Australia

Australia is failing to tackle infrastructure backlog: report

THE Infrastructure Investment Metric, a new major series of research reports being produced by Infrastructure Partnerships Australia (IPA), in collaboration with business research and forecasting firm, BIS Shrapnel, was released last week.

The Metric measures Australia's actual progress on its infrastructure backlog and reveals that headline infrastructure investment figures are being inflated by mining related projects, with the nation not making substantial progress on its infrastructure shortfalls.

"These figures indicate an alarming fall in the level of new investment into the nation's infrastructure deficit," said IPA Chief Executive, Brendan Lyon, adding that the March quarter data shows that non-mining investment has retreated to its lowest levels since the mid-2000s.

My Lyon said the figures demonstrate that infrastructure is not immune from the two-speed economy, with governments struggling to fund public infrastructure. He called on Australia's governments to rein in expenditure and free up capacity for infrastructure investment.

Key findings of the report, which covers the March 2012 quarter, include:

  • Total civil commencements have fallen back marginally in the March 2012 quarter compared with the December 2011 quarter (from 149.3 to 125.9), and remain above the historical average reading since the series began in March 2010. However, the sector continues to be heavily reliant on growth in mining and heavy industry commencements.
  • The March 2012 Metric reading suggests that, outside of mining and heavy industry, infrastructure commencements have fallen to their lowest levels since early 2006; non-mine commencements fell back to 82.3 in the quarter, well below the average metric reading (112.6) over the last two years.
  • Transport commencements fell substantially in the March 2012 quarter (to 68.7), driven primarily by weak road commencements (50.5) as well as small retreatments in railways and harbours. This may reflect work being contracted out under smaller packages (under $10 million), but more likely represents an aggregate decline in transport contracts let in the quarter.
  • Utilities commencements moved higher in the March 2012 quarter (96.7); a level above the average over the last two years (87.9). This rise was influenced by new contracts in gas pipelines, sewerage and telecommunications; the latter driven by NBN-related work.

"The March quarter data shows a concerning decline in contracted investment across non mining infrastructure, particularly transport," Mr Lyon said, with recent Federal and state budgets making little new funding available for major projects.

"Already our major cities are straining under growing congestion which will cost the Australian economy more than $20 billion by 2020."

According to IPA, the Infrastructure Investment Metric has been in development for more than three years and provides a unique leading indicator of actual investment in the nation's infrastructure.

The Metric draws on a survey of actual work won during the preceding quarter by close to twenty of Australia's largest civil construction companies, with the survey capturing around 30 per cent of the market.

The Metric will be published each quarter, with the next publication, for the June 2012 quarter, due in August. More information is available from the Infrastructure Partnerships Australia website at <http://www.infrastructure.org.au/>.

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