There are many options for a short-term response and what might be good policy. Unlike the disastrously bad quick-fix policies of the Rudd government’s attempt to stimulate in response to the global financial crisis – most noticeably spending on pink batts and school halls – there are immediate needs, and effective opportunities, in terms Newstart, social housing, and the like. The government certainly hasn’t listened to the RBA, and obviously doesn’t want to, having unrealistically promised a string of budget surpluses and debt repayment. Indeed, there is a reasonable argument that the tax cuts now being pushed through the Parliament will not be affordable as we move into the 2020s, given global uncertainties and considerable expenditure commitments, especially in the National Disability Insurance Scheme, defence and infrastructure, all unfunded. The major cities are blighted by traffic jams. Credit:Paul Rovere Unfortunately, in the language of our short-term politics, a budget surplus has become an end in itself, rather than a deficit being a means to an end. At the extreme, we saw the Abbott language of "budget emergency", with the implication that all debt is bad. Clearly it is not, otherwise most people would not buy a house, or build a business. Indeed, debt can be good if productively employed in the development of important social and economic infrastructure, where the broadly defined benefits (economic, social and environmental) are adequate to service and repay the debt.

As a general budgetary discipline, debt should not be accumulated to fund recurrent government expenditure, hence the desire to balance the budget over the cycle. But net surpluses will be required to repay previously accumulated debt. The government is in something of a bind in these terms. In a longer-term, strategic sense, Australia is in a unique position to capitalise on our AAA credit rating and develop a long-term, government-guaranteed, Australian Infrastructure Bond (maturity say 30 to 50 years) that could be issued at a very low coupon rate in today’s cheap interest rate world. It would be particularly attractive to central banks, sovereign wealth funds, pension and super funds, insurance companies, and a host of other global and domestic institutions. Illustration: Dionne Gain Credit: This could easily raise hundreds of billions and underwrite what could be considered an infrastructure revolution in this country, at a time when we are so far behind in both updating and developing new transport, water, energy and widespread social infrastructure. To be effective, such a program would need a number of other key elements. First, the money raised should not be counted in consolidated revenue or the annual budget, but would need to be managed in a separate Australia Infrastructure Fund, with strong, independent governance, to be used to provide equity or loans to prioritised projects, perhaps co-investing with state governments, the private sector, even the Future Fund (which is not devoted to the nation's broader future, per se, but to meeting liabilities for public servants' superannuation).

Second, the assessment (and perhaps ranking) process for individual projects would need to be transparent and independent, and considered against accepted financial and environmental, social and governance criteria. This role could be played by a reformed and redirected Infrastructure Australia. Loading Third, while the approach should be overwhelmingly national, it would importantly require the co-operation of the states and perhaps local government, in identifying, promoting and bidding for and implementing projects, and also to dramatically expedite necessary approval processes. It is a national embarrassment when we consider how unbelievably long it takes to initiate and complete major infrastructure projects. The broader community endures huge costs from traffic congestion, especially in the three major capitals, and from inadequate schools, hospitals, aged care facilities, energy and water supply. The big infrastructure opportunities such as very fast trains, water transport and desalination schemes, large-scale renewable energy export, energy storage projects, innovation, space and science hubs seem to go no further than limited imagination.