Grattan Institute is the latest think tank to warn against governments relying on big infrastructure projects as a post-COVID-19 economic recovery measure.
Grattan Institute is the latest think tank to warn against governments relying on big infrastructure projects as a post-COVID-19 economic recovery measure.
More than $120 billion of infrastructure projects are being built across Australia, Grattan Institute said, driven by a big increase in mega projects valued at more than $5 billion each.
About two thirds of the pipeline’s value was mega projects, ‘Grattan’s Rise of Megaprojects’ report said.
But that brings a range of risks, with capacity pressures likely to lead to cost overruns.
The big major projects usually take much longer to build, making them a poorer choice for short-term stimulus, the report said.
“Spending big on transport projects conceived before COVID makes little sense, because the pandemic has pushed population growth over a cliff, and fewer people will commute in future as working from home becomes part of COVID normal,” Grattan said.
"The danger is that governments are rushing to waste our money on what may turn out to be a herd of white elephants," Grattan Institute transport and cities program director Marion Terrill said.
"Taxpayers would get bigger bang for their buck if politicians steered clear of what they like to call nation building and city shaping mega projects, and instead spent more on upgrading existing infrastructure and on social infrastructure such as aged care and mental health care.
"The key lesson is that mega projects should be a last, not a first resort”
The report said that, before the pandemic, the prime minister and treasurer were worried there weren’t enough workers, materials, and machinery for the massive construction workload.
“When there are already bottlenecks, racing to build projects dreamt up before the pandemic just pushes up prices,” Grattan said.
A suite of recent major projects have cost more than expected, with seven highlighted by Grattan.
Those included Clem Jones Tunnel in Brisbane, at $3.1 billion more than planned, and Eastlink in Melbourne, at $1.7 billion over budget.
Mannkal Economic Education Foundation issued a similar warning about potential waste from infrastructure spending in September.
Fast-tracking tendering to spark job creation could expose taxpayers to future risks and invite rent-seeking behaviour, a Mannkal paper said.
“Spending hundreds of millions of dollars to create employment today for uneconomic and unessential infrastructure projects does not create wealth, it merely moves it from one productive area of the economy to another unproductive area at the expense of future generations,” Mannkal said.
