New road, rail spending slumps as Labor tells premiers to cut back
Planned infrastructure spending fell by nearly $12 billion in real terms this year as skills shortages, cost blowouts and a shake-up of federal government grants forced premiers to rationalise project pipelines.
Just over $256 billion in spending is planned over the next four years, up just $1.8 billion on last year, state and territory budgets show. When adjusted for high inflation – in real terms – the amount is an $11.7 billion decrease.
The North Sydney Metro station under construction. Ben Symons
Just eight new projects valued at $6.6 billion were added in 2022-23, a sharp decline on the 24 projects valued at $25.3 billion added the year before. The cost of new projects was largely offset by a decline in spending elsewhere.
It is the first time since 2015-16 that planned spending on roads, rail, schools and hospitals has stagnated, according to the latest quarterly spending report from Infrastructure Partnerships Australia.
The flat line comes after the Albanese government told states to axe or delay billions of dollars in spending due to a 41 per cent blowout in the cost of 700-plus projects backed by federal government money.
A 90-day review of the Infrastructure Investment Program announced ahead of the federal budget in May revealed a $33 billion cost blowout, according to Infrastructure Minister Catherine King. Details of what projects passed the review is expected before the mid-year budget update.
NSW best exemplifies the moderation in spending. Treasurer Daniel Mookhey implemented a goal for spending of 2 per cent of state gross product in 2026-27, down from a high of 3.1 per cent in 2019-20.
In his first budget last month, Mr Mookhey cancelled a clutch of road and rail projects.
Infrastructure Partnerships Australia CEO Adrian Dwyer said this year’s state and territory budgets all trod a similar path, shying away from big new announcements,
“It would be remiss to discuss a shortfall of publicly funded projects in the early pipeline without acknowledging the dual impacts of the federal government’s infrastructure investment review and the nationwide energy transition,” Mr Dwyer said.
“Instigated with sensible rationale to take stock of a large pipeline and realign funding priorities, it is not beyond the realm of possibility that once the review is complete and government’s funding priorities are known that the slide in new projects is arrested.
“The volume of new projects added to the pipeline has been further minimised over recent years by the rightful allocation of market capacity from the public and private sectors to delivering the energy infrastructure required for Australia to reach its legislated net-zero targets.”
‘Boom and bust’
With many major projects set to be completed in the next two years, including the $20 billion Sydney Metro, $10 billion Perth Metronet, $12 billion Melbourne Metro Tunnel and West Gate Tunnel, Mr Dwyer warned of the risk of a “boom and bust” cycle without proper pipeline management.
“With these major projects approaching completion, the danger of entering a so-called ‘boom and bust’ cycle – which sees delivery capability wax and wane with high variability and low efficiency – approaches,” Mr Dwyer said.
“Underlining this danger is [the] fact in this year’s budget season, only eight projects were added to [the Australian infrastructure pipeline], and two of these have an estimated value over $1 billion.”
Those two projects were the $2.3 billion Royal Melbourne Hospital and Royal Women’s Hospital Expansion Program, and the ACT’s $1 billion New Northside Hospital.
Other projects include $550 million for the Fairfield Hospital redevelopment, $350 million for the Canterbury Hospital redevelopment and $309 million for the Penrith Stadium redevelopment.
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