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Overseas investors, including China, in Labor privatisation the icing on the cake after good week for Turnbull

Just weeks after the Turnbull government blocked, ‘for strategic reasons’, the Chinese from taking a controlling interest in the New South Wales power grid, China has been given the nod to take a 20 per cent stake in the strategically significant  Port of Melbourne, the country’s largest.

The Port of Melbourne has been privatised by Victoria’s Labor state government for an unexpectedly high figure of $9.7 billion, in what is the most significant Australian infrastructure deal for two decades. The winning Lonsdale Consortium consists of four pension funds, with the Australian government’s own Future Fund, chaired by former federal Liberal treasurer Peter Costello, taking the lead.

Beijing’s sovereign wealth fund, CIC Capital, put US$2 billion cash into the deal, giving it a stake of approximately 20 per cent. Other overseas investors include Canada’s OMERS Private Equity and Borealis Infrastructure and America’s Global Infrastructure Partners.

Missing out with a slightly lower bid was a consortium led by IF-M Investors and Macquarie Infrastructure. However, Australian Strategies understands that the final decision was made on the strength of Future Fund and Chinese government support, a detailed 50-year business plan and a commitment to invest immediately an extra $5 billion to expand and develop the port, which will transform the Port of Melbourne’s prospects and make it a strong competitor to Port Botany in Sydney. The State of Victoria has achieved double the sale price that NSW achieved for Port Botany, but Melbourne is about double the size, occupying 575 hectares compared with Port Botany’s 270 hectares.

The outcome is a win for Victoria’s Labor premier Daniel Andrews, whose unpopularity over a couple of issues cost federal Labor key seats that might have won it the recent election. Although the privatisation is a state matter, it is also a win for the Turnbull government whose decision to block the lease of NSW electricity distribution business upset Beijing and left questions over future Chinese investment in Australia.

So far, September has been a surprisingly and unexpectedly good month for Turnbull. First, falling unemployment and a higher than expected growth rate in the first quarter of 3.5 per cent has lifted confidence. More significantly, the Government and Opposition reached a compromise on $6.5 billion of cuts to the federal Budget that had previously been blocked, and a compromise on reductions in superannuation tax concessions is also imminent. On both issues, the Canberra press corps were taken by surprise, partly because they believe Opposition leader Bill Shorten would not fulfil an earlier promise to cooperate in the national interest, as reported by Australian Strategies in July.

Friends of former prime minister Tony Abbott have been loudly canvassing a swift demise for Turnbull, and replacement by his predecessor, but this is improbable. The loss of Australia’s triple A rating, once looking probable, now seems less likely in the light of a growth rate higher than any G-7 nation, improving relations with Indonesia, and a huge infrastructure deal, courtesy of a state Labor government.

The Coalition is not without its problems, however. It seems likely to lose the upcoming Western Australia state election. Turnbull lacks the punch and drive of New Zealand’s John Key, on whom he once pledged to model himself, and his treasurer isn’t as good as NZ’s Bill English. But marked as a D a month ago by Australian Financial Review readers, he probably now deserves a C+ or B-.