The Business Council of Australia (BCA) has warned that waning productivity and inflating costs are risking Australia’s unprecedented $921 billion pipeline of major investment in resources, energy and economic infrastructure. New research released by the council shows for the first time just how much capital investment is driving the economy.

 

The Pipeline or Pipe Dream? Securing Australia’s Investment Future report determines how important the effective delivery of major projects is for the economy and how they will shape the future health of the economy and living standards.

 

“Our research shows that capital project investments are the main show in town in Australia’s economy and will be for some time,” BCA President Tony Shepherd said.

 

“The story of our massive investment pipeline is really about an economy-wide investment boom, not just a mining boom, but what is clear is this investment is far from assured.

 

“We are becoming a high-cost and thus high-risk place to invest, and low labour productivity compared to other nations has reduced the competitiveness of our project delivery.

 

Mr Shepherd said the combination of dropping productivity levels and increasing costs could compromise as much as half of the $921 billion in capital investment.

 

“What is at stake if we don’t deliver on the pipeline is the opportunity to transform our cities, regions and communities through economic and social infrastructure, job creation, skills development, and growing government revenues to provide quality services to our ageing population. In simple terms, if we cannot deliver the pipeline more efficiently our standard of living will be reduced,” Mr Shepherd said.

 

Key findings of the study include:

  • by 2013 about 30 per cent of all economic activity will depend on the success of capital investments, making us the most investment-intensive economy in the OECD
  • Australian resources projects are 40 per cent more expensive to deliver than in the US Gulf Coast
  • Australian labour is typically 35 per cent less productive than in the US Gulf Coast for resources projects near cities, and 60 per cent less productive for projects in remote locations
  • infrastructure is estimated to cost much more to deliver in Australia than the US, with airports 90 per cent more expensive, hospitals 62 per cent, shopping centres 43 per cent and schools 26 per cent more expensive
  • major productivity problems, labour shortages and planning approvals and conditions are all contributing to delays and project costs
  • major projects are numerous, with 72 of 160 projects worth more than $1 billion already underway
  • the average resources or infrastructure project is worth $1.5 billion, up from $294 million in 2001
  • Australia’s largest ever capital project was Pluto stage 1, valued at $14 billion, but there are now nine projects either underway or about to start worth between $14 billion and $43 billion.

 

Mr Shepherd said the new study has guided the Business Council in developing a package of recommendations to take to next week’s economic forum in Brisbane. These include recommendations to:

  • build higher levels of community understanding and acceptance of the importance of growing our economy and population, as well as of individual projects
  • ensure a more concerted effort by government to undertake regional economic development in those communities impacted by growth of major projects
  • expand Australia’s capacity to deliver multiple capital projects by growing and developing the workforce, and through open and competitive markets for labour, materials and equipment
  • improve project delivery efficiency by streamlining and improving planning approvals processes and outcomes, building capabilities for project design, innovation and management while lifting workplace productivity
  • support investment and infrastructure delivery by developing growth strategies, improving strategic planning and unleashing private investment into public infrastructure, and developing infrastructure markets coupled with greater private ownership and operation of infrastructure
  • build the confidence of investors to risk capital in large, long-term and complex investment projects in Australia by maintaining a predictable policy environment and fiscal stability
  • ensure all jurisdictions agree through COAG the importance of consistent approaches by governments to policies and programs to facilitate efficient capital project delivery by businesses
  • require the Productivity Commission to conduct a comprehensive inquiry into the factors impacting on major project costs and delivery performance in Australia, including what is driving high construction costs.

 

An overview of the report can be found here 

 

The full report can be found here