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Program paved the road to re-election

By Andrew Leigh - posted Tuesday, 5 April 2005

Who really benefited from the Roads to Recovery program? Responding to research by the Australian Financial Review showing that spending from the $2.7 billion fund was overwhelmingly directed towards coalition-held electorates, Deputy Prime Minister John Anderson defended the program on the basis it had a high benefit-cost ratio.

The basis for Mr Anderson's claim was a report jointly prepared by the Commonwealth Department of Transport and Regional Services and the Australian Local Government Association, which found that Roads to Recovery produced a benefit (safety and transport efficiency) of $1.80 for every $1 invested.

Yet there is reason to doubt this finding. Most of the data underlying the report was provided by local councils, who surely had a strong incentive to exaggerate the benefits. A benefit-cost ratio of $1.80 is unusually high for a road-building project, yet councils claimed that even their own regular road programs had an equivalent benefit.


To measure the political rate of return on the Roads to Recovery program, I calculated the swing towards the coalition by comparing its share of the two-party preferred vote in the 2001 and 2004 elections. Nationally, the swing towards the coalition in 2004 was 1.8 per cent.

I compared the swing in the electorates that benefited most and least from the program. In the 20 electorates that received the largest allocations (averaging $28 million apiece), the typical swing towards the coalition was 2.8 per cent. In the 20 electorates that got least from Roads to Recovery (averaging just $2 million), the typical swing was just 0.6 per cent.

A more rigorous way of testing the relationship is to run a regression of the relationship between the swing to the coalition and Roads to Recovery funding. I obtained data for nearly all of the 150 federal electorates and found a statistically significant relationship between road funding and the coalition swing.

On average, each additional $10 million in road funding was associated with an extra 0.4 per cent swing towards the coalition. For each additional $28,000 in funding, the coalition won an extra vote.

Of course, it is entirely possible that the relationship is coincidental. Perhaps the Howard government's policies in 2004 were particularly appealing to voters in electorates which did well out of Roads to Recovery. But the correlation suggests that the program was largely targeted towards coalition-held seats, and voters in these favoured seats responded by voting for John Howard in larger numbers than in 2001.

US President Calvin Coolidge once remarked: "Nothing is easier than spending the public money. It does not appear to belong to anybody. The temptation is overwhelming to bestow it on somebody." Without independent analysis or a transparent allocation system, it's difficult to avoid the conclusion that Roads to Recovery was simply a means of paving the way back to the Lodge.

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Article edited by Leah Wedmore.
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First published in the Australian Financial Review on March 10, 2005.

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About the Author

Andrew Leigh is the member for Fraser (ACT). Prior to his election in 2010, he was a professor in the Research School of Economics at the Australian National University, and has previously worked as associate to Justice Michael Kirby of the High Court of Australia, a lawyer for Clifford Chance (London), and a researcher for the Progressive Policy Institute (Washington DC). He holds a PhD from Harvard University and has published three books and over 50 journal articles. His books include Disconnected (2010), Battlers and Billionaires (2013) and The Economics of Just About Everything (2014).

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