Prime Minister Malcolm Turnbull said “our forecasts say we will be in surplus” in 2021 when asked on Thursday about a faster timetable, but he added: “You will have the updated forecast in the budget next week – wait until then.” Finance Minister Mathias Cormann rejected the “off-budget” description for the projects and insisted all were being treated as commercial projects under long-standing accounting rules. The capital items include $​47 billion for the national broadband network, ​$​6 billion to take full Commonwealth ownership of the Snowy Hydro power scheme, ​$​10 billion to build the inland rail line, ​$​5 billion for western Sydney airport and ​$​5 billion to set up the Northern Australia Infrastructure Fund to lend to commercial projects. “Equity and debt financing is reflected in the budget as an asset and if financed by borrowings also as a liability,” Senator Cormann said. “Any loan issued by the Commonwealth, whether on commercial or concessional terms, has to be repaid, which is the basis for that budget treatment.

Finance Minister Mathias Cormann Credit:Andrew Meares “There are strict rules in place, independent from the government, to determine whether a federal funding contribution can be classified as equity or must be classified as a grant.” The key issue is whether the projects achieve a sufficient rate of return to justify being commercial equity investments – a factor that limits the scope to lower customer charges for the NBN because it would cut its commercial return. Assuming a 3 per cent interest charge, the $73 billion in off-budget items will require interest payments of about $2.2 billion a year when all the investments are made. While the $73 billion increases gross debt over time, it does not increase net debt because the borrowings are offset by the asset value of each investment.

Industry Super Australia chief economist Stephen Anthony said the concern for taxpayers was the “significant potential to underprice the risks” involved with each project. “The Commonwealth, to avoid that problem, should be very transparent about what the projects are, how much it is borrowing to fund them, what assumptions it is making and what the cost of borrowing is,” he said. Loading “We’re opening up the potential for more unfunded liabilities but we don’t need more time bombs.” Mr Anthony also said the debt could be a good use of funds but this depended on a key proviso: “as long as they’re getting value for money”.

The commercial return of the NBN is under question and the viability of the inland rail is doubted by critics who believe there will not be enough freight to deliver a commercial return. The NAIF is yet to identify enough projects to invest its $5 billion. Deloitte Access Economics director Chris Richardson warns in the firm’s latest budget monitor that the “underlying cash balance” traditionally used to measure the deficit is now hiding some of the capital outlays that are included in the “headline cash balance”. The firm estimated the annual deficits would be $10 billion or $15 billion deeper when all the capital spending was considered. “Headline deficits have been worse than underlying deficits over the past decade,” it said. “And, by the way, another $30 billion may be chalked up across 2017-18 and 2018-19 as well.”