Victoria has been warned it may need to postpone transport megaprojects as labour shortages, material price rises and an overstretched construction industry inflict budget and schedule blowouts on major infrastructure works.

Infrastructure Australia said more of the large transport projects planned across the country will suffer delays and cost overruns after the national construction pipeline grew by $15 billion over the past 12 months.

Premier Daniel Andrews and Minister for Transport and Infrastructure Jacinta Allan at the Metro Tunnel’s Town Hall Station construction site earlier this month. Credit:Nicki Connolly

In a blunt assessment, the peak infrastructure body said in a report released on Wednesday it is “no longer a question of if a project will slip, but more likely when, by how long and at what cost” owing to compounding pressures.

NSW delayed several multibillion-dollar transport projects earlier this year as industry headwinds hit. But the Andrews government has not announced any changes to Victoria’s $21 billion-a-year construction pipeline.

Credit rating agency S&P Global estimated in June that Victoria can build only 80 to 90 per cent of the projects it has planned over the next four years because of industry capacity shortages.

Infrastructure Australia acting chief executive Adam Copp said the sector was facing major disruption to supply chains caused by the pandemic, volatile demand and the war in Ukraine.

A severe labour shortage was having the biggest impact on industry capacity, he said. Governments competing for builders would need to take a “good, hard look” at how much of their project pipeline they could actually build.

“It’s as simple as … matching your ambitions to the ability of the sector to deliver it,” Copp said. “Victoria is definitely looking at improving the productivity of the sector, but the sector can only deliver what it can deliver.”

Major public infrastructure projects valued at $237 billion are planned across the country over the next five years – up from $15 billion in the past year – with 84 per cent of that in Victoria, NSW and Queensland. Transport projects account for 63 per cent of the budget and were “definitely the hardest hit” by the growing headwinds, Copp said.

The report estimates national labour demand to surge by 42,000 workers to a peak of 442,000 next year – more than double the projected available supply. Wages for public infrastructure jobs have grown by an average 17 per cent in the past year, while construction material costs have surged by 24 per cent.

Rising costs and a slump in profits led to a sharp rise in construction companies going bust this year, including Probuild and Condev, leaving fewer contractors to work on projects. Copp said the report underscored an urgent need to better manage construction risks and sequence major infrastructure projects.

“There are razor-thin margins for a lot of these construction companies and they will be under stress as input costs are rising,” he said.

The Andrews government is on course to spend just over $21 billion annually on infrastructure over the next four years – significantly higher than the state’s long-term average – as flagship transport projects near completion and others get under way.

The $12 billion Metro Tunnel rail project and West Gate Tunnel project are due to finish construction in 2025, with the latter already three years late and $3.8 billion over its original $6 billion budget.

Major work will ramp up on the North East Link toll road and Melbourne Airport Rail project next year, and start on the $35 billion Suburban Rail Loop – the state’s largest transport project.

Corey Hannett, director-general of the state government’s Major Transport Infrastructure Authority, said Victoria had a strong record of working with industry to plan and deliver projects, and the clear pipeline of projects ensured “we get the right people, suppliers and materials to build our new transport infrastructure efficiently and effectively”.

Adrian Dwyer, chief of industry lobby group Infrastructure Partnerships Australia, said the problem was “blindingly obvious” and that the country must “roll out the green and gold carpet” to foreign workers while training more domestic labour.

Transport Infrastructure Minister Jacinta Allan acknowledged last month that the construction sector faced workforce and supply chain challenges, but said the government would “work through” them with the industry “to get these projects delivered”.

The Morning Edition newsletter is our guide to the day’s most important and interesting stories, analysis and insights. Sign up here.

Most Viewed in National

From our partners

Source: Read Full Article