NAB’s CEO, Cameron Clyne, has this afternoon told governments not to expect Australia’s banks to fund Australia’s infrastructure needs. From the AFR:
National Australia Bank chief executive Cameron Clyne says the country needs to consider alternative funding sources to traditional bank lending to finance $700 billion of infrastructure requirements.
Mr Clyne said Australia should try to insulate itself from any future shock in global capital markets, which may not always be willing to provide funding to domestic banks during times of financial stress…
Mr Clyne said superannuation funds may be able to play a greater role in financing the country’s growing infrastructure gap.
“Infrastructure is a massive driver of productivity,” Mr Clyne said.
“There is always a tendency to focus on things like industrial relations which is important, but infrastructure is critical as well.”
He said the federal government’s AAA credit rating meant the most efficient financier of infrastructure may be the government, due to its low cost of funds.
Too right. One of the most disappointing features of government – both federal and state – is that it has become addicted to running surpluses, seeing all debt – productive or not – as “bad”.
Nation building was once a key feature of Australian government. Much of the essential infrastructure around Australia – be it railways, utilities, or other – was built generations ago and financed via government debt (bonds). Few would argue that this money was poorly spent. Yet the prospect of going into debt nowadays to fund similar types or infrastructure expansion or upgrades is, for some reason, off limits.
As noted several times recently, well targeted infrastructure investment offers 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.
And going into debt to fund expenditure is not a problem provided that expenditure expands the productive potential of the economy, allowing the debt to be self-liquidating.
Maintaining the status quo of simply growing the population (via immigration) without regard to the negative longer-term consequences on pre-existing infrastructure capacity, living standards, or productivity, is self-defeating and will no longer cut it.
