Public infrastructure drives up private sector productivity

Date: 17/06/2002

New research proves that public spending on bridges, roads, parks and transport produces big cost savings and productivity increases to the private sector.

A researcher from the University of Western Sydney (UWS) has estimated that private sector productivity in Australia is boosted by 96 cents every time the government invests one dollar in a public infrastructure project.

"When the government builds a new road or bridge, it makes private business more efficient," explains Associate Professor Satya Paul the author of the report.

The UWS academic is the first to comprehensively quantify private sector productivity increases flowing from public infrastructure projects in Australia.

Associate Professor Paul's research is based on the aggregate and sector specific time series data from the Australian Bureau Statistics from 1968-1996. It examines the effects of public infrastructure on cost and output in private sector industries.

"My research sends a clear message to politicians - it's financially sensible to spend money on infrastructure projects. Not only does the general public benefit from new bridges, parks and better transport facilities but it also brings tangible economic advantages to the private sector."

Dr Paul's study breaks down the productivity benefit by private sector industries.

"The wholesale and retail sector benefits the most from government infrastructure spending, probably because this sector is most reliant on public infrastructure to transport goods to and from their shops," Associate Professor Satya Paul says.

"Every time the government spends one dollar, the wholesale and retail sector gets a 31-cent productivity boost while manufacturing jumps 16 cents, construction 8.8 cents and agriculture 6 cents."

Interestingly, Associate Professor Satya Paul says the productivity benefits to the private sector have doubled during the last 30 years.

"In the 1968-1981 period the total productivity benefit to all industries was around 76 cents for every dollar spent on public infrastructure. But in the 1991-1996 period this figure has skyrocketed to $1.56," he says.

"It shows that the government is becoming wiser investing in infrastructure, or that private businesses have become smarter in utilising public infrastructure facilities."


For more information, requests for interviews or copies of the report, please contact
Mikael Kjaerbye
Media Manager
Tel: 02 9678 7418 or mobile: 0405 356 021