ANALYSING AUSTRALIA S INFRASTRUCTURE TRENDS 2013

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INFRASTRUCTURE TRENDS 2013

What has changed since the 2010 Infrastructure Report Card?

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ISBN 978-1-922107-00-8 Author: Andre Kaspura

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 www.engineersaustralia.org.au

Policy and Public Relations Engineers Australia

11 National Circuit, Barton ACT 2600 Tel: 02 6270 6555

Email: policy@engineersaustralia.org.au

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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 2010.

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.

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.

Stephen Durkin

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EXECUTIVE SUMMARY

This report evaluates trends in economic infrastructure since the last Engineers Australia Infrastructure Report Cards (IRCs) in 2010. 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 resources and heavy industry sector. In the year ending 30 June 2012, engineering construction on economic infrastructure was $58.16 billion,1 an increase of 17% over 2010 and almost 1½ times the activity in 1999-00 when the first IRC was released.

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.

At June 2012, there was work yet to be completed on economic infrastructure valued at $163.96 billion; 2.8 times the value of economic infrastructure work completed in 2011-12. There was also an

astonishing $523.52 billion in total engineering construction yet to be completed, a multiple of 4.6 times the engineering construction work completed across 2011-12.

In 2011-12, work commenced on new economic infrastructure projects valued at $50.44 billion.

Commencements of total engineering construction work fell to $93.93 billion in 2011-12, 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.}

“In the year ending 30 June 2012,

engineering construction on

economic infrastructure was

$58.16 billion… there is still a

phenomenal amount of

infrastructure and engineering

construction activity in the system

and scheduled for completion

over the coming few years.”

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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+”.

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.

This report also examines trends in engineering construction on some assets that are not typically 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 other words, it was specialised infrastructure. Some states and territories have performed better than others. Growth in economic infrastructure has increased since the 2010 Infrastructure Report 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.

“…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.”

“…several jurisdictions have at

least one asset class where little,

if any, new activity has occurred

since the 2010 Infrastructure

Report Card...”

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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 2010. 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 (Very Good); Infrastructure is fit for its current and anticipated future purposes

B (Good); Minor changes are required to enable infrastructure to be fit for its current and

anticipated future purposes

C (Adequate); Major changes are required to enable infrastructure to be fit for its current and

D (Poor); Critical changes are required to enable infrastructure to be fit for its current and

F (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 2010. An assessment of “C” indicates that national infrastructure is adequate but

2_{Australian Treasury, Australia to 2050: Future Challenges, January 2010,}

www.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf

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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 2011-12 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

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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 2009-10. Trends from 1988-89 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.

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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 2005. 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 2011-12, economic infrastructure work valued at $58.16 billion in real terms (2009-10 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 $114.56 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 1988-89, 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 2009-10 prices.}

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In 1988-89, 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 2011-12, 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

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The headlines have been about total engineering construction, which has increased from $17.63 billion to $114.56 billion in 2011-12. 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 2011-12, activity was $17.92 billion (30.8% of total economic infrastructure), 12.0% higher than the previous year. Since 1988-89, 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 2011-12, activity was $920.3 million in real terms and was the lowest activity level since 2005-06, contracting 26.4% relative to the previous year. Figure 2 shows that activity levels have been highest since about 2007-08, 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%.

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Railways

In 1988-89, 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 2011-12 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 2011-12. As was the case with railways, a substantial share of this change was related to the resources sector.

Water Supply and Storage

Until 2002-03, 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 2006. Since the IRC, engineering construction on water supply assets has contracted by 10.4% per annum.

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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 1988-89 almost three-fold to $2,981.4 million in 2011-12. 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 1988-89, 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 2011-12 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 1988-89, 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 2011-12, 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 1988-89, 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 2011-12 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 2011-12 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 2010-11 and 2011-12. 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

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THE INFRASTRUCTURE PIPELINE

The infrastructure pipeline for 2011-12 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 2011-12, $164 billion in economic infrastructure work was yet to be completed. This was almost three times the amount of engineering construction completed in 2011-12. 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 2001. 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 2012-13 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 2011-12 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 2012-13 in these sectors is highly likely to exceed the 2011-12 figure.

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Figure 4 shows that historically, new commencements in economic infrastructure have tracked very closely to economic infrastructure completed, but in 2011-12 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 2009-10 and equal to about 86% of the value of work completed in 2011-12. 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 2011-12 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.

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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 1989-90 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 1988-89, Australian economic infrastructure activity was $14.33 billion and increased by three fold to $58.16 billion over the 23 years to 2011-12. 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).

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• 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 1989-90 and 2011-12;

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 137.7 times average growth  In the NT, the variance was 264.7 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,}

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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 1988-89 and in 2011-12 in 2009-10 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 1988-89, 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,}

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2011-12. Total engineering construction in NSW was 29.0% of national activity in 1988-89 and this slipped to 18.6% in 2011-12. Although resources sector activity in NSW grew strongly, it did not match the growth that occurred elsewhere.

In 1988-89, economic infrastructure activity in NSW was $4.47 billion in 2009-10 prices. There was an additional $651.3 million of activity in other engineering construction, with 71% occurring in the

resources sector and heavy industry, resulting in total activity of $5.12 billion. The three largest areas of economic infrastructure were roads ($1.6 billion or 35.8%), telecommunications ($1.2 billion or 26.9%) and electricity & related facilities and pipelines ($829.4 million or 18.6%) with substantial amounts applied to water and sewerage ($594.3 million or 13.3%) and bridges, railways and ports ($240.6 million or 5.4%).

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Table 3 shows that in the 23 years to 2011-12, economic infrastructure grew by an annual average 6.0% compared to 1.0% per annum growth in population. Annual growth has increased over time and during the last year was 9.9%. However, there were substantial differences between asset classes and this is reflected in the distribution of activity in 2011-12.

The 2010 IRC gave NSW roads an overall assessment of C-, with assessments ranging from B- for national roads, D+ for state roads and D+ for local roads. Construction activity on NSW roads increased strongly in proportional terms and has remained the largest category of activity ($5.03 billion in 2009-10 prices or 32.6%). Figure 8 shows that the roads trend in NSW generally followed an upwards trend with a growth spurt from about 2002 to 2007 and a second growth spurt in later years. Average growth in the years up to the IRC assessment was 5.1% per annum and in the two years since the IRC it was 22.7%, pointing towards some improvement.

Activity on bridges, railways and ports experienced the highest average growth rates, particularly during the last 5 years, and by 2011-12 had grown to $3.43 billion or 22.2% of economic infrastructure. Figure 8 shows that there was a pronounced growth spurt from 2008 onwards. Average growth prior to the 2010 IRC assessment was 17.5% and in the two years since was 15.3%, a fall in growth but still substantial. Bridges were not separately assessed in the 2010 IRC but railways were assessed as D- and ports as C. Recent activity levels suggest some improvements are under underway.

Engineers Australia assessed NSW electricity infrastructure as C- in 2010 and gas infrastructure as C. Infrastructure activity on electricity and related facilities and pipelines also experienced strong growth to become the second largest activity sector in 2011-12 ($3.97 billion or 25.6%). Figure 8 shows that there was a pronounced increase in growth from around 2005. Average growth up to the 2010 IRC was 9.6% per annum which slowed to 7.9% per annum in the two years since. Much of the activity was associated with transmission facilities, but there has been little change so far as ageing coal-fired generators are concerned.

NSW IRC assessments in water and sewerage ranged from B- for potable water, C+ for waste water and C for stormwater and irrigation infrastructure. Activity on water and sewerage facilities remained below $1.0 billion until about 2004 when a pronounced increase in activity occurred, peaking at $2.12 billion in 2008-09. Average growth in the years prior to the IRC was 9.6% per annum. A large part of the growth spurt is thought to be associated with the Sydney water desalination plant and this activity was taken into account in the assessment. Since the 2010 IRC, average growth has become negative 13.0% per year, reflecting the completion of this project. At this stage there is little support for improved assessments. Telecommunications infrastructure was assessed as C- in 2010 and, as shown in Figure 8, reflects a relatively high level of activity that peaked at $2.3 billion in 2000-01. Activity has fluctuated a great deal and as late as 2006-07 was close to peak with activity levels at $2.1 billion. Average growth leading up to the 2010 IRC was 1.8% per annum, and in the two years since has been 15.7% per annum as activity on the National Broadband Network ramps up, but the level of activity in 2011-12 – $1.6 billion in real terms – was well within historical bounds. More progress is needed to support any change in this assessment.

Figure 7 shows that other engineering construction, the gap between economic infrastructure and total engineering construction, has widened substantially. In 2011-12, it was $5.87 billion, with average growth over twice the growth of economic infrastructure, and growth accelerating over time. Most (82.6%) was attributable to the resources sector and heavy industry.

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Infrastructure Trends in Victoria

In 2010, Engineers Australia assessed Victoria’s infrastructure as “C”, adequate but with stresses evident in traffic congestion and inadequacies in public transport in major cities, problems with waste water treatment, and inadequate broadband in regional areas. Figure 9 illustrates the background trends in economic infrastructure activity and total engineering construction in Victoria, and Table 4 provides end-point levels and growth statistics. Figure 10 shows the trends in the components of Victorian economic infrastructure.

In 1988-89, economic infrastructure activity in Victoria was $2.79 billion in 2009-10 prices (19.5% of national activity), and grew to $9.12 billion in 2011-12 (15.7% of national activity), at an average growth rate of 6.0% per annum. As shown in Table 4, growth was higher in the second part of this period than the first, but during 2011-12 activity fell by 3.6%. Average population growth over the past 23 years was 1.1%, but was higher over the last 10 years, averaging 1.5% per annum.

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Victorian roads were generally assessed as C+ with the exception of local roads that were assessed as C-. The assessment indicated that demand for roads was rising faster than supply, particularly in regional areas, and an increase in investment is essential to maintain existing standards. In 1989-90, roads activity was $954.4 million in real terms and increased by an average 6.5% per annum in the years prior to the 2010 IRC, but in the two years since has raced ahead to average 22.2% per annum, increasing activity to $2.81 billion in real terms in 2011-12. Figure 10 shows that roads growth has comprised two phases; a period of sharp contraction just prior to the IRC and the strong growth since. The net effect is that activity in 2011-12 was still well down on peak activity of $3.64 billion which occurred in 2006-07. The indications for future assessments of roads are still somewhat mixed.

Victorian railways were assessed as D, poor and critical changes were needed. Ports were assessed as C+, recognising that despite some improvements access and congestion problems were still prevalent. The background to this assessment was the low level of activity from 1988-89 ($161.8 million in real terms) to about 2002. Average growth in the lead-up to the IRC was 16.1% per annum and this has increased to 31.2% per annum since to be $1.17 billion in real terms in 2011-12. The strong activity levels since the IRC suggests that some improvement is underway but further monitoring is needed to confirm this.

Victoria’s electricity infrastructure was assessed as C-, recognising the tight supply-demand balance, uncertainty about coal-fired generation and climate vulnerability. Gas infrastructure was assessed as C, recognising that although some improvements had occurred, asset quality had not significantly improved and vulnerability to single points of failure in the transmission system remained. Prior to the 2010 IRC assessment, infrastructure activity had grown by an average 10.5% per annum to $1.7 billion in real terms. Growth has increased in the two years since to average 16.4% per annum and was $2,287.0 million in real terms in 2011-12. This additional activity has probably gone part of the way to addressing some of the transmission vulnerabilities raised in the 2010 IRC but is unlikely to be sufficient to resolve all issues raised, particularly electricity generation.

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Potable water infrastructure was assessed as C in 2010, waste water infrastructure as B- and

stormwater and irrigation infrastructure were assessed as C-. As Figure 10 shows, activity levels in this asset category were comparatively low until about 2007 when a sharp burst in activity commenced with activity increasing to $2.2 billion. Average growth prior to the IRC assessment was 16.7% per annum and has turned negative in the two years since averaging contraction of 9.0% per annum. In 2011-12, as major projects, particularly the water desalination plant approached completion, activity fell to $1.7 billion. This pronounced burst of activity was taken into account in the 2010 IRC assessment and the down-turn in activity raises questions about whether all outstanding water and sewerage issues identified in the assessment have been addressed.

In 2010, Engineers Australia assessed Victoria’s telecommunications infrastructure as C, with the main outstanding issue being under-provision of fast, affordable fixed broadband infrastructure. Figure 10 shows that activity levels in telecommunications, although susceptible to year on year fluctuations, have trended at a comparatively high level. Average growth prior to the IRC was 3.7% per annum but only 1.5% per annum since. At this stage, activity seems to be the continuation of the past trend with no sign of expansion.

Total engineering construction was $433.5 million higher than economic infrastructure in 1988-89 with about 80% attributed to the resource sector and heavy industry. As Figure 9 and Table 4 show, there was substantial growth in other engineering construction activity to $2.1 billion in 2011-12, bringing total engineering construction up to $11.25 billion. About two thirds of the other category was attributed to the resources sector and heavy industry with the remainder in the recreational facilities and other categories.

Infrastructure Trends in Queensland

The 2010 Engineers Australia IRC assessed Queensland infrastructure as C+, noting that many infrastructure sectors faced significant problems, which if not addressed, will lead to substantial reductions in quality and performance in future. Two issues received particular mention, under-investment in maintenance and renewals and demand pressures caused by population growth. This section follows the pattern established above; Figures 11 and 12 illustrate the trends in Queensland economic infrastructure and total engineering construction and Table 5 summarises key statistics.

In 1988-89, Queensland economic infrastructure activity was $3.16 billion in real terms (22.0% of national activity) and total engineering construction was $3.56 billion in real terms (29.6% of national activity). Growth in economic infrastructure averaged 7.2% per annum and in 2011-12 was $13.72

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billion (20.2% of national activity) and growth in total engineering construction benefited from rapid growth in the resources sector and averaged 11.0% per annum to be $33.98 billion in 2011-12.

The largest component of Queensland economic infrastructure is roads. The 2010 IRC assessed national, State and local roads as C-, noting that the overall quality of the road network has deteriorated due to traffic volumes growing faster than infrastructure improvements and under-investment in

maintenance and renewals. Figure 12 shows that roads activity grew steadily to about 2002 when a more pronounced growth spurt began, continuing through to 2009, followed by a lull for two years and a

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resumption of the earlier trend in 2011-12. Average growth up to the IRC assessment was 8.1% per annum and this has since fallen back to 6.0% per annum. The IRC assessment took account of the changes through to 2009 and present activity levels would need to be maintained for some years to warrant an upgraded assessment.

Activity on railways, ports and bridges followed a low but steady trend until about 2004, and most of the change reflected in the growth rates in Table 5 can be attributed to activity since then. The 2010 IRC assessed Queensland railways as C-, noting that while coal networks had improved, there were major problems with capacity constraints, congestion, particularly with respect to shared passenger and freight lines and failure to keep pace with residential and industry development. Ports were assessed as B, noting the dangers of expansion lagging behind increases in demand for port facilities and associated roads. Average growth up to the IRC assessment was 14.3% per annum and this has fallen to 1.8% per annum in the two years since. There appears to be little prospect of an improved assessment.

Energy related infrastructure in Queensland has grown strongly for many years from $430.6 million in real terms in 1988-89 to $3.12 billion in 2011-12. The 2010 IRC assessed electricity infrastructure as C recognising that there has been improved performance in the south east Queensland distribution network and commissioning of new generation plants. Reservations were expressed about failure to deal with ageing transmission and distribution infrastructure, particularly outside the south east. Gas infrastructure was assessed as C+, recognising the improvements that have occurred to service the domestic market and plans for the export sector. Average growth in activity prior to the IRC was 12.0% per annum but has since reduced to 8.1% per annum with most of this coming in 2011-12. More evidence is needed to support an IRC assessment upgrade.

As was the case in several other states, Queensland activity in the water and sewerage sector was relatively low until drought pressures led to a large increase in activity from about 2004 onwards. This surge in activity is reflected in IRC assessments; potable water and waste water infrastructure were assessed as B-, noting the improvements that had occurred including major changes to institutional arrangements. Stormwater was assessed as C and irrigation as C+, noting that while some

improvements had occurred, significant problems remained unresolved. From Figure 12, it would appear that improvements taken into account in the 2010 IRC have run their course. Average growth prior to the IRC was 13.0% per annum, even higher in the period immediately before it, but has fallen back to 8.7% per annum since. Recent high activity was included in the IRC process and further improvements would be needed to substantiate an improved assessment.

The IRC assessed Queensland’s communications infrastructure as B with the major reservations applying to areas away from the state’s east coast network. Figure 12 shows that activity in

telecommunications activity has been reasonably consistent over the years but fell before the 2010 IRC. Growth over this period averaged just 0.8% per annum and even though this leaped to 21.9% per

annum since, the increased activity was within the bounds of past fluctuations. There is little basis to suggest any change.

The resource and heavy industry sector in Queensland has experienced extraordinary growth since 1988-89, and this continued at an increased rate last year. The experience of Queensland is exceeded only by the changes in Western Australia. Queensland’s economic infrastructure activity in 2011-12 was just over 40% of the total engineering construction that occurred in the state and has resulted in

significant pressures on the supply of engineers in particular. The pipeline of engineering construction has not been examined on a state basis, but it is reasonable to say that the volume of work not yet completed in the Queensland resources sector will ensure high activity levels for the next one to three years.

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Infrastructure Trends in South Australia

In 2010, engineers Australia assessed South Australia’s infrastructure as C+, noting that there has been little improvement in the previous 5 years and evidence that suggests the state’s infrastructure is

stressed including traffic congestion, public transport inadequacies and inadequate broadband facilities. The background to this assessment is in Figures 13 and 14 which illustrate trends in economic

infrastructure and total engineering construction and the components of economic infrastructure in South Australia, and in Table 6 which gives details of activity levels and growth rates.

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In 1988-89, South Australian economic infrastructure was $1.19 billion in real terms (8.3% of national activity) and total engineering construction was $1.39 billion (7.9% of national activity). By 2011-12, economic infrastructure activity had increased to $3.59 billion but fell to 6.2% of national activity, and total engineering construction had increased to $4.7 billion in real terms (4.1% of national activity). Given the low density of the state it is not surprising that the largest component of economic

infrastructure is roads. The 2010 IRC assessed national and state roads as C and local roads as D, with the comment that significant improvements were needed to address a large maintenance backlog and growing congestion. Figure 14 shows that there was a steadily increasing trend in roads activity in South Australia until about 2007 when activity sharply increased, peaking at $1.13 billion in 2008-09 and, with the exception of a drop to $971 million in 2009-10, remaining close to the peak level. Average growth in the years prior to the 2010 IRC was 5.8% per annum, even higher in the period immediately before it. Growth has since fallen to 3.7% per annum and is unlikely to be sufficient to overcome deficiencies identified.

Railways were assessed as C with the comment that the continual decline in service quality may be arrested by planned investment. Ports were assessed as B- with the caveat that increases in minerals exports will require port expansion. The trend in Figure 14 shows low and spasmodic activity until about 2005 when activity began to grow more strongly, indeed increasing from $56.2 million in real terms in 2004-05 to $462.5 million in 2009-10, the year of the IRC assessment. Average growth up to then was 37.5% per annum and although growth has slowed it remains at 22.2% per annum. The high level of activity provides grounds for optimism about an improved assessment.

South Australia’s electricity infrastructure was assessed as B- with caveats relating to the management of peak demand and noting that generation capacity will need to be expanded in about 2012-13. Gas infrastructure was assessed as B+ and was in adequate condition. Figure 14 shows that activity in these energy facilities has followed a saw-tooth trend throughout the period examined growing from $264.6 million in real terms in 1988-89 to $925.2 million in real terms in 2011-12. Growth in the years prior to the 2010 IRC averaged 19.6% per annum and has been followed by contraction of 7.3% per annum since. The jury is out so far as any change to the IRC assessment is concerned.

The 2010 IRC assessed potable water infrastructure as B, noting that reliability will be related to the completion of the Adelaide desalination plant, assessed waste water infrastructure as B- recognising that improvements have occurred, but assessed storm water infrastructure as D and irrigation infrastructure

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as C+ with major improvements needed in both areas. Figure 14 shows that trend activity in water and sewerage has been modest until about 2008 when activity levels spiked sharply, peaking at $1.083 billion in real terms in 2009-10. Although activity has fallen since, it remains well above the level it was before the spike began. The desalination plant was considered in arriving at the IRC assessment. It is difficult to say how much of the activity during the last 2 years was on the completion of the plant or other work. Further monitoring is necessary to establish the likelihood of a changed assessment.

South Australia’s telecommunications infrastructure was assessed as C in 2010, noting that there were still many blackspots in broadband and mobile coverage and areas of network vulnerability. As Figure 14 shows, although displaying characteristic fluctuations, telecommunications activity in South Australia has been one of the more consistent areas of infrastructure activity over a long period of time. Activity prior to the IRC assessment year grew by an average 3.0% per annum. Table 6 shows rapid growth since but it is difficult to tell whether this is simply a repeat of past fluctuations or something else. At this stage there is no basis for a change in assessment in these figures.

South Australia has benefited from a minor share in the resources sector boom with relatively strong growth that has moderated over the past 5 years. There seems to be some pick up in the last year. The figures involved are large compared to other activity in South Australia but quite small compared to corresponding activity in WA, Queensland and, to some extent, NSW.

Infrastructure Trends in Western Australia

The 2010 IRC assessed Western Australia’s infrastructure as C+, generally adequate to good with some high quality components and some areas that need significant improvements due to capacity constraints and ageing. Using the same approach as for other States, Figures 15 and 16 illustrate trends in

economic infrastructure and total engineering construction and Table 7 provides details of activity levels and growth rates.

Several of the asset classes in Western Australia’s economic infrastructure have expanded because of new infrastructure investments in urban areas and because of infrastructure investments complementary

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to the development of a resources sector facility, and in some cases the latter is by far the greater. Both are regarded as economic infrastructure in their potential to increase economic activity, however, they each satisfy different demands for infrastructure services. For example, a railway to haul ore from a mine to an export port is an essential complement to the mine, and under ACCC third party

arrangements may be accessed by users other than its owners. But a railway in this location is unlikely to satisfy the demand for commuter rail transport. To unravel such possibilities information additional to that discussed in this paper is required.

In 1988-89, economic infrastructure activity in WA was $1.68 billion in real terms (11.8% of national activity) and total engineering construction was $2.99 billion in real terms (17.0% of national activity). The resources and heavy industry sector were already making its presence felt by a very high activity level. By 2011-12, economic infrastructure activity had increased eight-fold to $13.93 billion and was now 24.0% of national activity. Total engineering construction had increased to $39.69 billion, 34.6% of national activity.

In every other jurisdiction, roads represented the largest component of economic infrastructure and this was also the case in Western Australia until about 2005-06. Since then, activity on roads infrastructure has been exceeded by activity on railways, ports and bridges and by energy related facilities. National and state roads were assessed as B- in the 2010 IRC and local roads as C- with significant caveats relating to an inability to keep pace with growth in passenger and freight demand on major roads and insufficient renewal and maintenance on local roads. Figure 16 shows that there has been a consistent upwards trend in road activity from $580.7 million in real terms in 1988-89, to $2.19 billion in 2011-12. Average annual growth up to the 2010 IRC assessment year was 7.3% per annum but has since almost disappeared with growth averaging just 0.6% per annum. The growth in activity evident in Figure 16 was taken into account in the IRC assessment and the flattening of activity since provides little basis for reappraisal.

The trend in activity on railways, ports and bridges was comparatively low and flat until about 2003-04 when a period of extraordinary expansion began that saw activity increase from $495.6 million in 2003-04 to $7.27 billion in 2011-12 with a 74% increase in the last year. Much of the IRC assessment of C+ in 2010 dealt with persistent problems in the metropolitan rail network including overcrowding at peak times, capacity constraints and intermodal facilities. The assessment noted that Pilbara lines continue to be highly efficient reflecting recent design and construction. The pattern of activity in this group is

consistent with further expansion of resource sector facilities. While some part may be due to activity in the south western corner of the state, additional information is required to make a full assessment of the situation.

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The 2010 IRC assessed Western Australia’s electricity infrastructure as B-, noting that although facilities were adequate in the South West Interconnected System, there were transmission capacity and

reliability issues in many urban and regional areas. Gas infrastructure was assessed as C+ with the major concerns being the lack of a long term gas policy and unresolved single points of failure. Figure 16 shows that there have been two distinct growth phases for energy infrastructure, the first in the six years prior to 2000 and the second from 2002 to the present. Average growth in the lead-up to the 2010 IRC was 30.1% per annum and although growth since has fallen back to average 9.2% per annum, in other places this is high growth. These are positive signs and if activity continues at this level the prospects for an improved assessment are sound.

Relative to other asset categories, water and sewerage infrastructure activity in Western Australia has followed a modest upwards trend. Even so, much has been achieved as noted by the 2010 IRC which assessed potable water facilities as B- and waste water facilities as B, quite high ratings compared to other jurisdictions. However, stormwater and irrigation were assessed as C and C+, respectively, in both cases recognising improvements since the previous assessment. Figure 16 shows that activity in water and sewerage increased markedly during the drought years and peaked a year after the IRC

assessment. Average growth in the lead-up to the IRC was 9.5% per annum but opposite changes in the two years since have resulted in effective zero change. Although activity levels are high, it remains to be seen whether it is sufficient to overcome problems outstanding and to keep up with demand in a climate that has experienced a drying trend for over two decades.

Western Australian telecommunications infrastructure was assessed as C- in 2010 and noted major limitations in providing data services in the metropolitan area and limited availability outside it. Mobile coverage outside major regional centres was another serious problem identified. Figure 16 shows that the trend for telecommunications infrastructure activity was one of the lowest activity areas. As was the case in other states, activity was relatively consistent over time, although with fluctuations. Average

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growth in the years leading up to the 2010 IRC was 9.1% per annum and activity increased to $461.1 million in real terms in 2011-12 in a growth spurt which was within the bounds of historical activity. It is too soon to contemplate a revised assessment.

The stand-out activity in Western Australia has been engineering construction in the resources and heavy industry sector which experienced average growth of 21% for 23 years, and 78% last year. The 2011-12 activity level ($24.96 billion in 2009-10 prices) alone exceeds the level of total engineering construction in 2011-12 in every jurisdiction except Queensland, a state also experiencing a resources boom. The signs are that this situation will continue for at least the next two to three years as projects already underway progress. New project commencements will simply add to the load.

Infrastructure Trends in Tasmania

Engineers Australia assessed Tasmania’s infrastructure as C in 2010, noting that the state’s infrastructure was barely adequate or poor and stressed in many areas. The background trends in economic infrastructure and total engineering construction are shown in Figure 17 and the trends in the components of economic infrastructure are shown in Figure 18. Table 8 contains details of activity levels and growth rates.

In 1988-89, Tasmanian economic infrastructure activity was $523.5 million in real terms, 3.7% of national activity and total engineering construction was $626.8 million in real terms, 3.6% of national activity. For much of the 23 year period examined engineering construction activity in Tasmania was very flat and predominant changes were annual fluctuations. However, activity levels increased sharply between 2001 and 2006 and while subsequently the earlier flat trends re-established themselves, this occurred at about double the earlier level of activity. By 2011-12, activity on economic infrastructure was $791.5 million (1.4% of national activity) and total engineering construction was $947.6 million (0.8% of national activity).

The 2010 IRC assessed Tasmanian national roads as C+, state roads as C and local roads as D. The main observations made concerned reactive practices and an inability to keep up with demand. In 1988-89, roads activity was $203.7 million in real terms, 39% of Tasmania’s total economic infrastructure activity. Average growth in activity in the years prior to the IRC was 1.0% per annum. Figure 18 shows this outcome was the net effect of a downwards trend until about 2002 and some growth thereafter. Since the IRC, average growth has been 9.5% per annum, despite the fall in activity in 2011-12. This trend suggests the status quo is being maintained.

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The 2010 IRC assessed rail infrastructure as F, inadequate for current and future purposes, and assessed ports as B- with the reservation that there was poor integration between ports and transport infrastructure. There has been no rail activity, but as Figure 18 shows, ports activity has been quite low but average growth leading up to the 2010 IRC was 12.3% per annum and 30.5% per annum since, increasing activity to $53.4 million in real terms in 2011-12. These figures are promising but the last year fall needs to be reversed to be convincing.