As governments look to spend their way out of the recession, between $25 trillion and $30 trillion of fresh infrastructure investment will be pumped into the global economy over the next two decades, finds a new report from CIBC World Markets.

“Governments all over the world are buying jobs,” says Benjamin Tal, senior economist at CIBC World Markets. “And the infrastructure sector is where many of these jobs will be created. When it comes to creating jobs and stimulating activity, infrastructure spending is a much more effective tool than tax cuts.

“In the U.S., the impact of economic growth of infrastructure spending worth one% of GDP is more than double the impact of tax cuts, which have a greater leakage to imported consumer goods, and which risk being saved by households. In Canada, $10 billion of infrastructure spending can potentially create 110,000 jobs and lift economic growth by close to 1.5 percentage points-well above the stimulus effect of a tax cut of a similar size,” says Tal.

The report estimates that the U.S. government will spend close to $150 billion out of the upcoming $875 billion fiscal stimulus on infrastructure investments. China will spend almost 80% of its near-$600 billion stimulus package on infrastructure. Overall, the report estimates that governments will commit an additional $650 billion in global infrastructure spending in the next two years.

Tal notes that close to $57 billion worth of shovel-ready projects can be started in the United States in the next 120 days. That number swells to $136 billion over a 24-month time frame. In Canada, municipalities can deliver close to $14 billion worth of infrastructure work in 2009 alone.

Based on an examination of Canada’s 100 largest upcoming infrastructure projects, Tal estimates that roughly $23 billion, or 40% of all upcoming infrastructure investment, will go to the energy sector-of which the vast majority will be used to finance major hydro and nuclear projects. Later, that spending will be joined by new oil capacity investment as now-cancelled oil sands projects are moved to the front burner as crude oil prices rebound. The coming years will also see a significant inflow of infrastructure money into the transportation sector followed by spending on health infrastructure.

Tal says institutional investors are also pouring money into infrastructure investment.

“In Canada, for example, with more than $700 billion to play with, even a minor change to pension funds’ asset allocation can dramatically change the mathematics of infrastructure funding. And it’s already happening. We estimate that currently roughly 5% of pension funds’ assets are allocated to global infrastructure investment-up from only 2% earlier in the decade. And this allocation is rising,” he says.

Tal expects that rising trend to continue, with pension funds allocating between 10% and 15% of their assets to infrastructure investment by 2017-adding more than $200 billion of fresh money to this capital intensive sector.

“While investors have already priced-in these rewards in some countries and sectors, elsewhere there is still time to capitalize on the coming infrastructure boom,” concludes Tal. “And with massive injection of public and private money, this asset class will prove to be a profitable one.”

IE