Last year’s Citi A50 Sydney Investment Summit has seen growing institutional interest in New South Wales being converted more efficiently into firm project approvals, the state’s Treasurer, Daniel Mookhey, told the Sydney Financial Forum (SFF) on 5 June.

Mookhey said that since the event last October the state has pushed investments in data centre projects through a fast-track approval process, along with a batch of renewable energy projects, and has opened the same pathway to fuel security and electrification projects.

“We’re going to have a bit more to say about the next sectors… that we want to have access to this coming forward,” Mookhey said.

New South Wales has never had trouble attracting investment, but has had “a lot of issues converting investment interest into outcomes, in large part because of our planning system”.

The government has now reformed that process in “the biggest shake-up of planning in a long time”.

The Citi A50 Sydney Investment Summit was the NSW equivalent of the Australian Superannuation Investment Summit convened in the United States by former ambassador Kevin Rudd.

Mookhey said the government had partnered with the Commonwealth government, and with Rudd specifically, on the US summit, which showcased the financial firepower of Australia and the depth of its capital markets, and “especially the role of Australian superannuation in meeting the world’s capital needs”.

The decision to hold mirror summits in Sydney came from the US event and Mookhey said another will be held this year, with its financial management arm, TCorp, as the organiser.

Mookhey attended the US event, where he actively promoted Sydney as an attractive Asia-Pacific destination for global capital while Macquarie Group chief executive Shemara Wikramanayake set out the growing footprint of Australian investors in US markets. The Australian funds at that summit invest more than $630 billion in the US.

Mookhey said NSW is already a global financial capital “and this is a story we don’t tell ourselves enough”.

In response to a question from Investment Magazine about his ambition for Sydney as a global investment hub, Mookhey said “we already are, and this is a story we don’t tell ourselves enough”.

“In this particular city today, one in three people going to work this morning, who aren’t [at this forum], are turning up to insurance, turning up to banking, turning up to superannuation, or working in the related finance industries. This is a big, big, big competitive advantage for us, and it enables so much other economic activity at scale.

“At a time where the whole world is looking for a safe place to organise its operations out of Asia Pacific region, we’re just unabashedly and aggressively saying do it from here.”

Giving capital what it wants

Aware Super chief investment officer Simon Warner told the forum that superannuation investors want clear and consistent regulation and a credible fiscal foundation from government, because certainty, where it can be achieved, allows long-term capital to be put to the most productive use.

Warner said Aware – the sponsor of the SFF event – had significant exposure to New South Wales infrastructure, including airports, the energy transition, and one of Australia’s largest build-to-rent development pipelines, with projects under way and in planning across the state. 

The fund had also invested in long-term concessions with the state government, he said, covering light rail, land registries and the International Convention Centre – and that the appetite of institutional capital to participate is real.

“The challenge is always matching that appetite with investable structures with appropriate risk allocation, and the policy signals that give us long-term confidence.”

Warner said that when Aware’s members – which include teachers, nurses, police officers, construction workers, public servants and small business owners – think about retirement, “they’re not really reading macro forecasts or analysing budgets in detail, they’re thinking more holistically about what kind of world they’ll retire into”.

The answer to that relies on decisions right now “in the way that New South Wales invests in its future, its energy, its infrastructure, its housing, and its fiscal discipline, and how all those are balanced”.

“These are not abstract policy challenges, they are the conditions that will determine whether long-term capital can find a productive home,” Warner said.

Competition for lending

The NSW government will allow TCorp to issue debt in non-AUD currencies to deepen the market by bringing in offshore capital and lower borrowing costs for the state government by increasing competition.

“We’ve watched now how Victoria and Queensland have engaged in these markets,” Mookhey said.

“Ultimately, this will be a small part of our debt book, not a big part of our debt book, but we are pretty determined to get some more competition into our lending market. We are pretty determined to get best value possible when we have to pay for our loans.

“You often will find yourself sitting around the [expenditure review committee] table debating the merits of a $5 million policy, whether it’s worthy of investment or not. At the same time, just basic market movements and credit markets can move your balance sheet billions of dollars. 

“So, from our perspective, every dollar counts, and I am unapologetic to our bond investors… about wanting to pay you less so we can pay our essential workers more.”

Mookhey announced that former Reserve Bank governor Dr Glenn Stevens would become TCorp chair from 1 September, succeeding Michael Dwyer. 

“He is the best person for the job. He’s accepted the government’s invitation. I’m glad; I’m also grateful.”

Politely insisting

Mookhey said he is confident the government has the expertise to oversee and manage complex, world-leading infrastructure projects.

“There’s few people who are capable of building three [metro] lines at the same time we’re tunnelling under the harbour, at the same time we’re building a whole new power system, the same time we are having to fix so much of our water assets, and increasingly also having to respond to a housing crisis,” he said.

The state’s $100 billion-plus infrastructure program meant a government of its size had a significant impact on construction standards, particularly when disputes arose. 

“The stakes are always high, and the public is right to expect their government to act carefully, act deliberately, and act methodically and settle disputes as expeditiously as possible,” he said.

The government had recently had to “politely insist” that its agencies and contractors follow the principles it had set down when a dispute arose involving allegations of bad behaviour on the Western Sydney Airport Metro, and he expected it would insist on adherence to the same principles in disputes affecting the M6 project. 

The government had made a deliberate choice to send a strong message: “Bad behaviour is not acceptable in the New South Wales infrastructure program, and if we see it, we’ll act on it.

“But as you know, the public is even more insistent on getting the infrastructure they paid for, ideally at the time they paid for it to be delivered and at least close to the price the government agreed to pay.”

Data centres bundled with power and water

Mookhey said strength in the latest set of national accounts was driven by data centres and renewable energy together, and the two growing at once was not accidental. 

“One is the supplier of a key input of the other,” he said.

Much of the new inbound private-sector investment in NSW was going into new power lines, wind, solar, battery and storage projects, and the next iteration of the state’s data centre principles and strategy would reflect that link.

“That marriage between renewable power and data centres, which is powering the New South Wales economy, is something that we obviously do want to see continue on,” he said.

Mookhey said data centres sit alongside mining and energy as water-intensive industries, and that they could either compete against existing industries for resources or bring additional capacity with them. He said closer examination of using recycled water to cool data centres is warranted, and Sydney is rare among comparable cities in using fresh water only once.

“What is the harm of using recycled water to cool some chips rather than sending it into the ocean?” he said.

Data centres were also evolving, and “another thing that we’re seeing more and more in that industry [is] zero-water data centres.” 

“It’s a really interesting evolution taking place [and] we’re going have a lot more to say about this.”