The additional commitment of $17.9 billion towards new and existing infrastructure projects announced in the 2022 Federal Budget indicates that the construction industry will continue to take a leading role in building Australia’s economy over the next decade. The additional funding brings the Federal Government’s 10 year infrastructure investment program from $110 billion to $120 billion.
The Civil Contractors Federation National (CCF) has welcomed the funding, with Chief Executive Officer, Chris Melham saying the increase in infrastructure funding is in line with CCF’s 2022-2023 pre-budget submission for sustained growth of federal infrastructure investment.
He also welcomed announcement by Treasurer Josh Frydenberg that the Australian government will cut its fuel excise in half from 44.2 cents per litre to 22.1 cents per litre for six months, starting from today.
Regional Australia is a big winner from the 2022-23 Budget, with targeted stimulus including $7.1 billion for transformative infrastructure projects spread across Northern Territory, Western Australia, Queensland and NSW.
“CCF commends the Government on its announcement to cut the fuel excise by 22c per litre, boost infrastructure funding across urban, rural and regional Australia, and to amend Commonwealth Procurement Rules to support small to medium contractors,” Mr Melham said.
“CCF has been actively advocating for these three key measures and so we are pleased the Federal Government has adopted our recommendations to help strengthen the sector’s ability to contribute to Australia’s future economic growth.”
The CCF chief, however, did warn that the record investment needed to be rolled out in a “more coordinated and consistent manner” to maintain a “sustainable and consistent” 10-year infrastructure pipeline.
“This will provide the construction sector with greater confidence and certainty, incentivise civil construction companies to undertake the capital investment required to construct the pipeline of projects, and provide private investors with the confidence to invest in Australia’s infrastructure sector,” he said.
“…CCF maintains that further action is needed to address the super normal rise in almost all input costs that threatens the viability of civil construction companies in the immediate term.
“Federal, State and Territory Governments must follow the lead of the Queensland Government and introduce ‘price escalation clauses and addendums’ in all existing and new construction contracts that receive public funding, so governments share in the cost and risk of price escalation in these projects,” Mr Melham suggested.
Need for policy reforms
Roads Australia’s CEO Michael Kilgariff says it is crucial that the Federal Parliament supports key policy reforms to fully realise the economic benefits from the substantial investments in integrated transport infrastructure contained in the 2022 Budget.
“The investments being made in transport infrastructure through tonight’s Budget will enhance mobility for people and freight, improving efficiency, safety and sustainably of the network by addressing congestion, improving connectivity and boosting service capacity across all modes,” Mr Kilgariff said.
“Yet, the very strength of that recovery is now imposing significant challenges for our industry, as intense competition for materials and labour within Australia and globally is reflected in rising costs, skills shortages and pressure on project delivery timelines,” he added.
These concerns reflect the shortages identified by Infrastructure Australia in its first Infrastructure Market Capacity report, published in October last year, which forecasted a surge in demand for skills, labour and materials due to the rapid increase in public infrastructure investment.
The report forecasted demand for plant, labour, equipment, and materials would be two-thirds higher over the next five years than the previous five years, leading to reduced confidence in the industry’s capacity to deliver projects on-time and on-budget.
“To ensure that the projects supported in this Budget deliver the desired economic, employment and community benefits, they must be complemented by policy action in other critical areas including procurement, road funding, skilled migration and training and initiatives to support greater diversity in the workforce,” Mr Kilgariff said.
A fair road user charging model
Welcoming changes made to procurement to enable greater participation by SMEs and additional investments to support national skills reform, Mr Kilgariff called for the Commonwealth Government to lead the development of a fair, nationally consistent road user charging model.
“In relation to road funding, RA again emphasises the need for the Commonwealth to lead the development of a fair, nationally consistent road user charging model and implementation framework which offers greater certainty around the future funding base for road infrastructure,” he said.
“The temporary reduction in fuel excise contained in tonight’s Budget is just that – a temporary measure. Fuel excise was always intended to fund the construction and maintenance of our road networks. As it declines as a revenue source, we must ensure the nation has sufficient funds available to pay for the efficient, safe and sustainable road infrastructure our communities require.”
The productivity gap
Australian Constructors Association’s CEO Jon Davies was another industry player calling for industry reforms.
“With a record $120 billion investment in infrastructure, it is incumbent on government and industry to ensure taxpayer money is well spent and this means hitting the accelerator on industry reform,” Mr Davies said.
“The construction industry has barely changed in 30 years and reforms aimed at improving productivity and innovation could slash billions off the cost of constructing the planned infrastructure pipeline and in the process help repair the budget bottom line.
According to analysis undertaken by BIS Oxford Economic for the Australian Constructors Association, just halving the productivity gap between construction and other major industries would unlock $15 billion in savings annually.
The Australian Constructors Association is calling on the Federal Government to coordinate and incentivise reforms to state procurement and delivery processes in order to realise this opportunity.
“We are calling on the Federal Government to require all Commonwealth funded projects to be rated on completion on key reform metrics to drive improved outcomes and share lessons learned,” said Mr Davies.
“The proposed Future Australian Infrastructure Rating (FAIR) would see project ratings published, driving productivity and innovation across the states and territories.”
Improving participation
With a predicted 105,000-construction worker shortfall in less than 18 months, measures in the Budget to improve skills and increase participation, particularly from women, are welcomed by the Australian Constructors Association.
Apprentices in high-demand industries will get up to $5000 in cash payments for the first two years of their training but wage subsidies will be scaled back for employers, as part of a $2.4 billion incentive scheme designed to target the nation’s skills shortages.
In an effort to get more people into sought-after trades, trainees will get a $1250 payment every six months from July for the first two years of their apprenticeship in priority skills areas, while their employers can access a 10 per cent wage subsidy that will drop to 5 per cent in the third year.
“Whilst the Budget acknowledges women’s workforce participation has reached the highest on record at 62.4 per cent, women account for just 12 per cent of the construction workforce so, essentially, the construction industry is missing out on employing half the working population,” said Mr Davies.
“The proposed FAIR ratings initiative extends beyond a focus on productivity – it would drive increased participation of women, improved worker health and wellbeing, increased sovereign capability, skills development, emissions reductions and more.”
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