Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 301

Why Budget infrastructure spending matters

In the Federal Budget delivered last week, Treasurer Josh Frydenberg outlined $100 billion in infrastructure spending over the next decade, mostly on road and rail projects.

Two days later Opposition leader Bill Shorten said a Labor Government would spend more than $100 billion on the roads and rail network.

They were big numbers and there was spending for all states and territories, but is it enough for Australia to fulfil its long-term economic potential?

Invest in infrastructure, invest in economic prosperity

At a macro level, investment in infrastructure is an investment in the economic future of a country. It provides a major stimulus for economic activity and throughout history has has been a fillip for many poorly-performing economies.

The most famous modern-day example was the New Deal in the United States, announced by President Franklin D. Roosevelt in 1933 in the midst of the Great Depression. The New Deal was a broad package of reforms, including government spending on highways, bridges, schools and parks.

The New Deal established the Tennessee Valley Authority to provide electricity (and jobs) to seven of the most impoverished states in the south of the country. To this day, it remains one of the nation’s largest public power providers.

The New Deal also created the Works Progress Administration to employ mostly unskilled labour. It built more than 4,000 school buildings, 130 new hospitals, laid 9,000 miles of drains and sanitary sewer lines, planted 24 million trees, constructed 29,000 bridges and paved or repaired 280,000 miles of road.

But while President Roosevelt was overseeing a depressed economy needing substantial fiscal stimulus, Australia is a long way from that. Nevertheless, what the New Deal taught the world was that broad spending across major public projects can have profound effects for decades to come.

The New Deal spending transformed the economy and US society. It was the birth of the US road system that is still in place today, opening up cities and markets across the country.

Whoever is in government in Australia in the years to come has the same opportunity.

Spending on projects such as the so-called ‘high speed’ rail link between Melbourne and Geelong, with its intended 150 km/hr speed, will allow Geelong residents to quickly commute to jobs in Melbourne. The Government has promised $2 billion to the project, and the ripple effects are expected to be substantial, from stimulating regional growth through to putting both upward and downward pressure on house prices and taking cars off the road in urban areas. This can be genuinely game-changing for the city of Geelong.

Its success (or otherwise) will be closely watched, and it could become the model for many more hub-and-spoke rail projects around major cities across the country.

But despite the merits of this and the other projects announced, the promised spending on infrastructure from both the Coalition and Labor is still below the long-term average of infrastructure spend as a percentage of Gross Domestic Product, and is focussed on big-ticket spending on roads and rail.

More than roads and rail needed

In Australia, with our vast distances and relatively sparse population, it makes sense for government and the private sector to work together to provide a modern infrastructure network that goes beyond just our transportation needs.

In the US and Europe, there is enormous investment going into power generation, from natural gas power plants in the Ohio Valley through to wind farms across Scandinavia. Water utilities and waste processing plants are being developed attracting billions of dollars in investment.

Power and water, just like in the 1930s, remain central to infrastructure programmes that benefit society but the modern model now sees them funded by a mix of public and private spending. Other infrastructure projects include data centres and telecommunications towers and small cells for the roll-out of the 5G network.

When compared to roads and rail, there was relatively little spending on these types of infrastructure projects in both the Government’s announcement and the Opposition’s response. An exception was the Snowy Hydro 2.0 expansion which will receive $4 billion, most of which had already been announced.

Each state received funding for “roads of strategic importance”. New South Wales received $3.5 billion for the Western Sydney rail line and $1.6 billion for the M1 Pacific Motorway. In Victoria there was $1.1 billion promised for suburban roads upgrades, alongside the Melbourne to Geelong rail link. South Australia was promised $1.5 billion to build a north-south road corridor.

There was also funding for a national road safety package and to develop business cases for a future fast rail line running down the east coast of the country. The Urban Congestion Fund increased from $1 billion to $4 billion, to fund projects aimed at removing congestion from urban areas.

The opening of investment opportunities

From a private sector investor’s point of view, many public infrastructure projects will eventually be privatised. This has already occurred at airports, ports and utilities across Australia and is expected to occur with other infrastructure assets.

And while the increased funding provides a pathway to the delivery of much-needed infrastructure, questions will linger about whether it is broad-based enough, and large enough for Australia to fulfil its long-term economic potential.

 

John Julian is Fund Manager of the Core Infrastructure Fund at AMP Capital, a sponsor of Cuffelinks. This article is for general information only and does not consider the circumstances of any investor. 

For more articles and papers from AMP Capital, please click here.

 

  •   10 April 2019
  • 1
  •      
  •   

RELATED ARTICLES

No one holds the government to account on spending

What the Federal Budget means for you

Budget cash splash will do more harm than good

banner

Most viewed in recent weeks

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

Will you run out of money in retirement?

Fear of running out has become a defining retirement anxiety. Why do some retirees die with substantial wealth while others deplete their nest egg? Evidence suggests the answer is more complicated than we think. 

Four options for an income investor’s next dollar

What if Australia’s golden age of dividends is ending? Rather than overhaul your portfolio, it may be worth considering where new capital can work harder. I discuss four income strategies and the trade-offs behind each.

Why spending more in early retirement can improve lifetime income

Conventional wisdom encourages retirees to preserve superannuation. But if those likely to qualify for the Age Pension later in life spend a little more today, it may deliver higher lifetime income and a more stable retirement.

The investment that sidesteps the new tax traps

Tax rules have changed, but many investors are still using yesterday’s strategies. Insurance bonds may offer advantages for those seeking greater control, tax efficiency and certainty about their wealth.

Testamentary trusts have secured the CGT exemption

Treasury’s latest CGT reform draft delivers a win for testamentary trusts and deceased estates, exempting estate-derived gains from the 30% floor. However, questions on death and divorce rollovers remain unresolved.

Latest Updates

Shares

Is it time to bail on Australian stocks?

For generations, Australian investors have backed banks, miners and dividends. But has that loyalty come at a cost? A look at the numbers raises an uncomfortable question about where future returns will come from.

Investment strategies

Making a case for the 40 year mortgage

The housing debate tends to focus on prices, interest rates and deposits. Yet an overlooked feature of the mortgage itself could help buyers enter the market sooner without abandoning prudent lending standards.

SMSF strategies

Red flags to watch out for when considering an SMSF

Thinking about an SMSF? Before you sign anything, learn how to spot the difference between genuine advice and a sales pitch, understand the real costs, and avoid the compliance mistakes that attract ATO attention.

Investment strategies

Not all income is created equal

Market conditions are shifting as familiar yield sources quietly lose momentum. Australian public credit may be the most compelling source of income in today's market but many investors haven't noticed the shift. 

Investment strategies

The market paid for change, not comfort

Reporting season has delivered a clear message: the market is no longer paying simply for quality, resilience or an earnings beat. It is paying for change in earnings expectations and the outlook ahead. 

Investment strategies

Will AI destroy investor capital?

Some of history's most important innovations changed the world while leaving investors much poorer. As trillions pour into AI, a familiar pattern may be emerging, one that rewards society far more generously than capital.

ASX reporting season: Signals, surprises, stock stories

August reporting season delivered strong earnings and bigger-than-expected dividends, but beneath this, a more nuanced story emerged. First Sentier Investors’ David Wilson and Christian Guerra unpack the key trends.

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.