As H&H mentioned earlier today, Prime Minister Tony Abbott gave an address to the 2014 Economic and Social Outlook Conference Dinner last night. He outlined why Australia needs to invest heavily in infrastructure and why he wants to be known as the “infrastructure Prime Minister”:
An essential part of our Economic Action Strategy is record investment in infrastructure.
We need it to address the end of the investment phase of the resources boom.
We need it to improve our country’s long-term competitiveness and productivity.
And we need it if there is, indeed, to be an infrastructure prime minister!
Investments in infrastructure are investments in the productive capacity of Australia and Australians.
Little boosts confidence more than seeing cranes in the sky and bulldozers on the ground – because it shows that investors have faith in the future…
[But] there’s the syndrome known as BANANA – build absolutely nothing anywhere near anyone – that has been a further handbrake on building the infrastructure Australia needs.
Traffic jams plague our big cities.
Freight waits – and waits – on inefficient road and rail connections, especially inland.
Almost 70 per cent of businesses are frustrated with our country’s infrastructure, telling an Australian Industry Group survey that infrastructure was in their top three priorities.
Provided the numbers stack up, we should back big plans for our nation…
The new Government is embarked on a great and necessary task.
Let me state at the outset that I agree with the Prime Minister’s premise that well targeted infrastructure investment offers the nation the ‘double dividend’ of supporting growth and jobs as the mining investment boom fades, whilst also expanding Australia’s longer-term productive base and improving living standards.
Indeed, with the government choosing to run a high immigration policy, living standards of the existing population will be eroded over time via higher congestion, slower travel times, and lower productivity (amongst other things) unless there are commensurate investments in new infrastructure.
That said, the Coalition’s infrastructure policy is far from perfect and heightens the likelihood of sub-optimal investment where, in some cases, the costs may outweigh the benefits. For example, the Coalition has shown an overwhelming bias towards road-based investment when in some cases rail could provide far superior returns. For example, I can see few more worthy projects than building an inland rail freight network from Melbourne and Brisbane (including connections to Sydney), with world class intermodal connections at key locations along the way so transfers between rail and truck are fast and efficient.
To be fair, Labor and the Green’s favouring of urban rail projects shows equal levels of bias, and could also be extremely costly and mostly benefit wealthier residents that live adjacent to the rail corridor (via increased property valuations), as well as the small proportion of the workforce that is employed in the CBD (less than 15%).
This is why it is vital that infrastructure proposals are evaluated by an independent authority tasked with maximising overall welfare and productivity at lowest cost. Picking infrastructure winners, based on pre-conceived ideas or political motivations, is a recipe for waste and is likely to end up being productivity destroying for the economy at large.
On this point, it is highly disconcerting that the Abbott Government is looking to pare-back Infrastructure Australia, thereby reducing transparency around infrastructure decisions and heightening the likelihood that the Government will choose projects based on political expediency rather than their broader benefits to the community.
