Two articles at opposite ends of today’s AFR both discuss public spending on infrastructure but with a different message from each. There is firstly on the front page, Project spree risks AAA rating ,which begins:

The government’s AAA credit rating may be at risk if it embarks on major infrastructure initiatives before sweeping changes to how projects are funding are made, according to the ­Productivity Commission.

The rest is behind the paywall but the article discusses the views of Peter Harris, the Chairman of the Productivity Commission, who is trying to get the government to think long and hard before it spends our money. Infrastructure is seldom the best use of our resources and before we commit to such spending there needs to be a very thorough cost-benefit analysis undertaken with a real intent to ensure we are getting value for money.

Pet projects have been an ongoing disaster. There is only one reason for a government to enter into such expenditure and that is because there is a net dividend to the economy. If you think, for example, that Building the Education Revolution contributed anything at all to the Australian economy, you should not be making infrastructure judgments. Only if you are able to articulate why the BER was an almost total waste of money and resources could you be trusted to assess our future infrastructure needs.

Then at the back of the paper we have Peter Sheehan with an opinion piece, The new Keynesians: accident or design?. And his point: however it may have come about the Abbott government is about to launch into a Keynesian stimulus which he thinks is a great idea. As he writes:

Strong underlying growth cannot be assumed. The Keynesian response is clear: there needs to be a major program of infrastructure investment. This should be large-scale additional spending of 1.5 per cent to 2 per cent of GDP a year for five years.

If the government listens to this kind of thing they will end up as bad as Labor. They should dwell instead on this before they start spending money as if we are in some deep depression, also from today’s AFR:

Employment jumped in February by the most in almost two years, led by an oversized 80,500 surge in full-time work, Australian Bureau of Statistics data shows.

Some small part of government spending is productive, some is necessary because it provides assistance to those who are in need, but for the most part government spending is a drag on the economy not a stimulus. Cut the deficit. Get unions out of the road. Reduce unnecessary regulation. And leave recovery to the private sector which is already starting the process we need to continue along.