Business Looks Beyond the Boom

08 August 2013

“Australia’s investment project pipeline has started to decline and needs urgent action from governments and industry to address high costs and other barriers to successful delivery or we risk a slower-growth future,” Business Council of Australia President Tony Shepherd said.

“The most immediate challenge in continuing economic growth is how we manage the transition from the peak of the resources boom, and pulling out all stops to deliver on the investment pipeline, is critical to this task,” Mr Shepherd told an investment and project costs forum in Sydney today.

The BCA used today’s forum, which involved BCA members and other leaders from industry and government, to release the final report of an internal task force which has been investigating the high costs of delivering major projects in Australia, and opportunities for improving performance.

The report found Australia’s investment project pipeline is now declining from unprecedented highs, falling from an estimated $921 billion to $877 billion over the past 12 months. Importantly, the component of the pipeline most associated with future activity – projects ‘under consideration’ – at $159 billion is 30 per cent lower than one year ago, and 43 per cent lower than two years ago.

Mr Shepherd said Australia should aim to maintain infrastructure investment at more than 4 per cent of GDP per annum, or cumulative spending of $767 billion over 10 years, to smooth the transition from the peak of the mining boom and ensure investment benefits keep flowing to the community.

“At this challenging time for our economy, it is vital we deliver projects currently underway at lowest cost, secure viable projects that are not yet committed, and bring on the next wave of investment, including high-quality public infrastructure projects,” he said.

The BCA’s Project Costs Task Force, established 12 months ago and chaired by Mr Shepherd, has focused on actions companies and governments need to take to improve Australia’s project competitiveness.

The group concluded that Australia’s high project costs were due to problems in three main areas:

  • planning, design, scheduling and procurement
  • unpredictable and unnecessarily complex government regulatory processes
  • a workplace relations system which does not support productivity and competitiveness.

The remoteness of many projects and the high Australian dollar are also contributing factors and exacerbate these problem areas.

The task force is recommending government prioritise the following actions:

  • the federal government should lift its spending on Infrastructure Australia approved projects and consider the merits of borrowing to do so
  • reform the workplace relations system, particularly by:
    • reinstating the Australian Building and Construction Commission
    • ensure good faith bargaining on greenfield sites and where that fails, provide the capacity for employer-only agreements with no return of compulsory arbitration
    • improve the capacity for use of individual flexibility agreements
    • wind back expanded union right of access and entry
  • enable Infrastructure Australia to identify its own projects of national significance
  • urgent reforms to development assessment and approval processes, which should be guided by the Productivity Commission’s recent report on the issue.

“The opportunity remains to lock in $159 billion worth of investment in projects that are classed as ‘under consideration’ and continue to work to make viable $250 billion of projects that are listed as ‘possible’.

“We expect other sectors of the economy like housing, services and exports to strengthen over time but in the immediate period we need to prioritise actions to secure viable, productive investments.

“Securing major investment projects will help offset a projected real and cumulative decline of $39 billion in the engineering construction sector over the next three years. We have developed real expertise in project design and construction in Australia that we should be deploying for new investment opportunities.

“The BCA’s Action Plan for Enduring Prosperity, released last week, set out a vision for well-managed growth based on productive workers, continuing investment and unleashing innovation. These factors are fundamental in securing and improving the delivery of major projects in Australia.

“We need to improve the competitive environment in Australia and reduce project costs by:

  • ensuring businesses have access to skilled labour
  • improving project management skills and the capacity of managers to make productivity-enhancing decisions
  • improving the efficiency of our project approval processes
  • implementing a better workplace relations system that is more conducive to good project performance and productivity growth.

“Both governments and industry bear responsibility for taking the actions that will constrain the costs of delivering major projects and restore Australia’s competitiveness.”

For further information contact:
Scott Thompson, Director, Media and Public Affairs
Business Council of Australia
Telephone (03) 8664 2664 | Mobile 0403 241 128



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2013 Media Releases

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2013 Media Releases