Infrastructure facilities in Australia’s cities and population centres are likely to have higher economic multipliers and productivity potential, according to a new report released by Engineers Australia (EA).
EA’s new report, Engineering Construction on Infrastructure, looks into which sectors are trending up, and which are trending down.
The report examines trends in infrastructure construction over the past 26 years using data from the Australian Bureau of Statistic (ABS).
According to the report, all forms of engineering construction contribute to Australia’s GDP, but infrastructure facilities in Australia’s cities and population centres, by virtue of wider accessibility to large numbers of businesses and consumers, are likely to have higher economic multipliers and higher productivity potential.
The report found congestion in Australia’s cities has not been resolved and public transport remains inadequate and there is a long list of unresolved issues in other infrastructure areas.
The increases in public sector infrastructure recorded in the latest report are consistent with political pronouncements that action is underway to correct these problems.
However, compared to the nation’s response to the resources boom, the response to the infrastructure deficiency in cities and other population centres is slow.
From an economic perspective, the increase in public sector infrastructure has not come close to offsetting the reduction in construction in the resources sector resulting in a net depressive effect on economic activity.
The case for a substantial surge in public sector infrastructure remains strong.
The increases in public sector infrastructure recorded in the report are consistent with political pronouncements that action is underway to correct these problems.
But, comparing the relative scales of engineering construction components suggests that these efforts are more modest than put forward, and this needs to change.
The slow rise of public sector construction
According to the report mostly all public sector engineering construction is the construction of infrastructure, mainly in cities and other major population centres, and the transport links between them.
In 2016 the public sector infrastructure construction increased by 6.3 per cent and in the year ending 30 June 2017 construction grew by 10.7 per cent.
Three-quarters of public sector engineering construction completed in 2016-17 was on roads (43.2 per cent), telecommunications facilities (16.9 per cent) and on railways (13.2 per cent) and there were substantial increases in construction completed in each of these asset classes.
There were, however, several areas where public sector construction contracted in 2016-17, notably harbours, sewerage and electricity.
The large scale of growth sectors ensured the overall outcome.
In 2017 the public sector commencements on infrastructure fell, but remained consistent with the scale of commencements achieved over the past decade.
There was a large amount of unfinished construction outstanding on projects already underway sufficient for about 4.2 years of work at the current rate of public sector completions.
These trends suggest that the current scale of completions is likely to continue for several more years.
In constant price terms, public sector infrastructure completed in 2016-17 was $28,779.6 million.
This is higher than completions in the previous three years, but less than the 2009-10 outcome of $30,184.2 million.
Private sector construction proves to be a mixed bag
Long-term average annual growth in private sector infrastructure was high (nine per cent per year) and was strongly influenced by resources factors.
The report states the resources construction boom is now over and the average annual growth over the past five years was 7.9 per cent per year.
During this period only the construction of bridges, electricity facilities and telecommunications facilities showed positive outcomes.
According to the report, the key point to remember is that there continues to be a substantial amount of engineering construction taking place in the resources sector and it is likely to continue for a few years yet.
In 2016 in the private sector construction on infrastructure contracted by 2.7 per cent to $18,920.8 million in constant prices with strong results in roads and telecommunications.
The negative impact of the end of the resources boom on private sector infrastructure has now been offset by growth in public sector infrastructure construction on infrastructure and will have spillover effects in private sector construction on associated infrastructure.