Government infrastructure investment multiplying jobs globally

Sarah Shaw

4D Infrastructure

Recent IMF research shows that when governments invest in infrastructure, they create many new jobs. The IMF evaluated the direct employment effect of public investment in the key infrastructure categories of electricity, roads, schools, hospitals, water and sanitation. 

Using data from 41 countries over 19 years, the IMF estimates that US$1 million of public spending in infrastructure creates 3-7 jobs in advanced economies, 10-17 jobs in emerging market economies, and 16-30 jobs in low-income developing countries.

Overall, the IMF estimates that 1% of global GDP in public investment can create more than 7 million jobs worldwide through its direct employment effects alone.

And it appears the infrastructure investment message may be getting through. After months of negotiations, the US Senate passed a US$1.2 trillion infrastructure plan (US$550 billion in new federal investment) that will represent the biggest burst of spending on US public works in decades.

The package includes around US$110 billion in new spending for roads and bridges; US$73 billion for power grid upgrades; US$66 billion for rail and Amtrak; $65 billion for broadband expansion; US$55 billion for clean water; and US$39 billion for transit.

Similarly, Reuters reports that India will launch a 100 trillion rupee (US$1.35 trillion) national infrastructure plan that will help generate jobs and expand use of cleaner fuels to achieve the country's climate goals, PM Narendra Modi said.

The infrastructure program, called Gati Shakti, will help boost productivity of industries and boost the economy, Mr Modi said during his speech at the Independence Day celebrations in New Delhi.

"We will launch a master plan for Gati Shakti, a big program ... (it) will create job opportunities for hundreds of thousands," Modi said.

Boosting infrastructure in Asia's third-largest economy is at the heart of Mr Modi's plan to pull back the country from a sharp, COVID-driven economic decline.

The EU has also announced significant infrastructure investment plans, while the May 2021 Australian Federal Budget saw the Commonwealth Treasurer identify an additional $15.2 billion investment over 10 years on major infrastructure projects, and kept the 10-year plan at $110 billion.

This will spearhead the Federal Government's efforts to boost both jobs and productivity in the COVID-affected national economy.

This type of infrastructure investment is beneficial to both the publicly listed and private infrastructure sectors as it improves economic efficiency and enhances GDP growth, thereby benefiting GDP-correlated user-pays infrastructure assets (including toll roads, rail, ports and airports).

Further, the utility sector is directly benefiting as much of the stimulus supports a faster green energy transition.

This improves the investment outlook for those utilities capitalising on the opportunity via new renewable generation, grid strengthening and security of supply, as well as exploring new technologies in a government-subsidised environment. It also leads to a pool of possible future privatisation candidates, which would see the asset class continue to expand.

Invest across the globe

4D manages a diversified portfolio of stocks across the utility and user-pay sectors. We prioritise countries and companies with strong management teams, defined strategic goals that integrate with a sustainable future, strong balance sheets to support much-needed investment, and those that are best in class within their sector in capitalising on the opportunities currently available to them.

Managed Fund
4D Global Infrastructure Fund (Unhedged)
Alternative Assets

4D Infrastructure is a Bennelong Funds Management boutique that invests in listed infrastructure companies across all four corners of the globe. For more insights on global infrastructure, visit 4D’s website.

Source:

The Direct Employment Impact of Public Investment, IMF (Marian Moszoro), 6 May 2021

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The content contained in this wire represents the opinions of the authors. The authors may hold either long or short positions in securities of various companies discussed in the article. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely as an avenue for the authors to express their personal views on investing and for the entertainment of the reader. This information is issued by Bennelong Funds Management Ltd (ABN 39 111 214 085, AFSL 296806) (BFML) in relation to the 4D Global Infrastructure Fund (AUD Hedged), the 4D Global Infrastructure Fund (Unhedged) and the 4D Emerging Markets Infrastructure Fund. The Funds are managed by 4D Infrastructure, a Bennelong boutique. This is general information only, and does not constitute financial, tax or legal advice or an offer or solicitation to subscribe for units in any fund of which BFML is the Trustee or Responsible Entity (Bennelong Fund). This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on the information or deciding whether to acquire or hold a product, you should consider the appropriateness of the information based on your own objectives, financial situation or needs or consult a professional adviser. You should also consider the relevant Information Memorandum (IM) and or Product Disclosure Statement (PDS) which is available on the BFML website, bennelongfunds.com, or by phoning 1800 895 388 (AU) or 0800 442 304 (NZ). Information about the Target Market Determinations (TMDs) for the Bennelong Funds is available on the BFML website. BFML may receive management and or performance fees from the Bennelong Funds, details of which are also set out in the current IM and or PDS. BFML and the Bennelong Funds, their affiliates and associates accept no liability for any inaccurate, incomplete or omitted information of any kind or any losses caused by using this information. All investments carry risks. There can be no assurance that any Bennelong Fund will achieve its targeted rate of return and no guarantee against loss resulting from an investment in any Bennelong Fund. Past fund performance is not indicative of future performance. Information is current as at the date of this article. 4D Infrastructure Pty Ltd (ABN 26 604 979 259) is a Corporate Authorised Representative of BFML.

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Sarah Shaw
Global Portfolio Manager and Chief Investment Officer
4D Infrastructure

Sarah has almost 30 years of experience across financial services, including 20 years focused on global listed infrastructure. She is an experienced portfolio manager, having successfully launched and managed several listed infrastructure funds...

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