Where will the money come from?

Melbourne & Ballarat trams in the 60s (click)

According to Paul Austin in The Age (29/11/10), there’s little doubt that infrastructure inadequacies weighed heavily on voters’ minds in last Saturday’s election. His list of problems includes overcrowded trains, congested roads, the Myki debacle and long hospital waiting lists.

The pressure to “fix” these problems from voters in the eastern suburbs and sandbelt electorates that fell to the Coalition on Saturday will be immense.

The new Premier, Mr Baillieu, might therefore find it worthwhile to look at this report on public sector borrowing by Dr Nicholas Gruen (summary here).

Dr Gruen contends that governments in Australia have focussed on the cost of debt but have ignored the benefits. They’ve reduced the budget deficit to zero but exchanged it for an infrastructure deficit. Their constituents have saved on debt repayments, but:

they are paying inflated tolls on roads and heavy mortgage repayments that reflect the lack of land release and the loading of infrastructure charges onto the land that has been released. And they are paying with their time as they wait at peak hour in traffic that has slowed to a crawl or crowd into late trains and buses.

Thanks to the culture of strict fiscal rectitude that dominates modern government thinking, new debt has been kept off the government’s balance sheet by funding infrastructure in other ways – partly through asset sell-offs but mostly via Public Private Partnerships (PPPs). Read the rest of this entry »

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