The Federal Government’s infrastructure plan to boost employment

The Federal Government’s infrastructure plan to boost employment

David Chu, Head of International Business, discusses the Federal Government’s new infrastructure projects, plans to boost employment and what we can expect from the banks and more widely, the economy.

2020-06-17

David Chu, Head of International Business, recently joined Thomas Sung (host) on the SBS Radio Cantonese Program to discuss the Federal Government’s new infrastructure plan. Listen to the podcast episode in Cantonese or read the transcript of his interview in English below.

English transcript:

Host: David, we all know that the Prime Minister announced substantial expenditures for a series of new infrastructure projects on Monday. What are these projects? How is the market reacting?

David: In fact, the bushfires and the pandemic have both hit the Australian economy, resulting in a drop in gross national product by 8-10%. Especially during the pandemic, many businesses and shops have ceased operations due to the restrictions. Therefore, the government has come up with many plans for the post-pandemic recovery of the economy, one of which is to create jobs for the people through a number of infrastructure projects.

The Prime Minister mentioned that originally the Federal Government had $1.5 billion worth of infrastructure development initiatives in place, and now they have expanded the scope to allow some smaller projects to commence earlier in Victoria and New South Wales. The major reason is to generate employment, given the Federal Government estimates that the unemployment rate could hit 8% in September. In addition, the JobKeeper payment of $1,500 per fortnight is about to end. In this case, therefore, the government has to start thinking about how to get jobs back for the people.

Host: So what are these projects?

David: They include the construction of reservoirs. The Federal Government hopes to secure water supply by building more reservoirs. Water is important for residents in the urban areas, but it is even more important for agriculture. The Federal Government intends to adopt new measures to ensure water supply. There are also other projects, including communications. Urban residents have better access to the Internet and other means of communications. In rural areas, however, the cost of laying telephone lines is high. They are in dire need of wireless Internet facilities to facilitate communication.

These projects would commence ahead of schedule. In Melbourne, it is expected that the railway between the airport and the city centre will be launched as soon as possible. It is also expected that a rail line will go all the way down to Melbourne from Brisbane. There are also some power supply facilities between Tasmania and Victoria. All these projects will be launched as soon as possible, from which the Federal Government hopes to create about 66,000 new jobs.

Host: As far as I know, this is only the first stage, right? There are more projects, correct?

David: Yes. Of course, large-scale infrastructure projects would require further approval. There are environmental protection issues which contractors have to take care of. Generally, addressing these issues would normally delay the approval by three or four years. This time the approval process is said to be simplified, and it is hoped that the projects will be approved within an average of 21 months, meaning at least two years shorter than the normal timeframe.

The proposed reform will allow projects to be launched earlier. If following the original three-year timeframe, these projects will not be able to contribute as expected. Even if they eventually start, they will not resolve the economic challenges following the end of some relief measures in September.

Host: The Federal Government hopes to launch some short-term large-scale infrastructure projects in a short time, or shorten the approval timeframe for large-scale public facility projects. According to you, this is actually quite urgent, because the stimulus packages introduced by the Federal Government will end in September. Now everyone seems to be worried about it.

David: Yes. In fact, economists have expressed different opinions. Many measures will end in September. For example, the bank allows deferral of mortgage repayment for six months; and landlords allow deferral of rental payment for six months. In the case of debts, the threshold on which creditors may initiate recovery action at the small claims tribunal is raised from $2,000 to $20,000 for six months. In addition, previously, creditors could demand bankruptcy of debtors if the debt amounted to $5,000, which has now been raised to $20,000. All these measures will end in September. Economists have suggested that new measures may be introduced to gradually boost the economy, and the original measures should not be terminated all at once. For example, in terms of debt collection, it is now not allowed to collect debts in six months. The banks’ statistics shows 480,000 home mortgage deferral applications, and more than 210,000 commercial loan payment deferral applications, involving a total amount of $230 billion.

Nonetheless, temporary non-repayment does not mean waiver of repayment. On the other hand, however, the banks are concerned that if the borrower does not repay the loan in the future, it will increase the bank's bad debts. That being said, some economists say that the government may now have to work with banks to reduce the number of deferrals. For example, a few banks have also said recently that they have begun discussions with their customers on the timetable for repayments. About 10-15% of the NAB customers who applied for such deferrals have already resumed normal repayments; about 4% of the Westpac customers have done so; and about 5% of the ANZ customers have done so. Some experts in asset restructuring and insolvency say that the sooner these resume, the better it will be. It is good to know earlier if a customer cannot service the loan, so that the bank can get prepared; otherwise, they will have to deal with a sudden surge of borrowers failing to repay their debts in September, just like a landslide, which will impact the entire financial industry.

Host: The general understanding is that the bank is the mother of all other industries. If the banks are not doing well, it will affect not only the bank itself but also the entire financial sector.

David: Yes. There is more than that. Some experts also advise companies that were working well to be cautious, because if a customer applies for a trade credit, if the customer cannot service the debt, the lender will be affected, unable to recover what has been lent. Experts remind that even a well-functioning company should be cautious when extending credit. If any credit is extended in these couple of months, and the customer is unable to repay, the company's cash flow will be impacted. The general public certainly likes to have peace of mind.

Host: Given the situation, the Federal Government is also expected to introduce some new measures to deal with the end of certain aid policies in September - to continue these policies or to introduce replacement policies, so that the economy will stay on track.

David: Right. We all know that the government is working hard on viable plans from various aspects to restart the economy.

Host: Okay, we are very grateful to Mr. David Chu, Head of International Business of ShineWing Australia, for sharing with us how the market has reacted to the Federal Government’s latest infrastructure plan. Thank you very much.

David: Thank you Thomas! Thanks everybody.

Get in touch

David is attuned to the Asian listed company market, international taxation issues, corporate regulations and various stock exchange requirements and is highly regarded in the market place. Reach out below to discuss how we can support your business during this challenging time.

David Chu

E dchu@shinewing.com.au


This podcast was originally published on SBS Cantonese Radio on 17 June 2020.

Disclaimer: The material contained in this page is in the nature of general comment and information only and is not advice. The material should not be relied upon. ShineWing Australia, and related entity, or any of its offices, employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in the publication.