2018 CCF Victorian Infrastructure Outlook Report 1 | Page 46

With a relatively small resources industry , Victoria ’ s has always looked to other industries to drive growth . A core objective of Victoria ’ s long-term economic plan should be to attract business and people into the state by slashing costs of doing business and providing a long-term vision for investment and growth in the industries that are now emerging . This can be achieved through appropriate investment in productivity-enhancing infrastructure , but also through further cuts to business taxes and charges and deregulation where it can be shown to remove disincentives to invest in Victoria . With these perspectives in mind , this Report makes the following recommendations :
A . Developing a Long Term Infrastructure Program
Recommendation 1 : Given that the current profile of public and private investment is unlikely to be sustained , the Commonwealth and Victorian Governments should plan to sustain a rolling infrastructure investment program that provides industry confidence and certainty . This should focus on projects with proven productivity benefits .
Recommendation 2 : The Victorian Government should engage with industry to develop clear and comprehensive longer-term ( 15 to 20 year ) infrastructure plans , with bipartisan support , with a clear ranking of projects so they can be prioritised or deprioritised according to prevailing economic conditions .
Recommendation 3 : Both short term and long term public investment programs should be based on maximising economic benefits through transparent cost benefit analysis ( CBA ). This , in turn , requires ( i ) the publication of CBA supporting the public investment decision so it can be rigorously and independently tested , but also ( ii ) improvement in the quality of the data collected by the Australian Bureau of Statistics ( ABS ) which form key inputs to the CBA process , particularly surrounding the value of capital stock , investment , construction , construction costs and productivity .
B . Funding Productive Infrastructure
Recommendation 4 : While projected to gradually increase over time , interest rates should remain relatively low by historical standards and should not constrain Commonwealth debt funding of productive infrastructure in Victoria .
Recommendation 5 : Given the fiscal headroom of the Commonwealth Government , the vertical fiscal imbalance embedded in Commonwealth-State relations , and the relative benefits of using debt to fund productive infrastructure investment , the Commonwealth Government should guarantee the debt of any expanded infrastructure program by State Governments to a defined maximum figure so long as those projects are shown to be productive through the transparent CBA process .
Recommendation 6 : The Commonwealth Government should provide five yearly-pooled infrastructure funding to the States and reduce the use of project specific or tied ( conditional ) s96 grants as outlined by the National Commission of Audit report in 2014 .
46