Covid-19

The impacts of the COVID-19 pandemic, also known as Coronavirus, are being felt all over the world, with countries in lockdown, positive diagnoses increasing and major shocks to economies, including Australia’s.

The story is changing rapidly, with new developments each day. Infrastructure is keeping a close eye on these changes and will inform you as they’re happening. 

The first cases of the novel coronavirus were identified in Wuhan, China, in late 2019 before other cases outside of China started to be confirmed from January 2020. 

On 11 March the World Health Organization (WHO) characterised COVID-19 as a pandemic.

As of 16 March 2020, there have been 298 confirmed cases of COVID-19 in Australia. Of the confirmed cases, five people have died from COVID-19. 

On the morning of 16 March, Victoria and the ACT declared states of emergency, with the national and global focus now on slowing the spread of the virus.

Economic impacts

As well as the serious health concerns for the community, COVID-19 is causing major disruption to the Australian economy. 

All major industry events have been cancelled including all Australasian Railway Association events until the end of June; citizens are in isolation or practicing social distancing and supply chains have been significantly impacted, especially products that were previously imported from China. 

Modelling undertaken by KPMG Australia on the impact of COVID-19 on the Australian economy suggests that, in the absence of the Federal Government’s stimulus package, the COVID-19 pandemic would reduce Australia’s GDP in 2020 by about 0.9 percent.  

KPMG’s report said these impacts would amount to a hit to Australia’s GDP of more than $17 billion by the end of 2020, with a partial rebound of around $12 billion during the next 12 months.

The report states that the economic damage will continue for some time and in all likelihood will escalate in intensity.

The Federal Government released its Economic Response to the Coronavirus on 12 March 2020, which includes a stimulus package of $17.6 billion of fiscal support measures across the forward estimates period.

How is Australia’s infrastructure sector coping?

COVID-19 may have significant effects on Australia’s infrastructure industry, including major disruption to supply changes and possible difficulty sourcing materials, especially given the vast amount of materials being sourced from China.

In addition to supply chain disruptions, if health of construction workers is impacted, there could also be worker shortages on projects. 

Master Builders Australia said the Federal Government’s $17.6 billion stimulus package should bolster economic resilience in the face of the current challenge.

Denita Wawn, CEO of Master Builders Australia, said, “We strongly back the moves to back businesses, particularly small businesses, to keep workers and apprentices employed. The danger with economic shocks is that the labour market recovers slower than the rest of the economy so moves to offset employers shrinking their workforce is very well targeted.

“Builders and tradies around the country will respond favourably to the huge boost in the instant tax write-off threshold from $30,000 to $150,000 and expansion of its eligibility to businesses with turnover under $500 million (up from $50 million).

“Incentives to invest in business assets are also well targeted to our industry. There is no doubt builders and tradies will be encouraged to invest in new plant and equipment,” she said.

Ms Wawn also encouraged the Federal Government to implement measures on existing projects to help lesson the economic impacts of COVID-19.

“However, if there is a major contraction in building activity then the benefit of these measures will be blunted. The Government must take a strong leadership role in ensuring that construction of government projects currently underway continue and that projects scheduled to commence are not delayed or withdrawn,” Ms Wawn said.

“The Government could also bring forward expenditure on existing projects. Accelerating construction of current projects and bringing forward construction of shovel ready projects, big and small, would provide an immediate strong impetus for building firms to take up tax write off and investment incentive measures.

“Our industry also remains nervous about how protracted the inevitable shortage and delayed delivery of imported building products will be. This is a hit to our industry that is looming over the next few months and additional measures and extensions of some stimulus measures may be required to help the industry weather that storm.”

Australian Construction Industry Forum (ACIF) Executive Director, James Cameron, said that with more than 60 per cent of $6 billion worth of construction-related materials sourced from China, this represents a massive challenge for the industry if supplies continue to be affected.

“Some builders contractors are putting in requests for extensions of time for delays to their projects. This is contractually not always easy as many contracts do not provide illness as a reason for a claim,” Mr Cameron said.

“Where there are large components of structure, facades, and fit out in contracts, these usually require visits to suppliers’ factories in China.”

Mr Cameron also said the construction labour force in Australia may also be affected due to the disruption to the migration of certain trades and professions needed for the industry.

“If the coronavirus takes hold in Australia, construction projects in Australia may be further affected with sick staff and others saying home due to fear of infection. The construction industry labour force is highly integrated, and one missing link can mean that projects cannot continue.”

Impact on airport infrastructure 

The Australian Airports Association (AAA) has said Australia’s major airports are dealing with an unprecedented hit to their operations, with aeronautical revenues for the year expected to fall by more than half a billion dollars as a result of COVID-19.

“COVID-19 has, and will continue to, hit our income and operations with a severity not seen in this country before,” AAA A/Chief Executive Officer, Simon Bourke, said. 

“The AAA estimates aeronautical revenue for Australia’s major airports will collectively fall by more than $500 million this year as significant reductions in airline capacity take effect.

“Revenue from aeronautical charges and other airport services are all dependent on passenger numbers and are being heavily impacted by lower demand. International arrivals are at their lowest levels since 2013 and airports feel the loss of every passenger several times over.”

Sydney Airport’s international traffic was down 16.8 per cent in February compared to the prior year, and domestic traffic fell 4.5 per cent. 

Melbourne Airport saw a 17 per cent fall in international passengers in February, with 150,000 fewer people flying internationally compared to the same month last year. 

Brisbane Airport experienced a 7.7 per cent decrease in international passengers in February, with 34,000 fewer people flying internationally compared to the same month last year. Domestic travel fell 1.5 per cent, a loss of more than 19,000 passengers on the prior year.

Both airports and airlines are being seriously financially impacted by COVID-19 and Mr Bourke said industry must work together to make sure they are ready when the recovery comes.

“Further cuts when airline payments are already falling with every cancelled flight and empty airline seat would severely limit airports’ ability to support the recovery of our airline, retail and business partners.

“In order for airline businesses to recover when these challenges pass, airports must keep building the runways and terminal infrastructure we know they will need when then industry rebounds.

“The recovery will be strong, just as we’ve seen in the past, and we want to give our partners confidence that we are ready to support them as they rebuild,” Mr Bourke said.

This is a rapidly developing story. More to come.

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