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Article: Public cuts threaten recovery

Started by ozbob, July 04, 2012, 03:39:48 AM

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ozbob

From the Melbourne Age click here!

Public cuts threaten recovery

QuotePublic cuts threaten recovery
July 4, 2012

PUBLIC spending on roads, rail and power stations is collapsing to levels not seen since 2006, posing a threat to the country's falling productivity.

A new quarterly survey of the country's biggest construction companies compiled by Infrastructure Partnerships Australia and BIS Shrapnel, shows how the two-speed economy is distorting infrastructure expenditure - with headline national figures propped up by massive investment in mining projects.

The March metric reveals that outside of mining, key spending has fallen to its lowest levels in seven years. Non-mine commitments fell back to an index of 82.9 in the quarter, well below the average of 113. Transport infrastructure was the worst hit, falling to 68.7 as state governments reduced their commitment to roads and rail as they continued to cut spending to protect their AAA credit rating, or in Queensland's case tried to restore it.
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Of the $27 billion of infrastructure spending under way at the end of the March quarter, more than $20 billion is privately funded, with most of that dedicated to private mining related projects. That means little progress is being made against the country's $770 billion public infrastructure backlog.

IPA chief executive Brendan Lyon said the civil infrastructure metric showed that non-mining investment had retreated to a degree it was a concern. ''The falling construction figures should serve as a wake-up call to Australia's governments about the need to rein in expenditure and free up capacity for infrastructure investment,'' he said.

The data supports figures due to be released by the ABS today, which are tipped to show a disintegration in public infrastructure investment but strong growth in mining spending in Western Australia and Queensland.

Between 2006 and 2010 Australia's governments doubled annual infrastructure expenditure to more than $50 billion, funded largely through borrowing. With most states and territories now teetering on the edge of a credit downgrade, the recent round of budgets has not sustained the level of investment over the forward estimates.

Business leaders have warned governments about the impact on productivity if they continue to ignore investment in rail, ports, road and power stations.

Jim Miller, head of infrastructure at Macquarie Capital, said the problem in getting projects done was not a lack of appetite from capital and equity markets, but a lack of projects. ''There are broadly two types of projects, those that are on the government's balance sheet and those that are off,'' he said. ''For on balance sheet projects, solutions lie in governments freeing up money by selling assets and making changes to the way the public sector runs.''

Mr Lyon said the figures indicated an alarming fall in the level of new investment into the nation's infrastructure deficit. ''The metric confirms that governments are not keeping up with demand, and shows a clear case for reform,'' he said. ''Australia's productivity slide is one of the most substantial public policy challenges facing this country.''

David Jurd, managing director of Abigroup, said infrastructure was the backbone of the economy. ''Without action, infrastructure constraints will hamper national economic growth, which means it's even more important that we start getting good projects off the shelf and under way,'' he said.

The figures show that utilities commencements moved higher in the March 2012 quarter to 96.7, a level above the average over the past two years of 87.9 mainly due to new contracts in gas pipelines, sewerage and NBN-related work.

Tony Shepherd, chairman of Transfield and president of the Business Council of Australia, echoed concerns about civil infrastructure. ''This highlights that it will be critical for governments to identify and commence the next phase of public infrastructure projects based on comprehensive cost benefit analysis in order to maintain a strong economy and lift Australia's productivity.''

Read more: http://www.theage.com.au/business/public-cuts-threaten-recovery-20120703-21ff4.html
Half baked projects, have long term consequences ...
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