Public infrastructure a zero-sum game

    The Australian
    January 19, 2015


TONY Abbott’s hopes of boosting infrastructure spending are being frustrated by the poor financial position of state governments, which are cutting back as fast as the federal government increases its contribution.

Government spending on engineering and construction work this year will be 19 per cent less than the peak reached in 2012-13, and total public-sector investment will be down by a third.   

Estimates by consulting firm BIS Shrapnel show there will be some recovery over the next four years, however, as a share of GDP spending will remain far below the average for the past decade.

Mr Abbott has sought to present himself as “the infrastructure Prime Minister” and he made infrastructure spending one of the central themes of last year’s G20 summit in Brisbane. Reserve Bank governor Glenn Stevens has endorsed the government’s efforts to lift infrastructure spending and thus lift demand when construction work on resource projects will be winding down, commenting that it both supports demand and, if done well, boosts the economy’s productivity in the long term. However, economic growth this year now looks as though it will be dragged lower by cuts to both resource and public-sector investment.

Federal Infrastructure Minister Warren Truss said the government had committed a record $50 billion investment for infrastructure in its first budget.

“State and territory governments are most directly respons­ible for delivering Australia’s public infrastructure, and the Australian government is keen to work with each jurisdiction to deliver high-quality, value-for-money projects,” Mr Truss said.

“The government also continues to encourage the expansion of private-sector investment in infrastructure, including under the $5bn asset-recycling initiative, which provides incentive payments to encourage the states and territories to recycle their ­assets and invest the sale proceeds in new productivity-enhancing ­infrastructure.”

Labor infrastructure spokesman Anthony Albanese said there was a gap between the government’s rhetoric and the reality.

“There have been no new projects added to the priority list of Infrastructure Australia since the change of government, while projects that were there have been cuts such as the (Brisbane) cross-river rail project.”      

Mr Albanese said state governments were under pressure and were cutting infrastructure because the benefits of it were seen only in the long term.

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.

The Parliamentary Budget Office shows that the Abbott government did lift outlays on road and rail. Whereas spending was forecast in the 2013-14 mid-year budget update to peak in 2014-15 at $7bn, it will now climb to just less than $10bn in 2017-18

Although the states must match most commonwealth spending on individual projects, the commitments to projects such as West Connex in Sydney and road building for a second Sydney airport have been swamped by cutbacks in other areas by the states.

The Australian Bureau of Statistics’ latest survey of engineering and construction work, which includes most government infrastructure spending, shows that spending fell by 12.5 per cent in the past 12 months, while consulting firm BIS-Shrapnel estimates it will fall a further 5.2 per cent this year before starting to recover as proceeds of asset sales are rolled into new spending.

The firm says that having peaked at $32.8bn in 2011-12, spending will be down to $26.6bn this year, before lifting again to $33.3bn by 2017-18. That would repre­sent 1.7 per cent of GDP, well below the average of the past decade of about 2 per cent and a 2010 peak of 2.4 per cent of GDP.

Mr Branigan said the more difficult circumstances of the states meant they were likely to make better decisions about what projects to support.

yes... Daniel Andrews and his mates, FCMEU, has all but shut down Victoria at the moment...

And Abbott and Turncoat between them killed the biggest, most important bit of infrastructure spending in the NBN.

Our broadband speeds will be declining as every year the copper rots a bit more. Even tho a fair bit of money will be spent on the HFC crap when people start downloading 4K movies the congestion there will still be horrendous.

Since no money is being saved running out the MTM crap, and FTTH will need to be run out any way—Abbott and Turncoat are wasting $40Bn+. Bit less than that, I doubt FTTN will be run out much at all—with the Telstra copper being too thin and in too poor a state it will be trials and much–heralded roll outs in the few areas that have good new copper.

WestConnex costing $Bns, no CBA or business case.

Quote:


Probably because because both state & federal LNP governments have gutted the public service.

Those left can only do so much per day & the backlog continues to grow.

Submissions still need to be read
Tenders still need to be called & accessed
Projects still need to be considered & approved.
etc etc etc

But hey slashing the shiny bums is always good propaganda, I mean its not as if they do anything.....Oh wait!

Swagman wrote on Jan 19^th, 2015 at 10:38am:


So you want to compare something that happened in the 90's to now?

Public assets started to be sold in that era, are we not meant to learn from history?

P.S still no answer, do you find my suggestion quite sensible but to agree would be to concede?
Aren't you man enough to admit fault?


And another thought, if Albo's being a hypocrite what does that make Baird/NSW Libs who campaigned long & loud AGAINST the electricity privatisation in 2008.

Swagman wrote on Jan 19^th, 2015 at 11:51am:


But you yourself said that the project/s would

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So won't these new employees pay tax

Won't these new enterprises pay tax

Its a phurfy that the general public will pay less, they will pay more for something they already own & still pay tax.

I am happy to be proven wrong, which will be easy enough for you to do.

Show me once piece of government run enterprise that has been sold resulting in lower costs to consumers.

Not 1 or 2 years directly after the sale but a sustained saving over time.

President Elect, The Mechanic wrote on Jan 19^th, 2015 at 6:21am:



Building industry holiday?