Senator LUDLAM-Mr Deegan, you have submitted your priority list to government. Do you have a clear idea of when an announcement will be made of the first tranche of projects?

Mr Deegan-On 19 September last year Infrastructure Australia made public a report to the Council of Australian Governments on its views on infrastructure priorities and a host of issues to deal with those infrastructure issues. Subsequent to the release of that report, which is available for public comment, we are working further on a finalised list of priorities to go to government. That work is not yet complete.

Senator LUDLAM-When do you intend to hand that document over?Mr Deegan-We are aiming for March.

Senator LUDLAM-And that is your best appraisal of the first tranche of the Building Australia Fund spending?

Mr Deegan-That would be our advice.

Senator LUDLAM-So that will be some time in March. Perhaps this might end up needing to be a question to the minister, but can you tell us what effect the budget deficit has had, or are you still anticipating that you will have the full amount of spending that you were given initially?

Mr Deegan-Our role is to provide advice on infrastructure projects suitable for funding from the Building Australia Fund, but we have been clear all along that it is up to government to make the decisions as to the allocation of funds on whatever advice they might receive.

Senator LUDLAM-Minister, can I confirm with you that the Building Australia Fund is still funded to the degree that it was before the budget went into deficit-$20 billion or thereabouts?

Senator Conroy-$12.6 billion has already been allocated to BAF and further allocations are subject to budget circumstances.

Senator LUDLAM-We started with an allocation of $20 billion and now we are down to $12 billion and a bit-is that correct? Minister, just to confirm, of that $20 billion, was roughly a quarter quarantined for the National Broadband Network?

Senator Conroy-The lesser figure is due to revisions in budget surpluses.

Senator LUDLAM-I will put a couple of questions to you on that. We started with $20 billion, a quarter of which was quarantined for the National Broadband Network. What remains in the Building Australia Fund for infrastructure?

Senator Conroy-Of the $12.6 billion, $4.7 billion is for the NBN.

Senator LUDLAM-We initially started with an appropriation of-

Senator Conroy-Your definition of initially is probably where the problem is. Government announced an intention to allocate $20 billion depending on budget surpluses, so there was no actual allocation of $20 billion.

Senator McGAURAN-There was. There was a budget allocation of $20 billion.

Senator Conroy-There was an intention to allocate $20 billion.

Senator McGAURAN-Are you reading from a statement? If that is the case, I would like to see that statement.

CHAIR-Senator McGauran, the minister is answering Senator Ludlam. Senator Ludlam has the call.

Senator LUDLAM-Just to be clear, we had an initial intention to allocate $20 billion, of which a quarter was quarantined for the National Broadband Network. Just to confirm, we are down to around $7 billion or $8 billion in the initial spend-

Senator Conroy-As I said, of the $12.6 billion that has been allocated, $4.7 billion is for the NBN.

Senator LUDLAM-Thanks, Minister. Mr Deegan, has that reduction in funding played into the way you are prioritising the list, or has that not had an impact?

Mr Deegan-We hope to provide a long-term plan for the country's future in terms of its infrastructure; short-term or medium-term funding are issues for the government. We will provide advice about the type and nature of projects that might be considered, including by other funding opportunities either within government or the private sector.

Senator LUDLAM-Are you able to tell us the amount of funding the shortlist that you are preparing for government will total?

Mr Deegan-That list is still under preparation.

Senator LUDLAM-I understand that your initial list was very much oversubscribed; the number of projects put forward would cost greatly in excess of the $15 billion or so that was available.

Mr Deegan-Sure. The original list of 94 projects was an outline for the community of the sorts of projects that we were considering as part of our advice.

Senator LUDLAM-So will the list that you are putting to government in March be coming under a cap of $7.9 billion or are you just disregarding the amount of money that is available?

Mr Deegan-Again, the logic of our approach is to provide short, medium and longer term views of the country's needs in terms of infrastructure. How the government funds, or considers which part of that to fund, is a matter for them.

Senator LUDLAM-In October, we discussed that you were a couple of weeks out from consideration of the very first list. You were not able to tell us at the time how you were incorporating future carbon prices into your models and the kind of priorities you were setting for projects. Is that something that you are able to tell us a little bit about now?

Mr Deegan-To be fair, I said that at that stage we were developing our work.

Senator LUDLAM-Yes.

Mr Deegan-Rather than denying your request.

Senator LUDLAM-No, that is correct.

Mr Deegan-I am pleased to advise that-

Senator Conroy-So why did you say it the first time?

Mr Deegan-Part of our work has been looking at the short-term carbon and oil price assumptions and how that might figure. Treasury's advice has made it clear that the futures market for these are not yet matured. We sought to consider carbon costs in the cost-benefit ratios and have been evaluating projects on their merits as to how well they might help to position Australia for a robust economy within long-term carbon and oil futures. There are two processes: one in a strategic fit, or profiling, which is outlined in our report to the governments and the community; and then more detailed in the appraisal process of the sorts of issues that the proponents have dealt with in calculating direct and indirect emissions of their proposals and assigning a value-if at all-to carbon emissions, and whether those estimates were then in turn based on robust and reasonable sources. Similar was done for health, with pollutants and other such costs.

Part of our process is to try and address that broader issue of how these climate change impacts are considered. It would be only fair to say that a number of the proponents-indeed, a great majority-are struggling with working through how to deal with that. To be fair, I think it is a work in progress.

Senator LUDLAM-I note that you are actually quite critical in part 5(1) of the document as to the quality of some of the projects and how they have addressed those issues. If we pull the two apart for the moment, with hydrocarbon prices on the one hand and climate future carbon prices on the other, can you tell us-from a climate framework-how you have chosen to evaluate the projects that have been put before you, in particular your assumptions of the future price of carbon.

Mr Deegan-I think my previous answer did detail how we have dealt with that.

Senator LUDLAM-Perhaps I missed something really important. How have you evaluated-

Mr Deegan-There are two processes-firstly, a profile in terms of treatment of carbon and oil price issues. That has two parts to it, and in the strategic fit part we consulted on a range of methodologies we might use. We considered whether an initiative would reduce the oil vulnerability of communities and whether that would foster a stable growth economy in the face of growing energy and carbon costs. We also incorporated some checks, including climate assumptions and adaptation provisions. The issue for us was whether the proponents had quality of material for us to assess to take any further.

Senator LUDLAM-Okay.

Mr Deegan-It is very hard to assess when they do not have that material.

Senator LUDLAM-Agreed, so will you-

Mr Deegan-That has been the challenge. That is why I have said this is a work in progress.

Senator LUDLAM-So, just to pick one example: the Western Australian government proposed half a billion dollars worth of spending on freeways around Perth airport. Would you just take a look at that and knock it out on the basis that it does nothing to protect us from oil vulnerability, or would that make the cut?

Mr Deegan-It would be fair to say there are a number of projects where we have sought further information. That would be one of them.

Senator LUDLAM-Okay, that would be one of them. To what degree have projects that might go to exports of carbon intensive products been evaluated along the same lines?

Mr Deegan-That is part of the consideration.

Senator LUDLAM-So if somebody, for example, were proposing an expansion of a coal port or a coal rail line or something like that, it would be evaluated-

Mr Deegan-As measured, of course, by economic productivity issues and the economic interest of the country as well.

Senator LUDLAM-But you have set those against the carbon impacts for those projects?

Mr Deegan-We try to look at all of those, as set out in our document. They are the sorts of issues that we have dealt with.

Senator LUDLAM-I am sure we asked you about this last time: are you able to provide to the committee the modelling that you have used? What detail are you able to provide us with?

Mr Deegan-Again, the climate change modelling unit of Treasury has advised that that futures market for the carbon market has not yet matured. It is a very difficult process to get that sort of detailed modelling. We have not used those prices accordingly. Simply, our process has dealt with the strategic fit issue and then, in trying to question in the cost benefit ratios, to what extent those issues are being dealt with and how they have managed that.

Senator LUDLAM-Surely, to do a cost benefit analysis, you somehow have to monetise inputs such as-

Mr Deegan-That is right. That is what we have looked at from the states, all of the other proponents. There is very little detail in that to then go and model.

Senator LUDLAM-Okay. So you have gone back to the states and said that some of these are very insufficient and that there is not enough info to make a call?

Mr Deegan-In a range of areas.

Senator LUDLAM-Okay.