Phil Sutherland: South Australia must spend on infrastructure to stimulate economic growth

TREASURER Tom Koutsantonis must use the State Budget to create thousands of jobs by spending on infrastructure, just like Tom Playford, writes Phil Sutherland.

Spending hundreds of millions on infrastructure across South Australia will generate thousands of jobs, writes Phil Sutherland.

THIS week’s State Budget is a defining opportunity for the Weatherill Government to bring South Australia out of its current economic malaise by using its substantial borrowing power to catalyse economic stimulation, jobs growth and the foundations of a new economic framework.

It must show “Playford-esque” vision and bravery to turn around the state’s parlous economy — a reference to Australia’s and SA’s longest serving Premier, Tom Playford (1938-65), who is widely revered for his vision during his time in government to build crucial public infrastructure that would facilitate the state’s future needs and population growth.

The State Budget provides Treasurer Tom Koutsantonis with an ideal opportunity to show the same political courage as Playford to ignite the SA’s ailing economy and fix its worsening jobs crisis.

Never has there been a more crucial time than now for him to stand up against his Cabinet colleagues and demand the need for brave and aggressive state borrowings — in the same vein as Playford did six decades ago.

If the Treasurer needs any encouragement that nigh is the time for unprecedented political bravery, he needs to look no further than the state’s stunted economic growth — currently ailing at about half the rate of Australia as a whole — or worse, on a number of indicators.

The State Budget is a defining moment for the State Government — less than 10 months out from the State election — to announce a raft of aggressive government investment initiatives to accelerate our economic growth.

The Weatherill Government must use the state’s balance sheet and borrowing capacity to invest in productive infrastructure that will grow Gross State Product (GSP), and therefore the state’s ability to be competitive, attract investment and ultimately pay down the debt.

Treasurer Tom Koutsantonis needs to emulate South Australia’s longest serving premier, Tom Playford, writes Phil Sutherland.

State debt (general government sector) is currently running at about 5 per cent of GSP ($6 billion). This can be compared with debt of more than 35 per cent of GSP when the State Bank collapsed, and over 70 per cent of GSP when Tom Playford used debt to transform the state’s economy in the mid-50s.

Investment in infrastructure and utilising debt to build that infrastructure would put in place the foundation necessary to set up the state for the future.

Increasing state debt to about 20 per cent of GSP — given our economic circumstances — would be an appropriate thing to do.

Infrastructure is a key lever in terms of the economic growth it generates as evidenced by numerous unquestionable studies. Economic return on investment for every dollar invested in productive infrastructure will deliver up to an eight fold return.

In the same spirit and courage of Tom Playford, now is the time to act.

When Playford left office in 1965, South Australia’s population had essentially doubled from 600,000 in the late 1930s to over 1.1 million — the highest proportionate rate among the states. The economy had done likewise and personal wealth had increased at the same rate, exceeding growth in nearly every other state.

While the Playford era was a different economic time than now, the former Premier understood that infrastructure investment was a powerful lever in the hands of politicians and that it could make a long-term economic difference.

Today’s State Budget must be measured on how well it aligned with the 10 economic development priorities of government.

And for private sector stimulation to occur, the following areas also need urgent attention:

• cutting business and income taxes;
• cutting red and green tape;
• continue the focus on local industry/business participation in publicly funded projects;
• review government agency pre-qualification requirements for publicly funded projects;
• unbundle large publicly funded projects so that the SME sector can flourish;
• free-up labour supply by labour market deregulation;
• cutting government spending programs that fail cost-benefit analysis, and;
• fostering start-up businesses by eliminating regulation of them (except for health and safety purposes)

Further, productive infrastructure projects that would grow jobs and stimulate the SA state economy include:

• State-wide upgrade rail/road level crossings $500 million (200 new jobs);
• State-wide road maintenance $1 billion (1000 new jobs);
• Duplication of Augusta Highway and Princes Highway $2 billion (400 new jobs);
• Seal Strzelecki Track $350 million (400 new jobs);
• Seal Yorkeys Crossing Road $35 million (50 new jobs);
• Complete North-South Corridor $4 billion (South Road) (400 new jobs);
• Upgrade Joy Baluch Bridge $200 million (100 new jobs);
• Upgrade Paringa Bridge $200 million (100 new jobs);
• Upgrade Cross Road incorporate dedicated freight lane from South Eastern Freeway to North-South Corridor $1 billion (200 new jobs);
• Provide $3 million to every council in SA (68) to spend on local infrastructure projects using local businesses and local people (500 new jobs);
• Undergrounding of power cables statewide $1 billion (500 new jobs), and;
• Water and sewerage pipe replacement program statewide $5 billion (1000 new jobs)
• Phil Sutherland is chief executive officer of Civil Contractors Federation of SA