The QMPPR has become the barometer of current and future major project activity, and construction industry conditions in Queensland. This report provides a comprehensive list of major infrastructure projects and an analysis on the corresponding level of construction activity based on both the completion of existing projects and the likelihood of potential projects proceeding.
A complete list of major projects has been considered for this analysis and is provided in this report, including explicit assumptions for each project such as work done and construction workforces employed each year. During 2020 the QMPPR will be updated to include project developments from governments and the private sector.
Figure 1: Pipeline Summary
This is due to the addition of $9.4bn in unfunded works, mainly backed by the private sector. 71% of the increase in unfunded work is based in resources and heavy industry projects concentrated in the Mackay-Isaac and Outback regions.
Funded activity is stronger in transport (both road and rail) as well as water compared to a year ago, but is much lower in non-water utilities (electricity, gas pipelines and telecoms) and resources and heavy industry. Funded work in the pipeline is higher for the public sector by nearly $1 billion compared to a year ago, but is down an equivalent amount for the private sector.
Greater Brisbane remains a critical area for funded major project activity. Outside of Greater Brisbane, however, there is substantial risk to the pipeline given the high level of unfunded work. Industry and government can use the regional profiles to better plan for the coming phase of major project work – and also use the pipeline to see where any emerging latent industry capacity may be tapped.
Appropriately identifying infrastructure gaps, choosing the most productive projects, and developing funding and financing solutions will remain critical for sustainable growth infrastructure investment in Queensland. However, growth in major project work through the first half of the 2020s may also bring challenges for industry capacity and capability as there is substantial transport infrastructure investment already underway in New South Wales, Victoria and around the world.
This compares with $41.3bn identified in the 2019 QMPPR between 2018/19 to 2022/23.
In this year’s pipeline there is a significant increase in resources and heavy industry projects, but much of this work remains unfunded.
Last year, the value of funded private sector work was $8.3bn, compared to $7.6bn in this report. More worryingly, the value of privately funded work announced or under procurement has nearly halved from $3.5bn last year to just $1.8bn this year.
Unfunded projects represent between 40% to 60% of the pipeline value in 2021/22, 2022/23 and 2023/24, introducing a level of uncertainty associated with positive business case development and financial investment decisions.
Funded work in 2019/20 and 2020/21 is currently around $1bn lower than total work in 2018/19 ($7bn). Growth in activity in these years is mostly dependent on funding existing unfunded projects. On current funding status, the five projected years to 2023/24 sees lower levels of funded work than in 2018/19.
Total (funded plus unfunded) activity is 83% higher than 2018/19 levels if all projects were to proceed. However 60% of the projected work in that year is currently unfunded. Unfunded activity in that year is highly concentrated in resources projects ($4.8bn) as well as water ($813m), electricity ($750m) and roads ($560m).
In 2018/19, 23% of major project work was in projects valued at $50m to $200m. By 2023/24, only 4% of all projects are in this range, with 70% valued above $500m.
Over the past two years, the entire budget has been spent on projects and not just announced.
Around 40% of all funded work in the pipeline is focused in south east Queensland with Greater Brisbane expected to see the highest levels of work. Meanwhile, more of the riskier, unfunded projects lie in the central, northern and western regions of the state where investment in resources, large water projects (such as dams) and electricity generation projects are more prominent, however typically unfunded.
Figure A: Comparison of Major Project Activity: 2020 versus 2019
Figure B: Funding Mix by Asset Class, 2020-2024, $Millions, All Projects
Figure C: Major Project Activity by Funding Status
The 2020 QMPPR identifies four key challenges with implications for government, industry and the broader community, and includes the addition of sustainability as a critical challenge facing both industry and governments.
The QMPPR tracks major investments in economic infrastructure, including transport, utilities, defence and resources assets. There are important human aspects to infrastructure investment as it defines our quality of life and raises standards of living for all Queenslanders. This can include improving access to important social services such as health and education, making road travel both safer and quicker, improving work/life balance by reducing the time spent on the daily commute, and improving the quality of the natural environment through harnessing new technologies across water, energy and telecommunications.
The economic benefits of timely and adequate infrastructure provision are often noted by economists and politicians. At the macroeconomic level, the development and delivery of infrastructure provides a welcome boost to employment and economic activity. But infrastructure investment also has a critical microeconomic role. Through good project selection, infrastructure investment can be a powerful determinant of productivity growth and productive capacity in the long term, increasing the Queensland economy’s potential “speed limit” into the future. Indeed, the volatile performance of the major projects market in Queensland and the broader Queensland economy over the past decade can be attributed to the impact of large, long investment cycles – with both the public and private sectors playing important roles.
The Queensland economy is being heavily supported by growth in public investment and spending. However, while public infrastructure investment is important, it is not an end in itself. A core aim of public infrastructure investment – and Queensland’s broader economic strategy – should be to boost productivity, competitiveness and long term growth in productive capacity which will also help stimulate private investment decisions.
As highlighted in this QMPPR, private investment – including investment in infrastructure – is currently falling in Queensland. Given the sheer size of private investment in the economy, this has driven a sharp slowdown in state economic growth through 2018/19, and is limiting potential growth into the future. Realising stronger levels of both private and public investment in productive infrastructure projects is key to securing long term economic growth and employment in Queensland.
Recent disastrous bushfires across eastern Australia, coupled with crippling droughts and floods, highlight the risks and challenges. In the infrastructure and major projects pipeline space, this includes:
The 2019 QMPPR warned of a $1.4bn setback in 2019/20 unless new funding was secured. This gap has been reduced to just under $400m in this QMPPR, but only if $700m of currently unfunded work begins quickly. Of this unfunded work, only $210m is credibly proposed, meaning that a significant setback cannot be avoided. In 2020/21, the gap between funded work in that year and what was done in 2018/19 is still around $1bn, but there is a healthier $2bn in credibly proposed major project work, suggesting that major project work could increase above 2018/19 if funding were made available for existing but currently unfunded projects.
Given that $1.1bn of the $2bn credibly proposed work for 2020/21 is in private sector resources projects, stronger growth will depend heavily on the fortunes of the resources industry. Similarly, a further $600m in credibly proposed work for 2020/21 is in privately funded electricity projects. While the Queensland Government maintains a 50% renewable energy target, the end of the national 2020 Renewable Energy Target (and significant uncertainty on energy policy at the national level) coupled with transmission system challenges is impacting confidence in this market.
By 2022/23, total major project activity in the QMPPR is valued at $12.9bn. If all projects proceeded, this would represent the highest level of major project activity in Queensland since 2013/14. Interestingly, these years see a near 50-50 split in the contribution from public versus private sector projects, with rail and road projects dominating public sector work, and resources (mainly gas and coal) projects dominating the private sector profile. 79% of the public sector work profile in these years is already funded compared to just 30% for the private sector.
Indeed, following the setback in 2019/20, funded public sector major project activity is projected to grow 90% to $5.5bn by 2021/22, and remain at $4.4bn in 2022/23. By contrast, funded private sector activity declines in every year of the QMPPR, although there is a hefty volume of credibly proposed projects in 2021/22 and 2022/23 that could potentially proceed.
Given the potential size of this cycle – and its synchronicity with similar investment cycles in other states and even other parts of the construction industry (such as residential and non-residential building) it will be important to plan ahead to meet likely construction industry capacity and capability challenges. This may involve strategies to help smooth the volatility of the cycle itself – that is, to deliver infrastructure in a timely way to meet demand – while also pursuing policies that encourage the construction industry to invest in its own capacity and capability to deliver.
In particular, governments should be prepared to be innovative in the way major projects are funded, financed and procured to encourage maximum industry participation and reward tenders that target growth in workforce development and labour productivity. Governments may also need to demonstrate flexibility in the delivery of the public sector pipeline, bringing forward projects with positive net economic benefits during periods of pipeline weakness or have the discretion to shift delivery timelines on other projects when these may clash with a surge in privately funded major project work. In turn, pipeline flexibility requires pipeline depth (having projects which can be called upon in weak times) and the financial capability to fund and deliver. This suggests that project origination (the generation of actual project opportunities) along with employing appropriate funding and financing mechanisms, remain core challenges.
With global temperatures now 1C above pre-industrial levels, anthropogenic climate change is already happening and Queensland in particular is feeling the heat. The global challenge is to limit further warming to a peak of 1.5C by sharply reducing carbon emissions. Unfortunately, Australia is highly unlikely to meet its agreed emissions reductions under the Paris Agreement (26-28% reduction in carbon emissions by 2030 compared to 2005, followed by a zero target by 2050). While energy generation and transport sectors are likely to bear the largest share of emission reduction efforts from here, there is also much that the construction industry can do to lower its own carbon footprint. Meanwhile, decades of rising emissions have already baked in a changed climate that will require significant reinvestment in existing and new infrastructure to adapt to these changes and build in resilience.
Queensland is at the forefront of climate change impacts in Australia, having experienced the greatest economic costs from droughts, floods, cyclones and heatwaves over the past decade. But it is also extremely well-placed to benefit from movements towards environmental sustainability and a zero-carbon economy. As noted in this report, Queensland can leverage from its own natural and comparative advantages in the green economy including its world leading solar resources, access to “next generation” commodities including copper, lead, zinc, silver, phosphate and rare earths to build new industries that will help drive down carbon emissions, and the development of new ‘green’ energy from renewable sources including hydrogen. In turn, supporting the global effort to reduce emissions will benefit very important industry sectors to Queensland – tourism and agriculture – which are highly susceptible to climate change impacts.
Figure D: Funded Major Project Outlook by Sector: 2019/20 to 2023/24
For decades now, globally, infrastructure related investment has been stifled by shortages of skilled professionals, mismatched risk expectations, a lack of genuinely bankable projects, and disagreement on the proper role of private capital. At the same time the pressure on governments to build more and more infrastructure and deliver services keeps growing without a sufficient income base.
Queensland, as one of Australia’s largest states with a growing and dispersed population, acutely feels this burden. Public spending is under pressure from competing needs, with ever increasing community requirements for spend on health and education as well connecting infrastructure in transport, water, energy and digital.
Queensland needs to secure more financing without placing an unsustainable burden on public borrowing or taxation. Increasing private sector spending on economic enabling infrastructure is crucial to increase sustainability and maintain livability. In other Australian states, and globally, the share of private sector investment in public infrastructure has increased dramatically in recent years and their economies are seeing the benefits.
Globally, there is an emergence of innovative business models based on public-private partnerships. These offer scope for unlocking capital and expertise, while fulfilling public service goals. Here in Queensland, private sector investment in what has historically been public infrastructure is lagging behind due to a perceived lack of community support for private involvement. The delay in resources investment due to commodity market prices and global economic and trading market uncertainty is compounding the issue.
The need for all three levels of government and the private sector to collaborate and engage with the community on ways to lift the burden on the public purse is critically important.