From David Uren today:
Estimates by consulting firm BIS Shrapnel show there will be some [infrastructure] recovery over the next four years, however, as a share of GDP spending will remain far below the average for the past decade.
University of Wollongong research fellow Joe Branigan said the biggest barrier was the limits on state government spending.
“State governments are hitting budget constraints, as is demonstrated by both Western Australia and Queensland losing their AAA credit rating,” Mr Branigan said.
“NSW held on to their AAA rating because it has a more diverse economy and is not as cyclical but the financial metrics would have shown they were a borderline case. They are at their system limit.”
An analysis of budgets for the federal government and the three biggest states — NSW, Victoria and Queensland — shows total capital investment peaked at $50bn in 2009-10 at a time when the Rudd government’s stimulus program was in full swing but had fallen by a third to $33.4bn last year. The latest round of budget updates shows that, out to 2017-18, there is only a marginal increase in spending to $35bn.
Rigorously examined infrastructure ought to be a key platform for growth over the next five years. It provides jobs when the private sector cannot and if carefully planned boosts productivity significantly, meaning the broader post-boom Australian adjustment to increased competitiveness is made considerably easier. Not to mention that while you run a population pump and dump policy, it’s also needed to prevent congestion from dragging productivity and standards of living down.
It’s a no-brainer, really, and illustrates nicely the fiscal airheadedness at large.
