The federal government has signalled a dramatic shift in thinking on debt and paved the way for a surge in infrastructure spending, economists say.
Treasurer Scott Morrison says his forthcoming federal budget will make a clear distinction between the good debt used to pay for income-generating infrastructure and the bad debt used to fund the government's day-to-day expenses and welfare payments.
In changes to the budget approach announced on Thursday, Mr Morrison said he also intends to focus on the net operating balance, the gap between the government's expenses and revenue over a period, instead of the underlying cash balance which is the amount of cash the government will need to borrow over a period.
"These changes will make clearer the share of expenditure that is contributing to investment that increases productive capacity and produces future income, and the debt that is being incurred to deal with everyday expenditure," Mr Morrison said.
ANZ head of Australian economics David Plank says many of the states already use net operating balance over the cash balance in their budgets so the move is not a controversial one.
More importantly, Mr Plank said, the proposed changes pave the way for the federal government to ramp up infrastructure investment without attracting as much public concern about the bottom line.
"If this is the case then there will be implications for the economic outlook (with the exact impact depending on size and timing)," Mr Plank said in a note.
"While many may view this in a positive light, it is critical that the spending makes good economic sense. We doubt the rating agencies or the market will simply accept a good/bad split on debt without casting a critical eye on where the money is going."
Commonwealth Bank chief economist Michael Blythe was more confident the government would invest in solid income-generating infrastructure on the advice of agencies like Infrastructure Australia.
"You need to make sure what you're borrowing to invest is paying for assets that will give the biggest pay-offs," he told AAP.
"It's not like we don't know what to build, the argument has always been how we pay for it."
Mr Blythe said infrastructure provides a short-term economic boost to regions in the construction phase through things like employment and spending on building materials.
He said it will also boost overall productivity as the nation's population ages and the workforce shrinks in the coming decades.
