Weak budget outlook to threaten AU NBN

Tony Brown/Informa Telecoms and Media
15 May 2013

With a budget deficit of A$19 billion ($18.8 billion) now announced – and forecast budget revenues slumping by tens of billions of dollars – Australia’s politicians have some tough spending decisions to make – not least over the funding of the controversial A$37.4 billion National Broadband Network (NBN).

The real question now is whether politicians – Labor or the Liberal-National Coalition – will hold their nerve on funding the hugely expensive NBN when there are so many other competing funding demands on the budget?

Both are already committed to funding the National Disability Insurance Scheme whilst Labor must finance the Gonski educational reforms and the Coalition its Paid Parental Leave scheme.

The government has already pumped around $7.5 billion into the Fiber-to-the-Premise (FTTP) NBN – which is being principally funded by the sale of government bonds – but the deployment of the core FTTP network remains in its infancy with only around 1% of premises passed.

So far, the NBN has escaped close budget scrutiny, principally because as a Government Business Enterprise (GBE) it is being kept off budget, a move sharply criticised by the Coalition which has promised a cheaper Fiber-to-the-Node (FTTN) based NBN costing $20.4 billion.

However, even if Labor pulls off an upset win in September the worsening economic conditions and wide array of urgent spending priorities – not to mention the sluggish NBN rollout pace – will make it politically tough to keep pouring money into the NBN in its current form.

If Labor did have to scale back the NBN then the most obvious choice would be to eat a huge portion of humble pie and rollout FTTN in areas where FTTP is too expensive to deploy – thereby removing a sizeable amount of civil works from the cost of the project.

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