Opinion: Better ways to curb inflation than infrastructure cuts

If the Australian government’s objective in proposing infrastructure cuts is to help reduce inflation, it is too late and will probably make it worse, writes Steven Miles.

If the Australian government’s objective in proposing infrastructure cuts is to help reduce inflation, it is too late and will probably make it worse.

Inflation got out of control late in 2021 – before the last federal election.

Now, nearly two years later, the Australian government is threatening to cut Queensland infrastructure projects, they say to address inflation.

Obviously, all government spending contributes to demand in the economy.

That makes it incumbent on the Australian government to justify why funding earmarked for infrastructure should be prioritised for cuts, as opposed funding allocated to other priorities – tax cuts for wealthy households, for example.

Especially when investment in productivity-enhancing infrastructure is likely to reduce pressure on inflation in the longer term.

When comparing options for budget austerity, the problem with looking to infrastructure is you can’t cut projects already under construction, only future projects.

So any effect on total demand is likely to be years down the track, to be followed by a negative effect on productivity.

That is especially true when it comes to Queensland, which is already experiencing extraordinary population growth and will accelerate thanks to the Australian government’s plans to massively expand immigration.

Put simply, if you cut funding for improvements to vital infrastructure like the Bruce Highway – the most important national highway – you get limited benefits now, and even worse congestion down the track.

Queensland is delivering billions in additional revenue to the Australian government.

The Australian government should be looking to spend more of that windfall here, not less.

Queensland has demonstrated how governments should use spending to address inflation and directly reduce costs for households.

Recent inflation data was lower in Queensland than New South Wales and Victoria because of lower electricity prices, thanks to our energy rebates.

Brisbane prices went down 10 per cent, compared with increases of 12 and 17 per cent in Sydney and Melbourne respectively.

There are better ways for the Australian government to support our efforts to address inflation in Queensland – and at the same time help households to meet growing costs.

It’s bad enough that the Queensland LNP have already threatened they would cut more than $10 billion from Queensland’s Big Build.

The Australian government should rule out cuts to Queensland infrastructure needs like the Bruce Highway and rail to the Sunshine Coast.

Steven Miles is Acting Premier and Infrastructure Minister