States feast on infrastructure pork

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ScreenHunter_06 Jun. 06 09.33

By Leith van Onselen

The AFR is reporting this morning that Australia’s state governments have rejected calls to release cost-benefit analysis of new road projects, in a bid to increase transparency over infrastructure decisions and improve the quality of investment:

None of the projects receiving the cash has been identified as a priority by the government’s key advisory body, Infrastructure Australia, an analysis by The Australian Financial Review has confirmed…

Garry Bowditch, chief executive of the SMART infrastructure group at Wollongong University, said Infrastructure Australia should do its own financial analysis and release its conclusions to the public.

While the funding provided for big road projects in the federal budget seemed sensible, there was a lack of supporting information on why the government had chosen certain projects over others, he said. The result was reduced confidence that “the best decisions have been made”…

According to the report, the New South Wales, Victorian and Queensland state governments have all refused to publicly release details of their internal cost-benefit analysis on the grounds that it is “commercially sensitive”.

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This is a disappointing result, and looks as if Australia’s various levels of government are more interested in sexy pet projects and ribbon cutting opportunities, rather than selecting projects that deliver the biggest ‘bang for the buck’ and provide the greatest benefits to taxpayers.

Well-chosen and targeted infrastructure investment can offer Australia 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.

But if projects are chosen for political reasons, as appears to be the case above, then they can leave Australians short-changed and having to carry the burden of expensive ‘white elephants’ that offer only limited productivity/social value, and whose investment could have delivered much bigger returns elsewhere.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.