Cost blowouts, material and labour shortages and the need to exercise public spending restraint are expected to weigh on Australia’s crowded infrastructure pipeline.
There are several headwinds threatening the future of transport infrastructure investment and the boom has likely passed its peak, according to Deloitte Access Economics.
Government infrastructure spending, particularly rail, road and other transport projects, has been propping up overall business investment as tracked by the economic group.
The $445.1 billion in total value of definite projects – either under construction or committed – is a whisper from the last record high of 2014 fuelled by the mining sector.
Yet heavy public investment in infrastructure at a time of workforce and material constraints is contributing to higher construction costs and inflation, the International Monetary Fund warned on Wednesday.
The global organisation urged federal and state governments to consider deferring or staging projects to help the central bank bring inflation back to target by 2025.
Several projects are set to be cut or delayed as the federal government and some states assess the viability of pipelines.
A 90-day strategic review of $120 billion worth of major land transport projects is already underway.
It’s expected to uncover massive cost overruns and delays and outline opportunities to bring the program back within more sustainable limits.
Several states have already been downsizing, scrapping and delaying projects due to budget constraints.
Ongoing cuts to federal funding will likely further limit growth in infrastructure projects.
The Deloitte Access Economics report also identified the low carbon energy transition as a major opportunity that would need a strong uplift in investment in coming years.
The federal government is in the process of assembling a sustainable finance strategy that will help finance the transition to net zero.
A consultation paper released on Thursday flagged sustainable investment product labels and better disclosure of corporate transition plans as priority areas.
“Australia’s financial system plays an integral role in aligning investment and economic growth with climate, environmental and social goals, including financing the transition to net zero,” Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones said in a joint statement.
“We want to ensure markets have access to high quality, credible and comparable information when it comes to climate and sustainability so investors and companies have the confidence, clarity and certainty they need and are better able to manage climate-related risks.”
