Here comes the election infrastructure splurge
The T2T motorway in Adelaide, a recent infrastructure project. Photo: AAP
Ever made a mistake with your diary and turned up to a party a week after it was held? That’s what the federal government’s new “population plan” looks like – Scott Morrison standing at the electorate’s door well after the event with a party hat and six pack of Tooheys Blue while the residents go about their daily business.
The government’s half-formed four-point plan has two key elements and a couple of same-old-same-olds governments regularly trot out: “better planning” and “a focus on pinch-points”.
The latter should be part of the former, but never mind. Viewers of the ABC’s Utopia satire would be familiar with both.
The potential new news are “increased infrastructure spending” and the already-foreshadowed but as-yet-undetailed plan to encourage or force migrants to settle in Adelaide and the regions, rather than Sydney, Melbourne and Brisbane.
It is an interesting and welcome move by Prime Minister Scott Morrison’s government to promise increased infrastructure spending when treasurer Morrison’s government cut it.
Given the PR spin Mr Morrison put on reduced transport investment, it might be a matter of believing it when it happens, but cue a federal election campaign some time in the first few months of next year and roll out the barrel.
To recap Mr Morrison’s track record on infrastructure, as treasurer he picked up a trick from Joe Hockey and took it further in an attempt to disguise reduced spending.
Joe’s sleight of hand was to think of a big, impressive-sounding number and add up enough years’ spending to reach it.
Hence Mr Hockey announced a record $50 billion transport spend, albeit over six years. The average of $8.3 billion a year was less than the Anthony Albanese program he inherited.
(A particular lunacy of the Abbott era was a federal love of big road projects and antipathy towards urban rail – the sort of transport congested cities need most – but that’s just another footnote to an especially odd period of government.)
Whatever Joe Hockey could do, Scott Morrison could do better – by 50 per cent! Both Morrison budgets featured grand words about a record federal government infrastructure program of $75 billion.
The fine print was that the $75 billion was spread over 10 years – an average of just $7.5 billion a year and no allowance for inflation from one budget to the next. Thus, in real terms, this financial year’s spending is down on last year’s.
The bottom line is that two terms of Coalition government have seen federal transport infrastructure cut in both real and nominal terms.
Fortunately for the nation, the two states with the cash (NSW and Victoria) and now Queensland with debt haven’t been relying on the feds.
The predominantly east coast infrastructure construction boom is in full swing and has further to go, as Macromonitor’s graph of big-ticket rail and road projects shows.
Some of it has been rushed and badly planned (Sydney trams, anyone?), some of it has been fiddled and money wasted by party politics (Melbourne’s East West Link), some good ideas have fallen by the wayside (Sydney’s original WestConnex model), but it’s all part of the rush to try to catch up with the investment that should have been made earlier.
On top of the megaprojects attractive for political ribbon-cutting, there’s more mundane transport construction in the pipeline that will add roughly $16 billion to the peak spend – total of maybe $38 billion in 2022.
That’s great for the country and economy. And we could hope sensible investment will fill in behind the peak to create a steady, reliable channel of construction that industry can rely on and plan for, instead of our usual boom-and-bust cycles.
That’s what then-deputy RBA governor Philip Lowe was advising the federal government to do five years ago.
But there’s an immediate problem if Scott Morrison, arriving late to the party, wants to throw more fuel on the barbie and add spirits to the punch: The civil construction industry is already stretched.
The cities with the most politically-appealing needs for an election spending splash need to digest what’s already on their plate. Federal money can be used well and wants are unlimited, but it needs to fill in beyond the existing peak.
And there’s the usual question when it comes to the combination of politicians, elections, ribbons and other people’s money: Can the government be trusted to spend it wisely, rather than politically?
The Coalition has no commitment to Infrastructure Australia’s process of prioritising spending to maximise bang-for-buck. Barnaby Joyce’s dubious inland rail project doesn’t score well on that basis.
The last notable federal intervention on a specific project was shortly before the May budget with $155 million for a bridge across the Shoalhaven River in Ann Sudmalis’s marginal electorate – and with Ms Sudmalis subsequently deciding to quit politics anyway, it’s unlikely to even yield a political payoff.
How the government intends to deliver the second leg – migrants for regions – is yet to be seen.
There’s nothing new about the idea. A favourite example, Larry Adler of FAI Insurance infamy, had to spend his first couple of years in Australia cleaning trams in Adelaide. It’s unfortunate he didn’t stay there.
The idea of encouraging migrants to live in Adelaide and the bush rather than Sydney, Melbourne and Brisbane is reasonable – if it’s matched by a jobs strategy. So far, there’s no sign of that.
Left to their own devices, people tend to go where there’s demand for their skills. Greater Sydney’s unemployment rate is in the low 4s, a full percentage point below the national figure, with a participation rate of 66.8 per cent. Greater Adelaide’s unemployment rate is 6.1 per cent, its participation rate is 62.3 per cent.
There is a chicken-and-egg element to guiding migration out of the biggest smoke.
Migrants create jobs, both through the demand they bring and the extra skills, drive and entrepreneurial flair they tend to have. But it’s a delicate mix of opportunity and suitability to get right, rather than leaving it to market forces to sort out.