Business Feature, Earthmoving Industry Insight, Earthmoving News, Opinion

CCF QLD: Infrastructure funding should keep up with inflation

With state and federal budgets being announced, funding for infrastructure needs to keep pace with inflation

We are now in budget mode with all states and territories, including the federal government, handing down budgets for the next financial year.

All state budgets rely on federal financial support that are applied directly to state line items. I think these budgets are the most critical we have seen for some time.

The country is dealing with a cost-of-living crisis. This is not helped by rising inflation and, in turn, the associated interest rises to combat it. Across the country, state debt is increasing and the national debt is higher than we have ever experienced.

There is competition for government funding towards social programs, welfare, health, education, infrastructure and a range of cost-of-living relief initiatives.

Economists are calling for caution; for the government to not implement policies which are inflationary and force the Reserve Bank Australia to increase interest rates.

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In Queensland, it has already been flagged that government revenue is down from last year. Although it will be surplus, it will not be as high as projected. What is the government going to do with it? The first pre-budget announcement was that it will provide households with a $1,000 credit for power bills, which will cost the state $2.5 billion. This is not means tested and comes at a time where there is nearly full employment. In some circles, it has been cynically received as an election vote buyer.

Cost-of-living relief should be given to those who need it, and a large portion of these measures would be better spent on topping up budgets which, if maintained at last year’s levels, will deliver far less than it would have 12 to 24 months ago.

In Queensland, construction wages have been accelerated due to the Best Practice Industry Conditions (BPICs) – a policy that has also been adopted by the ACT and Western Australia. Due to this policy, wages are rising ahead of inflation, but the agreements are locking out productivity.

The state government has just approved the Renewables Best Practice Industry Conditions document. It is like the transport, rail and BPICs in that it prescribes a set of wage rates and conditions that are well above award and market rates. The industry can, and has, accepted rising wage rates in the past, but there has always been an element of productivity improvement associated with the increase.

The BPICs are now applied to such a wide range of state government projects that it is impossible to quarantine the wages, conditions and lack of productivity from the rest of the industry. The effect is industry-wide as other segments of the industry are being forced to compete to maintain a workforce. This is unsustainable for the industry, unsustainable for the state and unsustainable for the country.

The cruel twist in this policy is that nurses, teachers, firefighters, police officers and other government frontline service employees are not getting the same government sponsored wages and condition increases as those in the building and construction sector.

Those cynical about the $1,000 energy rebate may be right. $1,000 will not be enough to offset the higher cost of housing, transport and power for households because they all increase in price due to year-on-year wage increases; in excess of inflation and conditions that specifically forbid productivity measures.

Housing is one sector at the forefront of the cost-of-living crisis. 95 per cent of the dwellings required for our rising population will be delivered by the private sector. It is convenient to focus on the dwelling itself as the element of cost increases, but what is missed is the totality of the infrastructure required to support a dwelling.

The earthworks, road construction and other services – such as sewers, water, power, drainage, communications, public space, landscaping, water treatment, etc. – will all increase in cost, partly due to the government’s own policy. All will add to the cost of the dwelling, which will then have its own cost increase.

Budgets need to increase in value to offset the inflationary increases and positive productivity measures need to be allowed to be freely implemented. If this is not done, smaller projects such as the regional bridge upgrades critical for some communities, or rural overtaking lanes, intersection upgrades or flood proofing of sections of roads will be further delayed.

I think any cost-of-living rebate should be targeted at those most needing it and use surpluses to top up the infrastructure budgets to keep pace with inflation, fund planned infrastructure and continue to provide ongoing employment.

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