How household economics influences infrastructure spending

“Sometimes the small pieces of data can actually make the biggest difference,” affirms Director of Business Intelligence and Data Analytics in the UTS Business School Professor John Rose.

His primary research focus, thanks to an Australian Research Council grant, is understanding if and how people make household budgets, how changes in the economy influence peoples’ spending habits and what the repercussions of these changes might be. For example, if interest rates rise and your rent or mortgage repayments increase are you more likely to make up the shortfall by cutting back on your healthcare, entertainment or something else?

“If you are more likely to substitute mortgage payments with healthcare,” says John, “then that may have an impact on your health and wellbeing. Whereas households that are more likely to substitute mortgage payments with entertainment, that may have a different impact. So, I’m trying to understand what the flow-through effects are and how that has an impact on other non-traditional economic measures.”

To begin with though, John says, “I’m starting to go back and have a look at the first principles of a lot of microeconomic theory and finding the holes – the differences between what the theory says and how we’re actually using it.

“In many cases, the way we study demand for goods and services appears to be in violation of basic microeconomic theory.”

And that’s a concern because that’s how governments and large companies run cost-benefit analyses for large-scale infrastructure projects. “We’ve seen toll roads fail, go bankrupt, billions of dollars’ worth of infrastructure just going to waste,” says John. “To be able to come up with a better cost-benefit is the ultimate goal.”

Fiona Livy

Marketing and Communication Unit