The impacts of the COVID-19 pandemic are being felt deeply in Australia and around the world, with the infrastructure sector significantly impacted. But while the sector at large has experienced many challenges, opportunities for specific industries are emerging, and the role that infrastructure can play in Australia’s economic recovery is providing a beacon of hope. Here, we’ll take a closer look at how some of the major infrastructure sectors are faring as a result of COVID-19.
While the immediate concern is managing the health implications of the virus, the reality is that in order to do this, economies around the world have been forced into hibernation or lockdown periods.
The implications of this will be significant; and will be felt for years to come.
There remains considerable uncertainty around the economic implications of the Coronavirus for the June quarter and beyond, but the economic shock will be significant.
There are a wide range of potential paths for the spread and containment of the virus globally and in Australia. In addition, there is uncertainty around the impact on confidence, people’s ability to work and business cash flow.
The global spread of the Coronavirus and its global economic impact will also flow through to demand for Australia’s exports and the availability of inputs into domestic production and imported consumption goods.
At the time of going to print, the Federal Government has committed over $200 billion towards mitigating the impacts of COVID-19, and this figure includes both health and economic activity.
We have seen thus far that certain sectors of the economy have been more vulnerable to the impacts of COVID-19 (such as tourism, hospitality and retail), while other sectors have been more resilient (for example, prices of key bulk commodities have remained resilient to date).
How is Australia’s infrastructure sector coping?
In the world of infrastructure, it’s no different – we have seen certain sectors prove to be more vulnerable, while others have been more resilient in the face of this particular crisis.
Australia’s airports, and the aeronautical industry, have been severely impacted by COVID-19. 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 Acting 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 in 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.
“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 the 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.
The Australian roads industry is feeling the effects of the COVID-19 pandemic, according to a Roads Australia (RA) survey.
More than a third of industry players surveyed said the COVID-19 crisis was affecting their capacity to deliver current projects, and creating uncertainty about future project timing and funding.
Roads Australia is calling on governments to:
- Reduce payment terms to contractors to help them maintain their cash flows and pay their employees on time
- Provide assurances of their commitment to long-term pipelines so industry can plan and invest in capacity to support an economic recovery and deliver the next wave of infrastructure
The Roads Australia survey drew responses from 166 senior private and public sector executives involved in the delivery, maintenance and operation of major transport infrastructure across the country.
When asked if the COVID-19 crisis was impacting their organisations’ capacities to deliver current workloads, 37 per cent said yes and 23 per cent said no, with 40 per cent saying it was still too early to tell.
When asked where their organisations were feeling the pinch, 35 per cent pointed to the immediate availability of staff, ten per cent cited the availability of subcontractors and seven per cent plant and equipment.
Those who nominated other ‘pinch points’ cited:
- Border and travel restrictions which had stopped the transfer of interstate and overseas staff to key projects
- The unavailability of clients and key personnel to provide direction and sign-off on approvals
- The loss of current and future revenue
- Lower productivity associated with working from home
The unavailability of COVID-19 preventative supplies, such as sanitisers, and basic worksite staples such as toilet paper
RA President, Michael Bushby, said face-to-face collaboration was traditionally a cornerstone of the delivery process for major transport projects.
“Like a lot of industries and sectors, RA members are adapting and moving away from face-to-face meetings in design offices and on project sites – and like a lot of industries, it will take time to get used to the changes.
“In the meantime, productivity may suffer in the short to medium term.” Mr Bushby said RA members were also concerned about the long-term surety of project pipelines – particularly those in NSW and Victoria, underpinned by the Federal Government’s $100 billion, ten-year transport infrastructure investment program.
“Transport infrastructure projects can’t be readily switched on and off, so it is vital industry has confidence that project pipelines will continue over forecasted periods,” he said.
“We’re encouraged by recent assurances from NSW Treasurer, Dominic Perrottet, that the NSW Government remains committed to its project pipeline, and we are seeking similar assurances from other states and the Commonwealth.
“Continuing to push on with the planning, design and construction of transport infrastructure projects, as well as ramping up road maintenance, is an excellent approach for sustaining jobs in these difficult economic times.”
Many of Australia’s ports workers are finding themselves at the frontline of the virus, dealing with cargoes coming into Australia from hard-hit locations.
As a result, Australia’s peak ports authority has highlighted the need for more transparency around government measures to curb the spread of COVID-19, calling for a regularly updated summary document.
Since COVID-19 reached pandemic status, there has been a heavy flow of information coming from federal, state and territory authorities outlining the measures in place to manage the COVID-19 pandemic and keep trade moving.
Ports Australia has worked closely with industry and government to ensure those measures are well placed in keeping port staff safe, so they can continue their essential service of providing Australia with what it needs to survive.
Australian Border Force (ABF) has made clear that local authorities may enforce additional requirements over and above those outlined by ABF directives.
There have been many examples in March 2020, most recently with the Western Australian Government announcing the closure of its borders (with measures in place for continuing maritime trade).
Ports Australia’s CEO, Mike Gallacher, has expressed his appreciation for the work being done around the nation, but underlined the need for greater transparency.
“COVID-19 remains a fluid situation and one creating unique challenges for all, evident as we see the measures enforced on a federal level being built upon by individual states and territories to serve their unique conditions and risk assessments,” Mr Gallacher said.
“Ports Australia encourages this necessary process to continue, however is calling for more transparency around the current protocols set by all levels of government.”
The authority believes greater transparency may be achieved through a routinely updated document issued by the Federal Government in collaboration with each state or territories’ most relevant government entity, which concisely outlines the current practices around the nation.
Mr Gallacher said that such a measure would hold real value for all members of the supply chain – ports, shipping lines, importers and exporters alike.
“Greater transparency creates greater awareness across government, industry and the public, and bridges communication gaps which cannot exist in a strong-functioning supply chain.
The last thing we want to see is a lack of accessible information creating uncertainty across our trade networks and causing cracks to appear in our vital supply chain.”
In the rail sector, it’s clear that passenger numbers are significantly down across public transport routes.
Early estimates suggest that the drop has been as much as 80-90 per cent in major cities; and according to the Australian arm of the International Association of Public Transport, even then, the peak trough in ridership is yet to hit major public transport operators in many cities.
While public transport continues to play a crucial role around the world in meeting the mobility needs of those working in essential industries and supporting essential travel, reduced rates of ridership are going to have an impact on transport operators, and the reduced revenue associated with this will likely result in the need for government intervention in the form of economic injection or stimulus.
In the freight sector, the Australian Rail Track Corporation (ARTC) said Australia’s rail freight sector has been working around the clock to ease strained supply lines during the COVID-19 crisis.
ARTC Chief Executive Officer, John Fullerton, said, “Freight trains are playing a crucial role in Australia’s response to the Coronavirus pandemic – and our frontline teams are really part of a group of workers making sure the economy and society is able to keep functioning during these difficult times.”
In March 2020, national general rail freight movements on the ARTC network rose by 14 per cent, due to a continuing demand increase for critical supplies following escalation of the COVID-19 outbreak.
“The COVID-19 outbreak has sparked an unprecedented challenge for Australia’s freight and transport industry, with the country’s demand for critical supplies prompting a surge in rail freight,” Mr Fullerton said.
ARTC employs more than 300 people at its Keswick headquarters in South Australia including a dedicated band of network controllers who share an intensive 24-hour, 365-day roster to ensure coordinated passage for the country’s freight trains in the rail equivalent of an air traffic control centre.
The company also has teams of railway personnel working day and night across the nation including in the middle of the Nullarbor doing maintenance to help move vital freight to its destination.
“We’re really proud to be able to keep freight trains moving and do our bit for Australia, but like other essential service providers, these are testing times for everyone and there’s still a long road ahead,” Mr Fullerton said.
In the utilities sector, the challenges are different, as the sector moves to continue providing essential services for users whose needs have changed dramatically in the past two months.
In the energy sector, federal and state governments have established a coordinated national approach to managing the impacts of COVID-19, fully supported by industry associations and energy utilities.
Federal Minister for Energy and Emissions Reduction, Angus Taylor, said the energy sector remains well-prepared to deal with the virus, and early action taken by governments and industry should ensure energy supplies for the coming months.
“One of my top priorities will always be to keep the lights on for Australian families and businesses,” Mr Taylor said.
“We also want to make sure that generators, retailers and networks are ready to support any customers who find themselves in difficulty due to the Coronavirus.
“The energy sector is good at responding to disruptions. The industry has well-established risk management, emergency management and business continuity plans, which are regularly tested and improved.”
In the water industry, it’s a similar story as members of the industry come together to develop and provide a coordinated response to the crisis.
“Water utilities supply the most essential of essential services to our communities,” Adam Lovell, Executive Director of the Water Services Association of Australia (WSAA), said.
“Our drinking water remains high quality and safe to drink. In these unprecedented and challenging times the industry is taking actions to ensure the continued safe supply of high-quality water and wastewater services in Australia and New Zealand.”
Water utilities have been quick to assure customers their priority is delivering reliable water and sewerage services, and ensuring the safety and well-being of water industry employees.
Water authorities are also establishing dedicated teams focused on the COVID-19 response, implementing measures to minimise risks to staff, and liaising with key government agencies on a daily basis to monitor and understand the health impact of COVID-19 as it develops.
COVID-19 may have significant effects on Australia’s construction industry, including major disruption to supply chains and possible difficulty sourcing materials, especially given the vast amount of materials being sourced from China.
In addition to supply chain disruptions, if the health of construction workers is impacted, there could also be worker shortages on projects.
Master Builders Australia said the Federal Government’s 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 lessen 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.”
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 and 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.”
The Australian Logistics Council (ALC) has moved to assure industry, communities and customers that supply chains and the logistics industry are responding to, and adapting to the challenges presented by the COVID-19 crisis.
It states that above all, the community should have confidence that our supply chains are working.
Australia’s ports, stevedores, road, rail and air freight operators are working tirelessly to keep supply chains flowing and make sure Australian communities can access the goods they need day-to-day.
There is also evidence that Australian exports to other parts of the world – including China – are flowing, as consumer demand picks up. Australia’s ports, airports and freight operators are at the forefront of getting these products moving, supporting our exporters and protecting local jobs.
Is the internet the infrastructure of the future?
One thing this pandemic has highlighted is the reliance on the internet and cloud-based infrastructure for both the general public, and working professionals.
It’s clear that a high priority for governments and large organisations moving forward will be expanding the reach and capacity of things like data centres, internet bandwidth and cloud communication.
And if schools and companies opt to retain some of the initiatives we’ve adopted during the COVID-19 lockdown period– such as work and education from home – it’s not unfeasible to think that infrastructure that allows us to connect virtually, could start to be prioritised over infrastructure that connects us physically.
We’ve seen in recent weeks that the way we work, study and communicate can be less reliant on physical location – but if that’s the case, we’re going to be heavily reliant on internet infrastructure that can deliver the connectivity we need.
In Australia, it will be interesting to see how this reality plays out from here – particularly against the backdrop of the heavily criticised NBN rollout in the country to date.
The reality of the COVID-19 situation across Australia – not just in the infrastructure sector – is that it is a rapidly evolving situation which is changing daily.
While all aspects of the infrastructure sector in Australia have been impacted by the crisis in different ways, what is clear is the fact that infrastructure has a large role to play in the economic recovery from this unprecedented moment in history.
While we are navigating challenging and uncharted waters right now, there are positive signs on the horizon – for more information head to pages 18-23, where we’ll explore the infrastructure opportunities that will emerge from the COVID-19 pandemic in further detail.