Big business has told the government it should not be afraid to borrow money to help finance critical infrastructure, as part of a sweeping plan to ensure key projects get off the ground.
In a new report outlining its top priorities, the Business Council of Australia says big changes will be required to meet the country's estimated $750 billion in infrastructure needs over the coming decade.
The report, to be published on Wednesday, says one way to improve funding for infrastructure would be for the Commonwealth to borrow money that is "ring fenced" for use in high-priority projects, provided the nation's top-notch AAA credit rating was not compromised.
It made the suggestion as part of an economic blueprint that argued Australia was at a critical juncture and must embark on sweeping policy changes to make the country more competitive and prevent it "slipping back". While the plan also stressed the importance of running balanced budgets, BCA president Tony Shepherd distinguished between borrowing for investment and other purposes.
"There is such a thing as good debt, and there is such a thing as bad debt. Bad debt is borrowing money to meet recurring expenditure - a bad habit for a government," Mr Shepherd said.
"Good debt is borrowing for a needed piece of economic infrastructure which has a high cost-benefit, that will add to the productivity and the growth of the country.
"We're saying ... there is a case to make for the Commonwealth and for the states to look at leveraging private sector investment to get those sorts of projects going."
Aside from infrastructure, the BCA also nominated eight priorities for the government to pursue, including putting the budget on a sustainable footing, further population growth, greater labour market flexibility, and ensuring a stable financial system.
The BCA, which represents chief executives of the country's 100 biggest companies, has unveiled the plan as governments face historically low borrowing costs.
At the same time, a rising population looks set to place a growing strain on urban infrastructure around the country.
One of the report's authors, Rio Tinto Australia managing director David Peever, also said infrastructure spending would help to shield the economy as resources investment tailed off.
"That's not an argument to invest in sub-economic infrastructure, but we need a pipeline of highly productivity infrastructure ready to go so that we can indeed offset some of this downturn in other sectors of the economy," he said.
The BCA said another reform to infrastructure funding would be for the government to issue 30 to 50-year bonds, to provide a benchmark for private debt. It also called for another wave of privatisation of taxpayer-owned assets, and the development of a national list of projects to be rolled out as resources investment tails off. Assets that could be sold off included the electricity poles and wires in NSW, the world's largest coal port in Newcastle, power assets in Queensland and the Australian Rail Track Corporation, Mr Shepherd said.
Meanwhile, the report argued Australia's banking regulator should "proceed cautiously" with its plan to force local lenders to hold larger amounts of easy-to-sell assets in 2015, rather than delaying the reforms as some of its peers are doing.
Echoing complaints from banks, Mr Shepherd warned that the rules could have unintended consequences.
He said the Australian Prudential Regulation Authority's decision should be reviewed by the elected government.
"We've got to be sure that when we do import a regulation from offshore that it's appropriate and to our benefit," Mr Shepherd said.