Last week the IMF issued a warning to governments that the global economy faces “mediocre growth”. It recommended infrastructure building as a way to stimulate the economy. But while this aligns with the Abbott government’s infrastructure plans, the IMF’s research suggests the way projects such as the Melbourne East West Link were chosen significantly reduces the likely benefits.

Politicians absolutely love infrastructure. For them, being able to talk about a big infrastructure project is right up there with bright copper kettles and warm woollen mittens.

Infrastructure also renders as hogwash much of the “small government” lines spouted by conservative politicians. Tony Abbott, for example, loves to state that “governments do not create jobs”, and yet last Thursday he told parliament that the East West Link project in Melbourne, for which the Victorian and Australian governments are contributing $3.5bn, would create “almost 4,000 new jobs”.

Infrastructure is of course not only built by governments. Since the start of the mining boom in the early 2000s, engineering construction spending (which covers infrastructure works) for the private sector has massively outweighed that for the public sector:

Even infrastructure work done for the public sector is now more likely to be carried out by private sector firms. Governments have progressively cut back their own engineering capabilities and have ratcheted up the amount of work contracted to private firms.

Twenty five years ago 70% of engineering work done for the public sector was in-house, now 56% is done by private firms:

But regardless of whether it is for the private or the public sector, over the past 12 to 24 months, the amount of work done has been falling:

In the past year, the volume of infrastructure work done for the public sector fell 15% – the biggest fall since 1985.

It would be a bit harsh to blame this entirely on the Abbott government, as most of the work done now is a carry-over from the Gillard government. New infrastructure projects can take a long time to get going, unless a massive priority is put on “shovel-ready” projects (to use the in-vogue phrase on the GFC stimulus).

The current fall is indicative of the work that was initially driven by the massive GFC stimulus coming to an end. Moreover, as Anthony Albanese suggested when using the Guardian office’s whiteboard, a lot of the “new” infrastructure spending by the Abbott government is merely redirected funds. Thus in the broad sense it is not extra money, but at best just the same money spent differently.

This highlights the problem for Tony Abbott to be “the infrastructure prime minister”. Over the past six years there has been a hell of a lot of infrastructure spending. Public sector engineering on roads, bridges, rail and harbours has been above 1% of GDP since 2008 – a level not achieved before:

So plentiful has been infrastructure spending over half-a-dozen years by both federal and state governments that the Grattan Institute suggests any talk of an infrastructure deficit is overblown. The Productivity Commission, in its recent report on public infrastructure, similarly noted: “If there is an infrastructure deficit... it is not because of a fall in infrastructure investment.”

But there is no doubt that infrastructure can lead to significant economic benefit. The IMF last week argued that in an environment of “mediocre growth”, infrastructure spending “could provide a much-needed fillip to demand”. Given how low interest rates already are it is also one of the few “remaining policy levers available to support growth”.

It was, the IMF argued, time for “an infrastructure push”.

The IMF’s research counters some of the shibboleths about public infrastructure. It notes that financing infrastructure via debt can bring better returns than that which is financed by either selling other assets or cutting back on spending elsewhere. It notes “evidence from advanced economies suggests that an increase in public investment that is debt financed could have larger output effects than one that is budget-neutral”.

This does not mean there should be a free-for-all on infrastructure spending. The IMF notes that many advanced economies have “high debt-to-GDP ratios” that might prevent further debt lending without spooking investors. Australia, however, is not one of those countries.

The IMF argues that the output from public investment in infrastructure is strongest when there is “economic slack, when public investment efficiency is high, and when public investment is debt financed”.

Thus, there is little benefit from public infrastructure when the economy is growing strongly, if the investment is poorly chosen and organised, and when it is financed through budget-neutral methods.

The IMF suggested Australia’s manner of choosing projects through Infrastructure Australia (IA) was an example of “well-designed institutional arrangements” that was a “centralised, independent review process” that ensured a “robust estimate of the costs, benefits, and risks of potential projects”.

Unfortunately such a review did not apply to the East West Link project. While last year IA did rate the project as having “real potential”, there were other projects such as the Melbourne Metro which rated higher due to it having “strong strategic and economic merit” and which was “highly likely” to “deliver economic benefits exceeding costs incurred”.

Last week, when announcing the signing of contracts for the East West Link, neither Tony Abbott nor Victorian premier Denis Napthine mentioned IA’s review of the link – because there wasn’t one. During last year’s election, when asked about a business case for the project, Abbott told reporters that “Infrastructure Australia, as I understand it, has recently published one”.

Except it hadn’t then, and it hasn’t now.

IA’s most recent statement on the link was last month when it reaffirmed the view of last December that the project remained listed as having “real potential”. IA noted however that since then it had “received a full business case for stage one of the project” and was currently assessing it.

This means that the Abbott and Napthine governments have signed contracts and pledged over $3.5bn before that assessment has been conducted.

It was a curious way to display the LNP’s campaign promise to “empower Infrastructure Australia to deliver better value from infrastructure spending”. Especially since they also promised that “all commonwealth-funded projects worth more than $100m would be required to undergo a cost-benefit analysis by Infrastructure Australia”.

Even worse, in last year’s State of Play report, IA noted that there was a lack of “a framework designed for nationally significant” road infrastructure and that there also needed to be further work done to ensure “coordinated planning and transparent investment decisions”.

With the Victorian state election just eight weeks away, it is pretty transparent that the East West Link decision was based less on economic benefits and more on the hope that, just as it is for Abbott and Napthine, Victorian voters will view the road project as one of their favourite things.