Leading Australian economist Chris Richardson has claimed a “disappointingly patchy” and “opportunistic” pattern of infrastructure spending is dangerously hampering the nation’s ability to rise to the challenges and reap the opportunities in a revived and competitive global economy.
Speaking at the AFR Infrastructure Summit in Sydney on Monday, Richardson – who is a partner with Deloitte Access Economics – sounded alternating notes of hope and despair as he presented the both the possibilities for future economic expansion and the imposing and ever-growing “gap” between this potential and the currently-existing state of affairs.
“We sit upon a continent of opportunity – and at a moment when that opportunity is at its greatest. Half the world is having an industrial revolution, and it wants what we have,” Richardson said.
Infrastructure spending, he argued, had not kept pace with the rapid rate of population growth (driven by immigration), which currently sees approximately 380,000 people arriving in the country every year.
“We have let ourselves slide for so long,” Richardson said. “Our infrastructure approach and policies need planning and commitment and action.”
Richardson affirmed that he did not want to “underplay” the “magnificent spending moment” occurring in road and rail infrastructure across the nation’s cities, but said that this was nonetheless a much overdue “catch up” attempt following a long-term “failure” to address the shortfall in investment.
Following the ebbing of the mining boom and with it the reduction in private capital investment, the house-price boom in Australia’s major cities – with its attendant “bonanza” in stamp duties – has for now kept the economy afloat. But with house prices cooling and government revenues shrinking, Richardson said there was no “next surge” in public sector spending in sight. And nor is a surge on the cards for the private sector – especially concerning, Richardson explained, at a time when there is global demand for Australian commodities.
While rising population growth is necessary to maintain the labour force that will enable the nation to meet this “historic” opportunity and challenge, Richardson told the audience, the response in infrastructure planning and investment has not been up to standard. And the compounding effects of the ever-widening gap between increasing population growth and infrastructure spending are, he claimed, the poor outcomes evinced in government policy cycles: pricing, regulation and legislation in the infrastructure sector had been carried out poorly, while taxation policy had been ill-conceived and privatisations conducted “badly”.
Further morbid symptoms were emerging, Richardson indicated, in the “toxic” political discourse around issues of taxation, infrastructure spending, and immigration.
The public needed to apply more pressure to politicians so that they rose above partisan point-scoring and instead committed to investing in nation-building projects.
“Bipartisanship is stunningly important,” he said. “We have to embarrass them into more bipartisanship.”
He was especially concerned that “good” high immigration growth would soon come under further scrutiny – and possibly under the weight of public pressure be reduced – while the central issue of infrastructure spending continued to be kicked down the road.
“That would be Australia failing to rise to an historic challenge and historic opportunity,” Richardson said. “Infrastructure is the path to prosperity, but we are not on that path.”