How Australia can help America rebuild

16 November 2016

The US should look to lessons from Australia's infrastructure story to help realise Trump's economic agenda, writes Garry Bowditch and Edward Blakely.

Freeways in San Franscisco. Image: Angelo DeSantis/Wikimedia Commons

US President-elect Donald Trump has promoted a big infrastructure program to revitalise the American economy. So, Australia and the US have a lot in common for now.

Unlike Australia, the US has been a miserly spender when it comes to public infrastructure. As a result, rusty and decaying infrastructure is on display across US cities and its vast regional areas.

The scarcity of money ensured the "buff and shine" of US infrastructure was long ago substituted with something far more potent – innovation and inventiveness.

Necessity is the mother of invention and the US stands as a good example of pursuing high net benefit interventions such as decongesting and debottlenecking existing infrastructure.

New York's Fulton Rail Interchange is a case in point, along with innovation around big data, ride and asset sharing such as Uber and using analytics to sharpen and identify how to make US cities work better.

These are all important and beneficial characteristics for President Trump towards unlocking even more potential from cities and the infrastructure system.

Sweating assets in business and infrastructure is a prerequisite for lifting productivity and getting the most for every dollar invested. But the US is rapidly approaching a tipping point where the net economic gains of austerity are nearly depleted.

It is both timely and laudable that Mr Trump considers fixing inner cities and rebuilding highways, bridges, tunnels, airports, schools and hospitals as a priority.

Different approach

The US has room to move on this but not in the traditional way. Its infrastructure stock to GDP ratio is about 64 per cent, compared with 70 per cent for other big economies. However, the US federal budget, with endless deficits and growing public indebtedness, will require a different approach if a new infrastructure era is to be activated.

Australia and the US can work together to help make the Trump infrastructure agenda happen. Its infrastructure reform of the 1980s and 1990s is a worthy benchmark for US to adopt.

Reforming the US government balance sheet should easily connect with the Trump business mindset much like NSW asset recycling has unlocked previously closed doors with a sceptical public. It has the potential to do the same in the US too.

We think a new stakeholder-led US Infrastructure Bank could generate and allocate the money through corporatisation and privatisation of government assets and businesses much more efficiently than bureaucratic processes.

Despite local successes, the social licence to privatise is tenuous. Australia has threated the privatisation needle many times, and the lesson for the US is pretty simple: focus on long-term efficiency, not short-term stimulus.

Australia can share with the US our strong private sector infrastructure empowerment with full accountability to balance sheet reporting. We can work with our American cousins on our lessons where regulation has been kept to a minimum and where the government sought to get out of the way to enable the private sector to interact with its customers.

Winning formula

This is a winning formula in Australia, and the same for the US.

But before that can happen, the US must resolve a persistently stubborn contradiction. How can the world's pin-up capitalist economy be so ambivalent to private ownership of public infrastructure?

Australia can and should seek to help the Trump administration navigate an overdue national mind shift in favour of privately-owned customer-led infrastructure. It is an enormous market waiting for long-term superannuation capital and expertise from Down Under.

On the other side of the coin, there is plenty we can learn about how US cities are introducing smart city transport and local water and energy decentralisation and activating partnerships between universities. We can learn how to unleash new entreprenuership innovation districts that are building new jobs and revitalising large and small communities.

Both nations stand at the forefront of a new urban infrastructure-enhanced future that can reshape opportunities for people and places where both nations become leaders for the world.

Garry Bowditch is executive director, Better Infrastructure Initiative, John Grill Centre, University of Sydney; Edward J Blakely is Honorary Professor at the United States Studies Centre and chair of the Future City Collaborative. This article originally appeared in the Australian Financial Review.

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