The quality of the physical infrastructure in our major cities is just as critical as human capital
development in terms of driving long-run growth in productivity and rising living standards. The provision
of high-quality and reliable infrastructure network services (like roads, rail and telecommunications) can
have significant social, environmental and economic payoffs.
Notwithstanding the obvious intuitive connection between infrastructure investment and economic
growth, the link between the two is still debated. One reason is that not all infrastructure investment
supports growth over the long-term. Building a road or rail line that is not used for instance lowers
productivity and economic growth in the long-term. A second reason is that establishing an empirical
relationship between infrastructure and economic growth is confounded by a number of statistical issues.
The most important of these relates to identifying the direction of causality between infrastructure and
measures of aggregate output (GDP).
This study takes a microeconomic (or case study) approach to understanding the impact of next
generation infrastructure (NGI) on the effectiveness of our cities in supporting economic growth and
higher living standards.
We first look at the theoretical links between infrastructure investment, productive cities and economic
growth. We then focus on a hotly debated infrastructure project – the South West Illawarra Rail Link,
which could potentially better link the Wollongong region to Sydney.