US: Little likelihood of a major boost to near term Federal infrastructure spending - NAB

The benchmark for the President’s infrastructure plans has long been $1 trillion and while some parts of the President’s platform – particularly on trade – are a potential negative for growth, infrastructure investment offered hope of improving future prospects, according to analysts at NAB.

Key Quotes

“The $1 trillion was an amount to be spread over 10 years and it was always clear that it did not represent a promise for the Federal government to spend this amount. Further details of the administration’s thinking on infrastructure were provided in May. While committing to some Federal funding, the plan is to encourage, and provide incentives to, the private sector (including through public-private partnerships), as well as state and local governments, to undertake infrastructure investment. Regulatory relief continues to remain a focus, with a recent proposal to reduce regulatory approval time lines.”

“Other measures to encourage the private sector to invest more in infrastructure are still being considered. Proposals being looked at include loans and other credit assistance, expanded use of tax-exempt bonds, and liberalising tolling policy.”

“The President’s FY 2018 Budget specified $200 billion over the period 2018 to 2027 for its infrastructure initiative, with spending really kicking in FY 2019. Looking at the proposed budget in its totality, only defence related investment was projected to rise in FY 2018. Moreover, the budget also cut back – down the track – on other infrastructure related programs (such as spending under the Highway Trust Fund). The CBO’s view is that over a 10 year window Federal infrastructure spending wouldn’t increase much.”

“In the US, the President’s Budget is just part of the process – Congressional members often seem to make a point of announcing it dead on arrival. So as the budget process begins, more details may yet emerge on what the Federal government will actually do, but at this stage Congressional Republicans focus appears to be more focussed on tax than infrastructure.”