Thu 10 Sep 2015

‘If the economy has hit the brakes … then step on the infrastructure accelerator…’

The Australian Financial Review recently reported that the economy narrowly missed shrinking for the first time in more than four years.

Stephen Anthony a key economist and federal expert reported that the economy is ‘falling off a cliff’ and is in a perilous state. ‘Infrastructure underpins productivity, and productivity is the key factor in driving the economy forward …’ says Mike Carmody Chief Executive Officer Civil Contractors Federation.

‘Federal and state governments haven’t been spending nearly as much as they should on public infrastructure …’ said Carmody. According to figures quoted by Adrian Hart of BIS Shrapnel, we went through much of the 1980s and ’90s with little increase in annual federal and state spending on infrastructure. However, annual spending just about doubled, reaching a peak of $76 billion in 2009-10.

Since then, annual spending has actually fallen in real terms. By 12 per cent to 2013-14 and, according to Hart’s estimates, by another 10 per cent in 2014-15. Ross Gittens economic editor for the SHM noted that macroeconomic commentators are right when they say this is crazy at a time when the mining construction boom is coming to an end and leaving a vacuum in the civil construction industry, while long-term interest rates paid by governments are at record lows.

The message is simple ‘Get off the brakes and onto the accelerator! …’ ‘We need Infrastructure Australia to have the independence to work with the civil construction industry to conduct rigorous evaluations of Australia’s infrastructure needs and then make them public …’, says Carmody. As the Grattan Institute put it more bluntly, ‘the capacity for governments to waste money is a serious risk for infrastructure, given the very large amounts of money involved’.

Where is our ‘infrastructure Prime Minister’ when we need him?