In summary, Australia has got itself into a fiscal straitjacket, which is open to six objections:
it has no prudential rationale;
it starts with an arbitrary presumption in favour of private financing and spending instead of looking at each case on its merit;
it impedes the government’s capacity to meet the nation’s infrastructure needs;
it creates a bias in the capital market against high-yielding investment in human capital (because social investment has relatively less access to finance from commercially oriented financial institutions and enterprises);
it forces governments to adopt financing options that are economically less efficient;
it denies Australians a genuine, well informed choice on the appropriate balance between public and private goods.
A policy stance that militates against public investment in infrastructure thus gets low marks for both social and economic efficiency as well as on grounds of democratic legitimacy. With Australia’s public debt and tax levels at very low levels (historically and compared with the rest of the world) and with our social and environmental infrastructure perceived by most Australians to be in a state of neglect, it seems to be clearly in the national interest to relax the present fiscal straitjacket.