We often hear about the significant benefits of increasing recurrent operational spending on public education.

Less has been said about the potential benefits of increasing investment in capital infrastructure for public schools.

Our research, published in a new report from the Centre for Future Work, shows capital investment in public schools has a big educational and economic payoff.

In this research, Jim Stanford and I found the benefits of increased investment in capital infrastructure include those arising from the construction of infrastructure and those from increases in student school completion rates resulting in higher productivity of workers who have completed high school education.

Overall, we conclude that a sustained $1 billion increase in public school capital funding would increase school completion rates and this increased school completion would ultimately generate between $3.5 billion and $7.3 billion a year in GDP benefits.

Our approach

To calculate the economic and fiscal benefits of spending on public school infrastructure, we build on findings in a 2023 Centre for Future Work report.

This report calculated the economic and fiscal benefits of increased operational funding (not capital infrastructure funding) to bring funding for public schools up to the Schooling Resource Standard (Gonski) benchmark.

We adopted the approach used in the 2023 report. To estimate the impact of increases in capital infrastructure funding on educational attainment, we also applied the findings of an influential study which documented the educational outcomes from increased funding for capital infrastructure in public schools in the US.

Economic footprint of school construction 

The economic footprint of spending on construction for school infrastructure is considerable.

We considered three areas of impact using $1 billion as our benchmark to simulate the economic impacts of this expenditure.

The first area of impact is the direct benefit arising from this additional investment in construction.

The second area is the indirect impact of this expenditure on new supply chain purchases.

Finally, a third dimension of the economic footprint of new construction is the increased spending by construction workers, and those in the construction supply chain, on the full range of consumer goods and services which they purchase with their earnings. This is referred to as induced benefits.

We conclude that a $1 billion investment in school infrastructure construction supports more than 2500 new jobs, $1.1 billion in new GDP (for a positive GDP multiplier of 1.1-to-1), and $277 million a year in additional labour income.

The benefits of this increased investment in infrastructure are not limited to those generated through construction expenditure. The long-term economic and fiscal benefits of increased school completion from a sustained increase in expenditure on infrastructure within public schools should also be considered.

Increasing educational attainment

Bodies such as the World Bank recognise the benefits and the importance of education infrastructure for maximising the accessibility and effectiveness of the education being delivered.

Their research shows there is an established link between the capital investment in school infrastructure and student achievement measured by test scores, school completion, and enrolment in higher education.

Well-maintained facilities improve attendance, health outcomes, teacher retention and school participation. This generates higher educational attainment, which increases labour market participation resulting in economic benefits for individuals and society.

Applying the approach in the US research, we calculated that in Australia, a permanent $1 billion increase in annual public school capital funding can be expected to raise the school completion rate by 1.36 percentage points.

We then modelled the economic and fiscal benefits of this increase in higher school completion rates.

Broader economic and social benefits

How will this expected increase in school completion rates flow throughout the economy?

We quantified the impact, considering improvements in the employability of students, their increased earnings potential, and productivity arising from a workforce strengthened with a greater proportion of school graduates.

We estimate the improvement in aggregate annual GDP associated with a sustained $1 billion increase in public school capital funding would be $2.23 billion.

It is challenging to quantify the long-run impacts of improved school completion on a wide range of health, social, and fiscal outcomes.

However, applying the methods in the 2023 report, we also quantified these benefits.

We anticipate that the social and fiscal savings from higher school completion arising from improved school capital infrastructure would generate between $0.25 billion and $4 billion in GDP (benchmarked against Australia’s 2025 GDP).

Putting the immediate benefits from increased construction expenditure together with those benefits that flow from increased school completion we conclude that a sustained $1 billion increase in public school capital funding would ultimately generate between $3.5 billion and $7.3 billion per year in GDP benefits.

 Investment not a cost

The modelling in our research extends the picture of the substantial benefits of investment in public school infrastructure, showing that increased funding to provide better public school infrastructure pays off in improved student achievement, a stronger economy, and better budgetary outcomes.

In the past most federal government funding of capital infrastructure in schools went to public schools.

Today, public schools are almost totally reliant on state and territory governments for capital funding, whilst private schools can access both state and federal funding for capital improvements, as well as receiving substantial funds from private sources including fees.

There is ample evidence that funding for public school infrastructure in Australia has been, and continues to be, inadequate to maintain those facilities.

This should be addressed immediately, given the documented impact of the quality of school infrastructure on educational attainment.

Our research shows spending on public school capital infrastructure is very much an investment for government, not a cost.

Australia can afford this investment as it will pay off in economic and fiscal terms, as well as human and social terms.

Dr Lisa Heap is a senior researcher at the Centre for Future Work