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Borrow to build infrastructure, says West Australian construction sector

The West Australian government should take advantage of the current, post-mining-boom drop in prices and interest rates to borrow to build new infrastructure, the Civil Contractors Federation has said. 24 Sep 2015

According to a report by economic forecaster BIS Shrapnel, commissioned by the West Australian branch of the Civil Contractors Federation, the government should use debt to fund new infrastructure while borrowing costs are low.

BIS Shrapnel's senior economist Adrian Hart told ABC News that "Financing productive new infrastructure through debt is not only fair on intergenerational equity grounds, but also provides the best economic bang for the buck compared to other financing methods."

"Debt is not the enemy to public finances, rather, it is the purpose of that debt which counts," Hart said, according to ABC News.

Civil construction in Australia has begun a steep, four-year decline in activity, the BIS Shrapnel report said.

"Between the 2012/13 peak and the looming 2017/18 trough, total civil construction work in Western Australia is expected to decline more than 60%, or nearly $12 billion (US$5.5 billion) in annual work done," it said.

The collapse in mining investment will affect the building of related infrastructure over the next few years, particularly railways, ports, pipelines and electricity projects, it said.

"As privately funded infrastructure projects to support mining production are completed, much of the ‘heavy lifting’ for new infrastructure provision is expected to return to the public sector. It is crucial that governments undertake this task transparently and efficiently, and finance infrastructure in a way which provides the greatest economic benefit," BIS Shrapnel's report said.

With interest rates low and industry capacity at a peak, bringing low prices, "further debt funding of productive infrastructure should be used as an effective means to address the infrastructure deficit", it said.

Civil Contractors Federation chief executive Jeff Miller told ABC news that Western Australia needs infrastructure to deal with its expected growth: "Now with contractor dollars stretching 30%, even 50% further and great depression rates of borrowing, it couldn't be a better time to address that deficit. It is actually a wise investment in the future and that's because infrastructure has such a long life, it can last 50 to 70 years."

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