Australia has borrowed heavily to weather the recent COVID-induced economic storm. But, in dramatic contrast to the last major global recession, the nation is emerging with little to show for the deep debt incurred.
Australian Bureau of Statistics (ABS) figures show infrastructure spending under the current government has dropped off alarmingly: total investment in construction projects for 2020 was $34.9 billion. That is a decrease from 2019 spending, despite the raging pandemic and the urgent need to boost the economy with infrastructure development. Worse, it is $4.75 billion less than the investment in 2018.
Bizarrely, last year’s spend was also less than the infrastructure investment in each of the critical four years of the global financial crisis (GFC) — 2009 to 2012. And when calculated relative to population or to gross domestic product, which are both far greater than a decade ago, the comparisons are even more dismal.
What’s happening here?
There is no excuse for this failure to invest. Infrastructure Australia has identified many urgent priorities. Almost 1.2 million Australians are underemployed and more than 800,000 have no job at all. Thousands of these people are in the construction sector.
Australia should have abundant tax revenue given the extraordinary demand for most exports, the recent surges in commodity prices and record volumes shipped since early 2018. Just since Scott Morrison has been prime minister, Australia has reached a new all-time high monthly trade surplus six times. The latest was a thumping $9.62 billion in January this year. The coffers should be overflowing.
This is vastly different from the challenging global conditions Australia faced through the GFC. Yet that government managed to build extensive infrastructure with relatively little debt.
Investment by prime ministers
Infrastructure spending should increase steadily year on year as the growing population requires more transport, housing, communications and community services. Yet there were actual spending declines in both Abbott years, 2014 and 2015, and in both Morrison years, 2019 and 2020.
When you look at the above chart (comprised of data from the ABS), the increase in spending per person through the Howard years over the Keating period is normal and expected. The surge in the Rudd years was abnormal, but justified by the need to respond to the GFC — which Australia did better than any other country, according to most independent analysts.
The slight contraction in the Gillard period was not a worry, as spending stayed high. This built new roads and bridges, railway lines and split-level rail crossings, new port facilities, energy and water infrastructure, insulation in 1.1 million buildings, hot water units in sports facilities across the land, new community social housing, new defence housing, national park extensions and school and community buildings in every single town, suburb and rural region — virtually all of which are still in productive use.
The sharp reduction in infrastructure spending under Abbott was a major failure. Particularly after he had stated before becoming PM that: “I absolutely hope that in four or five years’ time people will say ‘yes, that Tony Abbott, he did all sorts of things but by God, he was an infrastructure prime minister. He was a builder.'”
He wasn’t. Investment recovered marginally under Malcolm Turnbull, but nowhere near the spending per person of the Labor period. Investment has slumped again under Morrison.
Stark debt comparisons
For Labor to have built so much infrastructure it would be reasonable to conclude that they had to borrow far more. This is the perception the Coalition and the mainstream media constantly reinforce. But the opposite is true.
In the critical three years 2008 to 2010, the Rudd government increased gross debt by $115.7 billion. In the last three years, from 2018 to 2020, the Coalition has borrowed $290.3 billion.
Over its full journey, the Labor government added $213 billion, or $37 billion per year. The Coalition, in contrast, has added $549.9 billion, or $72.4 billion per year.