Infrastructure Association of Queensland Inc (IAQ) Industry Event 2023

Publication Date
23 March 2023

Thank you to the Infrastructure Association of QLD for the invitation to speak this morning, and to all of you who have taken the time to attend. 

Before I begin, I would like to pay my respects to the Turrbal people, the traditional owners of the land on which we meet, and pay my respects to their elders past, present and emerging. 

Australia’s infrastructure market is at a critical juncture.  

The industry is experiencing unprecedented demand from a massive major projects pipeline, while simultaneously dealing with the lingering symptoms of the COVID-19 pandemic. 

It’s created a perfect storm that is bringing construction companies to their knees and threatening budget blowouts that will hit the public purse.   

It’s no longer a question of if a project will slip – the question is when, by how long and at what cost.  

Infrastructure Australia has been researching and reporting on these market capacity constraints for National Cabinet since 2020, following a request from the Prime Minister and First Ministers through the then Council of Australian Governments.  

Since then, we’ve been working with state and territory governments and industry across Australia and the globe to source unique data-sets, investigate the issues and find a pathway forward, releasing reports annually.  

As our 2022 report highlights, Australia’s public infrastructure pipeline increased by $15 billion over the last year alone.   

The five-year pipeline is currently valued at $237 billion with NSW, Victoria and Queensland accounting for more than 80 per cent of that investment.  

Our infrastructure ambitions have never been larger.  

Unfortunately, neither have the headwinds. 

This is all happening against a backdrop of severe labour shortages and supply chain disruptions causing huge delays and exorbitant cost increases for construction materials… creating a pressure cooker situation in an industry that was already dealing with low productivity.  

As I have said, the major project infrastructure pipeline grew by at least $15B over the last year. 

Supply side risks have surged globally in the last few years, with many made visible and exacerbated by the COVID-19 pandemic and then compounded by the war in Ukraine. 

The cost of construction materials has risen by an average 24% in the last 12 months.   

Labour shortages continue to plague the sector, with a shortage of 214,000 skilled workers as of October 2022.  

In 2022, women accounted for just 12% of the construction workforce. 

To cap it off, the productivity of the construction sector has remained stagnant for the last 30 years.  

The issues facing our sector are both complex and far reaching.  

No project is insulated, and no jurisdiction is immune. 

Looking to Queensland, the state’s infrastructure pipeline accounts for approximately 14% ($34.1B) of the national five-year pipeline and the QLD market has a demand-to-supply ratio for labour of 2:1.  

This means that there are two workers needed for every one worker that is available. 

Finally, we have all heard of the issues around the ‘profitless boom’ - we found in our latest report that 2 in 5 contractors are at 90%+ capacity (check) and they are facing decreasing profits and increasing allocation of risk from clients. This is pushing many to the wall -  creating a well-known environment of increasing insolvencies in the residential and infrastructure construction sector. 

These are issues I am sure many of you are dealing with on a daily basis. 

The better we understand these issues, the better chance we have of solving them. 

Which begs the question – what can we do to solve these issues? 

Unfortunately, there is no silver bullet.  

The good news though, is that there are positive changes we can make now that will yield long lasting benefits and support a more sustainable sector for years to come. 

The first and most immediate step governments can take to alleviate the pressure is to look at their current total pipeline (across all portfolios) and reassess their priorities based on the current capacity constraints within the market.  

We know many of the jurisdictions are already working on this and indeed, it’s a key priority for the Australian Government as well.    

Of course, these are difficult decisions. Delaying projects means communities need to wait longer for the energy, transport, digital, health and other projects promising to make their lives easier.  

But if governments don’t proactively take control, the end result will be budget blowouts and delivery delays that ultimately mean the taxpayer gets less infrastructure for their buck. 

Another important recommendation I want to highlight is around cultural reform – we need to attract new talent to the sector.  

When it comes to having the people available to do the work, supply will not even come close to meeting the demand this year based on current projections.  

In 2023, labour demand is projected to grow by 42,000 to a peak of 442,000 which is more than double the available supply expected.   

Our research shows that labour scarcity is the single biggest issue facing construction companies.  

We know working in construction take a toll physically and mentally.   

It is clear that there are real cultural problems to solve within the sector if we are to attract the workforce necessary to deliver Australia’s infrastructure pipeline.

Research by BIS Oxford Economics finds that cultural issues in the sector are costing the Australian economy nearly $8 billion annually due to workplace injuries, mental illness, suicide, long work hours and a lack of diversity. 

Women make up just 12 per cent of the construction workforce – that’s not good enough for a sector that is Australia’s third largest employer.  

We need to do more to attract young women to the industry and we need the industry to make diversity and inclusion a business priority.   

The reality is, you can’t be what you can’t see – we need more women in leadership roles across the industry.   

Already there is some good work happening in this space, including the work of the Construction Industry Culture Taskforce (started in NSW and Victoria, but now spreading throughout the country) to develop and implement a new Culture Standard for the industry.  

The 2022 Jobs and Skills Summit also delivered action in this space with the Australian Government and states and territories agreeing to a $1 billion one-year National Skills Agreement to provide additional funding for fee-free TAFE in 2023, while a longer-term agreement to drive sector reform and support women’s workforce participation is negotiated.  

The Australian Government also committed to strengthen existing reporting standards to require employers with 500 or more employees to commit to measurable targets to improve gender equality in their workplaces.  

An industry with a healthier culture and improved diversity will also be more a productive industry. 

I mentioned earlier that the construction industry has had little productivity improvement over the last 30 years. 

This graph paints a pretty compelling picture of not only the challenge, but the opportunity available to the sector. 

Along with an improvement in culture, innovation is one of the key tools we have to make change, improve productivity and attract and retain men and women to work in the exciting industry that construction is.  

A switch to manufacturing and off-site prefabrication is one way we can ease the physical burden for our construction workers and drive a better work/life balance, reducing safety hazards along the way.   

More widespread adoption of digital twins which enable the simulation and rehearsal of all aspects of construction can identify hazards, or better ways of doing things, as well as reducing risks, not to mention costs.  

We also have huge untapped opportunity when it comes to the use of recycled materials – an opportunity to not only improve sustainability in the sector but to also relieve current resource constraints. 

As mentioned, material costs have escalated by an average 24%.  

If you are running a billion-dollar project – that is an increase that is really going to be felt. 

Currently, around 27% of conventional materials used for road projects could be replaced with a range of recycled materials.  

This would mean substituting approximately 54 million tonnes of conventional materials used in roads infrastructure with approximately 52 million tonnes of recycled materials.  

With advancements in technology and updates to standards, the tonnage of conventional materials replaced could rise to 43%, replacing 87 million tonnes of conventional materials with 80 million tonnes of recycled products. 

To achieve this, we need to look at embedding circular economy principles and practices into regulations, specifications and standards. 

This will provide clarity and confidence to the market and allow it to do what it does best.  

We also need to look at the successful projects already utilising recycled materials – and there are many - to use these learnings as we move forward. 

So, thank you for the opportunity to present today. We have outlined a few key areas for reform to deal with this issues:

  1. Transparent pipelines across all portfolios 

  2. Cultural reform 

  3. Innovation in delivery across pre-fabrication and enhancing the use of recycled materials. 

But there is much more to do, and you can read about our full reform program in our Delivering Outcomes research – the companion piece to market capacity - on our website. 

Everyone in our sector, from government to the local tradie, is experiencing the impacts of these unprecedented challenges. Let’s take this opportunity now to work together and drive real change to set the industry up for a healthier future.   

Thank you.