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Infrastructure Australia releases new market capacity report

Demand for materials for use in road construction projects is expected to grow to a peak of $7.6 billion in 2023-24, according to the second Infrastructure Market Capacity Report released by Infrastructure Australia.

Improving risk management and proactively sequencing the major infrastructure pipeline will be key to managing the impacts of an overheated construction market, escalating input costs, labour shortages and productivity challenges, Infrastructure Australia’s 2022 Infrastructure Market Capacity report has found.

Infrastructure Australia’s Infrastructure Market Capacity Program is unique in the world as it provides a national view of Australia’s infrastructure pipeline and the market’s ability to deliver on it.

The 2022 edition shows that risks to on-time and on-budget project delivery have increased in the last 12 months, with demand for major public infrastructure projects climbing by $15 billion in a year.

Amid an increase in public and private sector infrastructure investment, Infrastructure Australia’s Acting Chief Executive Adam Copp said the industry was also contending with a surge in supply-side risks in 2021-22 caused by continuing uncertainty in the global economy.

“Australia’s infrastructure sector is facing significant disruption to supply chains caused by the COVID-19 pandemic, volatile demand and more recently, the war in Ukraine. This is causing delays and cost escalations for imported items, while delivery risks are being compounded by severe labour shortages that industry report as having the greatest impact on capacity,” Copp said.

“Industry also reports that fast-rising costs and contracts that are increasingly allocating risk responsibilities to parties not best-placed to manage them, combined with sharp declines in tier 1 contractor’s profitability observed in our 2021 edition, has contributed to a sharp rise in construction sector insolvencies in 2022. This leaves fewer companies to deliver the pipeline of work, with many already operating at 90 per cent capacity and above.”

The report finds that the five-year pipeline of major public infrastructure projects is valued at $237 billion – an increase of $15 billion in the last 12 months and equivalent to 6.7 per cent growth. Of this, transport accounts for 63 per cent of spend, with investment concentrated in New South Wales, Victoria and Queensland.

On the material demand side, the report finds the demand for materials for use in road construction projects is expected to grow to a peak of $7.6 billion in 2023−24. The cost of construction materials has risen by an average 24 per cent in the last 12 months.

The report deems labour scarcity as the single biggest issue faced by construction companies. As of October 2022, public infrastructure projects, including small capital projects, face a shortage of 214,000 skilled workers. In 2023, labour demand is projected to increase 42,000 to a peak of 442,000. This is more than double the projected available supply.

The opportunity to address supply-side challenges with recycled materials

This year, Infrastructure Australia expanded the Market Capacity Program to investigate the potential to unlock new supply chains of recycled materials for infrastructure construction.

It found that based on current technology and standards, around 27 per cent of conventional materials used for road projects could be replaced with a range of recycled materials. This would mean substituting approximately 54 million tonnes of conventional materials used in roads infrastructure with approximately 52 million tonnes of recycled materials.

With advancements in technology and updates to standards, the tonnage of conventional materials replaced could rise to 43 per cent, replacing 87 million tonnes of conventional materials with 80 million tonnes of recycled products

“Increasing the use of recycled materials is a cost-effective way to reduce waste and emissions and to deliver safe, sustainable and reliable infrastructure. However, in terms of embracing this opportunity, industry uptake is highly dependent on the technology, standards, market appetite and processes across the supply chain,” Copp said.

“The increased adoption of recycled materials in infrastructure projects can be expected to create additional jobs. Adopting greater quantities of recycled materials would create 9.2 jobs for every 10,000 tonnes of recycled waste, compared with only 2.8 for sending waste to landfill.

“With demand for materials for use in road construction projects expected to grow to a peak of $7.6 billion in 2023−24, there are substantial economic, social and sustainability benefits in utilising more recycled materials in delivering the infrastructure pipeline,” Copp added.


A number of recommendations and actions from previous Infrastructure Australia publications including the 2021 Australian Infrastructure Plan and Delivering Outcomes are reaffirmed in this report. Updated recommendations in this report include:

  • Improve industry capacity and capability by prioritising procurement and portfolio management, and increasing pipeline transparency, certainty and confidence.
  • Improve value for money and reduce risk by consistently adopting appropriate best-practice front-end due diligence for projects.
  • Build support and embed practices for the circular economy by developing a circular economy roadmap for the infrastructure sector, including annual progress reports.
  • Ensure the industry is a sector of choice for employees and can meet current and future workforce demands by introducing cultural reform that embraces diversity and inclusion.
  • Implement the focus areas of reform outlined in: Delivering Outcomes: A roadmap to improve infrastructure industry productivity and innovation.

The urgency of procurement reforms

Responding to the Infrastructure Australia’s report, Roads Australia Chief Executive Officer Michael Kilgariff said it was evident the industry was facing “a compounding range of challenges”.

“It is evident that our industry is facing a compounding range of challenges in the current economic climate, including cost escalations, skills shortages and stagnating productivity. Regrettably, these challenges are already having a serious impact on the viability of some industry participants,” said Kilgariff.

“Infrastructure Australia notes that of the $237 billion that will be spent on major public infrastructure projects over the next five years, nearly two thirds ($148.4 billion or 63 per cent) will be spent on transport projects. Yet as the report shows, there are serious pressures impeding industry’s capacity to deliver this pipeline, including a severe labour force shortage and increasing costs of materials.”

“Many of the remedies Infrastructure Australia outlines align with recommendations Roads Australia has made over the past two years to improve sequencing in the pipeline of transport infrastructure projects and enhance early planning and due diligence work,” Kilgariff  said.

“The report also highlights why we must accelerate efforts to attract more women to the sector’s workforce, embrace circular economy opportunities and deliver greater productivity benefits through technology.”

Kilgariff also said Roads Australia will be publishing its own updated report on options for procurement reform in the coming days.

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