Buildings and infrastructure contributed US$36 trillion to global GDP in 2016, according to Arcadis’ Global Built Asset Performance Index. Yet with commodity prices down, and manufacturing in decline, is Australia facing an over-reliance on service industries and consumption to drive growth?
What part does Australia’s stock of built assets play in generating wealth?
The Global Built Asset Performance Index, published by Arcadis, looks to answer some of these questions, and compare what’s happening in Australia with the 35 other countries that make up 78% of world GDP.
The results for Australia are pretty unspectacular, which for a proud and ambitious nation should be depressing and even scary.
Australia does OK, plodding along mid-table, gently getting overtaken by emerging nations that are committed to making investments in a broad range of high-performing assets to drive sustainable growth.
Countries basically have three sources of income: the profits they make on natural resources; the income generated by people, in terms of labour and services; and the income generated by Built Assets.
Australia’s income from the natural resources has taken a knock from lower commodity prices, generating a risk that Australia’s economy becomes too reliant on growing the profits made through its people.
The ability of Built Assets to make up the difference, is being hampered by the decline of manufacturing and by poor asset management practices. Too often existing assets become unnecessarily inefficient and prone to failure, due to asset management strategies that lack appropriate prioritisation and effective targeting.
There is hope though, that with broader infrastructure investments underway in New South Wales and Victoria in particular, the country can continue to benefit from built assets that currently generate more than 30% of national income.
A mind shift is needed to make this happen. Too often individual government investments are delayed or cancelled because of a narrow definition of their beneficial impact. As the Arcadis report shows, a “build it and they will come” mentality is having a major beneficial impact elsewhere, and while there is always a sensible middle ground to aim for, economic and social benefits have to be assessed in their broadest terms when looking at future infrastructure investments in particular.
Built asset investment remains a credible and necessary part of driving the country’s economy forward. Understanding and optimising the broad social and economic impacts of proposed infrastructure, and better looking after the assets that already exist, are vital if Australia is to avoid putting all its eggs in one basket.
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