Huge construction workforce shortfall will lead to price rises and delays, report warns

A shortfall of 229,000 workers is looming across the infrastructure sector, with warnings it will add to ongoing cost pressures on everything from steel to quarry rocks and make planning for new homes, roads and power generation even more difficult.

The federal government’s chief adviser on infrastructure projects, Infrastructure Australia, will on Tuesday use a report on the sector’s capacity constraints to reveal that the cost of some vital goods will climb another 25 per cent this financial year, putting more pressure on government and private-sector budgets.

Government and private sector plans for $230 billion of projects over the next five years could be delayed because of a shortage of workers.Credit: Paul Rovere

Some of the hardest-hit areas will be in regional NSW and Victoria, where major road works will struggle for essential inputs and workers. The agency says the federal government needs to bring in more migrant engineers.

All levels of government, and the private sector, have reported large cost overruns due to a combination of worker shortages, problems with supply chains, and the sheer quantity of infrastructure work spread across the country over the past two years.

Infrastructure Australia found the nation’s construction-related workforce needs to grow by 127 per cent to meet a shortage of workers that will peak in the middle of next year.

Of the 229,000 shortfall of full-time workers, the agency estimates 131,000 are in trades and labour. There are also significant shortages of engineers, architects and scientists.

The agency’s chief executive, Adam Copp, said on top of spending $230 billion in public infrastructure over the next five years, governments were hoping for the construction of 1.2 million new homes, as well as a quadrupling of spending in the energy sector.

“With so much construction activity under way, the industry is finding it increasingly difficult to source key building materials and workers – particularly engineers, skilled trades and labourers,” he said.

“While broad skills and workforce reforms are underway nationally, we need to urgently boost the pipeline of workers into the sector and develop a national infrastructure workforce strategy.”

About 50 per cent of apprentices in the sector complete their training, lower than the overall apprenticeship completion rate.

Infrastructure Australia found that despite the sector suffering a shortage of engineers, about 47 per cent of qualified migrant engineers were actively looking for work. It said a lack of local experience and a reluctance by businesses to employ skilled migrants were preventing people from getting a job.

House-building costs surged by more than 20 per cent towards the end of the pandemic as strong demand was hit by supply chain blockages across the globe. This year, builders are expecting the cost of timber windows, sand and terracotta tiles to lift by more than 25 per cent. Steel imports have also climbed by 20 per cent a year for the past two years.

The Murray, Riverina and Mid North Coast areas of NSW, the Northern Territory outback, Central Queensland and Victoria’s south-west are all areas facing shortages that could affect major projects.

Brisbane’s plans for the 2032 Olympics, and the Pacific Highway bypass of Coffs Harbour in NSW could both be affected because of building material shortages.

Last month, Infrastructure Minister Catherine King revealed the federal government was withdrawing support for 50 projects that formed part of the previous government’s $120 billion, 10-year infrastructure program.

That was prompted by a report that found some projects were not value for money, and that costs for many others had surged due to a range of factors including supply shortages and wages bills.

States and territories have warned they will be unable to deliver promised road and rail projects because of the federal government’s decision.

Copp said the national and state governments had to work in partnership to improve the demand and supply balance for major infrastructure projects.

He said there was also an opportunity to develop the domestic capacity for low-emission construction materials, such as recycled materials, that would take pressure off local supply chains.

“For major road projects, our modelling suggests that close to a third of conventional materials – 54 million tonnes annually – could be replaced with recycled materials,” he said.

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