Matthew Elmas at The New Daily reports “Offshored taxpayer projects costing Australians billions, research shows“:
The article is about a study “Build It Here” from the McKell Institute. My money quote:
David Levinson, a professor of transport at University of Sydney, said the McKell report asks “good questions” about government contracts.
But he told The New Daily that there’s a big debate about what “wider economic benefits” actually means.
“For instance the inclusion of tax revenue from workers is not standard practice,” he said.
“What would those workers have been doing instead? Presumably most of them would have had jobs, which would have paid almost as much, which they now have to defer.”
Dr Levinson said there’s also factors that are harder to monetise.
“There may nevertheless be strategic value in having domestic production, even at a higher price, so that there is a skilled workforce able to do other related tasks as well,” he explained.
Some additional comments:
There is debate in the transport community about how to consider “Wider Economic Benefits”. For instance the inclusion of tax revenue from workers is not standard practice. We should ask what would those workers have been doing instead? Presumably most of them would have had jobs, which would have paid almost as much, which they now have to defer. The tax revenue from labour markets that is considered is typically based on the wider economic activities that the completed project enables (compared to its absence), not to employment costs incurred to construct the project.
Second, the report assumes that domestic costs are 25% higher than international costs. But this 25% in the report is compared to the original estimate, and not the final cost. It’s not at all obvious that domestically built projects would not also have had cost blowouts of some kind or another. (Consider public works built locally, like the Stadium in Moore Park, for an illustration).
One of the observations of the US, which has a lot of “Buy America” rules, is that costs are higher as a consequence.