The ICE is seeking views on what measures can be taken to make Australia’s infrastructure delivery more efficient and effective.
Like many advanced economies, Australia has seen its productivity growth slow in recent decades.
And no sector has seen a worse productivity record than construction.
The productivity of the construction industry in Australia has declined by 16.5% since 2014 – a much more significant drop than that felt by other industries.
Looking over a longer time span, construction industry wages have risen more than 85% since 2001-02, while productivity has fallen 8% over the same period.
According to the Productivity Commission, Australia is “running to stand still”.
It’s not the case that governments and industry have been ignoring the issue.
Despite multiple reports and many initiatives to address productivity growth, the situation hasn’t improved.
It’s an issue being looked into at the highest level: construction productivity and market capacity are defined by the Australian federal government as a national cabinet priority.
To look at this issue in detail and find solutions, the ICE has launched a new scoping paper and call for insights.
This paper is the first stage of a new ICE policy programme on improving infrastructure delivery in Australia.
Attend the panel debate
In this upcoming policy programme, the ICE will look into what needs to happen to improve the productivity of infrastructure delivery in Australia.
To kick start this, the ICE is holding a public panel debate on ‘How do we improve the productivity of infrastructure delivery in Australia?’
This timely debate will cover how the quality of outcomes can be improved, and how waste can be reduced in doing so.Sign up for free
What will happen if productivity doesn’t improve?
Over the coming decades, Australia must deliver a net zero transition, the Brisbane Olympic and Paralympic Games and associated infrastructure, and provide for a rapidly growing and ageing population.
Australian living standards also face a long period of decline unless the productivity trend is turned around.
The Productivity Commission projects future incomes will be almost 40% lower and the working week almost 5% longer.
Compounding all of this is the fact that Australia is running out of prime working-age labour.
The share of Australians aged 65 and over has doubled since 1970. This carries economic consequences and is a particular problem in construction, which relies on younger workers.
This labour market situation was one of the drivers of the Australian federal government’s recent decision to cut 50 projects from its infrastructure pipeline.
Simply put, there isn’t the market capacity to deliver on the country’s infrastructure ambitions.
Infrastructure Australia is working to improve productivity and certainty in delivery costs and timescales, with a new report on market capacity due soon.
What’s holding back change?
Anyone familiar with construction productivity will recognise the barriers holding back change.
- Industry fragmentation and silo working that stifles innovation and collaboration;
- Low profit margins, meaning firms have limited scope to invest in productivity improvements;
- Complex procurement processes that exclude smaller firms.
There’s been a focus on the construction industry’s poor track record in adopting new technologies.
However, research from the Australian Constructors Association (ACA) shows this resistance to change is exaggerated.
Construction firms are willing to adopt technology when they show benefit.
The ACA argues that there’s no shortage of opportunities and solutions to improve productivity.
The challenge is instead in adopting these solutions across the industry’s operating system.
What solutions have been proposed?
There have been multiple reports produced and programmes of work undertaken on improving productivity over recent years.
But despite these efforts, stagnation in productivity has continued for some time, and ultimately, no real progress has been made.
Some of the solutions look at the frameworks that need to be in place to enable change.
For example, the ACA has recommended the creation of a National Construction Strategy with targets to improve productivity.
Engineers Australia has looked to the UK for solutions.
It has recommended the Australian federal government develop a ‘playbook’, based on the UK Construction Playbook.
This would be a best practice guide that mandates key policies to optimise benefits and minimise risk in infrastructure project management, delivery, and operations.
Other solutions focus on technology.
Digital transformation is widely seen as key to driving productivity and innovation in infrastructure delivery.
But the benefits of digital remain unharnessed by government and industry. The uptake of digital processes and practices remain low.
What happens next?
Ultimately, solutions need to be centred on a common definition of productivity, so they can have the greatest impact.
The ICE’s programme will focus on productivity in delivery, specifically:
- How to improve the quality of outcomes, i.e. effectiveness
- And how to ensure money isn’t wasted in doing this, i.e. efficiency
These are the same themes from ICE Past President Ed McCann’s presidential address, where he urged the industry to improve its productivity in order to fight the key challenges facing society today.
Australia isn’t alone in its productivity challenges - most other advanced economies are facing a similar productivity predicament.
But in an increasingly competitive global economy, unless improvements to productivity in infrastructure delivery are made, Australia is at risk of being left behind.
Call for action
The ICE is looking for insights and evidence on what measures can be taken to improve Australia's productivity in infrastructure delivery and achieve the country's growth and development goals.
The ICE is inviting infrastructure professionals globally to respond to the questions below. This consultation runs until 12 January 2024.
Responses can be made by emailing [email protected].
- How is Australia’s productivity challenge being defined?
- How are policymakers tackling it?
- How is the infrastructure sector tackling it?
- Australia has experienced sustained construction productivity stagnation, despite multiple attempts to address this. Considering this, why is productivity not improving?
- What learnings can be applied from countries that have faced similar productivity challenges?