The Australian Infrastructure Investment Programme has been significantly scaled back after an independent review ruled the AUD$120 billion pipeline “undeliverable”.
The Australian government has cut 50 projects from its Infrastructure Investment Programme (IIP).
The decision follows the findings of an independent strategic review, commissioned in May 2023. This found that the 10-year programme inherited from the former coalition government was undeliverable.
The main reason behind the decision is a changed economic picture.
The IIP was developed when interest rates were low, and assumed Australia would have the labour supply to deliver on its ambitions. High interest rates and labour shortages have since become serious/critical issues in Australia.
In October 2023, the International Monetary Fund warned that a spending boom on infrastructure projects, mainly at the state and territory levels, was pushing Australia’s economy beyond capacity and fuelling inflation.
Why did the infrastructure review take place?
The IIP contained several projects without sufficient funding or a strong enough business case to justify Australian public sector investment.
This led to a clogged infrastructure pipeline that didn’t reflect market capacity.
The projects removed from the IIP consist of road and rail projects totalling around AUD$7 billion. None of the projects were already under construction.
Even though there are cuts to the overall number of projects, Australia still expects to complete or substantially develop more than 400 projects over the next decade.
What were the findings?
The review found that many projects in the pipeline:
- did not demonstrate merit;
- lacked any national strategic rationale;
- did not meet the government’s national investment priorities; and
- were often at high risk of further cost pressures or delays.
The review concluded that several projects received funding commitments too early in their planning process, before detailed and credible design and costing were undertaken.
The review also found that the government addresses cost pressures, cost escalations, delivery delays, and changes to project scope on an ad hoc basis.
This ad-hoc approach has made the government slow to respond to evidence of looming cost increases. It also means a lack of transparency and consistency in addressing problems.
Finally, the review noted the absence of any requirement or mechanisms to fund projects based on alignment with long-term national priorities.
It recommended that states and territories develop annual infrastructure plans, including priority projects, to help the federal government make funding decisions.
What has the Australian government said?
The review made 15 recommendations in total, all of which the Australian government has agreed to either fully or in principle.
The government says it’s acting on the recommendations to improve efficiency and flexibility in project deliverability on nationally significant road and rail corridors.
For example, many projects along strategic national freight routes are now grouped into corridors to allow states and territories to manage project delivery schedules more flexibly.
The federal government has also said it will soon respond to the review’s recommendations on improving the funding, planning, and prioritisation of local government programmes.
A new Infrastructure Policy Statement
Alongside responding to the review, the federal government introduced a new Infrastructure Policy Statement for nationally significant transport infrastructure in Australia.
The statement defines nationally significant transport infrastructure, sets out three strategic themes that guide infrastructure investment decisions, and outlines how the government will implement these themes.
The themes focus on outcomes in:
- national productivity and resilience
- liveability
- sustainability
The ICE’s view
The government's efforts to ensure the infrastructure investment pipeline is sustainable and aligns with the right policy outcomes are welcome.
Reviews like this are a necessary part of strategic infrastructure planning and prioritisation.
The review emphasises a critical point: infrastructure isn’t just about building. It’s about building right.
It’s also provided clarity to the construction sector – which has sounded warnings about the lack of capacity available to deliver the IIP – on which projects will take priority in the next decade.
The need to reprofile the pipeline due to serious market capacity issues highlights Australia’s infrastructure delivery productivity challenge.
In an upcoming next steps and green paper programme, the ICE will look into what else needs to happen to improve the productivity of infrastructure delivery in Australia.
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