Government commits $3.8b on infrastructure

Government commits $3.8b on infrastructure

22 November 2019

The government is responding to increasing concern about the faltering economy by accelerating $3.8 billion of infrastructure investment into the next four years, including $1.8 billion for the current and next financial years.

Scott Morrison outlined the infrastructure move in a speech to the Business Council of Australia on Wednesday night, while insisting the government is not panicking about Australia’s economic conditions.

The government’s action follows increasing calls for some stimulus, with concern the tax cuts have not flowed through strongly enough to spending. Reserve Bank governor Philip Lowe has previously urged more spending on infrastructure.

Mr Morrison said that “a panicked reaction to contemporary challenges would amount to a serious misdiagnosis of our economic situation.”

“A responsible and sensible government does not run the country as if it is constantly at DEFCON1 the whole time, whether on the economy or any other issue. It deals with issues practically and soberly.

“Against this backdrop, it would be reckless to discard the disciplined policy framework that has steered us through many difficult periods, most recently and most significantly the end of the mining investment boom, which posed an even greater threat to our economy than the GFC.”

The projected return to surplus this financial year would be a “significant achievement”.

Lauding the government’s legislated tax relief, Morrison said “Our response to the economic challenges our nation faces has been a structural investment in Australian aspiration, backed by responsible economic management.”

Morrison’s infrastructure bring-forwards follow his post election approach to the states asking for projects that could be accelerated, comparing the impact with Labor’s “cash splash” stimulus during the global financial crisis.

The accelerated spending is worth $2.72 billion over the next four years and combines with $1.06 billion in additional funding to produce a $3.79 billion impact over the budget forward estimates. But the impact on growth is likely to be modest when measured as a share of the country’s nominal gross domestic product, worth $1.8 trillion each year.

Labor treasury spokesman Jim Chalmers warned on Tuesday it was “long past time” for the government to do more about sagging growth, saying one option was to bring forward infrastructure spending.

The government is acting on the idea after a blame game with the states over infrastructure, with federal ministers singling out Queensland for being too slow to approve projects already backed with federal cash.

The Rudd government boosted the economy with $10.4 billion of stimulus in October 2008, including direct payments to pensioners and families that were mostly paid within three months – a much tighter timeframe than the Morrison government plan.

“This was no desperate, one off, short-term sugar hit or panicked crisis measure, here today, gone tomorrow,” Mr Morrison says of his cuts to personal income tax rates. “Our response to the economic challenges our nation faces has been a structural investment in Australian aspiration.”

Treasurer Josh Frydenberg has warned of “headwinds” that could slow growth but is insisting on the need to produce a budget surplus in the mid-year fiscal update in December to prepare for longer-term challenges like the ageing of the population.

Mr Chalmers said the government was presiding over the slowest growth in a decade, stagnant wages, record household debt, higher unemployment and poor business investment figures.

“For months now, Scott Morrison and Josh Frydenberg have been saying that their policy settings are bang on, and that the fundamentals of the Australian economy are very strong,” Chalmers said.

“With this announcement today, they are conceding, in a humiliating fashion, that both of those statements were wrong.

“This is an admission that the economy has deteriorated since the election, but not a comprehensive plan to turn things around,” Chalmers said.