Infrastructure investment needed

Written on the 17 April 2009

 

WHEN he heard Queensland’s AAA credit rating was downgraded BIS Shrapnel’s Dr Frank Gelber dismissed its relevance, because the most important action needed by governments now is to boost confidence through infrastructure investment.
Chief economist Gelber says most of Australia’s economic downturn has been a result of precautionary saving out of fear, which will flow on to declines in private investment this year. Government investment is needed to help fill this gap.
“When I heard Queensland’s AAA rating go down I thought, look stuff them (S & P) – they have not the foggiest idea of what they’re talking about anyway. This is the right thing to do,” says Gelber.
“The most important thing they can do is spend on infrastructure projects – that will make this place a better, more effective place to live and work in the future.”
He points out that while private investment is strong now, as the current round of projects comes to completion the next round will be ‘slaughtered’. And despite extraordinarily strong mineral investment in the last quarter, over the next 2.5 years the number of mining projects is expected to fall by around 50 per cent.
He says while certain sectors will find it difficult to avoid recession, in others the downturn is mainly driven by fear.
“We’ve got a major credit squeeze and a number of other things and most of what’s happened so far is us shooting ourselves in the foot,” he says.
“They’ve gone from pure greed which caused the problem, to pure fear which makes it worse.”
Australia is doing well in comparison to the economic ‘disaster areas’ overseas and Gelber praises the Reserve Bank for nipping the housing boom in the bud at a time when the US did nothing to stop it.
And even though foreign investors have pulled out cash from Australian sharemarkets to ‘save the farm’ back home, as Australia rides out the next couple of years the Aussie should settle at around US$0.75 as money comes back into the country.
Gelber advises that to complement a recovery, governments in Australia need to hold their nerves and make sure there are enough projects in the pipeline to moderate the extent of the downturn, and they can do so at a lower price now because construction costs are coming down as well.
He says as far as the private sector is concerned, the extent of the problem will be deepened by further falls in spending due to increased job insecurity if firms aggressively cut back staff.
 “Unfortunately confidence is a fickle thing so we can’t say exactly how it will turn out,” he says.

Latest News

ASF UNVEILS TRAFFIC PLANS FOR THE SPIT

A SECOND bridge over the Nerang River is the centrepiece of the ASF Consortium's plan to improve traffic flow ...

BHP AND VALE EDGE CLOSER TO $47.5 BILLION SAMARCO DAM DISASTER SETTLEMENT

BHP Billiton (ASX: BHP) and Brazilian mining company Vale have entered into a preliminary agreement with Brazilian fe...

BLK SPORT FOUNDER TYRON BRANT REMAINS CEO UNDER NEW OWNERS

BLK Sport has been purchased from receivers McGrathNicol by a private consortium composed of a TimorLeste-based oi...

CARSALES CEO RETIRES AS NEW COMPETITOR COX FINALISES MERGER

CARSALES will have a new CEO as it takes on a fresh challenger to its crown as the dominant online car sales portal i...

Related News

CARSALES CEO RETIRES AS NEW COMPETITOR COX FINALISES MERGER

CARSALES will have a new CEO as it takes on a fresh challenger to its crown as the dominant online car sales portal i...

BUSINESS CONFIDENCE AT A SIX-YEAR HIGH

SMALL and medium businesses have entered 2017 with their confidence at a six-year high, building on strong gains m...

CONSUMERS PESSIMISTIC ENTERING 2017

CONSUMER confidence remains at its weakest point since April 2016, according to the latest Westpac Melbourne Institut...

RISE OF STARTUP SUPPORT PROGRAMS NOT AS ROSY AT IT SEEMS

ENTREPRENEURIAL cultivation companies in Australia are appearing quickly, but questions have been raised about whe...

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter