These are the siren calls that will never, it seems, go away. From the front page of today’s Australian:
The Coalition is being urged to abandon its aversion to public debt and give a body such as Infrastructure Australia more independence to realise the government’s goals.
Two of Australia’s most eminent economists say public borrowing is a sensible way to upgrade ageing infrastructure, provided projects pass “explicit, transparent, and robust benefit-cost assessments”.
A paper to be released today by professors Max Corden and John Freebairn argues that debt is the best way to shift the cost of paying for infrastructure to the the future generations of taxpayers who will benefit most from it.
My hope is that the Government really does have an aversion to public debt. There are, of course, certain things that governments can do that no one else can do, roadways being one of them. However the value added is in having the project completed not in the actual using up of resources along the way. The article continues:
Assistant Infrastructure Minister Jamie Briggs said he wanted to bring forward spending, if possible, to ensure the outlays not only lifted the economy but also fixed congestion on major roads.
You build a road and it takes let us say three years to get it done. And then, but only then, when it is actually operational will that road be in a position to lift the economy because it is then, but only then, contributing to our transport network. The belief that the outlays themselves, the actual construction, will lift the economy is drenched in the Keynesian notion that it is demand that drives an economy, that the actual spending is what makes an economy grow.
The only thing that can turn this economy around is that we continue to elect governments with a genuine aversion to debt and who also want to keep our taxes low. Public spending, and even worse, higher public debt as the road to recovery is exactly what is wrong with so much of the advice governments continually receive both from outside and from within their own public sector.
Cut spending, balance the budget, lower debt, reduce regulation, improve IR and things will take care of themselves. The last Costello budget was not all that long ago. Can’t we also learn from our successes as well as our mistakes.