By Adam Copp, Chief Executive, Infrastructure Australia

If there was ever a time for governments and industry to collaborate to tackle the chronic issues undermining the productivity of Australia’s construction industry, it’s now.

In December last year, Infrastructure Australia published its third annual Infrastructure Market Capacity report.

A flagship of our research program, this annual report paints a detailed picture of the state of the sector.

We do this by generating an aggregated view of the national demand across plant, labour, equipment, and materials as an evidence base for governments to actively manage their pipelines, with reference to prevailing market conditions.

Demand to build continues

What were our findings in this edition?

First, it found that across public and private investment, our nation’s total five-year infrastructure and buildings pipeline stands at $691 billion.

As part of that we noted an interesting trend – a four-fold increase in announced investment in energy projects over the next five years.

Given the Australian Government’s energy transition ambitions and legislated Net Zero agenda, this growth is to be expected.

It’s worth noting the volume of utility projects – which stands at $53 billion – is considerably less than the volume of transport projects.

What is important to consider here is that all projects will compete for the same scarce resources.

Skilled labour shortages

But just how scarce are our resources? From our research, we see that skilled labour shortages continue to be one
of the most critical constraints for the market, and generally accounts for about 50 percent of project expenditure.

In fact, there is a shortfall of 229,000 public infrastructure workers.

Of those workers, the professions most in demand are engineers, skilled trades, and labourers.

To meet forward demand our existing workforce will need to more than double. The industry is also facing a capability gap when it comes to energy projects. There are not enough people either in the market or coming out of university with the experience and skillset to work on these types of projects.

Industry is saying they are needing to rely on a lot of on-the-job training to fill capability gaps. Or they are relying on laterally transferring skills within their existing workforce from say transport to energy projects.

Stagnating productivity

On top of this, our report has also highlighted the ongoing stagnating productivity levels of the industry, which are at 30-year lows.

A core finding from our research is that the construction industry is one of the least innovative sectors in Australia. Moreover, nationally, Australia lags other economies in the uptake of new techniques for project planning, design, and delivery.

Through our surveys and interviews, the key reasons for this are due to
low awareness or understanding of the advantages of new and different techniques, and outdated procurement processes and attitudes. Put simply, the motivation to innovate, along with an enabling environment, are lagging in our sector.

Another reason is low pipeline visibility, which suppresses industry appetite for capability investment.

Stagnant productivity can be balanced with additional resources. Or, just push workers to go harder and faster longer.

However, as we have established, we are already significantly short on skilled labour, and Australia is in a period of low unemployment. Then there is only so long you can push a workforce to operate at such high levels until it eventually breaks. We are already seeing workers, especially younger workers, voting with their feet and leaving
the industry.

The solutions

So, in the face of these very constraints, what can be done to remedy it? How can the industry and governments ensure the success of infrastructure project delivery with what is available?

While our research paints a detailed picture of the nature of demand and supply within the industry, that is only half the story. We also provide a series of recommendations for both governments and industry to overcome the very constraints it is facing. Fourteen of them, to be exact.

Each of the recommendations advocates for governments to actively manage demand and reprioritise their pipelines, expand non-labour supply, and improve productivity within the sector.

When it comes to improving productivity in the sector, we call out the need for better methods to measure productivity and understand how it is influenced.

While understanding and better measuring productivity in the construction sector is important, there are of course things both governments and the industry can do to make improvements now.

One avenue is increasing the adoption of modern technologies and innovative techniques such as modern methods of construction.

Recommendation 13 from our report advocates for the Australian Government, in partnership with the states and territories, to encourage increased uptake by prioritising projects that adopt productivity-enhancing technologies and methods.

While there are governments and industry using these methods and technologies it is not happening at the scale or speed required to impact productivity levels.

To ensure ongoing viability and sustainability of the industry, as well as its success to deliver the nation’s infrastructure, action must be taken to improve productivity and close the gap in Australia between the infrastructure sector and other industries.

That of course starts with gaining a better understanding of productivity and how to measure it, but also implementing the things we know work now to help do more with less.

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