The implementation plan for Kevin Rudd’s $43b already-announced broadband plan is now to begin. This is to now determine how the project will be built, financed and operated. I guess better-late-than-never. Ziggy Switkowski is rumored to be a candidate for the chief honcho position. I assume Ziggy’s enthusiastic endorsement of this project will help him if he is indeed seeking employment. Ziggy does believe that there are legitimate concerns in relation to the returns to taxpayers from their investment - normal commercial returns are unlikely but – and this sounds promising for the Rudd economic illiterates – Ziggy also believes that ‘nation building’, while a valid justification (!), is hard to quantify.’ Onya Ziggy.
The Government will fork out $4.7b for this project and borrow enough from the private sector to take its stake to about 50%. My guess is that, if this project goes ahead, that 100% of the funding will be public – we will all pay directly for this one.
The AFR today sets out the financial actions since last October – $10.4b in cash payments and home-owner grants, $6.2b in subsidies for the car industry, $15b deal with the states, $4.7 b for road, rail and small business, $30b guarantee for Ruddbank, $42.5b for bonuses, pink bats and schools, $1b in repackaged work programs and, today, $31.7b in what are mainly road projects.
The cost of all these projects and handouts – every dollar – will eventually need to be repaid in full as taxes. In the long-run we are not all dead. Already we face large public sector deficits in the next few years due to revenue shortfalls.
I want to focus on this last class of spending – boring old roads. It was mainly promoted today as a way of generating jobs rather than a long-term measure to improve our road infrastructure – it will stimulate the economy over the next 5 years says Minister Albanese. It was also promoted simply on the basis that spending would occur faster than under the previous government. Moronic I know but the Opposition’s response was equally stupid in denying this! We spent faster!
Of the $32b NSW gets $8.6b, Victoria $4.4b, Queensland $6.6b, WA $2.8 billion and the rest being smaller bits. Partly the huge outlays to NSW are an attempt to boost the re-election prospects of the worst state Labor Government in Australia. Partly too, the large outlays in that state reflect the crucial role NSW plays in facilitating transport on the eastern seaboard. It is the ‘centre’ state.
It is a lot of money and rivals the broadband plan in its overall financial impacts even if it will gain less publicity. Absolutely no justification for this expenditure is provided. There is no overall plan and no attempt to relate road provision to road demands. Among conventional economists this does not surprise since broadband to them is a commercial product whereas roads – well they are just ’infrastructure’.
Yet there is a COAG agenda to reform the process basis of building and maintaining our stock of roads. Those governing in Canberra today should remind themselves of this. We don’t want road spending to continue to be a political football. The supply of roads should meet the commercial criteria that are applied to any large scale investment projects and, if there are community service obligations, these should be brought into the open and made explicit.