Balancing Priorities for Infrastructure Investment

As a society, we need critical, beneficial infrastructure to help drive our economic growth, societal well-being and future development. This is particularly true in Australia, where we have mass concentrations of population separated by vast distances, pockets of decentralised population dispersed across the nation, and major agricultural and resource products to connect to global markets.

As a consequence delivering major projects in Australia poses some unique challenges. Concentrated populations require infrastructure to rapidly move people and goods, with projects often having to traverse existing infrastructure and densely populated urban areas.

Decentralised populations require connectivity with the rest of the nation/world to support economic development and overcome vast distances and challenging topography.

Therefore investment in and delivery of infrastructure can be problematic.

For governments, it is expensive. Major projects are not inexpensive, with billions of dollars required to create the world-class infrastructure that we need. Governments balancing financial outlay with a return on investment are managing a delicate balancing act. However, In monetary terms, the total multiplier for the construction industry is 2.99 – meaning that every dollar spent on construction boosts economic activity by nearly $3[1]. Therefore governments are keen to support a sector that employs almost 10 per cent of the working population and contributes 7.2 per cent to GDP.

For society, investment in infrastructure can be disruptive and divisive. Whenever a project is announced, there are differences of opinion as to the benefits that will be realised and the priority that governments should place on society’s diverse needs. However, according to the Ipsos 2020 Global Infrastructure Index, the largest global survey of public attitudes towards infrastructure and investment, a majority (84%)[2] of Australians believe that investing in infrastructure is vital to our country’s future economic growth

For contractors and the industry, it can be financially challenging. In the Australian Constructors Association’s publication Constructing the Future, the association states, ‘Construction industry profits collapsed between 2014 to 2018 and many well-established construction businesses have gone out of business or been sold. The construction industry currently has the highest number of insolvencies of any major industry sector in Australia’. In addition, when delivering megaprojects between 2000 and 2015, the sector incurred losses of $6bn.

Yet investment must be made, and the Federal, State, and Local Governments are using infrastructure investment to act as a long term stimulus to support Australia’s post-COVID-19 recovery. Therefore it is beholden on everyone in the sector to work together to ensure that infrastructure is delivered that meets the needs of our long-term economic growth, society’s demands for essential infrastructure and industry’s requirement for profitability.

Based on our Fission’s collective experience, we believe that there are three key factors to overcoming the challenges posed to the sector. They are:

  • The creation of a pipeline of funded projects
  • The development of a sustainable sector with shared benefits for all
  • Improving planning, procurement and delivery methodologies and processes to improve productivity and efficiency.

We will be exploring each of those key issues in our future blogs, so please follow us on LinkedIn and our website for updates.

[1] https://www.constructors.com.au/wp-content/uploads/2020/10/ACA-Constructing-the-Future-09102020.pdf

[2] https://www.ipsos.com/en-au/investment-infrastructure-key-growth-and-post-covid-19-recovery

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