Wise investment in infrastructure is essential to future productivity growth, but how do we ensure it's wise?

How can we avoid bubbles and create long-term economic growth?

It is said that those who fail to learn the lessons of history are doomed to repeat them. Australia’s economic history since the turn of the century has been one of bubble, bubble, toil and trouble: a housing bubble, a mining bubble, the toil of dealing with a global economic crisis and the trouble with relying on bubbles again.

Australia’s on-again, off-again Budget Emergency is on again. Not that you’d know it, with a $300 million drought package unveiled in late February lifting the net cost of post-election Coalition government policy commitments to $14 billion. Yet when Treasurer Hockey announced a forecast $47 billion deficit for this year in the December mid-year economic and fiscal outlook, he blamed it all on the previous government.

Australia has been assessed by the UN to have the second highest living standard in the world and by the OECD as the best on earth. When we ask who built this country, the right answer is the Australian people. Yet national governments can play a role in nation-building. They help create the economic environment and they influence the broader quality of life of the citizenry.

As Australia seeks to make the transition to a more diversified, competitive economy with the passing of the mining boom, a convergence of opinion is occurring around the idea of a big step-up in infrastructure investment. It would help maintain employment during the economic slowdown now underway while giving Australia a competitive edge in the Asian Century. Of all the infrastructure investment proposals for our nation, none is more important or pressing than a second airport for Australia’s tourist gateway city of Sydney.

With the announced closure of the automobile assembly industry and the inevitable flow-on effects to suppliers it’s clear that Australian manufacturing is rapidly shedding jobs. Add this week’s closure of a major mining supply company with the loss of 1100 jobs and the extreme pressure on the aluminium industry as electricity subsidies are being removed by power suppliers and it’s no surprise that the unemployment rate now exceeds levels reached during the global recession of 2008-10.

When anti-poverty advocacy group Oxfam released a report last month estimating the world’s 85 richest people possess more wealth than the poorest 3.5 billion people, a wealthy business commentator responded that such inequality was “fantastic,” for it gave the masses the inspiration to look up to the top 1 per cent.

Education experts agree that extra school funding without reform won't improve student performance. But nor can the performance of disadvantaged students be improved without extra funding to pay for the support they need. Here's the irony: having called for reform and opposed extra funding for disadvantaged students the federal government has manoeuvred itself into a position of offering extra funding without reform.

Everything comes to an end. The Age of Reason that ushered in the period of the Enlightment is over. Public policy debate these days is conducted from preconceived ideological positions. To the extent that facts are used at all, they are deployed to bolster each side’s ideologically driven claims. Facts that contradict a position are dismissed as having emanated from a conspiracy of the left or the right. Australia’s society and economy have thrived on sound policy making. That, too, is coming to an end. Our country will be the poorer for it.