Experts debate how to solve Australia's infrastructure productivity problem

In December 2023, Ed McCann, ICE Past President, chaired a panel discussion on improving the productivity of infrastructure delivery in Australia.

Low productivity is a longstanding issue for infrastructure delivery in Australia, leading to inefficient project delivery and poorer outcomes for the public.

The panel unanimously agreed that there are many known potential solutions to Australia’s productivity challenges.

But so far, the construction industry and state and federal governments have been unwilling to implement them.

The discussion highlighted the importance of strategic workforce planning, a transparent pipeline of work, and innovation for productivity.

In particular, the panel reflected on how the significant number of infrastructure project cancellations have negatively affected the industry’s confidence in the pipeline of future work.

The panel included:

• Alex Katsanos, managing principal at Aurecon
• Louise Santos, partner at Pinsent Masons
• Jon Davies, chief executive officer of the Australian Constructors Association
• Kate West, co-chair of the Australasia Region at Arup
• Julie Wood, Vice President of the ICE
• Peter Colacino, infrastructure, strategy and transformation lead at Mott MacDonald

Watch the event recording

Low workforce capacity is holding back productivity

The panel agreed that the ongoing labour shortage is significantly impacting infrastructure delivery.

Jon Davies raised Infrastructure Australia’s recent finding that the labour shortfall has now risen to 229,000 full-time infrastructure workers.

Kate West further noted the persistent undersupply of engineers, predicted by Engineers Australia to reach a shortage of 200,000 by 2040.

Alex Katsanos drew a comparison to construction in Hong Kong, where an ageing population and fewer people coming into the industry, particularly women, have produced a similar labour shortage.

The panel agreed that gender equality initiatives are essential for reducing the labour shortage.

Kate West noted that only 13% of engineers in Australia are women, with the disparity being even larger in the construction and trade sectors.

West praised the Victorian government's mandates for minimum female representation in the construction of new government projects as an effective approach.

Demand remains high despite future projects being axed

While the changing economic picture in Australia has encouraged state and federal governments to cut planned infrastructure projects, the need for infrastructure hasn’t decreased.

The panel noted that the demand for new housing, schools, hospitals, roads, and defence projects continues to increase, and that Australia continues to fall behind on its decarbonisation commitments.

The high demand for new infrastructure to address these challenges means that cutting projects is no easy task.

Coupled with the labour shortage, increased productivity is all the more necessary.

Impact of infrastructure projects cuts on industry and investment

The panel’s consensus was that the impact of cuts to the industry is underappreciated by the Australian government.

Peter Colacino said that it’s not unreasonable for new governments to review and reduce the spending commitments of the previous administration.

Still, the lack of clarity around how they decide which projects to cut introduces more uncertainty for the industry.

This is worsened during the period between cuts and new spending commitments or strategies, when it’s unclear how the industry should prepare for future work.

Furthermore, cuts create a credibility issue for private investors, who look to other markets in Europe and the US for more stable opportunities.

Workforce planning

The lack of pipeline transparency holds back the industry’s ability to do effective strategic workforce planning.

The panel noted that many engineers have trained or retrained in transport in response to the high demand for this skillset.

However, activity in this area appears to have peaked and there’s growing demand for expertise in decarbonisation and renewable energy.

A more transparent pipeline enables better workforce planning to ensure engineers are skilled for future work.

The government needs to increase its appetite for risk

The panel discussed the need for government infrastructure commissioning in Australia to be more risk-tolerant as innovative projects will drive improved performance in the industry.

At present, public sector contract managers are led to be risk averse. They may lose their role if their project goes awry, and bonuses are rarely on offer to reward high performance.

Instead, the government could be structured to pursue more innovative work, be more tolerant of the possibility of failure from which public sector staff may learn, and apply those learnings to the next project.

The knock-on effects of this would enable more exploration within the broader sector and overall better outcomes.

As highlighted by Louise Santos, a significant portion of the risk for new infrastructure projects unfairly currently lies with the private sector.

Each contract is underpinned by a complex network of third-party stakeholders which the successful tenderer has to navigate.