Recent comments from new Prime Minister Malcolm Turnbull on potential infrastructure investment give hope that this Government understands the action needed to address Australia’s economic malaise and help restore business and consumer confidence.
Why is infrastructure investment important? Investing in infrastructure is one of the country’s few growth levers for creating jobs outside of housing. Targeted infrastructure such as rail and public transport will be vital to improving productivity and economic growth. The issue has become more important given the end of the resources boom and a softening housing market.
It is encouraging that discussion over infrastructure is being emphasised in the national debate on economic growth. Mr Turnbull has recently spoken to a range of innovative funding mechanisms. One proposal could see projects funded by selling investors a share in the expected future gains in the land and other taxes generated by the new infrastructure build. Known as “tax increment financing” this approach is increasingly common overseas, and brings forward the economic gain that often stems from new rail and other projects.
Such funding models could encourage private-sector interest in infrastructure, unlock more investment from the nation’s $1.9 trillion superannuation pool, and help reduce pressure on stretched state and federal budgets.
Talk is often cheap, and translating words into action is challenging. While it is early days, the narrative thus far does highlight to the nation that there is a new helmsman at the wheel who just might be able to navigate through the choppy seas ahead.
Marc Whittaker
Portfolio Manager
Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.