ANALYSING AUSTRALIA S INFRASTRUCTURE TRENDS 2013

Transcription

1 ANALYSING AUSTRALIA S INFRASTRUCTURE TRENDS 2013 What has changed since the 2010 Infrastructure Report Card? January 2013

2 ANALYSING AUSTRALIA S INFRASTRUCTURE TRENDS 2012: WHAT HAS HAPPENED SINCE THE 2010 INFRASTRUCTURE REPORT CARD? ISBN Author: Andre Kaspura Institution of Engineers Australia 2013 All rights reserved. Other than brief extracts, no part of this publication may be reproduced in any form without the written consent of the publisher. The report can be downloaded at Policy and Public Relations Engineers Australia 11 National Circuit, Barton ACT 2600 Tel: policy@engineersaustralia.org.au

3 INTRODUCTION FROM THE CHIEF EXECUTIVE OFFICER Analysing Australia s Infrastructure Trends 2013 is a comprehensive work assessing the current state of Australia s key infrastructure, including roads, ports, railways, bridges, water, electricity and telecommunications assets. In this report, Engineers Australia revisits the findings of our Infrastructure Report Card series to assess progress in these areas since our last evaluation in The quality of Australia s infrastructure is both a reflection of our economic prosperity and an indicator of our potential for future growth. Since we last published our Infrastructure Report Card series in 2010, there has been significant investment in Australia s infrastructure, especially across the resources sector. Stephen Durkin Chief Executive Officer While overall engineering construction is at record levels, a large amount of this work is specific to the resources sector. This tends to obscure the wide variability in infrastructure investment across the various asset classes, states and territories. This variation is particularly noticeable in Western Australia and Queensland where spending on resource-related infrastructure, such as ports and railways, masks the lack of attention given to non-resource projects. Hence, while investment in infrastructure may be at record levels, this analysis shows us that spending has not necessarily been spread evenly across public assets such as water and transport infrastructure. This report also reveals a staggering amount of economic infrastructure and engineering construction work yet to be completed across the country. With the backlog of engineering construction estimated at over half a trillion dollars, it is clear that engineering remains a key driver of Australia s economy. Variability in infrastructure project delivery remains a major concern for the engineering profession. With so many engineers employed on infrastructure projects, market fluctuations have a clear effect on the overall engineering workforce. Boom/bust' cycles of infrastructure delivery can create acute demand spikes across specific locations or engineering specialisations. In the context of engineering skills shortages witnessed in Australia over recent years, these fluctuations can have significant economic consequences. Engineers and engineering remain critical to Australia s ambitious nation building agenda and Engineers Australia believes it is vital that all governments continue to enhance their approach to developing and building Australia s infrastructure assets. Page 3

4 CONTENTS EXECUTIVE SUMMARY 5 WHAT THIS REPORT IS ABOUT 7 RECENT NATIONAL INFRASTRUCTURE ACTIVITY 10 THE INFRASTRUCTURE PIPELINE 15 ENGINEERING CONSTRUCTION IN STATES AND TERRITORIES 18 New South Wales 20 Victoria 23 Queensland 25 South Australia 28 Western Australia 30 Tasmania 33 Northern Territory 35 Australian Capital Territory 38 OVERVIEW 41 Page 4

5 EXECUTIVE SUMMARY This report evaluates trends in economic infrastructure since the last Engineers Australia Infrastructure Report Cards (IRCs) in The Infrastructure Report Cards provide an independent commentary on the quality of Australia s infrastructure, and are underpinned by the belief that the quality of Australia s infrastructure is an indicator of the nation s economic, social and environmental wellbeing and viability. Our analysis confirms that engineering construction on economic infrastructure is at record levels, and shows that an extraordinary amount of engineering construction is occurring across the In the year ending 30 June 2012, resources and heavy industry sector. In the year ending 30 June 2012, engineering construction engineering construction on on economic infrastructure was $58.16 billion, 1 economic infrastructure was an increase of 17% over 2010 and almost 1½ $58.16 billion there is still a times the activity in when the first IRC was released. phenomenal amount of This analysis also reviews the engineering construction pipeline. The pipeline is comprised of projects about to commence, work done on projects actually underway and work that still needs to be completed on multi-year projects. infrastructure and engineering construction activity in the system and scheduled for completion over the coming few years. At June 2012, there was work yet to be completed on economic infrastructure valued at $ billion; 2.8 times the value of economic infrastructure work completed in There was also an astonishing $ billion in total engineering construction yet to be completed, a multiple of 4.6 times the engineering construction work completed across In , work commenced on new economic infrastructure projects valued at $50.44 billion. Commencements of total engineering construction work fell to $93.93 billion in , though this was nonetheless the third highest year on record. These statistics show that there is still a phenomenal amount of infrastructure and engineering construction activity in the system and scheduled for completion over the coming few years. Cancellation of some marginal projects is unlikely to change this situation. A matter of some concern is the considerable year-to-year variability in infrastructure activity within states and territories, particularly in the smaller jurisdictions. This high variability may have a bearing on the engineering skills shortages that have been experienced throughout Australia. In practice, when infrastructure activity falls, so too does the level of available engineering and related jobs in the construction workforce. In some instances there is scope for workforce mobility between projects and locations. However, in engineering, there are limits to this related to the specialised nature of engineering expertise required. Modern lives are predicated on income from continuous employment and disruptions require those affected to find new jobs, whether that be in engineering or otherwise. When the first Infrastructure Report Cards were released in 1999, national engineering construction on infrastructure was $23.96 billion and the overall assessment was D ; a rating that indicated infrastructure was poor and critical changes were required for it to be fit for purpose. 1 All dollar amounts quoted are in real terms. Page 5

6 By 2005, engineering construction on infrastructure had increased by 28% to $30.68 billion. The improvements made were recognised by an upgraded national assessment to C+. By 2010, engineering construction on economic infrastructure had increased by a further 53% to $46.99 billion. Assessments in some assets classes improved, but gains were offset by deterioration in other areas resulting in no change to the overall national assessment of C+. a substantial part of apparent high growth in economic infrastructure appears to be spillover resources sector activity in ports and railways. This obscures large reductions in two conventional Prior to the 2010 Infrastructure Report Card assessment, investment in new infrastructure assets had increased substantially from the levels at the time of the first Engineers Australia assessments. Despite this long overdue change, the overall national assessment did not change from 2005 to 2010, remaining at C+ ; a rating that indicates that major changes are necessary for infrastructure to be fit for present and future uses. infrastructure areas: roads, This report also examines trends in engineering construction on some assets that are not typically and water and sewerage. considered as infrastructure. These are examined as some of these assets are inextricably linked with infrastructure. For example, the construction of a mine (not infrastructure) brings forward work on railways and ports (infrastructure). In June 2005, engineering construction in the resources, heavy industry and other sectors was $11.28 billion, and economic infrastructure was 72% of total national engineering construction of $41.96 billion. By June 2010, engineering construction in the resources, heavy industry and other sectors had increased by 157% to $29 billion, increasing total national engineering construction to $75.99 billion. Although there was a large increase in economic infrastructure activity over this period, this growth paled by comparison to the changes over the next two years. From 2010 to 2012, engineering construction in the resources, heavy industry and other sectors increased by a further 94% to $56.4 billion, with total It is important to bear in mind that a large portion of economic infrastructure on railways and ports, particularly in Western Australia and Queensland, was built in support of resources sector projects. In several jurisdictions have at other words, it was specialised infrastructure. least one asset class where little, if any, new activity has occurred Some states and territories have performed better than others. Growth in economic infrastructure has since the 2010 Infrastructure increased since the 2010 Infrastructure Report Report Card... Card in several jurisdictions, including NSW, Victoria, Western Australia and the two territories. In Western Australia, a substantial part of apparent high growth in economic infrastructure appears to be spillover resources sector activity in ports and railways. This obscures large reductions in two conventional infrastructure areas: roads, and water and sewerage. The growth rates for economic infrastructure show that activity in Tasmania and South Australia has contracted since the last Infrastructure Report Card. A general observation is that several jurisdictions have at least one asset class where little, if any, new activity has occurred since the 2010 Infrastructure Report Card was published. Page 6

7 WHAT THIS REPORT IS ABOUT Background The quantum, quality and condition of economic infrastructure are key determinants of productivity growth and economic growth. These connections and the critical importance of productivity growth to Australia s future were articulated in the Australian Treasury s Intergenerational Report. 2 Although this proposition is widely accepted by governments of all persuasions, progress towards optimising Australia s economic infrastructure has been slow and uneven. This has been the message from Engineers Australia s Infrastructure Report Cards, first released in 1999, with updated national reports in 2001, 2005 and the latest in In 2010, Infrastructure Report Cards were also released for each state and territory. Engineers Australia s Infrastructure Report Cards are complex documents that synthesise qualitative and quantitative information about the nation s infrastructure into a form useful for policy analysis and policy deliberations. Documents examined include regional development plans, infrastructure strategic plans, documents relating to specific infrastructure projects, government reports and government budgets and budget statements. Statistics examined included financial statistics made available by state and territory governments and the Commonwealth Government on funding for infrastructure, the progress of these commitments and funding of and progress of maintenance of existing infrastructure assets. Background statistics from a range of agencies on population and population growth, traffic volumes, freight volumes, water supplies and use, waste water collections and volumes recycled, energy supplies and demands and other statistics that influence the demand for, and supply of, infrastructure services are also examined. The synthesis includes the considered views of engineers with expertise and experience in infrastructure matters in all states and territories. The final outcomes of the process are assessments about the suitability of existing infrastructure for current and planned future uses. The scale used for the assessments is as follows: A B C D F (Very Good); Infrastructure is fit for its current and anticipated future purposes (Good); Minor changes are required to enable infrastructure to be fit for its current and anticipated future purposes (Adequate); Major changes are required to enable infrastructure to be fit for its current and anticipated future purposes (Poor); Critical changes are required to enable infrastructure to be fit for its current and anticipated future purposes (Inadequate); Inadequate for current and anticipated future purposes The 1999 Infrastructure Report Card (IRC) assessed Australian economic infrastructure as D, poor and critical changes were required to enable infrastructure to be fit for its current and anticipated future purposes. 3 Subsequent reports saw sufficient improvement to lift assessments to C in 2001 and C+ in 2005 and again in An assessment of C indicates that national infrastructure is adequate but 2 Australian Treasury, Australia to 2050: Future Challenges, January 2010, 3 See Page 7

8 major changes are required to enable infrastructure to be fit for its current and anticipated future purposes. Only one jurisdiction, the ACT, was assessed higher but was qualified. Engineers Australia argues that these assessments are inconsistent with the productivity growth necessary to meet the future challenges outlined by the Treasury report and that Australia s economic infrastructure must be improved through coordinated planning, maintenance and development at all levels of government. Two years have now passed since the last IRC was undertaken and it is time to assess progress. The complexity and resource intensity of the IRC process makes detailed analysis possible only periodically, and between IRCs progress needs to be assessed on another basis. Qualitative reports are often used for this purpose and contain important information but often do not convey an accurate sense of the relationship between past activity to build the stock of infrastructure and what is happening now. It is well known that because infrastructure projects take many years to complete that they are susceptible to changes, to multiple announcements and confusion between activity to maintain existing assets and activity to build new assets. In addition, states and territories and the Commonwealth have different ways of dealing with infrastructure matters. Measuring the Progress of Infrastructure In an ideal world, the nation s stock of infrastructure capital would be managed in the way a capital intensive business goes about its work. The assets that comprise available capital stock would be operated to supply the flow of infrastructure services required and maintained to optimise service delivery during the economic life of the asset. New assets acquired to meet growing demand and the retirement of assets that have reached their economic age would be managed in a capital account. Although infrastructure is critical to national productivity and to the social, environmental and economic wellbeing of Australians, an approach along these lines is not feasible. The alternative used in this report is to examine trends in the flows of activity that add to the national stock of infrastructure. The compromise in this approach is that the accumulation of capital assets that comprises the stock of infrastructure is not measured. The advantage is that the statistics used measure the value of work actually done on the ground to construct new infrastructure assets within a consistent statistical framework. This report reviews infrastructure activity in Australia across against the background of trends for the past twenty-three years. This approach provides an indication of how activity levels have changed compared to the past, and when used in conjunction with the assessments in the IRCs, an indication of progress towards an infrastructure stock that is more conducive to Australian productivity and economic growth. Statistics and Methodology The framework used in this report is the Australian Bureau of Statistics (ABS) engineering construction series. 4 The ABS undertakes quarterly surveys of engineering construction activity in Australia applying consistent definitions to produce statistics that accurately measure trends in the flow of engineering construction work completed. The ABS also collects statistics on new project commencements and work yet to be completed on projects that span several years. The statistics cover engineering construction owned and constructed by governments, engineering construction owned by governments 4 ABS, Engineering Construction Activity, Australia, Cat No , electronic statistics, Page 8

9 but constructed by private sector contractors and engineering construction owned and constructed by the private sector. The ABS framework applies a number of measurement conventions that mean engineering construction statistics are not synonymous with infrastructure project financial budgets. For example, one convention is to not include the value of land in engineering construction statistics because of difficulties in valuing the land content of the project. Other conventions rigorously differentiate between activity to construct new assets and activity to operate and/or maintain existing assets. Not all engineering construction is infrastructure. The key characteristic of infrastructure is that infrastructure asset services are not for the exclusive use of the asset owner but available to be used by others. Thus, new road infrastructure opens up transport options not previously available, including to existing consumers and businesses and may open opportunities for new businesses. Some capital assets are constructed for the exclusive use of their owner. For example, a mine is developed so that the owner can extract minerals for export. To differentiate between the two types of engineering construction the definition of economic infrastructure used by Infrastructure Australia is applied. Economic infrastructure includes transport-related assets, water and sewerage assets, assets in the energy sector and the telecommunications sector. The location of economic infrastructure assets is critical to who can use them. The statistics examined cover states, territories and Australia as a whole. Within states, the location of assets is not spelled out in the statistics and it is not immediately obvious what demand for infrastructure services will be met by the asset being constructed. For example, the statistics show that railway construction in Western Australia has experienced extraordinary growth, most likely because new railways are required to transport ore from mine sites to ports, but the same category of statistics includes the construction of railways to meet the requirements of Perth commuters. Railway facilities in both locations are infrastructure and important for economic growth, but each satisfies different needs. Infrastructure assets are usually very large and the projects to construct them can span several years. The infrastructure pipeline, or work that is in the system, is an important aspect of assessing new infrastructure activity. A section of this report is devoted to this but only at the national level. It is feasible to extend this examination to states and territories and this may be contemplated in a future revision of the report. The ABS statistics are made available in quarterly form. Original or unadjusted statistics were converted into financial year form. Current price statistics were deflated using implicit deflators derived from published chain volume statistics. The base year for deflated statistics was Trends from onwards were examined to establish the background against which 2010 IRC assessments were made. Activity in the two years since then can then be used to assess whether the prospects for different assessments. Page 9

10 RECENT NATIONAL INFRASTRUCTURE ACTIVITY The 2010 IRC Assessment In 2010, national infrastructure assessments were based on weighted state and territory assessments. Overall, national infrastructure was assessed as C+, unchanged from The assessments for asset classes were as follows: Roads were assessed as C in 2010, unchanged from 2005 Rail was assessed as D+, a downgrade from C- in 2005 Ports were assessed as B-, an improvement on C+ in 2005 Potable water was assessed as B-, unchanged from 2005 Waste water was assessed as B-, an improvement on C+ in 2005 Stormwater and irrigation were assessed as C, an improvement on C- in 2005 Electricity was assessed as C+, unchanged from 2005 Gas was assessed as B-, an improvement on C+ in 2005 Telecommunications was assessed as C, a downgrade on B in 2005 The discussion of national trends that follows is indicative of Australia-wide developments in economic infrastructure and total engineering construction. The purpose of this material is to draw a connection between infrastructure trends as statements about investment, and infrastructure trends in the Commonwealth budget and related commentary by political leaders and to describe the overall context in which infrastructure development has occurred. This is critical when considering related issues such as the number of engineers necessary to service these developments. Detailed consideration of the links between IRC assessments and recent trends is left until the discussion of state and territory engineering construction. National Changes In , economic infrastructure work valued at $58.16 billion in real terms ( prices) 5 was completed, an increase of 11.7% over the previous year. When engineering construction work on heavy industry, the resource sector and other activity is added, this figure more than doubled to $ billion, an annual increase of 35.1%. Engineering construction in the oil, gas, coal and other minerals sector alone was $51.16 billion, up 81.8% on the previous year. These activity levels are put into context by the trend lines in Figure 1. In , economic infrastructure activity was $14.33 billion. Table 1 shows that annual average growth since then has been 6.5% per annum compared to average annual population growth of 1.3% per annum. In the 21 years up to the 2010 IRC assessment, the growth in economic infrastructure was a little slower, averaging 6.0% per annum. Since the IRC assessment, average annual growth has been almost twice as high at 11.2% per annum and population growth slowed to an average 1.2% per annum. 5 Subsequent figures are also quoted in real terms using prices. Page 10

11 In , total engineering construction activity was $17.63 billion, about 23% or $3.3 billion larger than economic infrastructure activity. The difference comprised activity of $576.4 million on recreation infrastructure, $86.6 million on other projects, $2.14 billion on oil, gas, coal and other minerals projects and $493.6 million on heavy industry projects. Even then the dominant activity was in the resources sector. By , engineering construction in these areas had increased to $56.4 billion. While the IRC does not apply to these activities it is worth noting that up to the IRC, annual engineering construction in these areas increased by 13.3% per annum and since the IRC by 42.6% per annum. Page 11

12 The headlines have been about total engineering construction, which has increased from $17.63 billion to $ billion in Up until the 2010 IRC, average annual growth was 7.5%, increasing to 23.3% per annum in the two years since. Roads The largest component of economic infrastructure activity is engineering construction on roads which includes all roads from new subdivisions through to major freeways. In , activity was $17.92 billion (30.8% of total economic infrastructure), 12.0% higher than the previous year. Since , activity has more than tripled, with annual growth averaging 5.9%. Although annual activity has been somewhat variable, Figure 2 shows that in recent years, particularly since the assessment for the 2010 IRC, activity has increased. Up to the IRC assessment annual growth averaged 5.4% and this was taken into account in arriving at the assessment. Since the 2010 IRC, annual growth has increased to 11.7%. Bridges Engineering construction on bridges is the smallest and most variable asset class. Although many bridges are road bridges, this is not exclusively the case. In , activity was $920.3 million in real terms and was the lowest activity level since , contracting 26.4% relative to the previous year. Figure 2 shows that activity levels have been highest since about , and even with the recent contraction remain higher than earlier years. Up until the 2010 IRC, growth averaged 9.4% per annum but in the last two years averaged an annual contraction of 13.6%. Page 12

13 Railways In , engineering construction on railways was just 2.1% of economic infrastructure activity. Annual growth averaging 18.6% saw this share increase to 14.2% by with an activity level of $8.27 billion in real terms. Up to the 2010 IRC, annual growth was 17.2% per annum but in the last two years average growth has been 33.2%. Although there have been several major urban railway projects, this acceleration has coincided with the upsurge in resources sector activity, and a large part of it can be attributed to this rather than to improvements in urban infrastructure. Ports The trend line for ports in Figure 2 shows that activity levels were low for many years, but since about 2002 there has been rapid growth coinciding with resources sector expansion. The situation for ports parallels railways with expansion of, and improvements to, several major existing ports as well as new resources ports contained in the figures. Up until the 2010 IRC, average annual growth was 19.4% and in the last two years growth averaged 51.0% to be $4.81 billion in real terms in As was the case with railways, a substantial share of this change was related to the resources sector. Water Supply and Storage Until , annual growth in water supply and storage assets did not keep pace with population growth. Annual activity change was -0.1% per annum compared to 1.2% per annum population growth. As Figure 3 shows, the onset of the drought saw a large and rapid expansion in activity on these assets and this is reflected in Table 1. Up until the 2010 IRC, average annual growth in engineering construction on water supply assets was 12.7%, mainly attributable to the growth since Since the IRC, engineering construction on water supply assets has contracted by 10.4% per annum. Page 13

14 Sewerage and Drainage There was a similar pattern for engineering construction on sewerage and drainage assets. Activity levels increased from $1.07 billion in real terms in almost three-fold to $2,981.4 million in Average annual growth was 7.1% up until the 2010 IRC (faster in the last 10 years) but fell to 3.6% per annum in the two years since then. Electricity and Related Assets In , engineering construction on electricity and related assets ranked third behind roads and telecommunications and was $2.18 billion in real terms. The growth trajectory has been strong and in the activity level was $11.37 billion. Annual growth averaged 8.7% up until the 2010 IRC assessment and just 1.8% per annum in the two years since. Engineering construction on electricity and related assets is now the second highest area of economic infrastructure after roads. Pipelines Pipelines includes pipelines for all materials, including both gas and water. Activity levels for this asset class like railways and ports reflect work related to the resources sector, as well as to improvements in urban and irrigation water supplies. As Table 1 shows, activity levels have grown strongly over time, but beneath the averages shown, year to year activity was highly variable. In , engineering construction on pipelines was $350.5 million and up until the 2010 IRC grew by an average 13.2% per annum. Growth during the last two years averaged 57.6% per annum and in , activity had increased to $2.48 billion, largely attributable to the resources sector. Telecommunications Figure 3 shows that engineering construction in the telecommunications sector has been consistently high over a long period of time. In , real activity in this sector was $3.5 billion and average growth prior to the 2010 IRC was just 1.4% per annum. In the last two years telecommunications activity has grown by an average 11.7% per annum reflecting the build-up of activity on the National Broadband Network. However, activity in was $4.7 billion, well within historical levels. Resources and Heavy Industry Table 1 shows that the resources sector and heavy industry engineering construction has experienced explosive growth in the two years since the 2010 IRC. Prior to 2010, average annual growth in the resources sector was 17.6%, and in heavy industry 5.5%. In the two years since the IRC, these average growth rates have increased to 48.6% and 36.0%, respectively. So far as activity levels are concerned most has been in the resources sector which in accounted for over 90% on non-economic infrastructure activity, almost rivalling the national level of economic infrastructure activity. The extraordinary growth in resources sector activity has affected the demand for engineers but more importantly was responsible for large levels of spill-over activity in several categories of economic infrastructure; notably railways, ports and pipelines which account for 69% of the annual increase in economic infrastructure activity in and These spill-overs contribute to economic activity in a similar fashion to other increments in the stock of national infrastructure but because of their location satisfy a different demand to similar activity in an urban location. To this extent, care in interpreting recent increases in economic infrastructure is essential. Page 14

15 THE INFRASTRUCTURE PIPELINE The infrastructure pipeline for is summarised in Table 2. The first part of the table covers the statistics just discussed on engineering construction work completed. The table also includes statistics on work yet to be finished on existing projects and new projects about to commence but where material progress has not yet been made. As well as current year statistics for each stage of the pipeline, Table 2 also includes the direction of change from the previous year. Figures 4 and 5, respectively, illustrate the infrastructure pipelines for economic infrastructure and for engineering construction in the resource, heavy industry and other sectors. Table 2 shows that at the end of , $164 billion in economic infrastructure work was yet to be completed. This was almost three times the amount of engineering construction completed in Even allowing for the inclusion in this figure of activity related to resources projects, the scale of activity is very high relative to work completed. Figure 4 shows that the gap between engineering construction completed and not yet finished has been growing since about The greatest differences between work completed and yet to be completed are for railways (multiple of 3.3), ports (multiple of 5.5) and pipelines (multiple of 7.9). On face value, these statistics suggest that should be another strong year for engineering construction on economic infrastructure. As well as economic infrastructure, engineering construction work yet to be completed in the resources and heavy industry sector at the end of was another $359.6 billion in real terms. This was 6.4 times the amount of work done that year compared to 8.4 times the previous year. Once again, these figures suggest that engineering construction completed in in these sectors is highly likely to exceed the figure. Page 15

16 Page 16

17 Figure 4 shows that historically, new commencements in economic infrastructure have tracked very closely to economic infrastructure completed, but in there was a sharp reduction in new commencement activity. Even so, $50.4 billion in new activity has commenced, about equal to new commencements in and equal to about 86% of the value of work completed in New commencements are lower than work completed in six asset classes (roads, bridges, railways, ports, water and sewerage) and higher than work completed in three asset classes (electricity, pipelines and telecommunications). Figure 5 shows that a similar relationship between engineering construction completed and commenced was evident in the resources, heavy industry and other sectors, but with a higher level of variability in commencements over the last decade. Table 2 shows that new commencements were $43.5 billion; about 77% of work completed in and about 12% of the volume of work yet to be completed. These figures suggest that over the next year or two, activity in this sector is likely to be dominated by the work already underway and yet to be completed. Although both commencement lines in Figures 4 and 5 moved in a downward direction last year, the scale of new commencements remains historically high for both economic infrastructure and for the resources, heavy industry and other sectors. When this information is combined with the statistics on work yet to be completed on existing projects, the indications are that activity levels are likely to remain high for the next year or two at least. The statistics reviewed do not reflect negative government budgetary outcomes that have been announced, and the likely effects from these decisions will require careful monitoring over the coming year or two. Page 17

18 ENGINEERING CONSTRUCTION IN STATES AND TERRITORIES This chapter reviews engineering construction activity in the states and territories. Two perspectives are considered; one aims to show how change in each jurisdiction compares, adjusting for jurisdictional size differences; the second looks at each jurisdiction in turn to highlight major changes, replicating Table 2 for each jurisdiction as far as possible. Several jurisdictions, typically the resource states, feature very strong growth, but in the smaller jurisdictions, it is not uncommon for projects regarded as average in larger jurisdictions to overwhelm activity that comes before or after it. Overview of Economic Infrastructure Trends Australia s states and territories vary greatly in size, and to construct an overview this needs to be taken into account. Figure 6 converts each state and territory trend in economic infrastructure into index number form with as the base year. Movements in the trends after the base year indicate the growth that has occurred since the base year allowing growth to be compared between jurisdictions. In , Australian economic infrastructure activity was $14.33 billion and increased by three fold to $58.16 billion over the 23 years to Figure 6 shows: The experiences of states and territories differ radically with some displaying very large changes yet others quite small ones. Until about 2001, in real terms, economic infrastructure activity grew comparatively slowly in most jurisdictions and even contracted in some (SA contracted until 1997; Tasmania and the NT until 2001 and the ACT had a contractionary period from 1995 to 1999). Page 18

19 In most jurisdictions, a period of more rapid growth in economic infrastructure began from about 2001, but activity continued at a slow pace in some smaller jurisdictions (Tasmania and the NT and the ACT until about 2010). The range of experiences between States and Territories is great; annual economic infrastructure spending for Australia increased by 306% between and ; o two States exceeded this growth; WA with 727% and Queensland with 337%, o four jurisdictions increased economic infrastructure by more than 200%; NSW with 246%, Victoria with 227%, SA with 201% and the ACT with 251%, o two jurisdictions experienced much smaller annual increase; the NT with 75% and Tasmania with 51%. Variability in Infrastructure Activity Observation suggests that the state and territory infrastructure trends (illustrated in Figure 6) display greater variability than the national trend (illustrated in Figure 1). A similar difference is evident between state and territory trends in the employment of engineers and the corresponding national trend. 6 The range of variation in economic infrastructure activity was far greater for States and Territories than for the national aggregate: The range for Australia was from negative 9.3% to an increase of 12.9%; in three years, the annual change was negative reducing activity below the level of the previous year. The range of activity in every State and Territory was greater than the range for Australia and the number of years in which the activity change was negative at least double that for Australia (in Queensland) and up to four times the Australian occurrence (12 years in Tasmania). Average annual growth was also compared to the variance of growth rates. For Australia as a whole, average annual growth in economic infrastructure was 6.5% and had a variance of 42.0, or six times the average. In every state and territory, the variance of annual growth was at least 15 times the state or territory s average growth; In NSW, the variance was 15.5 times average growth In Victoria, the variance was 26.9 times average growth In Queensland, the variance was 18.6 times average growth In WA, the variance was 34.9 times average growth In SA, the variance was 64.1 times average growth In Tasmania, the variance was times average growth In the NT, the variance was times annual growth In the ACT, the variance was 69.4 times annual growth. 6 Engineers Australia, State Engineering Labour Markets in 2012, Policy Note, 14 September 2012, Page 19

20 The past decade has been characterised by persistent shortages of practicing engineers, while at the same time just 60% of persons trained to be engineers are employed in engineering work. 7 Economic infrastructure is an important component of the work undertaken by Australian engineers, either directly as employees of engineering construction companies or through engineering consulting businesses working on infrastructure projects. There have been no formal studies of the relationship between variability in infrastructure development and engineering careers, but anecdotal information suggests that there is a connection between dispersal of project workforces and the interval between one project coming to an end and another commencing. This connection has been recognised by Infrastructure Australia through its work on the infrastructure pipeline. By ensuring that there is a continuous pipeline of shovel ready infrastructure projects, Infrastructure Australia aims to minimise the interval between projects, if perhaps not eliminating it completely, so that more continuous workforce planning can become a feature of infrastructure development. Infrastructure Trends in New South Wales In 2010, Engineers Australia assessed NSW infrastructure as C, in poor condition with significant underinvestment in all sectors over a long period of time. Figure 7 illustrates the background trends to this assessment distinguishing between economic infrastructure and total engineering construction. The gap between the two trends represents engineering construction in the resources sector, in heavy industry and on recreational facilities. Table 3 shows the activity levels for components of economic infrastructure in and in in prices on a similar basis to the national statistics in Table 1. Figure 8 illustrates the trends for these components between the end-points in the Table. In , NSW economic infrastructure activity was 31.2% of national activity but despite the strong trend in Figure 7, this share fell to 26.6% in 7 See Engineers Australia, The Engineering Profession: A Statistical Overview, Ninth Edition, 2012, Page 20