This paper examines the impact of the provision of public transport infrastructure on the cost structure of the Australian economy within a context that recognises industry agglomeration externalities. The paper extends the symmetric generalised quadratic cost function by incorporating public transportation capital as an external input and adapting the spatial econometric techniques to an industrial context to allow for industry spillovers in the cost analysis. Using industry level data over the period 1990-2010, the paper finds that while public transport has a productive effect in reducing the cost of production, neglecting inter-industry spillovers has noticeably overestimates this effect.