Strategic investment in public infrastructure such as bridges, roads, transit systems, and hospitals is the foundation for a well-functioning society and crucial to Ontario’s future prosperity. CANCEA’s recent research report demonstrates that these investments have a tremendous long-term economic return.
The Ontario government has committed to a 10-year $130 billion investment in public infrastructure. The CANCEA research demonstrates that this investment in public infrastructure will not only create jobs, but as importantly increase long-term economic productivity, incomes and investment. Crucially, it will also generate significant amounts of tax revenue for the Provincial and Federal governments that strongly exceed the costs of the infrastructure spending and improve the quality of life for millions of Canadians.
Traditional economic assessments of government investments take an input-output approach, where estimates of economic activity include the direct, indirect and induced effects of that decision and only for the near term. With that approach, government investment in ice-cream and public infrastructure have almost the same economic returns. However, CANCEA takes a new, more robust approach to assessing the economic impact of government investments.
CANCEA’s agent based modeling and systems approach evaluates the complex and often interdependent relationships that exist among “agents” in our economy. This framework involves a significant set of data including demographic and broader economic metrics which allows CANCEA to assess the long-term productivity associated with investment decisions and also the associated risks if a government does not make a particular investment.
The CANCEA research shows the tremendous economic importance of investing in appropriate public infrastructure assets. Public infrastructure promotes productivity growth by increasing the efficiency of capital and labour, and by attracting more private sector investment. CANCEA found that public infrastructure investments can generate an economic return on real GDP that is more than 11 times greater than other options relative to a no-investment baseline. This includes anticipated Provincial and Federal tax revenues.
The study also found that a $1 billion investment in public infrastructure supports 85,000 job years in Ontario over the next 3 decades. There are also major wins for the government tax base. For every $ 1 billion invested in infrastructure as part of the $130 billion – 10 year plan, $1.7 billion in Provincial tax revenue will be generated relative to a no-investment baseline.
Now that the Federal election is over, governments at all three levels have important decisions to make with regard to public infrastructure. We all know that public infrastructure investments are important and we understand that good projects are essential, but the CANCEA’s research shows us the very large and sustained economic returns these investments can generate over the long-term.