“You know when Victoria privatised the trams, the State Government gave the private investors a $200 million up-front payment, and they got a lot of stick for that, but the thing was it was the costing them $600 million a year to run the system.” The public slowly came to realise they were getting a better deal. What else but a subsidy would encourage anybody to begin the work of making the infrastructure run more efficiently, especially since sales of tickets – which had to be priced at near their long-subsidised levels – were never going to make an investment case on their own. In Garling’s experience, the annual subsidy to the private operator can often be a declining subsidy, such as that in place for the Darwin Convention Centre, the first ever public-private partnership undertaken by the Northern Territory Government, which AMP Capital Investors came to own through its recent takeover of the Royal Bank of Scotland’s Community Infrastructure Fund.

The investors pay all of the operating costs of the centre, which as Garling says, “incentivises us to operate it more”. In a couple of decades’ time, the centre is handed back to the people of the Northern Territory. Another model worth considering currently only operates in that other Territory – the one containing the Australian Capital. Known as “value capture” or “betterment”, the model sees a government reward the investor for creating a new piece of infrastructure which would otherwise struggle to provide the inflation-plus return required. To transplant the ACT model to Sydney, Garling says an example of “betterment” might feature the investor building an extension of the Eastern Suburbs railway line to Bondi Beach. Just as in Victoria’s tram example, the investment would not pay for itself through patronage of the new line, but a government could make it feasible by, for instance, awarding the infrastructure consortium sole development rights for land and buildings around the new station.