We must borrow and build infrastructure

Fear that debt-servicing costs will impact the budget

Debt servicing costs would be moderate, around .06 per cent of GDP, and these would reasonably quickly come to offset by the boost to GDP and taxes the new infrastructure would bring. In the long-term successful infrastructure investments will bring a ‘profit’ to the budget.

Also, a commonly overlooked benefit is the income tax paid by those building the infrastructure, this could be 10 to 20 per cent of the total cost, and would almost certainly cover interest servicing costs during building.

Fear that debt was what got Europe into difficulties, and we would be mad to go down the same path

It was uncontrolled budget deficits that got Europe into trouble, not controlled borrowing for infrastructure. Our state and federal budgetary arrangements are at close to balanced levels. Fear that if Europe is trying to reduce debt, why should we engage in extra borrowing.

Many such fears arise from poorly considered direct comparisons with Europe. It is wrong to make these direct comparisons.

Our circumstances could hardly be more different from those of Europe.

They have unsustainable budgets, stable or falling populations, broadly adequate infrastructure, and huge debt as a proportion of GDP.

We have tight but well-controlled budgets, a rapidly growing population, very poor infrastructure, and a very low level of national debt.

This proposal does not suggest any increase in debt as a percentage of GDP above its present very low level.

Europeans wish to avoid further borrowing. We must start quickly to borrow to assure jobs, productivity growth and international competitiveness.

Fear that borrowing now will mean extra taxes in the future