How Australia can get a better bang for its transport infrastructure buck – Submission to the Productivity Commission

by Marion Terrill

Submission to the Productivity Commission Inquiry into Horizontal Fiscal Equalisation

Australia does not get the best results from its transport infrastructure spending, because the way the Commonwealth makes grants to the states creates perverse incentives and causes unintended consequences. Spending is skewed to favour particular states, locations and projects, rather than being targeted at projects that will give the biggest boost to the national economy. For example, the Commonwealth invests too little in the major capital cities, which are the engines of Australia’s economic growth, and too much in the country. And the Commonwealth spends more in NSW and Queensland – where federal elections tend to be won and lost – than in the other states which have fewer marginal federal seats. In this submission to the Productivity Commission, Grattan Transport Program Director Marion Terrill exposes the causes and scale of the problems, and proposes a solution.