Improving public infrastructure investment outcomes

Appropriately targeted investment in public infrastructure can improve Australia’s global competitiveness and create jobs and stimulus three times the economic value of the initial outlay. Not surprisingly then, governments are investing heavily in infrastructure and relying on the construction industry to lead the economy out of recession.

Whilst industry has concerns over inefficient public procurement processes delaying projects coming to market, BIS Oxford Economics latest forecasts indicate the overall dollar value of construction work performed on civil and engineering projects will surge from $88.7 billion in 2019/20 to almost $120 billion by 2022/23.

Domestic housing has also been a major recipient of investment off the back of the Federal Government’s homebuilder scheme and State based first homeowner incentives. In a positive step forward, most states have also tweaked policy settings to make investment in Build to Rent schemes more favourable.

Whilst there has been a strong focus on housing and transport infrastructure, this has not been matched by stimulus focused on social infrastructure. This has meant pipelines of new work in this sector are thin and businesses specialising in this work are struggling. Government must not lose sight of the need to invest in critical social infrastructure such as schools, hospitals and correctional facilities. Such investment is important for creating employment opportunities, with social infrastructure more labour intensive to construct than transport infrastructure, and achieving well-functioning social infrastructure that will enhance community well-being.

Regardless of the type of infrastructure, there is a real opportunity to improve how infrastructure is constructed. If we could just halve the gap in productivity growth between the construction industry and other industries over the past 30 years, we could construct an extra $10 billion of infrastructure every year, creating more schools, hospital beds, roads and, importantly, employment. This will be vital in a post COVID-19 world with high levels of government debt but no less of a requirement to continue constructing productivity enhancing infrastructure.

To realise this productivity saving, all levels of government need to work with industry to address the underlying issues. In an industry where only 12% of the workforce are women and workers are six times more likely to die from suicide than a workplace incident, the opportunity to create a more sustainable construction industry is significant.

The Federal Government, as the majority financier of infrastructure, needs to take a more active role in defining and encouraging the use of best practice procurement and delivery processes by the States tasked with delivering the infrastructure.

The Construction Playbook, recently published by the British Government following collaboration with industry, is a good example of how this could be done but there are also other examples such as the Construction Accord developed in New Zealand.

COVID provides us with a burning platform for reforming how public infrastructure is procured and delivered in Australia.

It is incumbent on us all not to waste this opportunity.