In an article in the Age today titled State Told Not to Fear Debt with Big Projects, an Australian Industry Group spokesman urges Victorian premier Ted Baillieu to bring the government into debt in order to finance big infrastructure projects like roads and freeways. A member of the Property Council also said the following: "'Governments seem to be averse to borrowing to fund infrastructure, but the community can and would accept that."
An argument can be made for a country to go into debt to build infrastructure like roads and freeways. Infrastructure can attract business into the state, which increases economic growth and tax revenue. But the problem with funding infrastructure with debt rather than with surplus cash is you need to pay interest, and would it make much of a difference if we waited until the financial position of the state is healthier rather than spend now?
The Baillieu government has promised $100 million in surplus per year. It will be interesting to see if he is able to keep that promise.
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