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RBA and Illawarra First support borrowing for future


Release Date: 26/09/2016
RBA and Illawarra First support borrowing for future
By Chris Lamont, Executive Director Illawarra First and Illawarra Business Chamber
 
Last week Illawarra First identified the unique opportunity to take advantage of the record low in the 10-year bond rate that provide a once in a lifetime opportunity to invest in major infrastructure and capital projects for the Illawarra. 
 
Major infrastructure for the Illawarra could be delivered using funds borrowed at record low interest rates. 
 
Improved transport connections in and out of the region, measures to support the already important tourist industry, improved inter-regional connectivity and relocation of key government support services are just a few examples of where record low interest rates could be used to fund major projects that would drive business growth and investment and providing a lasting economic contribution
 
But it is not just the Illawarra Business Chamber and Illawarra First expressing this view. This week incoming Reserve Bank Governor Dr Philip Lowe in a Parliamentary Hearing on Monetary said monetary could only do so much to stimulate economic activity and that the Australian Government could borrow at the lowest rate since Federation to both deliver productive infrastructure.
 
Governor Lowe has advised the Turnbull government that good economic management of the country involves borrowing big for infrastructure.
 
Dr Lowe makes the important distinction that borrowing for long term assets that provides a return for the community should be encouraged against   borrowing for recurrent government expenses. 
 
We are now experiencing what may be the lowest cost of capital for many years to come, this opportunity shouldn’t be lost.  For the Illawarra there are a number of significant road, rail and major capital infrastructure projects that could be funded by either private and/or government capital that would provide enormous potential for the region for many decades to come.
 
In the context of government spending we need to be more receptive to the concept of debt.  As Dr Lowe notes national policy challenges such as housing affordability and supply may in part be addressed through an investment in transportation infrastructure. 
 
The proximity of the Illawarra to Sydney and the unique comparative advantages of the region combined with some of the lowest borrowing rates in history and perhaps decades to come provides a unique opportunity that we shouldn’t waste.  It’s time to put Illawarra First and this means borrowing for our future.



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