Once lockdowns are phased out and normality begins to return, over the first 6 to 12 months, infrastructure investment can be structured to play an important role. Learning from the GFC, this spending must be incremental to existing capital plans and cannot replace or crowd out existing commitments. Just as importantly, “shovel-ready” is often an incomplete perspective. Rather, to get things moving quickly, government should adopt a view that “small is beautiful.
Smaller projects relating to maintenance backlogs, minor repairs, and asset improvements or enhancements should be the focus. Almost every department head in every government around the world has a list of capital items that they never quite get to in the annual budgeting process because, in any given year, they are easy to defer. These projects typically also have the benefit of attracting small and medium-sized contractors, which tend to be locally based. With benchmarks in hand, many of these projects can also awarded on an accelerated basis, given that governments tend to have reasonable understanding of what the cost should be. Taken together, this can promote agile investment delivery and local economic stimulus.
Using an example from Australia, EY analysis demonstrates the positive impact that spending on infrastructure has on overall employment, with every direct job in the sector creating two or more across the economy. Maintenance, in particular, is a key driver of employment activity with each direct job creating up to 3.5 more across the economy. This form of investment is labour-intensive, involves ready-made works programs where crews can mobilise quickly, and supports the most critical infrastructure networks. The retrofitting programme set out in the Climate Action Plan, is another example of smaller scale projects which could be accelerated quickly. Further, this spending can enable stimulus to be targeted at specific regional areas that are most in need of help. Getting these projects started in the first few weeks following the lifting of economic restrictions will quickly stimulate much-needed economic activity. Importantly, these maintenance programs need to be planned out as a priority, so that they can be delivered when economies spring back to life – with most of the population staying inside, some of this could even start today.