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Australia’s social infrastructure - the schools, hospitals, public housing, and community facilities we use every day - is at a critical juncture. Much of it was built during the post-war boom or the 1980s, and today these assets are increasingly challenged by demographic shifts, fiscal constraints, urban densification, rising service demand, and aging structures. The case for investment is clear: we need new assets.
Governments around the world are facing increasing pressure to deliver high quality social infrastructure, and the Australian Federal Government is responding; positioned to accelerate its $60.7 billion infrastructure pipeline over the next four years across essential assets, transport corridors, renewable energy transmission, and housing supply1. In fact, infrastructure investment in Australia is hovering near record highs across public and private2. However, it’s private capital that plays a critical role in accelerating delivery of new social infrastructure assets, namely through Public-Private Partnerships (PPPs) – a market currently valued in Australia at $155 billion3.
Australia has a well-established PPP framework and is one of the most experienced adopters of private finance globally for social infrastructure. This is further supported by state governments and a robust legal and regulatory environment. Despite isolated challenges, a strong pipeline of PPP projects remains across jurisdictions. Internationally, governments are increasingly adopting PPPs to deliver social infrastructure, recognising their ability to align public interest with private sector efficiency.
PPPs have become the favoured model for governments due to their transparent procurement processes, faster project delivery, reduced immediate fiscal burden, and focus on achieving best-value outcomes. Unlike traditional procurement, PPPs incorporate whole-of-life costing, ensuring that long-term maintenance and operational considerations are embedded from the outset. This model is underpinned by a well-established framework that allocates risk to the party best equipped to manage and price it.
For investors, this clarity around risk allocation translates into a high level of confidence that expected returns are commensurate with the risks undertaken, given stability and predictability are highly sought after in today’s volatile market. PPP investments offer an attractive risk-adjusted return profile, with significantly lower volatility than equities - around 2% compared to 14%4 - and are negatively correlated with equity markets. This combination provides valuable diversification and resilience during periods of market stress.
Investors, however, have moved up the risk curve in recent years chasing higher returns from their Infrastructure exposures through investments in economic infrastructure such as transport and digital assets. As a result, there has been lower demand and therefore lower competition for PPP assets which has created buying opportunities for investors that value the stability of the sector. Investors looking for enhanced returns from PPPs are looking beyond mature projects, to early-stage assets.
Confidence in PPPs is further reinforced by the presence of high-credit government entities backing 20 to 30 years of cashflows. State governments, usually rated AA or better, are the counterparties in most PPP arrangements, offering higher credit quality than other typical providers.
PPPs also offer a compelling way for the government to tap into private sector expertise, particularly in construction innovation, sustainability, and whole-of-life asset management. PPPs encourage innovation and global best practice through competitive bidding and performance-based contracts for ultimately the best value. Whether it’s a school, hospital, higher education or water treatment plant, private sector experts have a strong track record in safekeeping valuable community facilities. While some public infrastructure can grow tired over time, PPP assets have well-understood contracts that ensure they are maintained to high standards by specialists, delivering enduring value and performance.
Royal North Shore Hospital is a classic availability-based PPP. The building was delivered by the private sector under a 40-year contract with the state, which operates the hospital and pays the owner as long as the hospital is available, but actual usage doesn’t affect revenue. And around 91% of that revenue is CPI-linked. Most of the costs, including the full lifecycle capital works program, are outsourced and also CPI-linked. That creates an inflation hedged pass-through structure where rising costs are matched by rising revenue, keeping things in balance.
Interest rate risk is largely taken off the table and the base rate is hedged for the life of the project, and unlike many PPPs with refinancing risk every five years, this one has fully termed-out debt. It benefits from higher rates thanks to interest-bearing reserve accounts.
One of the key risks in PPPs is refinance risk. Strong lender relationships help manage this across the long lifespan of these projects, with some tapping into robust demand from banks and capital markets for ESG-aligned infrastructure. With the right treasury capability, risks can become opportunities as the sector continues to evolve and as the market places a greater value on stability.
The Dexus Community Infrastructure Fund (CommIF) provides exposure to operational social infrastructure assets supported by long-term government contracts. Its portfolio spans healthcare, education, justice, and water sectors, with income primarily generated through quarterly distributions. Compared to traditional core infrastructure assets like airports, toll roads, and ports, social infrastructure carries materially reduced demand risk. In CommIF’s case, 97% of revenue is availability-based, meaning income is tied to asset availability rather than usage, supporting income stability and aligning well with long-term investment horizons.
The portfolio also delivers measurable community impact: 1.9 million annual patient treatments, two million entertainment venue guests, support for 50,000 students, making it the largest private investor in schools nationally, and a 150GL per annum water treatment capacity at the Victorian Desalination Plant.
Renewable energy projects like the Macarthur Wind Farm highlight the potential for public-private partnerships to deliver both financial (through its stable, long-term returns) and social value. As one of the largest operating wind farms in the southern hemisphere, with 140 turbines, its 25-year concession period is underpinned by contractual arrangements with AGL and is a strong example of how operational and revenue risks can be effectively managed. The project powers the equivalent of 180,000 homes with clean energy - a tangible outcome of well-structured investment in sustainable infrastructure.
The Riverland Water project, a 25-year Build Own Operate Transfer (BOOT) initiative, involved the design, construction, financing, operation, and maintenance of ten water treatment plants in South Australia's Riverland region. Fully owned by CommIF, the project provided treated drinking water to key agricultural areas and townships along the Murray River.
The asset exemplifies the success of the PPP model. The private sector funded the build and operations of a vital piece of infrastructure and after 25 years of successful operations, it was time to hand the asset back to government hands. As the concession approached its conclusion in January 2025, Dexus effectively managed handback risk within budget, delivering a successful financial and operational outcome for its clients and demonstrating the importance of strong relationships and disciplined execution in long-term infrastructure projects.
By embedding social infrastructure into a broader investment philosophy, stakeholders can unlock a powerful combination of income stability, inflation resilience, and long-term societal benefit. For those focused on enduring outcomes, the case is compelling: social infrastructure delivers strength, purpose, and the potential to leave a legacy. With the right timing, coordination, and vision, it can redefine what’s possible for communities nationwide.
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