Nov 25, 2010

Gruen: paying for Australia’s infrastructure deficit

Rather than simply getting budgets into operating surplus -- mostly a very good thing -- Australian governments have embraced the notion that all debt is bad, writes Nicholas Gruen, CEO of Lateral Economic.

Economic reform in Australia has been a triumphant success. From the mid-1980s on, it pulled our relative economic fortunes out of their decades-long decline and propelled us through the Asian crisis. Reform was built on simple and compelling principles, including some that affronted the common-sense beliefs of many ordinary Australians. Surely tariffs create jobs? Well, they don’t — and so we cut them.

But having made such progress, we’ve gone backwards in one area, and all in the name of a kind of faux economic rationalism. Enter fiscal populism. Rather than simply getting budgets into operating surplus — mostly a very good thing — Australian governments have embraced the notion that all debt is bad. But most of the time debt is only bad if it’s used to fund recurrent expenditure — see Charles Dickens on the difference between small, sustained operating profits and sustained losses; it’s the difference between happiness and misery. But debt can also help us fund investment.

Free Trial

Proudly annoying those in power since 2000.

Sign up for a FREE 21-day trial to keep reading and get the best of Crikey straight to your inbox

By starting a free trial, you agree to accept Crikey’s terms and conditions


Leave a comment

3 thoughts on “Gruen: paying for Australia’s infrastructure deficit

  1. John Bennetts

    There is a further major problem with PPP’s.

    The private “partner” calls the shots re perceived and actual competition. For freeways and tunnels, that means that road signs lead only to the toll roads. Alternative routes are choked by removal of lanes and made generally and artificially less useful.

    This means that the most efficient final arrangement is sacrificed on the altar of profit to that which returns the most to the PPP’s private partner, enshrined in contracts, cast in stone and is unable to be revisited again – at least for the 30 years of the “partnership”, which is in fact an arrangement between unequal partners, hammered out by lawyers and hidden from public knowledge under the veil of being “commercial in confidence” or “commercially sensitive”.

    So, the very fact that profit is the motive drives these PPP’s away from their objectives which were social amenity and social utility. They instead become dominated by the purely private objectives of commerce, profit and lawyers.

    Bah! Humbug!

  2. jchercelf

    Surely during this mining boom a sensible government will go into debt to invest in the desperately needed infrastructure so shamefully neglected in the ‘Howard years’.

    Do something for Australia, and let the Opposition carp on about our debt. At least we will be doing investing in something which will return its cost in future years.

    Joan Croll

  3. JamesH

    There is no need to even create a “debt”; the notion that governments must issue bonds to cover their deficits is an ideological construct we can do without.

Share this article with a friend

Just fill out the fields below and we'll send your friend a link to this article along with a message from you.

Your details

Your friend's details