The South Australian Government has vowed to push ahead with an economic stimulus initiative aimed at reviving local building and construction activity after the state was stripped of its AAA credit status by ratings agency Standard and Poors.
The infrastructure push aims to speed up the approval for construction projects that can be commenced quickly and are worth more than $20 million but still pending approval.
As a move from South Australian Premier, Jay Weatherill, it mounts a renewed defence of his government’s decision to prop-up the construction sector through infrastructure spending at the expense of its rating as the least risky grade of borrower.
Economic value of AAA ratings by credit agencies of governments has come into question recently because of a combination of historically low interest rates and Australia’s reputation as a comparatively safe market for lenders compared to the US or Europe.
At the same time, public sector buyers of investment products and securities remain wary of the quality of agency ratings. Several local governments have found themselves unwittingly exposed to toxic collateralised debt obligations (CDOs) even though products were marketed through bonds rated at AAA.
“Given the choice of retaining the AAA credit rating or continuing to invest in major infrastructure, we chose infrastructure to help sustain the level of activity within the economy – for example the Riverbank precinct, Adelaide Oval, Royal Adelaide Hospital and Southern Expressway duplication,” Mr Weatherill said.
A key measure in South Australia’s construction stimulus will be an assessment of so-called “shovel-ready” projects by the Economic Development Board, Urban Renewal Authority and Department of Planning, Transport and Infrastructure.
“There is a sense of urgency about the circumstances of the building and construction sector,” Mr Weatherill said. “That’s why we are taking this extraordinary step to ensure that our construction industry is supported.”
“Where additional work is required for approval to be granted, we will appoint a case manager for each project to help expedite the relevant approvals,” Mr Weatherill said.
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