THE PROGRAM Sources of transport infrastructure funding relied on up to now - federal taxation, state taxation, federal GFC borrowing, state borrowing, government asset sales, and stand-alone private investments - are all, for various reasons, drying up. Some major new source of funding is necessary if we are to make realistic progress. Joe Hockey is considering sale of long-term bonds to fund infrastructure, and in the last few days Andrew Robb has said “We need to seek new ways of funding public infrastructure.” I now put forward my specific proposal setting out in detail how federal borrowing could be used to give a fast-track comprehensive fix to our transport infrastructure problems. The program being suggested would involve off-budget borrowing of 0.6% of GDP annually – $10 billion in the first year. Half of this would then be used for 50% free contributions to private projects. Major projects now unworkable would be made commercially viable by this Federal co-financing, and the result should be new expenditure on road and rail of $15 billion per year. This sum would be available for spending on transport infrastructure - urban and nonurban, road and rail, and light-rail. With this level of transport infrastructure spending, and a likely fiscal multiplier of 1.5, total annual expenditure in the community would increase by $22.5 billion (1.3 % of GDP). In round figures, this would generate extra annual tax revenue of $6 billion - $4.5 billion income taxes to the Commonwealth, and up to $1.5 billion in GST to the states: thus adding to the sustainability of budgets across the nation. While the interest payable under the program would be treated in the Federal budget as an expense, borrowing and spending would be a hypothecated and kept off budget. This would preserve a clear separation between recurrent revenue and expenditure, and borrowing based long-term capital investment. The program may take two or three years to become fully established. After that, the above figures would grow year by year in proportion to the growth in GDP. This program is cheap, safe and sensible. Borrowing is the traditional conservative way to fund long term economic infrastructure. For more information and a copy of the full report please goto borrowandbuild.au
Posted on: Mon, 03 Feb 2014 03:50:03 +0000
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