Adele Ferguson July 04, 2012
PUBLIC spending on roads, rail and power stations is collapsing to levels not seen since 2006, posing a threat to the nation's falling productivity.
A new quarterly survey of the country's biggest construction companies, compiled by Infrastructure Partnerships Australia and BIS Shrapnel, shows how the two-speed economy is distorting infrastructure expenditure - with headline national figures propped up by massive investment in mining projects.
The March metric reveals that outside of mining, spending has fallen to its lowest levels in seven years. Non-mine commitments fell back to an index of 82.9 in the quarter, well below the average of 113. Transport infrastructure was the worst hit, falling to 68.7, as state governments reduced their commitments to roads and rail as they continued to cut spending to protect their AAA credit rating, or in Queensland's case, tried to restore it.
Of the $27 billion of infrastructure spending under way at the end of the March quarter, more than $20 billion is privately funded, with the majority of that dedicated to private mining-related projects. That means little progress is being made against the country's $770 billion public infrastructure backlog.
The Infrastructure Partnerships chief executive, Brendan Lyon, said the civil infrastructure metric showed non-mining investment had retreated to a degree where Australia was not making substantial progress in its infrastructure shortfalls and this was a concern. "The falling construction figures should serve as a wake-up call to Australia's governments about the need to rein in expenditure and free up capacity for infrastructure investment," he said.
The data supports figures due to be released by the Bureau of Statistics today, which are tipped to show a disintegration in public infrastructure investment but strong growth in mining spending in Western Australia and Queensland.
Between 2006 and 2010, Australia's governments doubled annual infrastructure expenditure to more than $50 billion, funded largely
through borrowing. With most states and territories now teetering on the edge of a credit downgrade, the recent round of budgets has not sustained the level of investment over the forward estimates.
Business leaders have warned governments about the impact on productivity if they continue to ignore investment in rail, ports, roads and power stations.
The head of infrastructure at Macquarie Capital, Jim Miller, said the problem in getting projects done was not a lack of appetite from capital and equity markets, but a lack of projects. ''There are broadly two types of projects, those that are on the governments' balance and those that are off,'' he said. ''For on balance sheet projects, solutions lie in governments freeing up money by selling assets and making real changes to the way the public sector runs.''
Mr Lyon said the figures indicated an alarming fall in the level of new investment into the nation's infrastructure deficit. ''The metric confirms that governments are not keeping up with demand, and shows a clear case for reform,'' he said.
''Australia's productivity slide is one of the most substantial public policy challenges facing this country.''
The managing director of Abigroup, David Jurd, said infrastructure was the backbone of the economy and ''any robust discussion about productivity has to consider how we can improve on infrastructure delivery.
''Without action, infrastructure constraints will hamper national economic growth, which means it's even more important that we start getting good projects off the shelf and under way.''
The figures show that utilities commencements moved higher in the March quarter to 96.7, a level above the average over the past two years of 87.9, mainly because of new contracts in gas pipelines, sewerage and work related to the national broadband network.
The chairman of Transfield and president of the Business Council of Australia, Tony Shepherd, echoed concerns about productivity and the need for more budget allocations to civil infrastructure. ''This highlights that it will be critical for governments to identify and commence the next phase of public infrastructure projects based on comprehensive cost-benefit analysis in order to maintain a strong economy and lift Australia's productivity,'' he said.