Good morning everyone, and thank you to the Australian British Chamber of Commerce for inviting me to represent Infrastructure Australia here today.
I am very pleased to have an opportunity to be part of this year’s Australian British Infrastructure Catalyst.
It’s a program that my predecessors in this role, Romilly Madew and Philip Davies, always spoke very highly of.
And equally too, I am pleased to have an opportunity to address this morning’s topic – infrastructure planning in the new paradigm – as it is very much front of mind for my organisation as we seek to advise the new Australian Government on opportunities for investment and reform.
For those of you aren’t familiar with Infrastructure Australia, we are the independent infrastructure adviser to the Australian Government – with a mandate to provide evidence-based analysis and advice on ways to deliver better infrastructure for all Australians.
We have two core functions:
- The first is to evaluate business cases for nationally significant investment proposals and/ or those seeking more than $250 million in Commonwealth funding and
- The second is to set the policy agenda on the long-term opportunities for infrastructure policy and projects – that will improve living standards and national productivity.
This morning I will share our perspective on the principles that should guide infrastructure planning and delivery in this new environment.
But first I want to underscore the complexity in understanding and responding to the future needs of the community.
Background to the new paradigm
In 2019, we undertook a wide-reaching Audit of the challenges and opportunities facing Australia’s infrastructure sector.
We identified a range of factors that were likely to complicate long-term planning and decision-making in Australia.
This included major shifts in technology, consumer preferences, climate, patterns of trade and the geopolitical landscape.
The 2019 Audit pointed to a period of constant and rapid change – with growing social, economic and environmental interdependencies bringing added complexity to the planning, delivering and operation of our infrastructure.
Little did we how know prescient this work would be.
Because like with all things, the COVID-19 pandemic had an enormous impact on Australia’s infrastructure sector – and on our ability to understand and anticipate what our future needs would be.
For Australians, it also came at a time when our communities were reeling from a series of other shocks – with bushfires, drought, floods and even cyber-attacks all testing our individual and collective resilience.
To give you a sense of scale – in a single week in January 2020, more than 1,400 telecommunications facilities went offline because of bushfires, jeopardising the safety of many thousands of people.
So immediately prior to the pandemic, the impacts of climate change were being felt more acutely than ever before.
Then COVID-19 hit and completely changed how we work, consume goods and services and move around our cities and regions.
Infrastructure Australia moved quickly to gather and assess all the data available, publishing a report in December 2020 on the impacts of the pandemic on the infrastructure sector.
It showed that the demand profile for all our infrastructure had changed drastically, and so too had consumer expectations.
Across sectors, Australia’s infrastructure providers navigated dramatic changes to community behaviour and network requirements, and rapidly adjusted their service provision.
In this way, the pandemic really demonstrated the untapped potential to make better use of our existing infrastructure.
But it was clear that the pandemic had disrupted the longstanding growth trajectory of Australia’s largest cities –
Pausing historical growth rates, shifting activity from the urban core to the suburbs and surrounding regions and bringing a ‘new normal’.
For example, during the pandemic car use sky-rocketed in our cities, as people shunned public transport across all modes.
In Sydney, where I live, patronage on the city’s transport network is still well below average.
It is reportedly expected to return to 60-75 per cent of pre-pandemic levels by 2023.
And with the workforce largely settling into a hybrid pattern – a few days in the office, a few days at home –some of these changes in transport demand may be here to stay.
There was also a 200% increase in net migration from capital cities to regional areas spurred on by the pandemic – putting huge amounts of pressure on local infrastructure.
And we have also seen challenges in our freight and supply chains – impacted by the pandemic, but also natural disasters and global events like the Russian invasion of Ukraine.
This is occurring alongside Australia’s growing freight task – which is set to increase by more than 35% by 2040.
In reflecting on the new paradigm – what emerged in this period was an even greater appreciation of the need for infrastructure that is resilient and adaptable in the face of change and uncertainty.
Another major challenge I want to highlight, as we consider infrastructure planning in the new paradigm, is the impact of current market capacity constraints.
As you are all well aware, Australia is in the midst of an unprecedented wave of investment in public infrastructure projects.
Investment in major public infrastructure over the next five years will exceed $218 billion.
As well as supporting the recovery from the pandemic, this investment by Australia’s governments will lay the foundation for future economic growth and lift our standard of living.
However, Infrastructure Australia’s Market Capacity research – unique in the world in providing a national view of a country’s infrastructure pipeline and its market’s ability to deliver on it - has shown that this wave of investment has put significant pressure on the sector, and contributed to localised shortages of skills and materials.
Our 2021 report, delivered to National Cabinet, showed that by mid next year, the potential shortfall in jobs being filled in the infrastructure sector is forecast to exceed 105,000, with one in three jobs advertised going unfilled.
Over the next three years it is expected there will be:
- 120% average growth in demand for materials
- 125% growth in demand for equipment
- 140% growth in demand for plant
These challenges present compounding delivery risks that are difficult to predict.
We are currently finalising our 2022 report and it appears that the demands of government are only increasing this year – a $15B increase in Australia, in comparison to last year.
Unfortunately, the capacity of the market to deliver, in the context of constrained international supply chains and war in Ukraine, is declining.
So, in this new and complex environment, how do we plan and deliver the infrastructure our communities need?
Responding to the new paradigm
This is one of the central challenges we sought to address through the Australian Infrastructure Plan, which was published in 2021 and really sets the framework for our ongoing reform and investment advice.
The Plan has three key themes:
- unlocking the potential of every place
- embedding sustainability and resilience into infrastructure decision-making and
- driving a step change in industry productivity and innovation.
The first of these themes is about elevating place-based approaches in the planning hierarchy.
Making ‘place’ the starting point for infrastructure planning provides a clear lens for identifying and adequately meeting the different needs of Australia’s communities.
For example, a new railway might allow for increased housing density near train stations.
These homes then require supporting infrastructure, such as schools, hospitals, parks, telecommunications and services such as water, waste and electricity.
If these are all planned together using place-based principles, the pace and benefits of growth will be magnified.
The Victorian Government has shown particular leadership in this space, with a place-based framework that actively works to break down barriers between sectors and portfolios.
This is supported by a firm commitment to genuine community engagement, including with First Nations people.
Building resilient and sustainable communities through systemic, collaborative planning is also key in this new paradigm.
Integrating these considerations into planning and decision-making will allow Australia to meet its present needs without compromising the ability of future generations to meet theirs.
Sustainability and resilience considerations have been increasingly embedded into Infrastructure Australia’s project advice in recent years.
As of just a few weeks ago, the consideration of Australia’s new greenhouse gas emissions targets in our business case assessments, priority lists, and policy work is now enshrined in law, and that of a range of other Australian government agencies.
We welcome this change and are working to implement it in our Assessment Framework and other work.
As a sidenote, I am particularly looking forward to engaging and learning from UK colleagues on how they are dealing with net zero in infrastructure.
Of course, in addition to the recent legislative change by the Australian Government, state and territory governments have been working to manage climate impacts – alongside impacts of the pandemic – for a number of years.
For example, last month, the New South Wales Government published its Climate Adaptation Strategy – an important piece of work that aimed to embed climate change risk assessment and adaptation in decision-making.
However, what we would like to see is a nationally consistent, all-hazards, systemic approach to understanding and quantifying risk – of all kinds.
This will help to ensure Australia’s assets, networks, systems, communities and places are resilient to shocks and stresses.
And finally, I want to touch on the third key theme, which relates to industry productivity.
This is a significant challenge –
The future of Australia’s infrastructure depends on access to a high-functioning and sustainable sector.
In the Australian Infrastructure Plan, we propose a series of reforms that will transform how governments sequence, plan, engage and communicate with industry to support this.
This sequencing point is particularly significant.
Ensuring project scheduling responds more effectively to local industry capacity need to be a priority.
This enables the public and private sectors to direct people, equipment and related resources to where they can deliver optimal value
What we want to avoid is hyper-escalation of input prices, when goods, services and labour shortages force ever-higher costs – the cost of which is ultimately borne by the taxpayer.
Across the board, State Governments are actively considering their portfolio
However, the market is national, and States are competing with each other for most of the same resources.
The challenge we see is to start having a more mature conversation between governments about collaborating and coordinating the national portfolio more effectively to ensure that we can deliver everything we want as a country within the resources available.
There is also much more to be done in terms of broader industry reform to increase the productivity of the sector, including use of digital innovation, collaborative commercial models, modern methods of construction and of course better managing worker’s wellbeing.
Thank you again for the opportunity to speak this morning, to share Infrastructure Australia’s perspective on how we can respond to the challenges at hand.
We take the view that rather than simply projecting forward the status quo, infrastructure planning must set an ambitious vision for the country.
It should anticipate and adapt to change, manage risk and deliver infrastructure that works for— rather than against — the unique needs of each community.
This will enable us to deliver infrastructure that enhances our standard of living and builds a stronger, more resilient Australia.