Building on semantics: Labor debt versus Coalition funding
But there are more signs that Joe Hockey is signalling that just such a turn is in the offing. The big bloke is about to attempt a backflip with half twist - everybody stand back.
The AFR reports that Hockey "is considering identifying government borrowings raised to fund infrastructure as separate from debt raised to cover the budget deficit as the Abbott government contemplates an infrastructure spending splurge".
Suddenly I'm running into senior Liberal types wanting to explain what a good idea infrastructure bonds would be, and not just John Hewson expanding on his National Press Club speech in July.
The semantics are wonderful: the Labor Party generated evil government debt that will enslave your children; the Liberal Party will access capital markets to set your children free. And that is a good thing, however galling the about-face might be for those who suffered the fiscal ranting of Hockey as shadow treasurer.
The problem though is the speed of the change of rhetoric. It takes time to prepare the ground, to work out a structure and then to develop a narrative and sell it to an electorate that has just bought the idea that all government debt is bad - but in the meantime the window of greatest need for infrastructure stimulus is already upon us.
The various roads projects being promoted by the Coalition as symbols of its infrastructure commitment are convenient because the projects already exist. They have been in development for years. (And there's another whole question about concentrating only on roads anyway, given the reality of better roads quickly attracting more cars that make them not much better at all. Something about mid-20th century solutions to 21st century transport problems.)
Which is why Hockey has to get on with it, why he has to come back from his trip to the US next week fired up to explain the difference between what he will paint as Labor's "bad" debt and his "good" debt.
There is no end of support available for sensible borrowing for infrastructure. Professors Freebairn and Corden last month provided the economic theology with which to bless it in their paper Vision Versus Prudence: Government Debt Financing of Investment. All that's missing is the hiring of Jennifer Hawkins to be the official ambassador for Infrastructure Australia.
Oh, there also is a little matter of keeping politicians at a great distance from the infrastructure fund Hockey wants to establish. They are not to be trusted with a pile of money and sundry mates and electorates wanting a favour.
And the privatisation thing also has to be sorted. Privatisation-wary states and electors have to be brought along for the ride. That takes time too. Hurry up, Joe.
Frequently Asked Questions about this Article…
According to the article, Joe Hockey is reported to be considering treating borrowings raised to fund infrastructure differently from debt used to cover the budget deficit — effectively creating dedicated infrastructure bonds or funding that can be presented as separate from ordinary government deficit debt.
The piece explains that the Coalition plans to use semantics to distinguish 'good' debt — borrowing for long‑lived infrastructure projects via capital markets — from 'bad' debt used for everyday budget shortfalls, making infrastructure borrowing more politically palatable.
The article notes supporters argue sensible borrowing for infrastructure can finance productive investment and act as stimulus when needed, with academic work (Freebairn and Corden) providing intellectual support for government debt financing of investment.
A key concern raised is the speed of the rhetoric change: it takes time to design the funding structure, develop a persuasive narrative and sell it to voters who have been told government debt is bad — yet the window for effective infrastructure stimulus may already be open.
The article says the Coalition has been promoting various roads projects as symbols of its infrastructure agenda because those projects already exist and have been in development for years, though it questions focusing mainly on roads.
The article argues politicians should be kept at arm’s length from any infrastructure fund to avoid the risk of political favours or pork‑barrel spending — suggesting independent governance is important for credibility.
Privatisation‑wary states and electors need to be convinced to accept any sale or private financing element of projects, the article notes, and bringing them on board takes time and careful handling.
The takeaway is that not all government borrowing is presented the same: borrowing for long‑term, productive infrastructure can be framed as beneficial, but investors should watch for credible structures, transparent governance, timing of projects and political risks as the government retools its narrative.
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