Unmasking the Money Pit: Why Aussie Infrastructure Breaks the Bank?

Australia spends more on our infrastructure?than comparable countries building similar projects. ?

In fact, 74% of completed large and technically complex projects in Australia have been failures, in terms of going over schedule or over budget. For example, the Sydney Metro rail project started at $13 billion but now exceeds $25 billion due to cost overruns. Inland Rail, initially a $16.4 billion investment, ballooned to over $31 billion. ?

Civil engineer and construction consultant, Grahame Campbell recently published a paper,?Bungles, Blowouts and Boondoggles: Why Australia's infrastructure projects cost more than they should . In the paper, he?exposed a troubling trend of wasteful spending in taxpayer-funded projects.

A significant amount of federal and state government spending on large-scale projects, arguably, is wasteful, or even the product of government pork-barrelling.?

Wasteful spending was highlighted in the federal government’s recent Infrastructure Investment Review, which cancelled funding for around 50 planned projects, finding some “do not demonstrate merit, lack any national strategic rationale and do not meet the Australian Government’s national investment priorities”.?

So why are we overspending??

1. Labour and Industrial Relations Costs: Australia generally has higher labour costs compared with many other countries, often constituting as much as 45% of construction costs.?
2. Lower Productivity: Our workforce may be paid better than those across the world, but they tend to be less-educated, skilled or engaged. Work environments are inefficient and there is a lack of trust between industry stakeholders. Since 2014, construction costs surged over 25%, a figure that echoes Australia's declining construction productivity, down 8.5% over 15 years.?
3. Stringent Regulations and Standards: While safety is paramount, Australia's strict construction, safety, and environmental standards inflate costs. Compliance with these regulations often adds to the complexity and cost of infrastructure projects.?
4. Design Complexities: High standards for safety, sustainability, and resilience make our projects more intricate and costly. This can include considerations such as environmental impact, sustainability, and resilience, which may contribute to increased costs.?
5. Poor Project Management: Inefficient planning, delays, and scope changes contribute to financial chaos.?
6. Risk Offloading: Project cost is often inflated in Australia by a misguided focus on unloading risk in the early stages of a project's development. This is often driven by the type of contract that is presented to the industry by lawyers, with the objective of minimising up-front costs and putting most of the risks on the contractors.?

Australia's path to growth demands a balance between regulatory compliance, collaboration, and innovative solutions. Large scale taxpayer-funded infrastructure projects are vital to Australia’s growth and prosperity. As we strive for a prosperous future, it is vital we address these issues.

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Grahame Campbell served as the Managing Director of CMPS&F, is a past president of the Association of Consulting Engineers in Australia and the Australian Pipeline Industry Association, a past member of the Pacific Basin Economic Council and a Fellow of the Royal Society NSW (FRSN).?

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