According to the report for the Business Council, Groundwork for Growth, by Port Jackson Partners, only 14 per cent of the $76 billion it regards as stimulus spending was on infrastructure. That actually overstates the real amount since it includes all those unnecessary school assembly halls, welfare housing, pink batts, “clean” energy and other expensive low productivity expenditures that are oriented towards the ballot box rather than economic efficiency.
Meanwhile, in keeping with political tradition, Infrastructure Minister Albanese and Nationals leader Warren Truss are falling over each other to claim the credit for spending the taxpayers’ money. Mr Truss says the Howard Government identified the spending priorities for which Mr Albanese is busily cutting the ribbons.
Although Mr Albanese claims to have completed 32 major road and rail projects, the “successes” trumpeted most loudly are community centres and bike paths with his press releases over the past fortnight alone listing 20 new cycling initiatives. Perhaps he is preparing us for the bleak low-carbon future when, other than for the political elites, tax induced fuel price increases will replace the car trip with peddle power and air travel vacations with freewheeling along local roads.
Mr Albanese hits at a plummeting level of “public” infrastructure spending in the Howard years. Misleadingly this neglects the vast increase in private infrastructure provision as a result of the privatisation reforms that Mr Albanese bitterly opposed. According to the Port Jackson Partners report, overall economic infrastructure spending averaged about 4 per cent of GDP in the 15 years to 2004 and has since risen, hitting 5 per cent in 2008. Within that total spending, the private share of infrastructure increased to one half from under a fifth. In real dollars, engineering construction work over the past three years was threefold its level of the late-1980s/early-1990s.
This shift of infrastructure spending towards the private sector during the past 20 years provided a productivity bonus. This is because private investment spending must pass a true test of economic necessity, shorn of the political dividends that offer the main justification for bike paths and most public investment.
Even though it identifies an increase in capital expenditure, the Port Jackson Partners report considers we have missed an opportunity to use the global financial crisis to bring increased infrastructure investment. The report may be correct in its judgement that had we had the “shovel ready” projects, this would have made far better use of public money than the give-aways that it claims accounted for 86 per cent of the stimulus package. But in discussing broadband it notes a major deficiency of government infrastructure provision. The National Broadband Network is being planned without proper costing, with unclear objectives and with a likely potential to create an artificial monopoly by shutting out rival technologies like wireless.
This typifies a wider problem with public or subsidised projects. Those projects are rarely judged with the same rigor as private measures and are always likely to be geared towards less than optimal populist measures. They will comprise under-patronised regional rail services rather than roads, high priced desalination plants rather than dams, costly and poorly performing windfarms rather than base load power plants.
Instead of having the government identify “shovel ready” projects it is better that the regulatory impediments to private provisions of infrastructure are removed. The Port Jackson report identifies some of these but fails to recognise the “chilling” effect on new infrastructure provision caused by regulatory controls of agencies like the ACCC and the NCC. Indeed, the report calls for rather more government intrusion into the management of freight, electricity and water provision.
And this is especially hazardous when the lights are flashing green on government spending increases.
Alan Moran is the Director, Deregulation at the Institute of Public Affairs.