Hockey's tough infrastructure road

Offering investable securities to self-managed super funds will allow Joe Hockey to tap the superannuation market’s full potential for financing much-needed infrastructure and creating jobs.

Of almost all the G20 finance ministers/ treasurers, Australia’s Joe Hockey has the hardest task in increasing job creation. He is therefore the most likely to fail, although that is not a prediction.   

So let me start a series on how Hockey can create jobs, beginning with what he needs to do to boost infrastructure spending from superannuation money. Remember that we have little money in the government’s spending budget.

Why is job creation in Australia going to be so hard? First, we have a big proportion of our labour that is inflexible with SPC-type labour agreements (SPC’s infinite management matrix, February 6) or high-cost weekend work.

And we have the three employment tsunamis coming at us: the rapid decline of mining investment boom; the retail switch from stores to online; and the biggest of all, the motor industry’s decimation (A tsunami warning for business and executives, February 11). 

So if Joe Hockey is to lift the Australian growth rate via infrastructure, he will need to be a lot smarter than any previous Treasurer. I do not believe the knowledge of how to boost Australian infrastructure is in Treasury.

Australia’s budget deficit means the Coalition is not able to do what the Labor government did in the global financial crisis and spend government money wildly. The current government must tap the funds in superannuation, but not rape them, as some in Treasury will advocate.

That means that every superannuation-financed piece of infrastructure must carry an adequate toll, rent, fare or some other form of income.  In the case of roads, travellers will try to avoid the toll. For trains, travellers believe they should not bear the cost of infrastructure via higher fares, and that governments should pay for the infrastructure. That’s one reason why the rail infrastructure is so poor.

Two of the biggest infrastructure projects prospects, Melbourne’s East West Link and Sydney's second airport, both have dubious income projections, particularly as the new airport must compete against lower-cost operations in Mascot, Melbourne and Brisbane. The NBN’s problem was that competition with mobiles and community price resistance meant that it could not lift prices high enough to justify the investment.

Governments are going to be required to underwrite the income for what could be a long period, which will affect budgets.

The second problem is that one third of Australian superannuation investment is in self-managed funds rather than big institutions. Half of those taking superannuation pensions use self-managed funds. In his KGB interview, AMP chief executive Craig Meller said he planned to offer self-managed funds infrastructure securities.

That may work, but it will take a decade. Meller admits that the big institutions’ past heavy charges make self-managed funds very suspicious of institutions.

If Joe Hockey wants to tap the full potential of the superannuation market this decade, he will need to construct investable securities and go direct to the self-managed funds via a prospectus.

And that makes incredible sense. Assuming the securities are right, Sydneysiders will relate to an investment in the second airport and Melbournians will invest in the East West Link and rail projects. They then have a personal link with the infrastructure investment. The same goes for every state.

Finally, the royal commission into the building unions has to make the community understand that it was the cartel-style agreements between big builders and unions that left the way open for the thuggery.

That will provide the backing for the Australian Building and Construction Commission, led by Nigel Hadgkiss and John Lloyd, to bust the agreements in any new infrastructure and lower the cost of building infrastructure by between 15 and 30 per cent. We will get a lot more infrastructure for our dollar and employ more people.

None of the infrastructure tasks – charging a price to users, the government underwriting of income, tapping self-managed funds and ending the cartel style agreements – is easy.  But it is not impossible.

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