It would cost more to shut the NBN than to finish building it

Angus Kidman 20 December 2016 NEWS

NBNSite

Killing off the NBN would cost at least $16.7 billion.

The National Broadband Network (NBN) isn't officially due to finish construction until 2020. It's a big project, so no-one would be surprised if it ran a little late. But despite that four-year wait, we're now well and truly past the point where any money would be saved by electing to shut it down. Any politician who decided that killing off the NBN was a good idea would face an immediate bill of some $16.7 billion dollars.

That figure comes direct from the government's mid-year economic and fiscal outlook (MYEFO), a document which updates assumptions used for the 2016-2017 federal budget in light of what has actually happened in the economy since. The NBN shutdown penalty is explicitly outlined in a section of the document labelled "fiscal risks". While an NBN exit is classed as a "significant but remote contingency", it's telling that we can still put a figure on it.

Here's how the $16.7 billion figure is calculated:

  • $11.8 billion is the official cost for "termination" as of 30 September 2016, and would cover the costs associated with staffing liabilities, writing off existing contracts and general expenses.
  • An additional $4.9 billion would be due to Telstra, which has a complex set of contracts relating to its handover of the existing copper network.

So how does that compare to projected spending? Having spent all of the $29.5 billion allocated as government funding under current models, the NBN was supposed to source private finance to finish its rollout. That has proved challenging, so last month the government agreed to lend the NBN $19.5 billion on "commercial terms" to continue construction (with roughly $10.3 billion next year, and $6.5 billion and $2.2 billion in subsequent years). The current assumption is that this loan will be refinanced on the private market in the 2020-2021 financial year, at the same time the whole NBN operation is privatised.

$19.5 billion is a large loan, but it's close to what it would cost to stop constructing the NBN at this point. Bear in mind the $16.7 billion figure doesn't include any reputational effects from a cancelled project, or ongoing economic impacts from all those lost jobs. Nor does it include the loss of interest income from loan repayments, which is calculated at $1.6 billion over the next four years.

For most of us, the biggest question around the NBN remains "when am I finally going to get it?"? You may be waiting a while, but with numbers like these, even if we saw a radical change in government, there wouldn't be any fiscal incentive to kill the project. To paraphrase Lady Macbeth: returning would be as tedious as continuing.

Angus Kidman's Findings column looks at new developments and research that help you save money, make wise decisions and enjoy your life more. It appears Monday through Friday on finder.com.au.

Latest news headlines

Picture: NBN

Get more from finder

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms and Conditions and Privacy Policy.
Ask a question
Go to site