State told not to fear debt with big projects

David Rood

April 25, 2011

     

    A LEADING business group has called on the Baillieu government to consider sending its first budget into deficit to pay for long-term infrastructure projects.

    As the government talks up the financial pressure on next week’s budget from the flood recovery, cost blowouts on programs inherited from Labor and billions in lost GST revenue, the Australian Industry group said continued spending on big projects was crucial. ”The AIG doesn’t have a problem with going into deficit as long as it pays for inter-generational infrastructure projects, because we recognise there are pressures on the state’s finances,” AIG Victoria director Tim Piper told The Age.

    But putting the budget into deficit should only be used for major projects – not recurrent or day-to-day spending, he said.

    The comments come as the Property Council said the government could and should look to increase debt to pay for big projects that benefited the community and economy.

    ”Governments seem to be averse to borrowing to fund infrastructure, but the community can and would accept that,” the council’s state executive director, Jennifer Cunich, said.

    The Baillieu government has committed to a $100 million surplus in the budget.

    A spokeswoman for Treasurer Kim Wells said the former government had failed to invest adequately in infrastructure or allocate money to meet the needs of population growth, service provision or price rises.

    ”The Coalition government is implementing a clear strategy to put Victoria’s finances on to a responsible and sustainable setting, which will reduce debt over time, and increase infrastructure investment,” spokeswoman Kate Walshe said.

    In its pre-budget submission, the AIG said the government should use the budget to develop its own investment strategy and indicate the Coalition’s future direction for Victoria.

    ”The risk … is that due to the challenging financial circumstances, the government may chose to reduce spending and investment in very important inter-generational infrastructure areas,” it said in the submission.

    The group also warns that continuing deterioration in the competitiveness of the Victorian economy – fuelled by the rising Australian dollar and ageing population – could see many businesses priced out of domestic and international markets, leading to job losses.

    The submission calls on the Baillieu government to borrow more money for infrastructure and change Victoria’s carbon emission reduction target – from 20 per cent of year-2000 levels by 2020 to the federal target of 5 per cent over the same time.

    As well as calling for increasing debt to pay for major projects, the Property Council’s pre-budget pitch calls on the government to establish a Victorian Planning Authority and increase incentives for home solar-energy generation.

     

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