President’s Column 28 June 2019

As the Australian economy continues to slow and the global outlook remains uncertain, local government is ready to step up and play its part with infrastructure projects.

In recent weeks, the heads of both the Reserve Bank and the Department of Infrastructure, Transport, Cities and Regional Development have highlighted infrastructure investment as a way of boosting the economy, and creating local jobs.

Local government can play a major role in boosting public sector construction, if we receive federal government’s help.

In a speech on June 4 after the Reserve Bank lowered its cash rate for the first time in almost three years – to 1.25 percent – Governor Philip Lowe said that monetary policy was not the only option to stimulate what he calls “spare capacity” in the economy.

“As a country, we should also be looking at other options to reduce unemployment,” he said.

“One option is for fiscal support, including through spending on infrastructure. This spending not only adds to demand in the economy, but it also adds to the economy’s productive capacity. So it works on both the demand and supply side.”

The Secretary of the Department of Infrastructure, Transport, Cities and Regional Development, Steven Kennedy, recently told an Infrastructure Partnerships Australia audience about Australian transport infrastructure in the wake of the April Budget.

He said it was “worth thinking through the opportunities for public transport expenditure should, for example, international downside risks eventuate, the domestic economy weakens and policy makers become interested in responding with increased spending.

“Often, the response in these circumstances is to suggest bringing forward existing projects, including large projects…., it is challenging to bring large projects forward even when spending isn’t so high.”

Mr Kennedy went on to say “in a situation where there is a generalised slowdown in activity, the ideal fiscal response is one that is generalised, including from a spatial perspective. What am I getting at talking about a spatial perspective? Well for infrastructure, it is spending that occurs across the country in regions and cities.”

“An opportunity in transport infrastructure to provide a relatively quick and generalised support to demand is through a step up in maintenance expenditure. Moreover, this may be a no regrets policy choice by which I mean even if the fiscal response was not needed, the increased spending would deliver significant productivity returns.”

“And while the maintenance expenditure would typically be targeted at more trafficked roads, it is likely to be reasonably disperse in nature and provide good generalised support to the economy. Maintenance is also more labour intensive than large-scale construction, so spending impacts more domestically. Moreover, the likely road safety benefits of improving existing regional roads would be high.”

Local government can play a major role in infrastructure projects, provided we councils are given enough notice to factor the projects and associated funding, into our annual budgets.

As I said in my closing address at the 2019 National General Assembly of Local Government last week in Canberra, we need to have a list of “shovel ready” projects ready to present to the federal government.

We know that local government has a $30 billion infrastructure maintenance backlog, across a range of asset classes including community infrastructure.

We will be expanding on these to the Prime Minister, Treasurer and other government ministers in the coming weeks of the new Parliament.

Local councils are best placed to identify and explain what bridges, roads, air strips, pools, halls and other infrastructure needs upgrading or replacing, likewise what projects need to be undertaken to manage risks from climate change and natural disasters such as coastal protection structures and river levy banks.

Aside from the infrastructure maintenance backlog, another area about which ALGA and I will continue advocating on your behalf is the Financial Assistance Grants (FAGs) to local governments.

In this coming Parliamentary term, we must intensify our advocacy to restore the grants to a level equal to at least 1% of Commonwealth Taxation revenue.

The 2019/20 Budget, which has not been approved by Parliament, has maintained FAGs at about 0.55% – a level that’s not enough and falls well short of the 1% we received in 1996 when the current FAGs distribution was established.

Reaching that goal of course takes time, but councils can assist us by engaging with their local Federal Members and Senators to educate them about the importance and value of FAGs funding for local governments and the communities we serve.

We must thank them for the FAGs we’ve received, and also build the case for what else can be achieved if we get a Fairer Share of Commonwealth money.

I look forward to sharing more about our advocacy plans when I meet local councils at the Local Government Association of Tasmania conference next week.

David O’Loughlin
ALGA President