Asset sales a yellow brick road, states told CASH-STRAPPED state governments that want to replace ageing infrastructure without increasing their debt need look no further: privatisation. The states have $120 billion in assets -- mainly ports, electricity businesses and water companies -- that could be sold to fund new infrastructure and shore up their wobbly credit ratings, a new study from ANZ argues. "Privatisation can offer significant benefits for all -- governments, voters, superannuation funds -- if the proceeds are allocated not only to pay off debt but to build new infrastructure," said David Byrne, global head of infrastructure at ANZ. He said that asset sales had been politically difficult in the past because the public could not see an improvement in services. The report argues that selling $50bn of these assets would be enough to improve states' credit ratings, leaving $70bn to build new public transport and utilities and help plug Australia's $700bn-plus infrastructure deficit. The states' average debt to revenue ratio is on track to hit 100 per cent next year, up from about 60 per cent in 2008, as growing health and education costs outstrip sluggish GST and stamp duty revenues. NSW's credit rating is on negative outlook and all states' credit changes since 2009 have been downgrades. Standard & Poor's stripped Western Australia of its AAA credit rating this week. However, the study suggests the sale of Western Australia's $12bn Water Corporation would help trigger a review Mr Byrne praised NSW's recent "recycling" program, including the long-term leases of ports Botany and Kembla, which raised $5.1bn and were now helping to fund the electorally popular WestConnex motorway and the North West and South West rail links. The O'Farrell government, which has ruled out further asset sales until a second term, could raise a further $35bn if it sold the state-owned electricity distributors, as Victoria did in the 1990s. South Australia, with the lowest credit rating at AA, would reap almost $13bn from selling its water utility. "There's no shortage of private sector capital available to finance infrastructure projects, but a limited pipeline of suitable projects," Mr Byrne said. Infrastructure Australia has recently identified $220bn of commercially viable publicly owned assets in Australia.