Labour shortfalls risks record infrastructure investment

An almost 50 per cent labour shortfall is tipped to hamstring record investment in public and private infrastructure, compounding fears of project delays and higher costs for taxpayers.

Infrastructure Partnerships Australia chief executive Adrian Dwyer said while the record expenditure was welcome for the sector and economy more broadly, ‘growing pains are inevitable’. Picture: Hollie Adams

A labour shortfall of more than 40 per cent is tipped to hamstring record investment in public and private infrastructure, compounding fears the workforce shortage will lead to project delays and higher costs for taxpayers.

The government faces new calls from Infrastructure Partnerships Australia chief executive Adrian Dwyer to recalibrate the skilled migration program and introduce a “specific visa sub-class for infrastructure” to better match in-demand skills to meet project timelines.

Forecasts from the IPA reveal national infrastructure expenditure is projected to peak at $19.4bn in the third quarter of 2024, driven predominantly by major projects across NSW and Victoria.

The road, rail, energy and social infrastructure projects will place considerable pressure on an already tight labour market, IPA chief executive Adrian Dwyer said, and while the record expenditure was welcome for the sector and economy more broadly, “growing pains are inevitable”.

“We are already seeing some acute shortage of high-end skills, such as tunnelling and signalling engineers and project directors, emerging in the delivery of this multi-decade pipeline,” Mr Dwyer said. “Unless we can meet the coming workforce demand – or at the very least improve construction productivity – we’ll start to see delays in delivery, with taxpayers footing the bill through higher project costs.”

The construction sector would need to grow its total workforce by nearly 43.4 per cent to meet the demands of the pipeline, he said.

He called on the Morrison government to help bridge the workforce gap with a visa sub-class for infrastructure targeted at “acutely in demand skills” to provide longer-term certainty to industry, and state governments.

Australian Constructors Association chief executive Jon ­Davies said the workforce shortfall was “already lapping at our door”, and he called for a greater emphasis to be given to rectifying the sector’s lagging productivity.

“We can’t rely solely on skilled migration to solve the shortfall – it’s bigger than that. Every country is investing heavily in infrastructure and Australia faces stiff competition for skilled labour,” he said. “We need to use this opportunity to grasp the productivity nettle.”

Mr Davies said by halving the gap in productivity growth between construction and other better performing major industries over the past 30 years, the sector could build an extra $15bn worth of projects off the same ­investment.

At a national level, major road, rail and energy projects dominate the projected pipeline of infrastructure works. Until 2025, expenditure on major rail projects are forecast to average $5.5bn a quarter, while major road and energy projects are expected to average $3.7bn and $3.9bn respectively.

Much of the national pipeline will be driven by NSW, with infrastructure expenditure averaging $6.5bn a quarter until 2025, reaching $8bn in the first quarter 2024.

A combination of federal and state projects – including the Western Sydney Airport, Sydney Metro West and stage one of the M6 Motorway – will continue to heap pressure on limited work forces, with labour demand reaching 145 per cent by April 2024.

In Victoria, demand for labour will reach 143 per cent by April 2024 on the back of the North East Link Tunnel, the Suburban Rail Loop, Melbourne Airport rail and other social infrastructure works.

Queensland will see significant infrastructure expenditure and major workforce pressures, with an average quarterly outlay of $2.8bn by the middle of the decade and labour demand peaking at 156 per cent by January 2023.

Labour demands in South Australia could peak at 2½ times ­capacity by October 2024.