Government fear of debt costing jobs

Australia is being starved of major infrastructure projects because governments lack initiative, according to the Property Council of Australia. Chief executive of the Property Council Peter Verwer said today that Australia is crying out for significant investment in infrastructure of all types.

“Investment in public infrastructure is not keeping pace with growing needs. A lack of funding is the key constraint,” he claims.

Verwer said the governments’ fear of debt is costing thousands of jobs and billions of dollars in lost economic growth.

The report shows the NSW Government could increase debt by $5 billion without affecting its AAA credit rating.

The landmark report on infrastructure, prepared by Allen Consulting Group for the Property Council, called Funding Urban Pacific Infrastructure: Approaches Compared, challenges governments to fundamentally rethink how our cities are recapitalised.

It finds that the most efficient way to raise $5 billion to fund public infrastructure is through public debt.

Modelled on the NSW economy, this would:

• create over 12,500 new jobs,
• deliver a $13 billion dollar increase in economic output,
• provide the infrastructure item up front, and
• have no impact on the state’s AAA credit rating.

The report finds that developer levies are by far the least efficient method:

• costing 3,100 in lost jobs,
• providing a mere $0.8 billion dollar increase in economic output,
• increasing housing prices and business costs, and
• delivering infrastructure late depending on levy income.

Leader of the Allen Consulting Group project team Dr Vince FitzGerald, laid the case for the greater use of government debt is strong.

“Public infrastructure typically involves long lived assets and it seems rational that they should be financed over time.

“The evidence produced in this study is that this funding approach provided the macro-economic path with the highest gains from infrastructure investment,” Dr FitzGerald added.

The Property Council has urged governments around Australia to break out of their debt reduction, debt elimination mantra.

“Governments’ debt phobic approach is costing the economy billions of dollars and thousands of jobs in lost infrastructure opportunities”, Verwer said.

“This report shows governments need to consider innovative debt structures such as bonds, and move away from an increased reliance on harmful developer levies which drive up housing costs.

“This country was built on bonds. Australians understand them and will embrace them.

Verwer said that public debt is not a problem in Australia. Our public sector debt is among the lowest in the developed world.

“We are not asking governments to be fiscally reckless.”