Posted: 15 Jul. 2020 05 min. read

Making the most of Australia’s infrastructure opportunity

All economies are underpinned by a strong infrastructure platform. In the current COVID-19 crisis, investment in infrastructure provides the immediate opportunity of keeping people employed and businesses afloat, while maintaining the productive capacity of the economy.  This is evident in the recent infrastructure stimulus measures announced by Government, such as the $1.5 billion boost declared by Prime Minister Scott Morrison in mid-June.

The Hon. Alan Tudge MP, our Minister for Population, Cities and Urban Infrastructure, recently commented in a CEDA webinar that the Federal Government is focussed on working with state counterparts “on some of the bottlenecks which are occurring so we can accelerate some of the larger-scale projects.” He commented, “We want the approvals process halved from an average of 4 years to 2 years.”

While these announcements are positive and widely supported, Australia needs to be careful that we don’t run too fast and invest in the wrong places. We must work out what the right infrastructure projects are and what can be done right now to improve existing projects. We don't have to build our way out of the problem.

There are two simple things that Australia can do to ensure we invest our money in the right place with infrastructure stimulus:

1)  Start by improving existing processes and assets

We should start by looking at our existing asset base and see what efficiencies we can deliver on by upgrading or using different demand management tools.

Contract management:

There's a huge amount of upside for governments to consider how we manage existing contracts. Starting from a simplistic level, they can begin to really enforce their contractual rights on deals that are alive now. If governments look at contract management tools to extract maximum value from their existing projects and apply them to new projects, there's quite a lot of value that can be achieved.

Maintenance and upgrades of existing projects – particularly digital innovation:

We're moving to a more digital world and there's a clear role for digital innovation and technology to ensure more efficient delivery, but also add value beyond just the project delivery lifecycle and into the operational phase of the asset. Some short-term economic benefits of using technology include:

  • Achieve decision acceleration and bring benefits across the asset lifecycle
  • Cost reduction on projects thus allowing resource dollars to be spread further
  • Stimulus of the technology sector at the interface of infrastructure
  • More efficient use of raw resources such as steel or timber in a time of resource shortages
  • Training and upskilling of the labour market.

2)  Focus on project prioritisation to ensure we choose the right infrastructure projects

We don’t want to fall into the trap of just ‘getting on and doing stuff’ when there’s a risk that down the track we haven’t done the right ‘stuff’. The government should be using this ‘great pause’ as an opportunity to prioritise projects, particularly those that will deliver on long-term infrastructure needs. For example, COVID-19 has had a game-changing impact on how we will work and operate into the future – this will need more digital enabling assets like national high-speed broadband coverage and 5G. The government should also consider the digital upgrade of our regions, as people reassess their need to be in cities. 

We must consider resilience and social infrastructure: 

For Australia, on top of COVID-19, we are also recovering from the recent bushfires and floods, so identifying the catalysts to create resilient infrastructure is important. Smart Infrastructure considers the future climate and is designed to minimise damages due to natural disasters and recovers quickly and cost-effectively after disaster strikes. Community is also starting to call for greater involvement around decision making in infrastructure, they need to be consulted and buy-in to projects, so community engagement and social outcomes will become increasingly important. For example, infrastructure should provide wellbeing benefits, such as cycle paths and urban planting.

We must take a macro view:

Rather than just looking at individual projects, we need to take a more macro view around precincts and broader community outcomes. Precinct approaches can create wider social and economic benefits than traditional approaches to development and infrastructure investment. Some of the benefits include:

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The upfront planning and prioritisation can create short-term stimuli to economic growth. From a longer-term perspective, an assessment of economic outcomes for communities as well investors will translate to broader benefits, rather than just singular project outcomes.

In closing: Yes, invest! But make sure it’s the right thing.

Choosing the right projects and making sure projects are based on the right economic and social drivers is important for the market because it builds investor and citizen confidence and will set us up for a more resilient future.

Click here to read more on our perspective on infrastructure investment opportunities or watch this video

Meet our author

Luke Houghton

Luke Houghton

Partner, Financial Advisory

Luke is the Global Infrastructure and Capital Projects Lead Partner, and the Asia Pacific and Australia Lead Partner Infrastructure and Capital Projects. This has included extensive experience in structuring project financing across a range of industries and procurement models. He is passionate about seeing infrastructure and services creating better economic and social outcomes for citizens.