Careful with this investment now …

So I hear that Wellington’s Morrison & Co’s Public Infrastructure Partnership fund is going to start spending the government’s “$500m infrastructure fund” ($100m of which is arbitrarily from the Super Fund).

According to the article they:

see significant potential for the fund because of under-investment in the past and because the Government is facing many years of budget deficits

I find this strange since:

  1. We haven’t necessarily had under-investment (discussed here and here)
  2. Spending more makes the budget deficit worse, not better

Now I have no problem with PPP’s, as I have this fantasy that the private sector part of the investment will actually listen to market signals, and do things that provide an economic benefit.

However, I think we need to be careful here. We are in a situation where, as a nation, we have been borrowing to invest (poorly at times) – do we really think that ramping up the number of arbitrary public projects based on sketchy cost-benefit studies is going to help us here. Or will it hinder us?

  • Change is before us. The investments in this should be made carefully with views from all sides. Improvements need to happen and will hopefully put people back to work.