Check against delivery

Good morning, everyone. 

I would like to start by acknowledging the traditional owners of the land on which we are gathered today.

In doing so, I wish to pay my respects to their Elders—past and present. 

I also extend that respect to all Aboriginal and Torres Strait Islander people here today.

Thank you, Rob for that introduction. 

And thank you, Bently Systems and Engineers Australia for inviting me to speak today.

I am Steve Brogan, Infrastructure Australia’s Chief of Policy, and Research.

It is my pleasure to be here today to give insights into Australia’s infrastructure landscape and help set the scene from the Australian perspective. 

It is certainly an interesting time for Australia’s infrastructure industry. 

A time when there is a great demand to build. 

A time when competition for resources is fierce. 

And a time when real change needs to be both explored and implemented in order for infrastructure projects to be delivered to meet the needs of communities. 

Right here I have really given you the three key critical points for what is happening in Australia’s infrastructure sector. 

Three key areas that have well and truly been under the microscope through multiple government reviews over the past year. 

Reviews of their respective pipelines and indeed of key projects.

Of course, these are also areas Infrastructure Australia pays a great deal of attention to through our research and policy work. 

An area, I might add, that I am incredibly proud to lead. 

We provide independent advice on key areas that directly influence and impact the nature of the infrastructure sector. 

One such way we provide this advice and insights to the Australian Government is through our Infrastructure Market Capacity work. 

And this is something I will be largely talking to today. 

Before I do, I want to highlight some work from our newest addition to our work program—our Annual Statements.

By way of background, Infrastructure Australia’s legislation was amended in December last year following an independent review of our agency in 2022. 

As part of those amendments, there were a series of changes made to our agency, including the addition of these products.

One of these being the need to produce an Annual Budget Statement and Annual Performance Statement.

The intention of the Annual Budget Statement is to inform the Australian Government’s budget process on infrastructure investment.

While the intention of the Performance Statement is to report on the outcomes being achieved by the states, territories, and local governments in relation to the Infrastructure Investment Program and other initiatives funded by the Commonwealth.

I’ll start with our Performance Statement, where we note six trends in project planning processes. 

We note that projects are increasing in scope, scale, complexity and cost. 

Not only are they getting bigger, the number of megaprojects—which are those valued at over $1 billion—as a proportion of state and territory infrastructure pipelines is also increasing. 

We also note that strategic planning could be better when it comes to infrastructure projects. 

What we mean is, while jurisdictions have infrastructure strategies and long-term infrastructure pipelines, business cases for individual projects often do not consider the impact of project delivery and staging on that state or territory’s program. 

These are just a couple of examples. We also highlight: 

• That assessment of sustainability and resilience is inconsistent. 

• That business cases could do better to assess alternative options, and

• That disruption impacts are often not included in business cases.

Our Annual Budget Statement also helps tell a story of what is happening within the industry. 

In this advice to the government, we note that larger projects, irrespective of project type, are more likely to face increased risks, costs, and schedule overruns. 

In fact, a key insight we call out is that the average cost increases on transport infrastructure projects in Australia typically range from 12-50 per cent. 

Through this Annual Budget Statement, we provide advice to the Australian Government on where it could invest. 

We do this by making four recommendations, which include:

• Prioritise investment in project planning, development, and business case proposals to support a sustainable pipeline. 

• Prioritise proposals focused on better utilisation, maintenance, and renewal of existing infrastructure assets alongside potential new investments to ensure a more sustainable investment mix. 

• Prioritise proposals that support decarbonisation and the circular economy; and 

• Prioritise place-based infrastructure planning proposals. 

So, with that context around the key trends and issues, I have given you an insight into the most recent advice we have provided the Australian Government and a very small glimpse into the nature of the industry. 

But, now I want to help you understand the market conditions on which we have formulated this advice.

And to do this, I will talk to our Market Capacity research that I mentioned at the start. 

To give a little bit of background, our Market Capacity research is designed to help better understand the nature of the nation’s infrastructure pipeline, and the market’s ability to deliver on it. 

Essentially, we have data sharing arrangements with all the states and territories on their respective pipelines. 

We take this data and run it through our models to generate an aggregated view of national demand across labour, plant, equipment, and materials. 

This report is one of the key pieces of work we do to helping us and the Australian Government understand what is happening in the infrastructure sector. 

In December last year, we released our third annual Infrastructure Market Capacity report. 

Through this report, we know that the nation’s five-year infrastructure, buildings and utilities pipelines stands at $691 billion. 

An interesting insight is we have found that over the next five years, there will be a 400 per cent increase in the investment in new energy projects.

This brings the overall utility projects within the pipeline to stand at $53 billion. 

Although, while we are seeing this significant increase in energy projects, this is significantly less than public infrastructure investments of $230 billion. 

Comparative to the view of the pipeline we had from our 2022 Infrastructure Market Capacity Report to now, we can see there has been a slight smoothing in demand. 

That is, we aren’t seeing the same peak in demand.

But it is only slightly different. 

This can be attributed, in part, to governments reevaluating what is in their respective pipelines.

For example, the Australian Government commissioned an Independent Review of its Infrastructure Investment Program last year.

Or, another being the NSW Government’s Strategic Infrastructure Review. 

While we have had that slight smoothing, however, we are still seeing a significant demand to build. 

Significant demand by every state and territory. 

Of course that’s also not to mention the private sector.

What is important to point out here is with this demand by the country’s state and territory governments, and indeed the private sector, they are all competing for the same resources. 

Buildings, roads, public transport, water and even energy projects all need people. 

They all need equipment.

And they all need materials. 

For which the competition is fierce.

But just how scare are these resources?

Let’s start with skilled labour, which accounts for 50 per cent of project expenditure. 

That’s right. Fifty per cent of the nation’s $230 billion infrastructure pipeline is just labour costs. 

Currently, we have 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. 

This is an incredibly challenging issue to have. 

A skilled labour shortage, in a climate of low unemployment, with a huge amount of demand to build. 

There is, however, one other issue which compounds on our workforce shortages. 

With such a boom in energy project investment and the number of these projects increasing over the years, we not only have a workforce shortage, but a shortage on people with the capability to work on these projects. 

That is, 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. 

Projects, which are critical to our renewable energy transition. 

Projects which are critical to us meeting our legislated goal of Net Zero by 2050. 

And projects, which will be critical to our energy security. 

Then there are materials.

We are facing critical issues with the supply of materials.

Especially our domestic supply.

For instance, we are increasingly relying on more and more imported steel. 

Over the past two years alone, steel imports actually grew 20 per cent compared with the previous two decades. 

This poses issues with uncertainty in pricing, material quality, and an inability for us to properly tack carbon emissions with these materials. 

Then we also have acute quarry shortages in key areas of the country—Melbourne, South East Queensland, and NSW’s Mid North Coast.

Shortages which threaten the deliverability of major public infrastructure works and even increase costs. 

While our Market Capacity report explores labour and material supply, there is another critical component to our research, which given the theme of today’s conference I feel is important to mention. 

Productivity.

Our report has an entire section on the productivity levels of the industry. 

It found that Australia’s construction industry is continuing to stagnate at 30-year lows.

That is, the construction industry has not improved its productivity since the days of dial-up internet.

This will be a hard pill to swallow. 

Especially given the theme for today’s conference.

But the construction industry is among the least innovative sectors in Australia. 

More so, nationally, Australia lags other economies in the uptake of new techniques for project planning, design and delivery. 

Through our surveys and interviews with the industry, we have found the key reason for this lag is that there is a low awareness or understanding of the sector-wide advantages of new and different techniques.

Put simply, the motivation for the construction sector to innovate is just not there. 

Companies are intrinsically motivated to be more efficient, productive and profitable themselves, but the motives are not necessarily there to encourage systemic enhancements for the greater good of the sector.

There is also the issue of the industry having low visibility of the country’s infrastructure pipeline, which suppresses the industry’s appetite for capability investment. 

Of course, we know that there are some among the industry that are taking the initiative to explore ways to improve productivity and adopt more innovative practices to drive improvements. 

You all here today are evidence of that.

While we detail the state of the infrastructure industry, we also provide practical recommendations for driving improvements. 

Recommendations that I will add, were developed in collaboration with governments to ensure they complemented current policies. 

In our 2023 report, we make 14 recommendations for governments and the industry to overcome the very constraints it is facing. 

The recommendations advocates for intervention across 4 key areas, for governments to actively manage demand and reprioritise their pipelines, expansion of labour, and non-labour supply, and improvement of productivity within the sector. 

In the spirit of today’s conference, I want to touch on recommendations which I believe will resonate with you all. 

And these are the recommendations we put forward on the need to prioritise productivity within the sector. 

We call out for the need to better measure productivity and understand how it is influenced. 

We identify that there is currently no agreed set of productivity measures at the project level for the construction industry. 

Unfortunately, this means it makes it incredibly difficult to meaningfully design, implement and measure policy interventions to boost industry productivity. 

What is interesting here is that, while we have no agreed set of productivity measures, we do have access to a lot of rich data on project design and delivery. 

There is a real opportunity for governments and the industry to leverage this existing data to create a bespoke baseline for measuring productivity within the construction sector. 

From there, policies could be designed to increase it over time. 

We think that that governments should agree on:

• Better understanding the drivers and barriers of productivity at a project level. 

• Developing productivity metrics and indicators to measure infrastructure productivity at a project level. 

• And, creating a national collection and baseline, and regular reporting of productivity metrics at a project level. 

But what does this all mean? 

Basically, it all comes down to the age-old adage of what gets measured gets managed.

Until we can understand how to measure the productivity of the construction sector, we will unfortunately be unable to properly track if its improving or not. 

The end result to this is we will be destined to continue chasing our tails and repeating the same practices in the hopes productivity will improve.

We need to leverage the tools, resources, and indeed the data we have now to create a baseline for measuring productivity, which we can then build from. 

There are various other actions governments, and the infrastructure sector can be doing to lift productivity within the sector. 

And this brings me to the second recommendation from our report that I want to share with you.

A recommendation, which I know will resonate.

Encouraging the increased uptake of new technologies, and by that we mean digital technologies, and modern methods of construction.

As I mentioned earlier, the construction industry is one of the least innovated sectors in Australia. 

There is a real opportunity to uplift productivity by taking up and trialling new technologies and methods of construction. 

I understand that this may seem obvious for many of you. 

And for those organisations that are already using new digital technologies and modern methods of construction, you are helping pave the way for others to do the same. 

And, we need governments to play a role in helping motivate the uptake of these methods. 

That is why we recommend that the government, in partnership with the states and territories, should help foster the uptake of these methods. 

And we encourage this by advocating for the prioritising of projects that adopt productivity enhancing technologies.

Even more so, we recommend that projects be prioritised that progress national priority objectives. 

Objectives such as emissions reduction, boosting domestic workforce capability, boosting sovereign capability, and even strengthening local supply chain resilience. 

Infrastructure Australia believes that data and digital technology can play an incredibly powerful role in infrastructure planning and decision-making.

So much so, we have developed our own tools to support governments better understand their pipelines, and how changes within the market can impact them. 

Through these data tools, governments can even calculate the extra resources needed to deliver their respective pipelines in light of what is happening at a national scale. 

And this is important. 

As I mentioned, states and territories are ultimately competing with each other for the same scarce resources, so having a better understanding of what’s coming and what resources will be needed will greatly help in infrastructure planning

Before I close, there is one last piece of work that I want to mention, the Infrastructure Policy Statement released by the Australian Government late in 2023.

It is worth understanding the importance of this document, and it would be remiss of me not to mention it given its standing, and the role it plays to enable the infrastructure sector to prosper amidst the challenging market conditions I’ve spent the best part of the last 20 minutes describing.

The Infrastructure Policy Statement outlines the Government’s intentions to take a strategic view of its investments and the infrastructure pipeline.

It defines nationally significant transport infrastructure.

It sets out three strategic themes that will guide investment decisions, the first being productivity and resilience, the second is liveability, and the third sustainability.

And it outlines how the Australian Government will put these themes into action, and leverage the unique opportunities to deliver policy objectives.

For instance, it states intentions around the use of recycled materials in projects, around the participation of First Nations peoples, around women’s participation, around decarbonisation, around the resilience of our infrastructure, around the long-term sustainability of the construction industry to deliver the pipeline, and, as a data practitioner perhaps of special importance to me, increased access to data.

As I mentioned at the very start. 

It is certainly an interesting time for Australia’s infrastructure industry. 

But with these intentions clearly stated by the Australian Government, there is no better time than now to seize the interesting opportunities that lie ahead.

Opportunities to build. 

Opportunities to reshape and strengthen our communities. 

Opportunities to innovate, by making change that adds value.

That’s all that innovation is—change that adds value.

I want to end on this final point.

While it is important to talk about the state of the industry so we can better navigate what is happening it is also important to talk about where improvements can be made. 

This is where events such as this one are so important. 

Because by working together we can overcome the shared challenges of the industry, whether that be significant skills shortages or low productivity. 

With the themes and issues, I have touched on, I have no doubt these will carry through today’s conference. 

Looking at the program, I certainly see some areas where these topics will ring true. 

Thank you again for having me here today, and I trust you will enjoy the rest of today’s event.