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Infrastructure spending a budget problem for states

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States and territories have spent more on infrastructure in the past five years than any other time on record and it is causing them budget problems, a new report has found.

As News.com.au notes, the study by The Grattan Institute says that the states and territories, collectively, have borrowed extensively to invest in infrastructure. As a result, their finances have moved from $37 billion in the black in 2006 to $69 billion in the red last year.

"States and territories are spending three per cent more of their budgets on interest and depreciation for past infrastructure," Grattan Institute chief executive officer John Daley said.

"This really hurts state and territory budgets already under strain from extra health spending."

He added that they will have to achieve budget surpluses if they want to continue high infrastructure spending.

As the SMH reports, Daley said, "Those payments are completely locked in. If we increase capital expenditure from here, or even if we simply maintain capital expenditure at the levels we've seen, the depreciation expense keeps piling up."

The report coincides with the release of a survey of 364 businesses by the Australian Industry Group. Respondents to the survey nominated increased infrastructure spending as their number two budget priority.

According to the survey, the top budget priority should be reducing the tax burden on businesses.

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