Economic infrastructure in Australia : a review of the issues

Abstract

This paper examines the questions of whether the economic infrastructure in Australia is adequate or excessive and whether it is efficiently used. Problems with the present framework of control for investment decisions are identified, and the options for improving the framework are discussed. The paper considers the criteria for determining whether or not the infrastructure is adequate and discusses the costs of inadequate or excess provision. There is little evidence of a general inadequacy of infrastructure investment although one can point to many instances of inadequate or excessive investment. Thus, the allocation of investment funds in the public sector is not always efficient. Unless these problems of efficiency can be addressed, increased funding of public enterprises will not ensure that funds are directed to projects with high economic or social returns. A range of possible options for improving investment decisions is considered, including financial targets, incentive and sanction structures, improved monitoring, and increased private sector involvement. None of these is without its problems, but a commitment to greater reliance on them could lead to improved infrastructure investment decisions. Show more