Former prime minister Paul Keating says the Australian economy is "idling at the lights" and needs a government-led infrastructure spending boost that should include a fast train between Sydney and Newcastle.
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Mr Keating, speaking to broadcaster Alan Jones on Tuesday, accused the government of having a budget "surplus virus" that was preventing it from using record low interest rates to lift the economy out of its malaise.
All governments have been urged by the Reserve Bank of Australia (RBA) to use low rates to expand their infrastructure programs in a bid to drive down the unemployment rate and lift wages. The RBA's official cash rate sits at a record low of 0.75 per cent while interest rates on government debt are at near-record lows.
Mr Keating said with monetary policy barely having an impact, and the economy growing at 1.4 per cent, it was time for the government to develop a growth-led agenda.
"The economy is idling at the lights, it's like the car idling at the lights, waiting for the lights to turn green again to take off," he said. "The economy at 1.4 per cent is simply idling."
Mr Keating, who oversaw the first budget surpluses since the 1950s when he was treasurer, said Howard government treasurer Peter Costello had been correct to follow with more surpluses. But that focus on a return to surplus was now risking the broader economy, with too many within the Liberal Party believing the budget should be run like a small corner shop.
There was now a view that it was "naughty" or "immoral" not to run a surplus when a government was very different to a small business.
"I think what Peter has done has put the surplus virus into the Liberal Party bloodstream and they can't get away from it," he said. "The budget of the Commonwealth of Australia is not like the budget of a corner shop that in the end must be able to close the door on Friday night and be in surplus."
Mr Keating said the government should take advantage of current low interest rates to invest in very large infrastructure projects. Major projects with bipartisan support, rather than those only championed by politicians with a direct local link, should be developed.
He nominated a fast train between Newcastle and Sydney, which could be extended to the NSW south coast, as an idea that would deliver substantial economic and social benefits.
A train that travelled at 250 kilometres an hour would effectively turn Newcastle into a suburb of Sydney, taking price pressures off the Sydney property market while giving a boost to Newcastle's market. It would also open up the Hunter Valley.
"What we want is a long program of really important infrastructure," he said. "A fast train from Sydney to Newcastle would completely change the housing pressures inside Sydney."
