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From the AFR:
Former Reserve Bank of Australia board member Warwick McKibbin has called for an independent agency such as the Productivity Commission to analyse any future government borrowing to boost infrastructure investment to ensure funds are used appropriately.
Readers may recall that Joe Hockey is in the process of revving up off balance sheet investment:
Mr McKibbin said Mr Hockey’s proposal was “a great idea” as long as a thorough analysis of planned investments was made to avoid “political point-scoring”. “It has to be a transparent process and has to be based on procedures and public consultations.”
Absolutely right except for one small problem. In a macroeconomic sense, the infrastructure spend is most needed in 2014 and 2015. Just about everyone sees even the projects that have been fast tracked – without the kind of scrutiny demanded by McKibbin, – as unable to kick off before 2016. Goldman Sachs even warned last week of a possible inflationary bottleneck in that year when the projects all hit the market simultaneoulsy. McKibbin’s process will slow things dramatically (which does not mean it should not be followed).
The mining capex cliff has been obvious for a year. The risks to the mining boom were obvious a year earlier when the terms of trade peaked. If two dudes in a garage could see it all coming why couldn’t the $400 billion government do a bit of risk and contingency planning?
What we really need is some folks running the executive and legislature that don’t drink the cool aid.
About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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