Infrastructure Australia Chief Executive, Adam Copp
Thursday, 31 October 2024
Melbourne, Victoria
Check against Delivery
Good morning everyone.
I would like to first acknowledge the Traditional Custodians of the land on which we are all gathered today—the Wurundjeri Woi Wurrung people of the Kulin Nation.
In doing so, I wish to pay my respects to their Elders, past and present.
I also extend that respect to all First Nations people here today.
It is a pleasure to be here today and I would like to thank the event organisers for inviting me to speak with you.
I want to start with a story that speaks to the critical role that road infrastructure plays in the lives of Australians right across the country.
In May 2022, when the first sod was turned on the Walkerston Bypass, this wasn’t just the start of a new road.
Walkerston, which lies six kilometres from Mackay, has a population of around 3,400 people – some of whom had waited more than 40 years for this project.
The Peak Downs Highway, which runs through Walkerston, is critical for the region's sugar, mining, timber, dairy and cattle industries, and a key tourism gateway.
And every day, more than 6,000 vehicles—130 B-doubles, 136 semi-trailers and hundreds of trucks and buses—rumbled along this highway and through the heart of the town.
This presented an opportunity to make a change.
In 2019, Infrastructure Australia assessed the Queensland Government’s proposal for a 10.4-kilometre two-lane bypass, complete with new bridges and infrastructure, to help divert this conga-line of trucks moving through the town.
When we evaluated the proposal, we found a cost-benefit ratio of 1.5, considering travel time, operating costs, safety and environmental benefits.
Now some five years later, the project is on its way to completion, and it is leading to a number of key benefits.
But for the people of Walkerston, the prime benefit will be diverting hundreds of heavy trucks from passing their schools and small businesses every day.
Meaning the road will have less congestion.
The community will have less disruption with heavy trucks passing through the town.
And the truck drivers will be able to have a more streamlined journey leading to increased productivity.
I share this story because it shows how road infrastructure can help improve lives.
And in a market that is evolving rapidly, this story captures the kind of meaningful change that good planning and investment in infrastructure can achieve.
If you’ll excuse the pun, Australia’s transport infrastructure sector stands at a crossroads.
For nearly two decades, the nation’s investment focus has been on major projects in capital cities.
But the future points towards our country’s energy transition to renewables.
In fact, Infrastructure Australia’s latest Infrastructure Market Capacity report shows a four-fold increase in energy sector investment over the next four years alone.
As Australia moves towards net zero, investment and labour are being directed toward renewable energy projects.
However, while renewable energy projects are growing, transport projects like roads are still a dominant asset class in the nation’s infrastructure pipeline.
What is important to consider though, is that infrastructure can’t be looked at as just individual project types.
What I mean is, while there is a strong increase in renewables, these project types can’t be achieved without strong planning and consideration of enabling infrastructure like roads.
Roads will be the major pathway—forgive the pun again—for helping move the very assets needed for wind and solar farms to designated Renewable Energy Zones.
But just as we need to consider how these projects inter-relate with one another, we also need to consider the shared challenges they face in being delivered as well.
As you will have seen from the title of my presentation, I am going to talk about the Australian infrastructure landscape and the challenges ahead as Infrastructure Australia see them.
These challenges include:
Skills shortages
Decades of low productivity
Cost and access to materials.
Challenges which no project type is immune from—road, rail, or energy.
While I will talk to these challenges, I will also share the opportunities to overcome them as well.
Before I get to that point, I want to talk briefly about what Infrastructure Australia does and share how it is that we have such a unique understanding of the infrastructure landscape.
We are the Australian Government’s expert independent infrastructure advisor on nationally significant infrastructure investment planning and project prioritisation.
This is our mandate and our purpose.
And this was solidified following an independent review of our agency and changes to our governing legislation late last year.
Now we go about fulfilling this purpose and provide advice to the Australian Government in two ways.
The first part of our work is project evaluation and advice.
We independently evaluate project proposals of national significance when a state or territory government is seeking $250 million or more in Commonwealth investment.
Since 2016, Infrastructure Australia has evaluated 104 nationally significant projects relating to more than $230 billion in Commonwealth funding.
Walkerston Bypass is among one of the projects we’ve evaluated, presenting our independent view to the Australian Government.
As part of this work, we maintain the Infrastructure Priority List—a list of investment opportunities for the Australian Government to partner with state and territory governments on.
The second part of our work is policy and research.
In this capacity, we undertake comprehensive research and policy development to inform and guide the Australian Government’s infrastructure decision-making.
This encompasses our Infrastructure Audits, Plans and our flagship Market Capacity research program, which I will address today.
Across these two streams, our work aims to support Australia’s economic, environmental and social prosperity.
Now, I have already mentioned our Market Capacity research program, which I’ll use to provide an overview of the Australian infrastructure landscape.
This is an annual piece of research we do with the help of state and territory data, to create a comprehensive view of the nation’s infrastructure pipeline.
This work reveals the national demand for plant, labour, equipment and materials needed to deliver this pipeline.
Governments and the private sector value this work, as it provides a national overview of who is doing what and what is needed to make this happen.
Through it they can see how much is going on and the competition for the resources to deliver on projects.
But what does our latest report say?
Our third annual Infrastructure Market Capacity report captured plenty of media attention for the headline numbers.
Australia has a total five-year infrastructure and building pipeline of $691 billion.
That includes:
$427 billion for building projects
$210 billion for transport projects and
$53 billion for utilities.
An interesting insight is that we found there is a 400 per cent increase in investment into energy projects over the next five years.
Although transport and building projects largely overshadow energy projects in terms of total investment dollars.
We can also drill down to look at Australia’s major public infrastructure pipeline.
This covers the projects valued at more than $100 million in states like Victoria, NSW, Queensland and Western Australia.
As well as projects over $50 million in the smaller jurisdictions.
From our Market Capacity research, we know Australia’s total five-year major infrastructure pipeline stands at $230 billion.
The graph up now shows the national forecast of that pipeline.
To quickly explain—the red line shows what was initially forecast by governments from 2022 onwards.
That is the major infrastructure investment planned by states and territories.
Some of this is supported by the Australian Government’s $120 billion Infrastructure Investment Program.
By comparison, the green line shows what’s actually been delivered.
Now the important thing to note is the dark blue line that follows on from the green line.
This has been informed by our 2023 Market Capacity research and shows a revised forecast of the pipeline and what governments plan to invest.
So, what does this all mean?
First, the green line shows governments are not meeting their total ambitions for infrastructure.
In fact, our historical data shows that they haven’t been doing so for at least the last three years.
We suggest this is due to market capacity constraints, which I will come to shortly.
Second, when you compare the red and dark blue line—the blue line shows a materially lower projected forward pipeline.
It is also less ‘peaky’, and the demand is spread across the future years.
This indicates a slightly more stable outlook for the nation’s major infrastructure pipeline.
That being said, demand to build is still incredibly high – even with this more ‘stable outlook’.
This means there are a lot of projects that are all competing for the same scarce resources—labour, plant and materials.
But just how scarce are these resources?
As I mentioned, our research looks at labour and non-labour supply, and the productivity levels of the industry to get an understanding of the market’s ability to meet demand.
At a high-level, skilled labour shortages are a critical issue for the sector.
From our research, we know there is a shortfall of 229,000 public infrastructure workers, which is up from the previous year.
Trades and labour shortages are growing at the fastest rate and will remain high until 2025.
Productivity is another critical issue. In fact, productivity levels in the infrastructure industry have not shifted in 30 years.
It is not clear yet what the driving force is preventing construction from keeping up with other industries like manufacturing who have soared in productivity in comparative terms
One key theory is that a low and inconsistent take-up of modern methods of construction is leaving opportunities on the table, along with a failure to leverage data, digital tools and technology.
A significant lack of diversity within the workforce is also holding us back.
Women, for instance, only make up 14 per cent of the workforce and this has barely shifted over 10 years.
I’m sure many of you in the room have heard these statistics before.
What we need are solutions.
We put forward 14 potential solutions for the Australian Government, in partnership with state and territory governments, to consider.
We have grouped these recommendations into four areas:
Ways governments can proactively manage demand
Ways to expand non-labour supply
Expanding labour supply and
Improving productivity within the sector.
We developed these in close collaboration with governments to ensure we were providing practical recommendations.
Recommendations that would either complement or fill gaps in existing policies.
And recommendations that would potentially lead to improvements
So, let’s take a closer look at some of those recommendations that specifically relate to the roads sector.
I take great pride in the work we’ve done on Infrastructure Market Capacity for many reasons.
One of its most profound contributions, I think, has been to ignite new dialogue about skills shortages in infrastructure.
The statistics are stark and illustrate why we must think beyond the infrastructure we are building—how fast and how cheaply we can deliver it and who we are building it for…
But think about who we are building it with.
It takes three to four years for a worker to enter their first role in construction.
But within eight years, 42 per cent have already left the construction sector.
The pandemic-induced infrastructure boom showed us what we could achieve when we put our minds to it.
But it also stressed that we need people power to achieve it.
Without these people, we will be on a road to nowhere.
One of the ways we must focus on helping keep people within the industry and in construction is by addressing the deeply entrenched cultural issues.
The Construction Industry Culture Taskforce’s Culture Standard to enhance diversity, wellbeing and flexibility is a good place to start and something Infrastructure Australia has advocated for the industry to take up.
We also propose the development of a national infrastructure workforce strategy to enhance worker attraction and retention – especially among women.
This strategy would also address upskilling the workforce along with enhancing mobility so it is easier for workers to move across sectors and locations in line with market demand.
This is particularly important, given the project-by-project nature of infrastructure projects, and the uncertainty that restricts our ability to scale the workforce.
There is a real risk of a ‘brain drain’ away from Australia as transport project investment subsides – and we must do all we can to keep our skills and knowledge in Australia.
As I said, multifactor productivity in Australia’s construction sector has stagnated for 30 years.
The construction sector has struggled to achieve sustainable productivity growth when compared to adjacent industries like transport, logistics and manufacturing.
Sure, dormant productivity can be offset with more resources.
But when those resources are scarce, like they are now, rising costs and schedule delays chip away at investment value, putting unsustainable pressure on the industry to do more with less.
Even modest productivity gains could deliver significant economy-wide benefits—and yet construction continues to rank among Australia’s least innovative sectors.
Technology is advancing at lightspeed, as anyone who has experimented with generative AI tools can attest.
What’s surprising, however, is despite the clear benefits of innovation and the risks of inaction, there remains a lack of awareness and understanding of the advantages of new and different approaches.
Our industry needs to get better at using data, analytics and technology to ensure the lessons learnt on one project are transferred to the next.
Infrastructure Australia continues to advocate for governments to investigate new ways to promote and share industry best practice – and digital should be the default.
Cost escalation has been an acute problem across the infrastructure sector since the COVID-19 pandemic.
Take just three of the biggest materials risks...
Concrete production is tied to the availability of adequate quarry supply, but the timeline for quarry application approval and extraction often spans 5-10 years in Australia.
We have just five cement kilns in operation, and some of those likely to shut as energy costs rise and carbon emissions targets draw near.
And while the cost of steel has fallen with China's slowing demand, that puts pressure on domestic steel fabricators and exposes vulnerabilities in our local supply chains.
Our ability to predict supply and mitigate shortfalls in key materials used in road construction is limited because we have no comprehensive method for collecting or analysing data on local manufacturing and production outputs.
The Australian Bureau of Statistics’ Manufacturing Industry series was discontinued in 2007 due to a lack of funding – and reinstating this would give us the information we need to better align demand with project needs and market capacity.
There is also a tremendous opportunity to increase Australia’s adoption of recycled materials and grow our nation’s circular economy.
Infrastructure Australia analysis has found cost savings of up to 83 per cent can be achieved by integrating recycled materials in road infrastructure.
Based on current technology and standards, around 27 per cent of conventional material tonnage in major infrastructure road projects could be replaced with recycled materials.
That would save 54 million tonnes of conventional materials, reduce the embodied carbon footprint of infrastructure projects, and cut disposal costs and landfill fees.
This illustrates the solutions that are possible when we see the intersecting opportunities that road infrastructure projects present.
What is critical to consider in among all the demand to build, the challenges to that and indeed the very opportunities to overcome them is that they are all interrelated.
Demand to build one project type is going to have implications for another.
The challenges facing the industry are felt by everyone.
Whether it be accessing skilled labour or materials—the pressures to accessing these are the same.
But what is also universal is the opportunities to overcome these challenges.
And here in lies the critical point I want to make—when we look at the infrastructure industry, we need to be looking at it as a whole.
We need to consider the big picture in our infrastructure planning and delivery, especially when it comes to road infrastructure.
In fact, road infrastructure is perhaps the most critical asset class that needs to consider the big picture.
And this brings me back to the Walkerston Bypass – and why we must consider the intersectionality of our infrastructure projects.
Roads do more than connect points on a map or shuffle people and goods from A to B.
Roads are community connectors that make the lives of Australians better.
They are the nervous system of Australia’s infrastructure network that links every sector of our economy.
Planned and built right, roads are enablers of new industries, incubators for innovation, and inspiration for circular economy thinking.
Getting it right is our challenge – and our opportunity.
Thank you again and enjoy the rest of the conference.