Future generations will rue present governments’ reluctance to borrow money to fund infrastructure, a multinational consultancy has warned as Queensland’s public spending sank to a 10-year low.
An RPS Group analysis of Australian Bureau of Statistics data showed the public sector spent $1.3 billion on infrastructure in the March quarter, which was the lowest level since 2006 and half the rate of expenditure seen five years ago.
RPS Group regional technical director of economics Mark Wallace said infrastructure spending was vital to stimulate the economy, particularly at a time when other sectors were in the midst of downturns.
“It’s been trending down for a number of years now, so it’s not a flash-in-the-pan issue,” he said.
“There’s obviously something structurally wrong at the moment.
“It’s a combination of the political climate over the past six years and how difficult it has become for governments, particularly at a state and local government level, to borrow money.
“It’s really not politically possible any more and that was the primary way we funded infrastructure for the past 50 or 60 years.”
A lot of that, Mr Wallace said, was due to increasingly negative community attitudes towards public debt.
Mr Wallace said the failure of all levels of government to borrow money for infrastructure spending would have long-term consequences.
“Future generations will look back in 30 years’ time and we’ll be lambasted for not borrowing more money at the cheapest possible interest rates the Australian government has had in the past 50 years,” he said.
“Instead, in the future in a higher inflation cycle, we’ll have governments who’ll have to borrow money to make up a shortfall at double the interest rates.
“Future generations will look back at this period of politics and see the wasted opportunity this whole cycle represented.”
Mr Wallace said there needed to be more focus on new funding models for infrastructure projects.
“In a post-GFC environment, how do we fund infrastructure when we’ve politically demonised debt so much?” he said.
“That’s a huge issue, as is the fact the federal government has basically not been in Queensland for six years.
“There’s been virtually no expenditure, no major infrastructure expenditure, and now we’re in a situation where any major infrastructure expenditure from the federal government is tied to asset sales.
“Whether or not those asset sales are good for Queensland is a bit irrelevant as part of the strategy; it’s just ideological extortion that’s happening at the moment.”
Mr Wallace said borrowing money to build the infrastructure to support a future economy was “absolutely essential” for prosperity going forward.
“If debt was such an issue, then none of us would own homes and most of us wouldn’t drive cars,” he said.
“Debt itself, when managed properly and done for the right reasons, is a fantastic tool.
“The problem is when it’s done for paying wages, or you’ve got a credit card bill. That’s when debt is bad and, unfortunately, that’s a pretty nuanced argument and, politically, both sides of politics have failed to explain why some debt is good and some debt is not.
“Borrowing money to build the infrastructure for a future economy is not only the right thing to do, it’s actually absolutely essential to our future economic prosperity.
“That’s gone now.”
On Tuesday, after the publication of this story, Queensland Infrastructure Minister Jackie Trad said the RPS analysis was based on completed work and was a “reflection on the Newman-Nicholls government’s failure to invest in infrastructure”.
“The value of work that has commenced under the Palaszczuk government has climbed every single quarter we’ve been in office and continues to grow,” she said.
“Construction has kicked off on multiple projects throughout the state, supporting thousands of jobs for Queenslanders.
“Our government is serious about investing in Queensland and stimulating the economy, we have a $40 billion capital program rolling out over the next four years and we have released Queensland’s first state infrastructure plan in more than three years.
“However, we need the Turnbull government to invest in Queensland too. It’s time they commit their fair share to vital projects like Cross River Rail and the M1 upgrades.”
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