Op-ed: With road and rail we're putting people to work

The Turnbull government is investing in infrastructure at unprecedented levels — and we are well on track to meeting our commitment to invest $50 billion in transport infrastructure over the period from fiscal 2014 to fiscal 2020.

Commonwealth budget figures show an average infrastructure spend exceeding $8bn a year from fiscal 2014 to fiscal 2021. By contrast, over the six years of the Rudd-Gillard-Rudd government, average spending on infrastructure was just over $6bn a year.

The share of total public infrastructure spending coming from Canberra has risen markedly. In the Rudd-Gillard-Rudd years, 24 per cent of total public investment came from the commonwealth (with the balance coming from other levels of government.) Under the Coalition, that figure has risen to almost 30 per cent.

Australia’s level of transport infrastructure investment and maintenance spending was equal highest in the OECD, at 1.4 per cent of GDP, in 2014, the most recent year for which the OECD publishes this data.

Across the country there is plenty of evidence of this infrastructure spending hard at work.

Nationally, there is construction work under way on more than 100 projects funded by the Turnbull government — with more than 130 currently in planning before construction commences.

From the Pacific Highway in northern NSW, to the North South Corridor in Adelaide, to the Perth-to-Forrestfield Airport Rail Link, bulldozers are moving and concrete is being poured.

Infrastructure projects of this scale bring jobs in large numbers. Construction of WestConnex in Sydney will generate 10,000 direct and indirect jobs; there are 1350 jobs on the M80 ring road upgrade in Melbourne.

The impact on the level of construction activity in the economy is showing up strongly.

For example, the Australian Bureau of Statistics regularly produces an engineering construction survey. It tracks the value of “work yet to be done” — in other words, the pipeline of work on projects that government has committed to and are yet to be completed.

According to this survey, the value of work yet to be done for projects already commenced on transport infrastructure for the public sector is at a record high. It currently stands at a level 60 per cent higher than the peak under Labor in fiscal 2011.

BIS Oxford Economics, a respected private sector economic consultancy, also publishes a regular report on engineering construction.

Its most recent report highlights the strong growth in publicly funded engineering construction, saying that in fiscal 2016 publicly funded engineering construction commencements was up 24 per cent, and work done rose 11.3 per cent. BIS said the “pick-up in publicly funded work has been underwritten by the commonwealth government’s Infrastructure Investment Program as well as strong growth in state government infrastructure programs”.

The Australian Industry Group has forecast a recovery in major construction project work through to mid-2019 in its latest Construction Outlook Survey, saying that a “key driver of activity will come from non-mining infrastructure work in line with the significant growth impetus from public sector spending on transport infrastructure projects”.

Deloitte Access Economics, in its recent Investment Monitor, assessed the outlook for business investment in Australia as being healthier than it has been for some time — and notes that this comes at the same time “as state and federal governments are spending large amounts of money on transport projects”.

So the message is clear — the Turnbull government’s high levels of infrastructure investment are driving economic activity and growth around the country.

The spending commitments are flowing through into very high levels of infrastructure construction activity — and in turn we are seeing a direct effect on jobs and economic growth.

According to the economics team at the Commonwealth Bank, the lift in public infrastructure spending in fiscal 2018 will directly add half a percentage point of GDP growth in fiscal 2018. Including the multiplier effect, it estimates the impact to be as high as 0.7 percentage points.

With real GDP growth projected at 2.75 per cent for fiscal 2018, this shows just how important the Turnbull government’s infrastructure spending is to our economy.

The most direct effect, of course, is on jobs. According to the Commonwealth Bank, the lift in public infrastructure spending in fiscal 2018 will generate an extra 36,000 jobs in Australia.

And one more thing is clear — we are going to be feeling the benefits for several years to come.

In the 2018 budget, the Turnbull government committed $75bn of infrastructure investment over the next 10 years.

NAB economist Tapas Strickland has observed that federal infrastructure projects are likely to be a continuing feature of economic growth over coming years.

Investing in infrastructure results in long-lived assets which deliver benefits to the community for many decades — but it also stimulates economic growth as the investment occurs.

That is why the Turnbull government’s record infrastructure spend makes so much sense.

This article was originally published in The Australian.