such as electricity and water, as well as transport links, need ongoing investment to accommodate a rising population. this challenge has clearly been recognised and, over recent years, governments at both the state and federal level have been increasing infrastructure investment. as can be seen from this graph, public investment in communications infrastructure has increased with the rollout of the nbn. transport infrastructure – road and rail – has increased even more sharply and is back close to the share of gdp it represented in the years immediately after the global financial crisis. graph 1 https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 15. html 4 / 8 6 / 15 / 2018 how infrastructure fits in | speeches | rba the recent federal budget foreshadowed additional infrastructure spending. more broadly, investment by the federal government is projected to increase over coming years. most of the infrastructure spend is by state governments, however. this has already increased noticeably, particularly in the south - eastern states, and according to state budgets it is projected to increase further in the next couple of years. much of this work is in urban transport projects, both road and rail. graph 2 another area of infrastructure attracting substantial investment at the moment is renewable energy. the value of renewable generation projects slated for the next year or so is similar to the average of recent years'investment in electricity generation, distribution and transmission, a much broader total set of activities. most of the investment in renewables is by the private sector. these projects have become more attractive lately as the cost of the underlying technology has fallen. at the same time, the costs of fossil - based inputs to existing generation methods has risen, and so has the price of electricity. so renewable energy projects are becoming increasingly commercially viable. as such, it is an area where the private sector can provide the infrastructure. and that is indeed what we are seeing. a range of data sources on both capital expenditure and financing show greatly increased activity recently ( graph 3 ). a few years ago, much of the https : / / www. rba. gov. au / speeches / 2018 / sp - ag - 2018 - 06 - 15. html 5 / 8 6 / 15 / 2018 how infrastructure fits in | speeches | rba investment in renewables was in small - scale rooftop solar. more recently, as the economics of these projects has changed, we are seeing more large - scale solar and wind projects being financed and built. graph

- which is the ratio of our resource - intensive export prices to our manufacturing - intensive import prices - bottomed in 1985 but have on average risen since. more importantly, few now doubt that it is manufacturing prices which are under continued downward pressure as a result of the rapid expansion of capacity in asia, particularly in china. ( d ) institutions matter more and more, development economists and economic historians are coming to the conclusion that, at the deepest level, a sound institutional framework is the crucial ingredient for sustained economic performance, and that it is far more important than distance, geography or the presence of resources. one only has to look at the extreme differences in economic performance between south and north korea, or west and ( formerly ) east germany to see how different institutions can outweigh the same geography, culture and resources. the different economic performance of australia and argentina is another clear case, as is the more general economic superiority of the former british colonies over the former spanish colonies, which has been a subject of recent studies emphasising the importance of institutions over geography. 5 what are the “ deep ” institutions that are conducive to sustained economic performance? • the first one is the enforcement of property rights. no - one will venture capital for an economic project if success leads to confiscation by the government or other powerful forces. thus, the enforcement of property rights means a strong body of commercial law ( particularly the law of contract ), impartial courts, honest police force, etc. it also means eliminating, or at least minimising, corruption. it often used to be thought that corruption “ greased the wheels of commerce ” and helped things get done. but modern research has unequivocally shown the higher the level of corruption, the worse the economic performance. 6 • the second institutional requirement is constraints on the ability of government or other elites to exercise arbitrary power. this usually means an open society, democratic political system and a free press, but i would also add institutions that encourage competition by challenging monopoly powers. an important ally in this is the openness of the economy to wright and czelusta ( ibid ). stoeckel ( 1999 ). acemoglu, johnson and robinson ( 2003 ). mauro ( 1995 ). international trade in goods and ideas, which has been shown to have a significant correlation with economic performance. 7 • some degree of equal opportunity so that people can invest in human capital formation. in this area,