Mr BAYLEY – Treasurer, I want to take you to risks in the Budget and risks specifically to the Macquarie Point stadium. The Budget has identified that this project is subject to the ongoing procurement, supply and cost risks that other major projects have experienced, and the Pre-Election Financial Outlook (PEFO) identified that the actual cost of construction of the stadium won’t be known until the project is put to tender. I’m not defeatist and I don’t think the vote is won in the upper House in any way, shape or form, but I want to ask you a question. If it was to be approved and you go to tender and seek a builder for this project, is there an upper threshold cost that the government is willing to pay for this stadium? It’s had four cost blowouts now since it was first mooted. It’s now $1.13 billion and we don’t need to debate the additional things that that doesn’t include, but the question is very simple –
Mr ABETZ – All of which I debunked in the debate.
Mr BAYLEY – One of which.
Mr ABETZ – No, all of them. I’ll go through them if you like.
Mr BAYLEY – I don’t need you to do that. The question I need you to answer is: is there an upper limit that the government is prepared to spend on this stadium? Treasury has identified the risks. The budget has gone up four times now and it’s $1.13 billion. Is it $1.5 billion, is it $2 billion? Is there an upper limit that you’re prepared to put on the table?
Mr ABETZ – This is one of those questions like how long is a piece of string? If I were to give you a ridiculous figure, the headline would be, ‘Abetz contemplates stadium to cost $1 trillion as acceptable’, whereas if I give you another figure – I’m not going to play that game. We are going to look at things as they arise on the best evidence and professional advice. I am advised that the quantity surveyors who have been informing the process thus far have come up with the $1.13 billion figure. Within that there is a significant contingency and you’ll be able to ask about the detail of that later today when Macquarie Point Development Corporation appears before this committee.
Mr BAYLEY – There are plenty of projects, particularly big projects, though, Treasurer, that you’d have to agree, even if or when they get planning approval, the proponent may choose not to proceed with them. We’ve had housing developments in Hobart that have been passed and don’t proceed to construction because when it does go out to tender it turns out that the budget and the contingencies and everything that’s been factored in in terms of building that project can’t be met. It would blow out such that it doesn’t deliver a return. I think it’s an entirely reasonable question for the Tasmanian people to understand if there is an upper limit to what the government is willing to throw at this stadium.
Mr ABETZ – Most of those projects of which you speak would not have been 70 per cent designed, as this one is. They have not been through the quantity surveyor process, as this process has –
Mr BAYLEY – It’s had four cost blowouts already, Treasurer. We’re on the fourth escalation.
Mr ABETZ – Some of those extra costs, as you would be aware, are courtesy of the unnecessary election that we had. That is part of the extra cost and it’s always been made known that the longer we delay this the more it’s going to cost. That is why as a government we want to get this underway as son as possible. I’m not going to put an artificial upper limit figure on it so that you can say, ‘Oh, he’s gone over by a dollar’ or fudge the figures, as you did when you talked about footpaths, the TSO, the northern access road, the car park. I think you had five but I can just remember four off the top of my head.
Mr BAYLEY – There’s also the buses that the Tasmanian Planning Commission mentioned that you don’t remember.
Mr ABETZ – And the buses, the $49 million –
Mr BAYLEY – All referenced by the Tasmanian Planning Commission in their refusal.
Mr ABETZ – to retrofit all our school bus fleet to be disability compliant, as though that should all be visited on the cost of the stadium to make it operational with public transport. With respect, how can anybody assert that that should all be visited as one of these costs on the stadium when we have a duty and obligation in due course to get all our school buses disability compliant in any event? I say to you, Mr Bayley and the people of Tasmania, very strongly, no stadium, no team, but you will have in due course disability-compliant school buses. Trying to link the two is disingenuous.
Mr BAYLEY – So there’s nothing you’re prepared to give reassurance to the Tasmanian people about around an upper limit and the fact that there is a point where this stadium, when it goes out to tender, as has been referenced by Treasury, is a risk? There is nowhere you would draw a line and say that’s actually beyond what we can afford?
Mr ABETZ – Look, we rely on the best advice from the professionals and the best advice we have is $1.13 billion and that is exceptionally doable in all the circumstances.
Mr SWAIN – Treasurer, I was just going to make a process comment. The Macquarie Point Development Corporation will be going through commercial engagement and procurement. It obviously wouldn’t be helpful to have any number in the public domain that would signal –
Mr BAYLEY – You’ve got a number in the public domain, $1.13 billion.
Mr SWAIN – If you had another higher number, that would affect bids. If it were the case that bids came back at a different number, they would need to go back to the budget committee for consideration.
Mr BAYLEY – Treasurer, I want to come back to the Macquarie Point stadium and the risks in the PEFO. The Pre-Election Financial Outlook is explicit that the actual cost of the stadium won’t be known until the project is put to tender and a range of issues could further impact the costs and take it to the fifth, let’s say, cost escalation and the tight construction market generally. We’ve talked before about the Brisbane Olympics and that’s explicitly referenced in the PEFO and the bespoke nature of the roof design. You mentioned before in your answer that you got the best advice from the professionals, including quantity surveyors, but I note that their advice has consistently blown out and we’re at now $1.13 billion, the fourth cost escalation. Have you sought advice from Treasury about the cost implications and more detail in relation to the risks that they’ve identified in the PEFO?
Mr ABETZ – I was just checking to make sure, but no specific advice has been provided.
Mr BAYLEY – So you haven’t asked Treasury for any advice in relation to the Macquarie Point stadium, the affordability of it in the budget context and the risks they have flagged both in this Budget and the PEFO? You haven’t asked explicit advice of Treasury in relation to this expenditure, the biggest infrastructure expenditure the state has seen probably ever? You haven’t sought advice. I know the Premier didn’t seek advice when he signed the AFL deal, but you’re saying you haven’t sought advice from Treasury in relation to this as well?
Mr ABETZ – Any project has associated with it certain risks, irrespective of what it might be. Until the project is complete, be it building a house or whatever else, there is always the prospect of risks that have to be managed. That is why you seek, to the best of your ability, advice from professionals and that is what we’ve done. Whether it’s engineering advice, building of stadiums, development of a precinct, et cetera, that is why we’ve got all that advice together and we’ve now got a 70 per cent detailed design. The further on you move in the design process, one can, I think, safely assume the lesser the risk component. That is why, as I understand it, when you develop a project of a sizeable nature, when you start off you usually have a substantial contingency factor, but then as you develop through and more and more of the unknowns become known, you can in fact restrict the contingency aspect of your financial planning for the project.
Mr BAYLEY – I put to you that in the space between 50 per cent designed and 70 per cent designed, this stadium blew out by $400 million or thereabouts –
Mr ABETZ – There were a number of factors associated with that and you can explore that at Estimates this afternoon when the MPDC will be before you.
Mr BAYLEY – You talk about professionals, Treasurer. The professionals you have on hand are Treasury and Treasury staff. I ask again, because you didn’t answer it, have you sought advice from Treasury about the Macquarie Point stadium and the cost and affordability of it? Have they modelled scenarios at different price points and the affordability? Have you sought that advice? I think the Tasmanian people would be shocked to think that you hadn’t and you seem to be willing to simply write a blank cheque.
Mr ABETZ – No. With respect to Treasury, there are such things and professions as quantity surveyors, engineers, architects, designers, et cetera, and –
Mr BAYLEY – They don’t model the impact on the budget, though, and ongoing financial –
Mr ABETZ – No, no, they give us their professional assessment as to the cost and –
Mr BAYLEY – Blown out four times?
Mr ABETZ – I’ll park that.
Mr BAYLEY – They had a [inaudible], Treasurer.
Mr ABETZ – No, the price has changed for a variety of reasons, including the unnecessary election, for which you voted, to ensure that there was a further delay. It’s been on the public record: I think every week’s delay, or something, is worth something like $90,000, so –
Mr BAYLEY – Can I ask it a different way, Treasurer?
CHAIR – Mr Bayley.
Mr ABETZ – You can factor those situations in as well.
Mr BAYLEY – Chair, can I ask a different way? Do you have Treasury advice?
Mr ABETZ – We have Treasury advice on the basis of that which the professionals have provided to us of $1.13 billion.
Mr BAYLEY – And what does that advice say?
Mr ABETZ – That advice is in the Budget for us that there’s going to be a $375 million capital injection. And that’s in the Budget for all to see. We are going to have contributions from federal and the AFL towards the end, and then there will be borrowings. We have been given advice in relation to that figure and how it might impact, or how it will impact, hopefully, being confident how it will impact the budget.
Mr BAYLEY – Treasurer, I think Tasmanians would be shocked and appalled to think that the only advice Treasury has given you is the figures in this Budget about the amount of money you’re going to allow Mac Point to borrow and the cost of servicing that debt. I ask again, have you asked Treasury for any advice about the stadium and is there any Treasury advice about the stadium that has not been made public?
Mr SWAIN – I want to make a comment. Treasury doesn’t typically give what I might call ‘nuts and bolts advice’ around the delivery of projects. There are projects delivered all over government that Treasury won’t have a specific view on whether an element is right or wrong. We’ve given advice to the Treasurer through the budget process in relation to this project. We have an involvement through some governance structures to understand where the project’s at and in our weekly meetings with the Treasurer we’ve certainly given advice around process issues like the importance of an assurance process, the importance of clear governance, the importance of procurement and contracting arrangements following best practice, the importance of Mac Point not being able to enter into a contract unless it has the financial capacity to meet those obligations, which means that if there were a different market response than is hoped, that would come back to our budget committee.
Mr ABETZ – And does the Secretary of Treasury sit on the oversight committee?
Mr SWAIN – Yes, I do.
Mr BAYLEY – So you’re saying you haven’t sought or given advice around different scenarios in terms of budgetary implications going forward for years to come about different price points and that this may ultimately cost the Tasmanian budget?
Mr SWAIN – We’re more focused, we’re probably up a level, so we have started to give some advice to the Treasurer around budget repair pathways and what that means in terms of borrowings over time. That is at the level of total opex, total versus revenue, total capex and total equity, as opposed to the elements of each one of those things.
Mr BAYLEY – So just to confirm, then, in relation to Ms Johnston’s question, the Treasurer referenced the $30.7 million and the $32 million going out into the 3031-32 financial years that it would cost the general government sector to service the Macquarie Point borrowings, $490.7 million of them. Can you confirm for the record that the general government sector, where we will be finding this $32 million, is the same place, the opex that the secretary just referenced in relation to the operations of government? It’s the same place you’re trying to seek efficiency dividends from, you’re seeking vacancy control, you’re seeking cuts in the public service and the like. This is the operating budget of the government that in this Budget is a deficit and quite optimistically is looking for a surplus in four years’ time. Can you confirm that’s the case?
Mr ABETZ – That is the same area that will benefit from the revenue streams of increased payroll tax, increased stand damp duty, the benefits of the enabling to the economy of a new hotel being built and other infrastructure projects that will be privately funded. This is an economic enabler, so what I encouraged the Legislative Council to do yesterday, and I do the same with the House of Assembly, is that it’s fair enough to talk about the interest component that will need to be paid out. You then have to look at the income that’s going to be generated as well and the economic activity to offset that –
Mr BAYLEY – And did you ask Treasury to model that? Who modelled that for you, Treasurer?
Mr ABETZ – It is exceptionally difficult to model some of those things. It’s like the Bridgewater Bridge. Is it of economic benefit?
Mr BAYLEY – Have you got modelling for it?
Mr ABETZ – Is there modelling for it? No. The new Brighton school – is there an economic benefit to that? I daresay there is. Has it been modelled? No. Same with the Legana school. Same with nearly every other infrastructure project that you can have, from experience, a knowledge that there will be genuine benefits.
Mr BAYLEY – You don’t have any modelling or any advice as to what the quantum is?
Mr ABETZ – Like with other infrastructure projects ‑ and I’ll be corrected if I’m wrong ‑ but I assume no modelling was done as the economic benefit ‑
Mr BAYLEY – It’s just not a major political narrative of other infrastructure projects, Treasurer. That’s the only thing.
Mr ABETZ – Well, the Bridgewater Bridge was what, a 600? That was the cost benefit ratio.
Mr BAYLEY – It was handy to hear the secretary outline some of the briefing material that has been given to you in context of the Macquarie Point stadium. Under normal circumstances, it’s usual for that just to sit with you, but this is a pretty extraordinary circumstance with the parliamentary involvement in approving this stadium. Is that information something you’d be willing to put on the public record or release at the very least to the Legislative Council for their consideration in the lead up to their deliberations?
Mr ABETZ – What particular information?
Mr BAYLEY – Well, the various bits of advice the secretary just referenced that Treasury had given government in relation to this project’s risks.
Mr ABETZ – If there are specific questions, I’m happy to see what can be done in providing specific answers.
Mr BAYLEY – But you wouldn’t be willing to give that to them upfront for their perusal?
Mr ABETZ – I am not sure exactly what is being asked. What you do know is that the head of Treasury sits on the oversight committee of the stadium and that should provide you with a degree of comfort that the financial side is being looked at very closely by the oversight committee which has other expertise on it.
Mr BAYLEY – Presumably, there are ministerial briefings and minutes of your oversight committee meetings and that sort of thing. Could they be provided to the Legislative Council for their consideration?
Mr ABETZ – I am happy to take that on notice.
It is a Cabinet subcommittee and therefore Cabinet-in-confidence applies –
Mr BAYLEY – It is your prerogative to release them.
Mr ABETZ – but that is why I’m taking it on notice, to ascertain whether that may be possible.
Mr BAYLEY – Treasurer, you helpfully again provided the $30.7‑32 million figure for debt servicing of Macquarie Point’s borrowings. That’s in the year 2031‑32. $32 million is coming from the general government sector. Have you modelled it beyond those years, and is that the highest that the debt servicing figure gets, $32 million?
Mr ABETZ – I don’t think it has, but when you start getting out there, the question then becomes what’s inflation going to do? What are the borrowing costs going to do? It becomes somewhat more difficult to provide exact figures, but the dark arts of economic modelling is in the province of Treasury, and I will ask.
Mr SWAIN – We’re just confirming that we haven’t gone past that commissioning point, we would have gone up $32 million.
Mr BAYLEY – Do you expect it to be higher than $32 million in those sort of more forward years, do you think? Or will it just kind of plateau out at $30‑odd million until you start paying down the debt?
Mr ABETZ – Look, I suppose if the Reserve Bank contains inflation within the band that it set, then interest rates will remain relatively stable. On that basis, one imagines those payments would remain relatively stable, but there are a lot of imponderables.
Mr SWAIN – We’re back to that complex discussion around when you hit peak debt and then what costs you attribute if you start paying back peak debt, what costs you ascribe that too notionally because really, we’re managing at portfolio level.
Mr BAYLEY – I’ll come to peak debt later, but I accept that. That’s in relation to the $490.7 million. I think the conversation you’re referring to, secretary, is the one we’ve had across a different table in relation to servicing the $375 million, the government’s equity contribution. You did make a commitment to the crossbench, basically, to provide that figure: how much will it cost to service the $375 million of government borrowings to inject into this project, equity contribution? Can you provide that figure?
Mr ABETZ – You see, the $375 million borrowings to which you’re refer to, the money comes out of the total bucket. As we are borrowing for the totality of the budget, it would be unfair and unreasonable to lumber the whole lot into the debt category, just as it would be unfair to lumber the whole lot of the Brighton or Legana school or the Health budget into debt, and say, in very rough terms – and treasury will correct me – what did we borrow, about 10‑15 per cent, is it, for the total?
Mr BAYLEY – I appreciate it’s difficult, but you did make a commitment to the crossbench to provide that figure.
Mr ABETZ – What we’re talking about in rough terms, and I will undoubtedly be corrected, but in rough terms 15 per cent of the $375 million over the totality of the budget would be from borrowings.
Mr BAYLEY – The annual servicing costs of that $375 million?
Mr ABETZ – I understand that in very recent times some information has been provided which I have not fully seen as yet.
Mr BAYLEY – Provided to you?
Mr ABETZ – Yes, and so allow me to take that on notice.
