The Federal Government has announced that it will undertake a 90-day independent review into its Infrastructure Investment Program, in efforts to ensure the land transport infrastructure projects it delivers are “nationally significant, and nation-shaping projects”.
The government said it is maintaining its commitment to the ten-year $120 billion infrastructure pipeline, and following through on projects already under construction.
Under the previous coalition government, the number of infrastructure projects in the pipeline increased from nearly 150 to 800.
In a media release on 1 May 2023, the Federal Government stated that these projects did not have adequate funding or resources, projects without real benefits to the public were approved, and the clogged pipeline has caused delays and overruns in important projects.
State and territory governments agreed to support this review at the National Cabinet, and local governments will be consulted throughout the review.
This process is intended to allow all levels of government time to consider the projects that are priorities and assess their cost and deliverability in the current climate.
Federal Minister for Infrastructure, Transport, Regional Development and Local Government, Catherine King, said, “A properly functioning infrastructure investment pipeline means projects can be delivered with more confidence about timeframes and budgets.
“Easing the pressure on the construction sector will help drive inflation lower and deliver more predictable investment and delivery outcomes from governments.
“Communities will benefit from national significant infrastructure with shorter and safer travel, more liveable cities, suburbs and regions, while the economy benefits from the certainty brought by a smoother delivery of investment matched to project timelines.”
“Importantly for industry, projects under construction will proceed and we have committed to maintain significant infrastructure investment for the medium term,” Ms King said.
The review will be undertaken by Mr Reece Waldock AM, Ms Clare Gardiner-Barnes and Mr Mike Mrdak AO, who all have extensive expertise in land transport infrastructure.
Industry response
Australian Constructors Association
The Australian Constructors Association (ACA) has expressed concerns over the review, stating that it has the potential to cause significant cancellations and deferrals.
Cancelling or deferring projects can have a significant impact on the construction industry, as it takes time and resources to assemble teams and develop capabilities to deliver large projects.
Australian Constructors Association CEO, Jon Davies, said delivery of infrastructure is not like a tap. It can’t simply be turned on and off.
“Developing teams and capabilities that are equipped to bid and deliver large projects can take years, and once assembled, it is difficult to relocate them, particularly if there is a widespread deferral of projects,” Mr Davis said.
“It is vital that industry is consulted in the review to avoid inflicting further pain on an industry that is already doing it tough as a result of having to absorb significant rises in material and labour costs.”
Mr Davies said if projects are cut, governments must take action to reallocate a proportion of the saved funds to help the industry by compensating contractors who have incurred significant additional costs without any fault of their own and currently lack contractual relief.
“It is unethical and uneconomical for a government to pay less for an infrastructure project than its construction cost due to uncontrollable factors like a pandemic or distant war,” Mr Davies said.
“Construction currently accounts for 26 per cent of all business insolvencies in Australia and the implications of these failures on the wider economy are huge.
“As contractors mitigate risk by subcontracting works, any relief provided at a head contract level will similarly flow through the supply chain feeding into areas of the market beyond government infrastructure that have no other opportunity for support.
“Having a steady and transparent pipeline of government infrastructure projects is crucial for the industry to plan and invest for the future, and project cancellations and deferrals undermine this effort.”
Engineers Australia
Engineers Australia has welcomed the review, with CEO, Romilly Madew AO, stating that it will provide an opportunity to target investment to ensure best value for money is achieved.
“This is critical to helping ensure spending doesn’t further fuel current economic challenges,” Ms Madew said.
“Australia’s construction sector is already at breaking point, rising materials costs and labour shortages has caused budgets to blow out and project slippage.
“Over the past two years, engineering vacancies have grown by 80 per cent nationally. A significant contributor to this increase is infrastructure projects.”
Ms Madew said infrastructure projects are mostly medium-to-long term endeavours, taking years to be completed, so a healthy pipeline of projects to support Australia’s future is vital.
“When reviewing the pipeline, it will be important to give due consideration to changing consumer behaviour and economic priorities.
“Fiscal policy needs to balance tackling the cost-of-living crisis currently being experienced with investment targeted to support changing societal needs.
“Any funding allocation should also match the importance of policy outcomes, such as sustainability and emissions reductions, rather than just individual projects.”
Australian Automobile Association
The Australian Automobile Association (AAA) has expressed support for efforts to improve the integrity and transparency of government spending on infrastructure, but said that the review should not be about cost-cutting.
AAA Managing Director, Michael Bradley, said, “The AAA will be very supportive of transport spending reforms that deliver greater transparency and accountability. Both sides of politics have for too long been guilty of allowing political considerations, rather than data, to drive funding decisions.
“Efforts to avoid waste and inefficiency are appropriate and necessary, but the review must not become a cost-cutting exercise dressed up as an integrity initiative.
“Given Australia’s appalling rates of road trauma; the current road maintenance back-log; and the failure of successive governments to reinvest fuel excise revenues contributed by motorists into essential land transport projects, now is not the time to reduce funding.
“The AAA agrees there are likely too many small projects currently being managed by the Commonwealth, but this does not mean all of these projects lack merit.
“The AAA supports efforts to better clarify the respective funding and delivery roles of Commonwealth, state, and local governments. It hopes the announced review will initiate structural reforms capable of delivering aligned funding, delivery, and reporting obligations.
“The AAA notes no Terms of Reference has been released but hopes the announced review will start to examine the factors that continue to prevent Australia from having a sustainable, data-driven, and well-understood system of prioritising, building, and paying for infrastructure.”
Civil Contractors Federation
Civil Contractors Federation National (CCF) said it looks forward to contributing to the review.
Civil Contractors Federation CEO, Chris Melham, said, “CCF welcomes the opportunity to work with the Government and the review panel to ensure they take into account the current capacity of the civil construction industry as well as other challenges affecting the delivery of projects.
“CCF welcomes the Federal Government’s commitment to maintain funding for projects already under construction and to maintain investment for the medium term, as well as their recognition of the importance to the country of the local construction industry and the infrastructure it provides.
“However, it is imperative that the independent review not only takes into account the current capacity of the civil construction industry in delivering the infrastructure pipeline, but also addresses the key issues that continue to hamper our land transport projects including inefficient and under-resourced state and territory government procurement agencies.
“In the context of this review, it is important to point out that CCF’s previous surveys have found that there is additional capacity among mid-tier companies, a point which has been previously acknowledged by Infrastructure Australia in its 2022 Market Capacity Report.
“The 2022 CCF Market Capacity Survey found the civil construction sector is not operating at capacity, with a large proportion of companies taking part indicating they can take on additional work.
“A key to activating additional capacity is to smooth the infrastructure pipeline over the long term and bring to market more small and mid-sized infrastructure projects, invested across metropolitan, rural, regional and remote Australia, which collectively will increase industry capacity building to deliver our shared nation building objective.
“The economic multiplier for every one dollar spent on civil infrastructure is a return of three dollars to the Australian economy and seven jobs for every $1 million spent – it would be a huge mistake in the current economic climate to reverse engineer the economic multiplier by cutting back on civil infrastructure investment.”
