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Current infrastructure projects ‘may not stack up’ in post-COVID world

The Grattan Institute’s transport and cities program director, Marion Terrill, said two changes out of the coronavirus recession could affect the usage of planned infrastructure projects for years if not decades.

She said the sharp fall in expected population growth directly affected the business cases for many major projects that were predicated on many more residents in cities such as Sydney and Melbourne.

“We know that these big road projects for instance were based upon big increases in population, but that’s not going to happen,” she said. “All of these big projects should be halted, with their business cases reviewed to make sure they stack up.”

In its July economic and fiscal update, the federal government revealed it expected annual population growth to fall to 0.6 per cent this financial year. It would be the slowest growth rate since 1916-17 when many Australians were involved in World War I in Europe and the Middle East.

The forecast drop is due to a fall in the fertility rate and a collapse in net overseas migration which is expected to fall from 232,000 in 2018-19 to just 31,000 in 2020-21.

Australia's population growth is forecast to slow to its lowest rate since 1916-17, due to both falling migration and a drop in the fertility rate.

Australia’s population growth is forecast to slow to its lowest rate since 1916-17, due to both falling migration and a drop in the fertility rate.Credit:

Even before the coronavirus recession, population growth was slowing. In the 12 months to December last year, the nation’s population grew by almost 350,000. In the 12 months to December 2018, the population increased by almost 405,000.

Ms Terrill said another major issue was the large increase in people working from home.

Where about 5 per cent of Sydney and Melbourne residents worked from home before the virus, this had climbed to around 40 per cent.

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Some of those at home would return to their city offices but an unknown proportion may never return.

Mobility data mapped by Apple shows transit demand in Melbourne and Sydney less than half what it was before the coronavirus outbreak.

SGS Economics principal and partner Terry Rawnsley said governments also had to look at the relative economic benefit of projects.

He said social housing, which the federal government has been reluctant to support as it believes it is a state responsibility, would provide a substantial economic boost because it was widely spread across the country and required small scale contractors.

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A large “laundry list” of projects may be appealing but they had to deliver long-term improvements.

“You do have to consider what sort of impact the projects are going to have. If you’re going to spend $50 billion, is it better to have two projects worth $25 billion each or a thousand worth $50 million each?” he said.

“But if you’re going to build something for the next 50 years, then those projects are going to be big. That’s the nature of them.”

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