Michael Pascoe: Those infrastructure cuts aren’t worth the hype and howls

The Morrison government's tax cuts are having flow-on effects on inequality, writes Michael Pascoe.

The Morrison government's tax cuts are having flow-on effects on inequality, writes Michael Pascoe.

Contrary to just about every headline you’ve seen, the federal government’s infrastructure cutbacks do not come as a surprise to the industry and actually won’t make much of a dent in the massive spending underway.

You could be forgiven for thinking that the Feds are the major source of transport infrastructure spending. They’re not – the states already do most of the heavy lifting by far.

The Albanese Government and headline writers are still caught up in the cheap trick Joe Hockey played in 2014 to disguise his slashing of infrastructure investment when the country and economy desperately needed it. It was a trick repeated by every subsequent Liberal Treasurer and embraced by Labor.

Labor adopted the “$120 billion infrastructure investment” headline Treasurer Frydenberg left them as an election present, along with the much smaller type “over 10 years” – an average of $12 billion a year in dollars of the day.

The quest for ‘announceables’

For perspective, we invested $48 billion in transport infrastructure last financial year. Over the past 10 years we’ve invested $308 billion in roads, rail, bridges and harbours – and those dollars were worth considerably more than the $120 billion Canberra is promising to spend over the next 10 years.

Yes, the federal investment is important. No, it’s not as important as federal politicians looking for announceables like to make out.

Treasurer Hockey invented the trick in his first budget, thinking of a big figure – $50 billion! – and adding up enough years of possible spending to get to it. In his case, it was six years.

Treasurer Morrison (remember him?) repeated the con with a bigger figure – $75 billion! – but the small print ignored by nearly everyone was “over 10 years”. He was further cutting investment from Hockey’s $8.3 billion a year to $7.5 billion.

Treasurer Frydenberg did lift the figure to $100 billion over 10 years in his 2019 budget and proceeded to tweak the nominal spend to $110 billion in the 2020 COVID budget and $120 billion for his election budget last year that is now Labor’s.

But if you take the mid-point of the decade the money is supposed to be spread over, $12 billion in 2028 is actually worth less than the $8.3 billion Hockey was spruiking back in 2014.

Macromonitor is a consultancy that keeps tabs on what has been and will be spent in the construction industry in general and infrastructure in particular. It trimmed its forecasts back in August, anticipating what had to happen.

Macromonitor’s Nigel Hatcher said the federal announcements this week had not had much impact on its forecasts with all the big announcements being known for some time, including the Beaches Link cancellation, the Blue Mountains tunnel cancellation, changes to Sydney Metro, the Geelong Fast Rail cancellation and the Inland Rail and Melbourne Airport Rail pauses.

With constant 2020/21 prices to show the value of work done, Macromonitor has total annual transport infrastructure peaking around $45 billion in 2024-25, compared with the announced early 2022 plans of $53 billion for this financial year.

It’s Macromonitor’s count in 2022-23 dollars that we invested $48 billion in transport infrastructure over the last financial year – $29 billion spent on road, $15 billion on rail, and $2 billion on both bridges and harbours.

Macromonitor also counts $38 billion spent on utilities and $15 billion on social infrastructure – education, health and aged care buildings – giving total infrastructure spending of $101 billion.

Over the past decade, the total investment has been $728 billion in last year’s dollars, say $750 billion, a neat three-quarters of a trillion in today’s dollars.

That is a serious amount in any year’s dollars, an indication of how important such investment is to keep the Australian economy ticking over, let alone preparing it for the future.

Morrison’s legacy

For all the argy-bargy with the states now about individual projects and the funding split, the reality is that the chaos of the Morrison Government (anyone for “carpork”?) added to overly ambitious state plans, at a time of high construction-cost inflation, meant a recalibration had to occur.

The planning process, or lack thereof, under the Coalition had run off the rails, so to speak.

Not that Labor seems immune. Anthony Albanese’s pet High Speed Rail Authority is still supposed to be copping $500 million while it goes about writing scripts for the ABC’s Utopia satire.

As Macromonitor warned after an earlier budget headline “spending programs over a 10-year period should be considered indicative at best” – the real world can intrude on politicians’ election announcements.

It just helps to keep some perspective about who really does most of the work and pays for it.

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