National broadband network: impact on the budget

Report no. 04/2016
14 December 2016

The Australian Government has committed to provide $29.5 billion in equity funding to NBN Co Limited (NBN Co) for the rollout of the National Broadband Network (NBN) by 2020.  The Government also recently agreed to provide NBN Co with a loan of $19.5 billion to complete the NBN rollout at an estimated total cost of $49 billion.

As at 30 June 2016, the Government had contributed $20.3 billion in equity funding to NBN Co.  The Commonwealth’s equity in NBN Co at that time stood at $13.1 billion, representing a $7.2 billion deterioration in the Commonwealth’s equity holding in NBN Co.

The deterioration in the Commonwealth’s equity is principally due to NBN Co accumulating losses totalling $8.3 billion as at 30 June 2016 (see Figure 2–2, page 7).  These losses reflect the early years of the rollout of the NBN. The deterioration in the Commonwealth’s equity in NBN Co is reflected in the Commonwealth’s aggregate net worth in its balance sheet and the Department of Communications and the Arts’ annual financial statements.  It is not separately identified in the budget papers.

The annual cost to the budget of the Government’s investment in the NBN is estimated at around $580 million in 2016–17.  Following the final drawdown of the $29.5 billion in equity and assuming the loan is drawn down from 2017–18 and paid back in full in 2020–21, the annual cost is estimated to rise to over $730 million in 2019-20 and to $2.1 billion by 2026–27 (see Figure 2–1, page 5).  These costs, while significantly impacting the budget bottom line, are not separately identified in the budget papers.

The key driver of the annual cost to the Commonwealth of the NBN is the public debt interest payments associated with the government’s equity injection in NBN Co.  The provision of additional funding through a loan at an interest rate above the government’s cost of borrowing provides a partial offset to this annual cost.

The final cost of the Commonwealth’s financing of NBN Co will not be known until NBN Co is privatised and the market places a value on the NBN.  Until then the Commonwealth will continue to bear an annual cost associated with its financing of NBN Co.  If the sale price of NBN Co is less than the Commonwealth’s cumulative cost of financing NBN Co, then the NBN would have an enduring cost to the budget.

There is also a risk, albeit rated by the Government as small (less than five per cent probability), that the Government could be called upon to meet contingent liabilities it has entered into in relation to the NBN rollout.  These contingent liabilities totalled $15.5 billion as at 30 June 2016.

Publication Details

Format: 
Resource Type: 
License type (if applicable): 

Cite this document

Suggested Citation

Parliamentary Budget Office (Australia), 2016, National broadband network: impact on the budget, Parliamentary Budget Office (Australia), viewed 24 March 2017, <http://apo.org.au/node/71870>.

Page Shares