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US$1.5 trillion infrastructure plan: funding, process improvement and P3s

US$1.5 trillion infrastructure plan

Amid the renewed focus on US infrastructure, our report on opportunities and challenges in US infrastructure suggests the US Administration is on the right path.

Inadequate infrastructure is a worldwide issue affecting nations’ productivity and people’s standard of living. In the US alone, the American Society of Civil Engineers estimates that the investment gap through 2020, now over US$1.4 trillion, could exceed US$4 trillion by 2040. [1]

Whatever the exact dollar figure, Pat Foye, President of the New York State Metropolitan Transit Authority, is certain it’s a big number. “I don’t believe any reasonable person could argue that the country, and this region in particular, are not burdened by an investment deficit measuring in the trillions [of US dollars],” he says [2] in our report “Filling the Gap: A Realistic Look at Today’s Challenges and Opportunities in US Infrastructure.”

There is no easy answer, making a collaborative, multi-disciplinary approach is essential. A societal issue of this size also requires rigorous debate that is informed by reputable research and founded on robust data.

Road map

In partnership with Forbes Insights, we sought to inject some clarity and objectivity into the debate and perhaps offer a road map for the way forward. Together we conducted a survey (capturing 200 key decision-makers), as well as numerous in-depth one-on-one interviews. We also held a senior executive roundtable discussion.

The methodology was designed to get a clearer sense of the state of the US infrastructure market with both government and private-sector perspectives, as well as a global – outside looking in – perspective.

“Every dollar invested creates income for local companies, who hire more workers, who in turn increase household spending. This in turn increases secondary economic activity throughout the community, benefiting all who live and work there,” says Adam Hesketh, CFO North America, for toll road developer and operator Transurban.

It’s a virtuous cycle, says Hesketh, “where for every dollar you invest in infrastructure, you return two or two and a half to the local economy during construction, and the same again once construction is finished.” [3] That’s because the improved public services stimulate population growth and attract new business investment.

New spending

US President Donald Trump’s proposed budget includes US$200 billion in new spending over 10 years, citing “crumbling infrastructure”. He expects that commitment could produce total infrastructure spending of at least US$1.5 trillion by encouraging investment from state and local governments, as well as private companies.

Tom Osborne, Executive Director of Infrastructure at IFM Investors, advocates following the lead of the UK, where P3 structures account for about 15% of infrastructure spending. “P3 is an approach that is proven to work,” he says. “Properly structured federal infrastructure legislation could help the US gain momentum in public investment by encouraging the use of innovative financing methods.”[4]

Denis Hickey, CEO of Americas at Lendlease, agrees, noting most infrastructure is being financed by municipal bonds. “This method of financing is increasingly unsustainable – it’s a burden to taxpayers and the tax-free interest on loans is lost revenue.” In his opinion, government sponsors of infrastructure need to wean themselves from municipal bonds. [5]

We believe this report is a useful source for benchmarking and serves as a call to action in areas where both government and private sector can make a difference. Michael Thorpe, Global Head of Infrastructure, Commonwealth Bank of Australia, says “crisis or not, underinvestment is costing Americans trillions in lost productivity. We can all do a better job seizing opportunities.”

[1] Forbes Insights “Filling the Gap: A Realistic Look at Today’s Challenges and Opportunities in US Infrastructure”, page 5

[2] Ibid, page 5

[3] Ibid, pages 6, 7

[4] Ibid, page 15

[5] Ibid, page 15


Commonwealth Bank of Australia (“the Bank”) makes no warranty to the accuracy, reliability or completeness of the information set forth herein. This report has been prepared for discussion and information purposes only and, to the extent permitted by law, neither the Bank nor any of its subsidiaries accept liability to any person for loss or damage arising from its authorised or unauthorised use. None of the Bank nor any of its subsidiaries or affiliates is providing any legal, tax or other advice to you and you should consult with your legal advisers and such other advisers as you deem necessary or appropriate. Commonwealth Bank of Australia is not acting as an adviser in any respect in connection with providing this report.