As jurisdictions across Australia commit to expanding rail and transport infrastructure, the construction industry expects this expansion to contribute to its strongest performance since the mining boom.
Railway construction is set to grow 47.2 per cent by 2023/24, according to the chief economist at Master Builders Australia Shane Garret, who spoke to Rail Express.
The amount of rail construction work done in the 2018/19 fiscal year amounted to $8.75 billion (AUD), and is expected to amount to $14.2 billion at its peak in 2021/22, according to Garret.
Government led infrastructure projects are driving the expected boost. Transport projects in the major cities dominate, with both Sydney and Melbourne in the process of overhauling their rail networks with projects such as the Sydney Metro City and Southwest Project, set to cost $12 billion, and Melbourne Metro Rail Project costing $10.9 billion.
A range of fast rail corridors are also intended to tackle congestion and population growth. According to Garrett, these projects will “unlock new parts of the country to economic development and ease some of the strain on the large population centres”. A major advantage to this program of infrastructure projects is the low rate of interest which is making it easier for large entities, whether governments or corporations, to be able to source money at low cost for lengthy periods of time.
In fact, at the moment the Commonwealth government is able to borrow for ten years at an interest rate of 0.9 per cent per year.
“All of these major infrastructure projects are helped by the fact that money is just so cheap to borrow at the moment,” Garrett said, allowing them to be rolled out quite cheaply when it comes
to financing the work.
However, it’s not just about the money: “You need people with the right skills to unroll the work,” Garrett explained. Skills provision within the industry needs to be improved with some urgency if delivery on the projects is to be met.
“We need to have enough people to do the work at a low cost.”
Outside of labour, the construction market has been made robust and experienced enough to deliver on these proposed projects thanks to Australia’s mining boon. Rail infrastructure suppliers have spent the last decade enabling the transport of coal to Australian ports from where it could then be shipped to China. The construction industry reached its peak during this time, with $142.8 billion at 2012-13. However, an industry source pointed out that there are challenges ahead due to the sheer amount of work that is being proposed.
According to Infrastructure Pipeline, a total of 93 projects across the sectors are proposed just in NSW, with 60 concentrated in Sydney. With $200 billion slated towards infrastructure development across the jurisdictions, governments across Australia need to ensure sequencing across the pipeline is carefully considered so as not to overload the already stretched market.
If you have too many projects on at the same time it can slow down the overall pipeline which can then lead to cost escalation, according to the industry source. Some of these proposed projects are in fact high risk and extremely complex, said the industry source, such as the metro projects that are proposed in Sydney and Melbourne, where the required tunnelling work commands a pooling of resources and expertise.
Set to be the new normal for the next decade at least, governments are expected to work together to balance out the pipeline and the market is sure to adapt to this new normal. However, while we are seeing these huge investments across the jurisdictions and lots of announcements about commitment to transforming rail infrastructure, according to Garrett not a lot of action has been taken on the ground.
“At the moment, the actual volume of construction work underway is smaller than it was this time last year. While our forecasts do envisage growth returning, government can help by getting things moving on the ground with more urgency,” Garrett said.
The pace needs to quicken, claims Garrett, and there is a strong possibility of this occurring when it comes to small and medium-sized infrastructure projects. This can provide an opportunity for Australia’s smaller businesses to enter the market. Small businesses can be more adept at hitting the ground running when it comes to construction, than some of the big players. However, small businesses often run into hurdles when it comes to contracting with government.
According to Garrett small business can sometimes lack the resources to spend large amounts of time figuring out how to ‘check the boxes,’ whereas larger corporations can devote whole departments to figuring out how to contract with government. Government can help industry with a “speedier roll out of infrastructure projects” by cutting red tape and making the tendering process easier. This “would give the wider public real and visible evidence that our economy continues to move forward,” Garrett reasoned.
He emphasised the construction industry welcomes the work provided by the government’s increasing investment in rail infrastructure.
“The economy is growing at a slow rate and this work contributes a significant boost to the economy in the immediate and short term,” he said.
Investment in rail infrastructure will significantly increase the capacity of the Australian economy by increasing the speed and efficiency with which people and goods are moved around the country.
Garrett claims the economy will grow at a larger rate with the proposed investments than if these rail projects were not to go ahead.
A spokesperson from the Department of Infrastructure, Transport, Cities and Regional Development told Rail Express that the federal government recognises the importance of progressing projects as quickly as possible.
“[However], in most case project proponents such as state and territory governments are responsible for delivery against agreed construction milestones,” the spokesperson said. “A number of Australian Government-funded rail projects are currently underway.
“The Government has also established the National Faster Rail Agency to deliver fast rail connections between major capital cities and their regional centres. This includes leading the development and implementation of the Australian Government’s 20-year plan for a Faster Rail Network.
“The Government is also funding a range of business cases investigating options for faster rail connections between capital cities and regional centres.
“In addition, the Government has developed the National Freight and Supply Chain Strategy and Action Plan to position Australia to meet its emerging freight and supply chain challenges.”