Mr Perrottet said NSW’s investment in infrastructure would protect the state from economic headwinds but called on the federal government to deliver a fairer funding deal to the state.
He said NSW’s infrastructure spend would contribute about half a percentage point to the state’s growth this year and in each of the next two years.
“I urge the federal government to support this growth further with more equitable funding for NSW, to support transport projects of national importance such as the Sydney Metro West,” Mr Perrottet said.
“The recent NSW budget showed our state is forecast to receive less than half of Queensland’s average per-capita allocation of Commonwealth infrastructure funding over the four years from 2018-19.
“Given the influence our great state has on the national economy, that makes no sense.”
The state government has committed $6.4 billion to Sydney Metro West, the total cost of which is expected to surpass $20 billion.
The nation’s peak building body, Master Builders Australia, said its members were ready to mobilise – dismissing claims that Australia faced labour and capacity constraints while urging the Morrison government to pump money into projects outside of Sydney and Melbourne.
The Reserve Bank’s Dr Lowe has pleaded with the government to lift infrastructure spending and engage in substantial structural reforms to help grow the economy and bring down unemployment to at least 4.5 per cent.
Former Labor treasurer Wayne Swan said “of course” the government should borrow more money while interest rates were at record lows to invest in health, education, research, innovation and infrastructure. Mr Swan led Australia through the global financial crisis, the last time the economy recorded a result worse than the March national accounts.
“There is an obvious imperative to stimulate and make structural improvements and all the advice says to do it in those quality areas,” he said. “It’s not rocket science. It’s just blinding ideology standing in the way of a government.”
Mr Perrottet said the Coalition had poured more than $100 billion into infrastructure since winning government eight years ago.
“We’ve invested $130 billion in infrastructure projects since 2011 and have added another record $93 billion in the 2019-20 budget for schools, hospitals, roads, rail, water infrastructure and stadiums, ” Mr Perrottet said.
“That represents thousands of jobs, giving us the lowest unemployment rate in the country, and creates a better quality of life for people right across NSW.
“It also ensures our protection from headwinds with infrastructure contributing about half a percentage point to NSW’s economic growth this year and in each of the next two years.”
The Reserve Bank on Tuesday cut rates to a new record low of 1 per cent with Dr Lowe saying monetary policy alone could not help the economy, adding “the various arms of public policy” needed to work in the same direction.
The G20, in a report looking at the infrastructure needs of countries out to 2040, said Australia could lift its spending by 0.35 per cent of GDP. That equates to almost $7 billion this year alone.
Spending on Australian roads was at an appropriate level but the G20 found substantial shortfalls in ports and railways, noting that by 2040 almost 96 per cent of the nation’s residents will live in urban areas. Currently, 89 per cent of Australians live in cities or towns.
Former RBA governor Bernie Fraser, who headed the bank when official interest rates reached 17.5 per cent in 1990, said extra infrastructure spending had to be on the government’s agenda to deal with the economy.
Mr Fraser said the RBA was doing all it could but without federal government intervention the overall economy would continue to drift.
“You can lead the horse to water but you can’t make it drink. In this case it’s basic economics,” he said.
“This is a demand issue and the lower interest [rates] go the less impact that has on demand. The one body that can affect demand is the federal government with its spending, which could be on tax cuts or targeted payments or infrastructure.
“[Fiscal policy] is the policy instrument that should be doing the heavy lifting at the moment but it’s not.”
Mr Fraser said the government’s self-imposed cap on tax-to-GDP would also act as a restraint on the economy.
“What this dopey cap does is that it acts as a cap, not just on tax but also on expenditure, so if you have to do something you’ve created a problem for yourself,” he said.
Research by Commonwealth Bank senior economist Kristina Clifton shows that, nationally, capital works spending in the 2019-20 financial year will hit a peak of $93 billion after reaching $85.3 billion last year.
But the increase is being driven by the NSW, Victorian and Queensland governments. Actual federal spending on capital works, such as the NBN, is expected to slip by 10 per cent or $3.1 billion.
“There is no shortage of potential infrastructure projects with positive pay-offs to choose from,” she said.
“There is also plenty of spare capacity in the jobs market, meaning that there should be a pool of labour able to work on new infrastructure projects.”
Australian Bureau of Statistics figures released on Wednesday showed the volume of civil construction work done across Australia fell to a two-year low during the March 2019 quarter.
Master Builders Australia chief Denita Wawn said the peak body supported the Coalition’s $100 billion infrastructure investment.
“But activity hasn’t been at a lower ebb since late 2016 and state and territory governments need to work with the federal government to do more to get projects out the door and construction started,” she said.
Alexandra Smith is the State Political Editor of The Sydney Morning Herald.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Eryk Bagshaw is an economics correspondent for The Sydney Morning Herald and The Age.