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Debt is not a dirty word when it comes to funding infrastructure

By Greg Hallam - posted Wednesday, 16 June 2004


The future of state and federal governments will in no small part be determined by their capacity to service the infrastructure requirements of Queensland, most particularly the south-east corner.

Recent Brisbane City Council elections were a case in point. Each side of politics engaged in a bidding war on additional capital infrastructure outlays, especially roads and tunnels.

More recently, the Federal Government has joined the fray with fists full of dollars for the Tugun Motorway, Ipswich Bypass, Caboolture Rd upgrade etc.

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The fundamental question is how do you finance the additional infrastructure required to service the state's vast inland and massive population growth now and into the future?

State governments have a limited number of options available to them to finance infrastructure. They are: greater federal financial support, additional borrowings, selling-off one set of assets such as electricity to pay for other new infrastructure, user pays in the form of tolls, public private partnerships, higher taxes and/or the redirection of funding from existing programs.

Queensland Treasury boffins have been worried for some time about the long-term decline in the true value of state expenditure on economic wealth-generating fixed assets, such as dams, roads, bridges, and rail, in favour of social infrastructure such as schools and hospitals or recurrent outlays.

The Local Government Association of Queensland started public debate on this issue 2½ years ago with the Layton Inquiry into financing Queensland's future roads and transport needs.

The association followed up a year later with the State of our State Infrastructure Report by Professor Lyndsay Neilson, director-general of the Department of Planning and Infrastructure in Victoria.

In April, the Civil Engineering Construction Alliance added to the debate by releasing Building our Future, while at the federal level earlier this year Allen Consulting Group released a report for the Property Council of Australia entitled Financing Australia's Urban Infrastructure. It has become a popular cause.

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The simple message in all these reports is that as a state and nation we are foolishly under-spending on infrastructure.

Worse still, if that trend is not reversed it will adversely impact on future economic prosperity, result in increasing carnage on our rural and regional roads, congestion in our cities and increased greenhouse gas emissions.

All the reports concluded governments could and should increase public sector borrowing to finance the much-needed capital infrastructure.

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This article was first published in The Courier-Mail on 10 June 2004 .



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About the Author

Greg Hallam is executive director of the LGAQ, an economist and a director of the Queensland Treasury Corporation 1992-2000.

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