Thursday, May 30, 2013

Infrastructure for what?

Is microeconomic reform on its way back? - The Drum - ABC News (Australian Broadcasting Corporation)

Alan Kohler has been getting some inside gossip about what the Coalition is looking at doing in terms of microeconomic reform.  It gives a good summary of how we got to where we are, but as for future plans, this is the core:
The National Competition Council, which came out of the Hilmer reforms, still exists but it is no longer the barnstorming body it was under Graeme Samuel, when it critically examined 2,500 pieces of legislation in a few years and doled out money to state governments for privatisation and other reforms.

As I understand it, the Coalition will re-energise the NCC and offer to return company tax receipts from newly privatised state enterprises for 10 years.

This has been a particular issue for the Queensland Government in thinking about the privatisation of its electricity assets, adding to the difficult politics of it. The Labor Government in Canberra has so far refused to consider donating any tax receipts from those businesses back to the state once they are privatised. A Coalition Government will offer to do it for 10 years.

On infrastructure, I understand the Coalition is looking at several models, including some form of Government-guaranteed infrastructure bonds.
I have a few questions:

1.  privatising electricity seems to have been a fetish of right wing reform for some time, but what is the evidence that it has substantially helped those states which have already followed that path, and hindered those that haven't?  

2.  Infrastructure for what?   Martin Ferguson said mining represents 60% of export income, and it would seem everyone expects that to decrease.   Mining obviously needs specialised infrastructure, but if the growth in that is slowing, where are the big infrastructure projects that are identified as helping the economy?  (Apart from your generic things like improvements to roads and highways:  I guess that will always have some advantage to an economy, but not dramatically.)   I am particularly interested in infrastructure that will help export markets.   Are agricultural exports particularly hindered by anything at the moment? 

3.  If you want to talk dams, and in particular dams in the North, where are they going to go?   Why isn't the Ord River project taken as a definitive warning that it is not a case of "build it and they will come"?   And wasn't there some body that looked at Northern development years ago and concluded that the quality of soil and geographic restrictions on where you can dam in the north meant it wasn't really viable?  (Updatehere's one report from 2009 detailing the issues with northern agricultural development with irrigation.  I haven't read it carefully, but the conclusion does not sound very promising.)

4.  It does concern me that "niche market" ideas that Australia could develop and have started to develop in the last decade or so seem to be much more subject to rapid  fluctuations in demand and economic conditions than mining.   For example, we are supposed to be pretty good at higher education in the region, but if the economy tanks for a few years, those overseas students dry up very quickly.   Agriculture is at the whim of the weather and will boom in some periods, and then struggle badly in droughts; and in all likelihood, climate change is going to exacerbate the extremes.   Film production goes well for some years, but is very much at the whim of the strength of the Australian dollar and the level of government assistance (as well as the government assistance other countries give.)   Any industry which is essentially done using computers, the internet or telecommunications is very easily moved to any cheaper country where English is commonly used.   It is a worry that manufacturing is so much at the whim of the dollar.    I guess I just feel concerned about how you ensure that niche market ideas can avoid all these pitfalls.

Update:  Jessica Irvine talked about infrastructure a couple of days ago - but it still strikes me as kind of vague: 
We need something bigger, like a new boom in road, rail and public transport construction. ...

Australia needs an independent agency, on par with the Reserve Bank, with the power to decide infrastructure priorities.

Labor, to its credit, invented Infrastructure Australia. But it is hamstrung in important ways. It can only provide a cost-benefit analysis of projects submitted by governments. It can’t make recommendations on other projects, such as a second Sydney airport for example.

It consists of 12 board members, chaired by Sir Rod Eddington and including the Treasury Secretary, Martin Parkinson, but its support agency, the Office of the Infrastructure Co-ordinator, is run on a shoestring.

According to IA estimates, Australian governments have about $100 billion in assets that could be sold, like electricity, utilities, gas, to fund important infrastructure investments. Even a small portion of that would represent significant seed funding for a beefed-up national infrastructure agency.

Such an agency could, like any other business, have the ability to borrow to fund important work. Investors could purchase longer term (20-year or 30-year) bonds to fund its work.

No comments: