Infrastructure Spending Dives in Coalition’s First Year

Tuesday, October 7th, 2014
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The latest raft of data from the Australian Bureau of Statistics (ABS) indicates that public sector spending on infrastructure has plummeted to a six-year low as state governments curb their outlays in a bid to improve budgetary health.

An ABS survey indicates that public sector investment on infrastructure fell by 12.5 per cent over the past year, with NSW slashing spending by 16.4 per cent, Victoria 6.7 per cent, South Australia 10.7 per cent and Western Australia 3.5 per cent.

Queensland and Tasmania were the only two states to see any increase in spending by local government on infrastructure undertakings.

The release of the figures coincides with a call from the International Monetary Fund (IMF) for developed economies to take advantage of low borrowing costs to launch a concerted infrastructure drive.

“It’s hard to imagine any production process in any sector of the economy that does not rely on infrastructure,” say the analytical chapters of the IMF’s World Economic Outlook.

While the disappointing investment figures for the Coalition’s first year in office would appear to undermine Tony Abbott’s aspirations to become an “infrastructure Prime Minister,” as well as hopes that public spending on such projects would help offset the downturn in the resources sector, the government’s more ambitious infrastructure initiatives are just now coming into effect.

The Asset Recycling Initiative, the largest component of the Infrastructure Growth Package, was only signed into existence by the state and territory governments at the start of May.

The initiative will use $5 billion to incentivise the divesting of assets and re-investment of proceeds into new infrastructure. The Commonwealth will provide state and territory governments with an incentive payment equivalent to 15 per cent of the proceeds from asset sales that are used for spending on infrastructure projects that satisfy certain criteria, including enhancing the long-term productive capacity of the economy and demonstrating a “clear net positive benefit.”

The government expects the program to give a major boost to infrastructure spending by state and territory governments, creating nearly $40 billion in new investment over the next five years.

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