GST pool.

He said in determining each state's share of the GST pool, the commission, in most cases, takes into consideration infrastructure grants



"In other words, the GST redistribution methodology partially unravels the effects of Commonwealth decisions to fund more transport infrastructure in one state rather than another," he said.

According to a Productivity Commission report on federal-state relations, the Commonwealth has used infrastructure grants as a tool to even out the carve-up of the GST among the states and territories, which is determined by the Commonwealth Grants Commission.

For example, it estimates that, since 2014-15, the Commonwealth has provided over $1.2 billion in infrastructure funding to Western Australia to effectively maintain Western Australia's GST proportion at 2014-15 levels.



Phillip O'Neill, director of the University for Western Sydney's Centre For Western Sydney, pointed out that there was an obvious link between population growth, economic growth and infrastructure spending. This, he said, partly explained differences between jurisdictions.



"More spending on roads, transit, urban water and energy systems will obviously take place in the faster growing east coast cities," Professor O'Neill said.



He said federal infrastructure grants in recent years had also been tied to state spending on various projects.



"Record levels of state infrastructure spending in NSW, enhanced by privatisations, have thereby attracted significant Federal Government contributions."

Lead researcher: Josh Gordon, Senior Researcher, RMIT ABC Fact Check



Sources



