Spending on transport infrastructure remains huge and according to Arcadis managing director infrastructure Australia-Pacific Phil Kajewski, we likely haven’t even reached the peak.
But the sustained infrastructure boom is taking its toll, Kajewski says, with a lack of talent on both the private and public sides stretching the industry to its limits.
And he suspects the industry “will become more stretched before it gets better” and when it will ease off is anyone’s guess.
Kajewski says he’s observed a shift in the industry over the past five or six years as a result of the ongoing demand for infrastructure work, including the consolidation of some of the major contractors.
He’s not completely sure why contractors are stumbling in a time of strong demand but he suspects it’s true that “contractors tend to die of indigestion rather than starvation” – they struggle to make money when they don’t have the staff numbers and the competence to deliver projects.
[Some observers say the shortage of talent and experience and the consequent fast tracking of less talented staff up the ranks has led to at least some of the financial failures and poor contracting outcomes, such as on the Light Rail project for Sydney, which has been plagued by delays and a failure to factor in complications from embedded infrastructure on George Street in the CBD.]
Kajewski says fewer contractors in the market is leading to decreased competition. This is making the market more attractive to overseas contractors, particularly from countries such as Spain where the economy is stagnating and work is hard to come by.
He says the government will play a key role in ensuring the market remains attractive for overseas contractors.
Even split between road and rail expenditure
As big players in the design construction market, Arcadis has a workload dominated by major rail projects. Kajewski says the company is involved in both Melbourne and Sydney’s metro projects, as well as a road projects in the major cities.
He’s observed a close to even split in expenditure between road and rail. And he says there has been a marked increase in spending on rail “when you wind the clock back ten or even six years”.
“There’s a couple of things behind the new balance between road and rail and I can’t see it changing any time soon, it’s the new reality. As cities grow they realise they can’t rely on one mode of transport to solve their mobility issues,” he says.
“This will continue through 2019 and I don’t see it changing in the near future.”
A change of state government could stall proceedings
Although a federal election is unlikely to have much of an impact on infrastructure spending, a change of government at the state level can “kick the floor out from under us” as a new government establishes itself and asserts new priorities.
This is because state government drives the politics on infrastructure spending and informs federal allocations.
As such, the return of the Victorian Labor government means there will be no change of priorities and therefore a expected stable rate of activity. A change of government in NSW in March, however, could mean a temporary lull in activity while infrastructure priorities are reoriented.