On-ground infrastructure spending has shown a downward trend over the past decade, according to Engineers Australia analysis. But will the Federal Government’s $100 billion infrastructure plan deliver results?
The latest update to Engineers Australia’s Current Infrastructure Developments report was released this week. Policy Analyst Andre Kaspura told create the report draws on quarterly engineering construction statistics published by the Australian Bureau of Statistics (ABS) to capture long-term trends.
“The aim is to measure what is actually going on in infrastructure construction,” Kaspura said, adding that this could vary from the funding announced by governments.
In 2018-19, investment in infrastructure construction – including transport, energy, sewage and water, and telecommunications assets – fell 5.2 per cent. This included an 8.7 per cent drop for the public sector, which builds the majority of community infrastructure, and a 0.4 per cent drop in private sector construction investment.
Since 2008-09, construction spending has fluctuated, but shows an overall downward trend when corrected for inflation. Kaspura said this was cause for concern as Australia’s population is growing, which puts pressure on our existing infrastructure.
“More people means more cars on the road. It means more requirement for water and sewerage, telecommunications and energy. And yet, at the time that the population has been rising, infrastructure trends are going down,” Kaspura said.
The report also found that a significant number of construction projects for roads, railways and electricity assets were unfinished.
Will Federal Government investment help?
Kaspura said the Federal Government’s $100 billion infrastructure plan could help boost the construction of infrastructure, as long as it adds extra funds to existing investment.
By analysing documents on the Department of Infrastructure website, Kaspura found that many projects included in the Federal infrastructure plan are either completed or substantially underway, which indicates that previous spending has been factored into the total.
“It’s not clear what proportion of the $100 billion is new money, and which is rebadged existing programs,” Kaspura said.
Other projects did not seem to have developed business cases, although their overall costs had been predicted, Kaspura added.
“It’s problematic; we need transparency,” he said.
Another issue that needs to be taken into account is the effect of inflation. The spending is spread over a decade, beginning in the current financial year. Therefore, the money allocated to later years of the plan will be worth less than it is today.
And like many long-term infrastructure commitments, the plan extends over several electoral cycles, which makes its future uncertain if there is a change in government.
Do promises match spending?
Kaspura explained that actual cash allocations for infrastructure construction have increased modestly since 2012 when adjusted for inflation. However, he added that government budget announcements tend to push the bulk of their promised funding into projected spending for the next three years – known as the forward estimates.
“The evidence seems to be that when you look at what they do in subsequent years compared to what they promised in the forward estimates, they never deliver,” he added.
Kaspura explained that the Engineers Australia’s infrastructure report could help unravel promises from reality, as they reflected spending on actual infrastructure.
“It’s not a vague promise, and it doesn’t depend on finance. It’s actually been built, which is the key difference,” he added.
As well as Federal funding, the report figures include infrastructure spending by state and local governments, and the private sector.
Effect on engineering workforce
In terms of spending, engineering infrastructure accounts for approximately a third of the national construction sector, with the rest made up of residential and non-residential buildings.
According to figures published by the Federal Government in October, just under 4000 engineering jobs were advertised in September 2019, with most associated with infrastructure and construction projects in NSW and Victoria. The number of advertised engineering vacancies fell over a 12 month period, and over the past three months, engineering vacancies have fallen at a slightly higher rate than the overall job market. .
Previous Engineers Australia analysis suggests that as infrastructure projects reach their final stages, job numbers drop as engineering components reach completion, and a steady pipeline of projects is needed to maintain employment for engineers.
Kaspura said that infrastructure construction employs a wide range of engineering specialists – in areas including road and rail, bridge-building, tunnelling, communications, electricity infrastructure and water.
The Current Infrastructure Development report found that the year-to-year variation in infrastructure construction makes it difficult for companies to plan and maintain their workforce in these specialist areas, which affects employment and career prospects for engineers.
“Variability is a huge problem,” Kaspura said.
