Investment in infrastructure and housing can both improve productivity and reduce inequality when implemented together

Construction activity in western Sydney. Picture: Getty Images

The IMF recently published a report which, though it’s focused on the UK’s economy, contains some suggestions for improving productivity and reducing inequality across society.

One suggestion from the IMF was to improve the quality of infrastructure.

Transportation bottlenecks and other infrastructure problems hold back development in regions with lower productivity. Better connectivity would help reduce regional inequalities and support growth. For years, Australia has also had a backlog of infrastructure requirements.

In Sydney and Melbourne in particular, governments are proceeding with several major public transport and road projects to improve connectivity. It’s a welcome development that we are finally seeing a large volume of projects underway and in planning. Getting these right is now the key to ensuring Australia has the infrastructure it deserves to unlock the productive capacity of the economy.

Another recommendation from the IMF is to build more homes, which they suggest governments could do by easing planning restrictions.

With more houses available, they would become more affordable and it would be less costly for workers to move between regions to take better-paying jobs. That would improve living standards and reduce inequality.

Housing affordability is always a hot topic in Australia.

Several economists have highlighted the under-supply of new housing in recent years, especially in Sydney.

The Grattan Institute estimates that 725,000 new homes will be needed in Sydney alone over the next 20 years just to cope with predicted population growth.

This suggests that measures to boost supply, such as a simpler planning process and expedited approvals, are the key to improving affordability.

The Grattan Institute suggests that, until now, planning rules and practices made it reasonably easy to build apartments in the CBD and to develop new housing estates on the city fringe. But they made it relatively difficult to redevelop the inner and middle-ring suburbs of our major cities, where many would prefer to live because they would have better access to jobs.

How governments tackle infrastructure projects in the coming years will be a key factor in the health of the economy. Commonwealth Bank’s Executive Director, Government, Health, Education and Social Infrastructure, Emmanuel Alfieris, recently wrote about the importance of public private partnerships to ensure government projects can help both communities and budget bottom lines. You can read his full comment piece here.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.