The price of the nation’s road construction is projected to peak at $7.6 billion next financial year, with labour security and the rising materials cost threatening the delivery of public infrastructure on time and on budget.
Infrastructure Australia released its 2022 market capacity report on Wednesday. It warned public servants that improvements to risk management, as well as proactive sequencing of the major projects pipeline, were required in the years ahead.
The report signalled the government’s $237 billion five-year infrastructure investment plan, which has increased by 6.7%, or $15 billion, over the past 12 months, would be affected by an ‘overheated’ construction market, escalating input costs and productivity challenges.
The agency’s acting CEO, Adam Copp, described the preventative measures for mandarins leading infrastructure projects as urgent.
“A focus on productivity improvements in planning and delivery, and more ambitious reform to sustainably expand the market’s capacity through supply of labour and materials is increasingly critical for successful, timely and cost-effective delivery,” he said.
Transport projects in Australia account for 63% of the nation’s overall major infrastructure spend, with a total of 84% of investment concentrated in NSW, Victoria and Queensland.
Meanwhile, the demand for materials used in road construction projects is likely to jump to $7.6 billion in 2023-24 as the industry reports current delays of large-diameter concrete pipes of up to 45 weeks.
Copp noted time and cost blow-outs for imported items only worsened the challenges of delivering projects on time, with a severe labour shortage in the construction industry. The supply risks of the uncertainty of 2021-22 would continue to affect the global economy moving forward, he added.
“Australia’s infrastructure sector is facing significant disruption to supply chains caused by the COVID-19 pandemic, volatile demand and, more recently, the war in Ukraine,” Copp said.
The report also projected labour demand would increase 42,000 to a peak of 442,000 in 2023. This would represent a demand more than double the projected available supply.
As of October 2022, public infrastructure projects, including small capital projects, were dealing with a labour shortage of 214,000 skilled workers.
“Industry also reports that fast-rising costs and contracts that are increasingly allocating risk responsibilities to parties not best-placed to manage them, combined with sharp declines in tier 1 contractor’s profitability observed in our 2021 edition, has contributed to a sharp rise in construction sector insolvencies in 2022,” Copp said.
“This leaves fewer companies to deliver the pipeline of work, with many already operating at 90% capacity and above.”
The call to boost industry capacity and capability by prioritising procurement and portfolio management, and increasing pipeline transparency, certainty and confidence reaffirmed the recommendations of some of Infrastructure Australia’s previous reports.
The infrastructure market capacity report also updated recommendations to consistently adopt appropriate best-practice front-end due diligence for projects; develop a circular economy roadmap for the infrastructure sector, including annual progress reports; introduce cultural reform that embraces diversity and inclusion; and implement the reforms of a roadmap developed by the agency earlier this year.
This is the agency’s second report in its market capacity series, informed by information from a national infrastructure project database that aggregates and organises project data. A market capacity intelligence system is then used to apply analytical and system-based tools to visualise capacity across sectors, by project type and resource inputs.
Seeing recycled materials as a salve on the circular economy path
The 2022 market capacity report also found that about 27% of conventional materials presently being used for road projects could potentially be replaced with recycled materials. Current technology and standards mean the equivalent of 54 million tonnes of conventional materials used to build roads could be substituted with recycled materials.
Future advances in technology and standard updates could push that figure to replace up to 97 million tonnes of conventional material, with recycled materials like tyres, glass, concrete and asphalt, the report found.
Copp said that relying on recycled materials for major infrastructure projects would have positive flow-on effects and create 9.2 new jobs for every 10,000 tonnes of recycled waste. This was a big opportunity, he said, given the work required to send the same amount of waste to landfill only supported 2.8 jobs.
“Increasing the use of recycled materials is a cost-effective way to reduce waste and emissions and to deliver safe, sustainable and reliable infrastructure,” Copp said.
“However, in terms of embracing this opportunity, industry uptake is highly dependent on the technology, standards, market appetite and processes across the supply chain.”
Environment minister Tanya Plibersek confirmed in a statement that she would have the new advisory group looking at Australia’s transition to a circular economy by 2030 consider the report.
“The transition to a circular economy will need new ways of thinking and new ways of working. This is one example of how it could be done,” Plibsersek said.
“These findings are really exciting for our environment and our circular economy.
“It clearly shows the opportunity to use more recycled products when we build roads.”
The Department of Climate Change, Energy, the Environment and Water has also funded an analysis of how 10 different recycled materials could be used in road infrastructure this year, the minister added.
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Australia’s carbon reduction mandates greener infrastructure practices
