Private infrastructure investment key to COVID recovery

Some of Queensland’s most influential finance leaders say private investment in public infrastructure is essential.

Queensland Investment Corporation CEO Damien Frawley. Picture: Lyndon Mechielsen

Some of Queensland’s most influential finance leaders say private investment in public infrastructure is essential to driving the recovery of the economy in the wake of the coronavirus pandemic.

Queensland Investment Corporation boss Damien Frawley, who steered the government-owned body into becoming a national and international player, says investment in major infrastructure projects will need to come from private companies alongside government debt and equity.

Escalating government debt nationwide has exacerbated the need for public private partnerships, he told a Queensland Futures Institute gathering in Brisbane on Wednesday.

The sentiment was echoed by other leading Queensland business figures, who were optimistic about the economy, saying the state’s health response to the coronavirus pandemic had given it a competitive advantage as a safe place to do business.

Mr Frawley said political parties were successful in selling infrastructure projects to the community but there was a need to address the funding models in light of rising debt.

“You don’t need to be Einstein to realise we need to come up with a solution that includes both debt and equity and money from the private sector to do some of the lifting around infrastructure development,” he said.

“There is an enormous tide of capital out there interested in infrastructure and real assets to work alongside governments.

“With government debts to escalate from here, it becomes a real priority, in my view, to ensure that we properly think about a framework to incorporate private capital alongside government debt to build these things.”

Bank of Queensland chief economist Peter Munckton said households and businesses were “sitting on a mountain of money in bank accounts” but were uncertain about when and how to invest it.

“The really big question is … when do households and businesses get the confidence up to spend?” he said.

“Once they do that, we’re off to the races. As of now, households are getting the confidence to spend, but not enough. If that confidence is not around by May next year, we will need to see more assistance from the feds and the RBA.”

Mr Munckton said infrastructure was a medium to long-term option to stimulate the economy and that governments should also be investing in proper maintenance of existing infrastructure.

“In terms of economic stimulus, infrastructure is not necessarily the answer because these are big projects that take a while to get going,” he said.

“In terms of the short term you can get more bang for your buck from a good maintenance program and infrastructure is part of the long-term plan.

“You need to plan now for the next five or ten years. If you do that, the bottlenecks are not around.”

Queensland Treasury Head of Economics Dennis Molloy said the private sector needed to be prepared to carry the burden as the states transition away from government stimulus packages.

“The government can’t stimulate the economy forever,” he said.

“We have to go back to the private sector as the driver for growth.

“That is absolutely essential. One of the things that allows that to happen is getting the policy settings right. A great focus on competitiveness, growing productivity, and continuing to make those infrastructure investments that are going to help leverage private sector investment.”