Keating talks up infrastructure

Australian superannuation funds should continue to invest in public infrastructure assets under the close direction of asset management firms, according to former Prime Minister Paul Keating.

Addressing a Pimco function yesterday, he said such infrastructure investment opportunities would begin to decline, and that asset managers needed to play a key role in judging which assets in the public domain could be best managed by the private sector.

“Providing it is clear the asset can be managed in the private domain, I think they are an asset class that can be well considered,” he said, while emphasising the importance of selecting infrastructure assets that will not need to “fall back on the public purse”.

According to Keating, the current political environment represents a significant barrier to private investment in infrastructure, with state governments reluctant to part with many unprofitable water, transport and energy assets for reasons of “nostalgia and inertia”.

He suggested the Commonwealth needed to play a greater role in managing such assets, and that there is a strong case for further privatisation of public assets, but lamented the Federal and state obsession with “keeping budgets in surplus by hanging onto infrastructure they would be better rid of”.

Keating said such non-tradeable goods represented one of the most significant threats to Australia’s continued viability within the current economic boom, which he believes is in the second cycle of the economic wave begun in the 1990s with the Internet and telecommunications boom.

He said the major difference this time is Australia’s relative closeness to the booming markets of China and India, which means it is in a geographically and economically favourable position to fully benefit, provided the political structure allows it.

If Australia is to take full advantage of this, Keating believes decisive backing of innovation rather than a conservative, “hedging” approach to these economies is crucial.

Before this can happen, he believes the right political structure must be in place.

“It’s about getting smothered in blood to get the mail through … [but] the Chinese now see us as moving towards North America; we’ve lost that momentum,” he said.