The real estate market in Australia has been dealing with a lot recently, from the increased need for nathers assessor thanks to increasing environmental awareness, then the recent downturn, which has been a problem for the country, particularly the construction industry.
The state governments, however, are pouring record number in terms of funding into infrastructure, resulting in an infrastructure and public work boom, which many are saying will do much for the country’s economy.
Queensland’s state government committed about $50bn for infrastructure spending over the next four years, with $23 billion for road and rail. This number, however, is dwarfed by New South Wales’ budget, with $93bn earmarked for the same time frame.
Victoria’s Treasurer reports that the state has $107bn of state capital projects either commencing or already underway, with its 2019-20 centred around a $27.4bn suburban transport blitz. The Commonwealth, meanwhile, re-committed $100 billion for transport infrastructure over the next decade.
Undoubtedly, a lot of money is going into infrastructure across Australia, but Philip Lowe, Reserve Bank Governor, urges for more spending, noting how now is the perfect time for borrowing, as the government can borrow at the cheapest rate it can in its history, with the 10-year government bond rate sitting at 1.35%, with signs saying that it won’t go up past 2% for the next 3 decades or so, meaning that there are definitely projects with risk-adjusted rates of return at 1.5-2%.
Belinda Allen, the Senior Economist of the Commonwealth Bank, explains that infrastructure is good for the country, as it provides short-term boosts via employment in construction, then medium-term growth thanks to improving the country’s productivity.
The boosts for the Australian economy might take a while to come into effect, the Bureau of Statistics note that the short-term employment effects are already affecting the country, with construction employment going up by 30,000 in the three months leading up to May.
Ms. Allen notes that that was a sign that the bust in residential projects, which has affected many a nathers assessor and construction, was getting compensated for by the infrastructure boom.
These jobs, she notes, can be volatile, but the data doesn’t show job losses which should’ve happened given how much the residential construction sector has gone down.