Australia's infrastructure cost conundrum

Infrastructure is about the long-term growth and prosperity of a nation, but Australia will get very little of this benefit if the cost of building it continues to rapidly escalate. Australia is becoming increasingly uncompetitive in design and delivery of major projects. This is an unacceptable situation, and a newly commissioned multi-state inquiry by the SMART Infrastructure Facility will identify the key causes and make recommendations to help secure better value for taxpayers' money. Australian jurisdictions have experienced sharp rises in the cost of delivering mega-projects. In the pre-GFC mining construction boom period of the mid-2000s construction costs were 20-30% higher than previous levels. Infrastructure projects continue to get larger and, therefore, more risky, so relatively small percentage increases in design and construction costs translate into very large dollar costs. Certainly the pre- and post-GFC resources booms put upward pressure on scarce labour, equipment and raw materials but this does not appear to explain the full extent of the cost inflation. Put another way, some of the increases in the cost of large projects during the boom years has persisted and seems permanent. The Business Council of Australia is concerned about Australia's attractiveness to invest. Australia's hospitals are 62% more expensive to build, shopping centres 43% and schools 26% than OECD peers. Australia's onshore resource projects are 40% more expensive than the US Gulf Coast and offshore projects are 200% more expensive.