Earthmoving News, Opinion

CCF QLD calls for clarity on federal government funding

With inflation, increased pressure on states to provide funding, an overburdened infrastructure pipeline and decreased productivity, we need clarity on federal government funding.

We are slowly starting to receive more information from the government that reveals the true state of infrastructure delivery in Australia.

For those who are involved with government, either state or federal, it can often be the case that to get any clear bearing on an issue, it is out of your hands – and it takes quite some time for anything to make sense. Thankfully some very talented public servants are working hard to get the best from an evolving policy.

As I write this, we still have no outcome of the 60-day review into the infrastructure of the Olympic games. We do, however, have an executive summary of the 90-day report into infrastructure spending.

Headlines focused on projects that were cut or delayed and their dollar value. But while cuts and delays are unacceptable, the real headline is the establishment of the federal infrastructure funding commitment.

On the surface the reaffirming of the $120 billion pipeline over 10 years looks impressive, but it does not address the inflationary impacts on the delivery of infrastructure and the parallel productivity decline in delivering infrastructure.

The federal review established that spending will be capped at $12 billion per year. There is no allowance for inflation. Year on year each dollar will deliver less infrastructure.

Recommendation 6 of the 90-day review is that federal funding should be funded 50/50 between the federal government and individual states.

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This means states will need to find an additional 30 per cent for joint funded projects, which were previously an 80/20 split.

We can’t lose sight of the fact that when the Morrison government set the $120 billion 10-year pipeline it was prior to the hyperinflation emanating from the policies and environment of the post-COVID-19 era.

For our industry, the Road and Bridge Construction Index was approximately six per cent over the last calendar year.

Regardless of headline inflation trending towards the RBA target of below three per cent, it is expected that there will be a lag before we see parity in construction inflation.

This will be driven by demand over supply from the significant pipeline of renewable infrastructure over and above business as usual.

While there is a cost-of-living crisis for households, the current restriction on funding is setting up a greater cost of delivery crisis for infrastructure.

The elephant in the room is the lack of growth, or rather a decline in productivity in our sector.

Government policy at both federal and state levels has seen productivity declines in excess of 30 per cent.

This, coupled with inflationary pressure driven by demand exceeding supply, means any cap in spending will have a disastrous effect on the delivery of infrastructure.

To meet current cost overruns, the future cost of infrastructure and declining productivity, states must provide funding they can’t afford.

If we take Queensland as an example, the top competing contenders for state funding are the Olympic Games, transport, health, crime, renewable energy, education, maintenance and disaster recovery.

Coal prices have dropped, as has sugar, hit by coal royalties.

The population is increasing, state revenue is limited and the federal government is not only capping infrastructure funding but also requiring the state add another  30 per cent to projects that would otherwise only require 20 per cent.

It does not help that commitments such as a million homes by 2046 or 70 per cent renewable energy by 2032 are being rolled out on top of the current problem.

While 95 per cent of new housing and some of the renewable energy infrastructure will be delivered by the private sector, matching public infrastructure will be required. I doubt if Queensland, any other state, or the federal government has the appetite for more debt.

The Queensland Government’s own website boasts a $62 Billion Queensland Energy Jobs Plan.

Something has got to give.

It is time for governments to be truthful to the public about the funding pressures so sensible decisions can be made about what can be funded and how it can be funded.

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