25 August 2020

Barr to spend even bigger on infrastructure in budget update

| Ian Bushnell
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Chief Minister Andrew Barr will follow the RBA’s advice to borrow for productive infrastructure. Photo: Dominic Giannini.

Thursday’s budget update will include a massive boost to infrastructure spending on top of already announced projects as part of the ACT’s response to the coronavirus-induced economic slowdown.

Chief Minister and Treasurer Andrew Barr says the government will heed the advice of the Reserve Bank to borrow at record low-interest rates to stimulate the economy and create jobs.

”We foreshadowed some time ago that we will be undertaking a very ambitious infrastructure program,” he said on Monday (24 August).

”A normal infrastructure program would have between $600-700 million annually contained within it, so over four years $2.5-3 billion would be the standard program.

”We’re going much bigger than that.”

On Thursday the government will release its economic and fiscal update, and its Jobs and Recovery Plan that will add hundreds of millions of dollars to the budget deficit and blow out net debt beyond the current 7 per cent of state gross product.

But Mr Barr says RBA Governor Philip Lowe made it clear at National Cabinet last Friday that the states and territories should take advantage of the lowest-ever cost of borrowing, which would be in place for at least three years or more, and that now is the time to invest in productive infrastructure for the future.

Dr Lowe has publicly and privately told state and territory governments not to worry about preserving their credit ratings and to instead prioritise creating jobs.

The RBA says they need to spend an extra $40 billion over the next two years.

Mr Barr says the mistakes of governments during the Great Depression will not be repeated.

”The Prime Minister, state leaders and myself are being very clear that monetary policy is as low as it can be. It’s now up to governments using their budgets to stimulate economic activity, and that’s exactly what we’re doing.”

Mr Barr also took a shot at industry groups such as Master Builders ACT, which called for the government to bring forward infrastructure spending to provide a clear pipeline of work.

MBA CEO Michael Hopkins has noted that “suggestions by community and industry groups to bring forward infrastructure spending, such as the Molonglo River crossing, Convention Centre or sports stadium, have been swiftly rejected by the Chief Minister in recent months”.

“This has led many local construction businesses to wonder if the Government is saving these announcements to provide maximum political benefit ahead of the October election, or whether the Government simply cannot afford a sustainable infrastructure program to support Canberra’s long-term growth,” Mr Hopkins added.

But Mr Barr says these comments are ”woefully off the mark” and that these groups have not been paying attention.

”In the last month we’ve announced the largest-ever expansion of Canberra Hospital, today we’re announcing $250-300 million investment in TAFE [Woden CIT] and public transport,” he said.

”A little over a week ago we added another $60 million to the billion-dollar public housing renewal program. This is the most extensive level of investment in infrastructure in the Territory’s history.

”So those comments are not based on fact, and the industry associations who are making them are just wrong.”

This year’s budget was postponed until after the 17 October ACT election due to the pandemic.

Last year’s budget outlined a 10-15 year program of infrastructure works.

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Capital Retro9:21 am 26 Aug 20

“Clinton Berry 6:22 pm 25 Aug 20
I’d rather a deficit, it means more spending on government services.”

You do realize Clinton that it is you and the rest of us who ultimately underwrite whatever the government spends.

No, they don’t realize that “the problem with socialism is that you eventually run out of other people’s money.”
Basic economics is a not a strong point, or even of any interest, to Barr and his bleating supporters.

I am a Rabbit™8:11 pm 26 Aug 20

Imagine calling others out for not knowing basic economics when you don’t understand monetary models…

‘Stuffed’ Budget has ACT on road to bankruptcy By Jon Stanhope (former ACT Chief Minister)

https://citynews.com.au/2020/stuffed-budget-has-act-on-road-to-bankruptcy/

Capital Retro9:17 am 26 Aug 20

And this doesn’t include the $5 – $10 billion unfunded public servant pension liability!

From my readings, the unfunded portion is around $3.7 billion and tracking downwards.

Capital Retro,
How many times does it have to be explained to you how the defined benefit superannuation is being planned for and funded?

Its not remotely a big issue, we now have nearly $4.5 Billion saved, with money being put aside each year to meet the liability that will peak in around 10 years.

It would only be an issue if it wasn’t being planned for. But it has been recognised and planned for over the last decade+.

I find it interesting that this website seems to censor any comments that are critical of Stanhope’s attempts to whitewash his own history…..

JS9,
Yes, I find this line of attack by Stanhope to come with more than a bucket of irony considering a large percentage of the “problems” he now rails against were started and exacerbated when he was in charge.

Capital Retro12:09 pm 27 Aug 20

That is a “Rhodium Plated” call.

Yes good point Capital Retro, Rhodium is a good example of one of Stanhope’s many, many failures.

HiddenDragon8:17 pm 25 Aug 20

Dr Lowe also reportedly advised the State and Territory leaders that their stimulus spending should be “purposeful and achieve the maximum economic dividend, and not lead to permanent or structural increases in government expenditure. “

That would be consistent with the following comments in the RBA’s statement to the House of Reps Standing Committee on Economics the previous week –

“The reality, though, is that there is no free lunch. There is no magic pudding. There is no way of putting aside the government’s budget constraint permanently.

As I spoke about in a talk last month, it is certainly possible for a central bank to use monetary financing to affect when and how government spending is paid for. Depending upon how things are managed, it can be paid for through the inflation tax, by implicit taxes on the banking system and/or higher general taxes in the future. But it does have to be paid for at some point.”

Thursday will be interesting.

Capital Retro11:47 am 26 Aug 20

The noted socialist writer Saul Alinsky said one of the tenets of a socialist government was to increase debt to an unsustainable level. That way the government is able to increase taxes and that would create more poverty which in turn would enable greater control of the people when a government provides everything for them to live on.

Capital Retro4:03 pm 25 Aug 20

Mr Barr should ignore any advice from the un-elected, Marxist leaning Dr Lowe at the RBA. Lowe, who with his relentless failed policy of reducing interest rates to practically zero to stave off a crystalization of national household debt, has now got nowhere to go: https://www.abc.net.au/news/2017-06-29/rba-governor-philip-lowe-goes-marxist/8662228

Not content with wiping out the income of millions of self-funded retired Australians along the way, he now wants all governments to blow out their already huge budget deficits to create more jobs when there is no demand for any.

When will the leaders of this once prosperous country stop kicking the can down the road and bite the bullet?

Or is the plan to create a socialist state behind the veil of the COVID 19 protocols because that is where we are headed.

I find it entertaining that you think the current Commonwealth Government is trying to create a socialist state…. after all they are ultimately the ones that have forced the hand of the RBA to do what it has done.

Capital Retro5:41 pm 26 Aug 20

In what way? I thought the RBA was independent. In past times when credit became too plentiful the RBA used to increase interest rates to slow things down which is what they should have done.

Because fiscal and monetary policy do not operate in independence of each other. When one is ruled out of use to stimulate the economy (fiscal policy), then the other has to pick up the slack.

Drop all the dribble about marxism or whatever 1950s rubbish you want to splash onto the RBA, and recognise the constraints they have to work in.

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