The 2008 election issues

In a speech to the Probus Club on 22 August Michael Bassett gave his views on The 2008 Election Issues. Bassett writes

If we define the things that governments need to do to increase economic growth, in my view many of this election’s key issues come into sharper focus.

These things are, in Bassett's view:

1. First and foremost, governments must always maintain a steady, predictable investment climate with policies that are clear and defensible.
2. Restraining inflation must be very high in any government’s ambitions.
3. There are some areas of expenditure that are more useful than others. A study conducted by Macquarie Research Economics recently told us that for every 1% increase in the money spent on infrastructure a country can expect to lift GDP growth by 0.5%.
4. Setting a taxation regime that encourages effort is another must.
5. Closely allied to taxation is the need to control the numbers on the state’s payroll.
6. Maintaining employment laws that are fair to both employer and employee is another must. Governments should do nothing to discourage an employer taking on people at the margins.
7. Any government should always be cautious about special favours to any sector. If a government feels obliged to assist a particular group then there ought always to be a compelling reason.

My only real problem with his list is 3. It has a "Think Big" feel to it. Funds borrowed for infrastructure have an opportunity cost and its not clear how governments can workout which infrastructure projects are worth there costs and which are not. "Think Big" does not give us much reason to believe that they can. When carrying out 3. I would hope that they take note of 7.