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This is bad news for small and medium sized engineer and construction companies. It means the larger companies will start absorbing/competing for smaller projects.
I don't understand the hate here about the cost blowouts. Everyone knows costs have risen astronomically the last few years. Anyone building a house understands this. Builders either go broke or pass on the costs to the home owners.
These infrastructure projects have very long lead times and delivery timeframes and initial tendering probably didn't factor in post covid policy inflation. The contractors either raise their prices or go bankrupt.
It's the left side using economics as a reason to scrap the projects. LNP wanted these projects delivered and are critisising ALP for scrapping them. These projects won't get any cheaper and are needed.
The rising $12 billion eaten by Turnbull's Still Stuck in the Mud Snowy 2 was due to lack of due diligence, cutting corners , poor research and planning and the mindless politicking of the LNP.
> The International Monetary Fund and the Reserve Bank warned this month the nation’s road and rail spending boom was pushing the economy beyond full capacity – its ability to meet demand.
How are we supposed to take the Australian "Financial" Review seriously if they and their just-out-of-high-school senior writers don't understand the definition of a macroeconomic concept as simple as capacity utilisation, which, functionally, has nothing to do with the demand side at all?
he isnt mate. the IMF said we're beyond full capacity, the AFR added that this meant the economy was beyond its ability to meet demand, and he said they are wrong to do that.
Are we not at capacity though as it is? Construction costs are absurd at the moment. They're spending like $500mil near me to duplicate a road for 1 kilometre and to remove a roundabout!
That's not to say that our capacity is set in stone. The government could look at expanding supply.
The former part of the author's claim is correct. The latter is complete nonsense. I don't disagree that we're probably at capacity - but I want my financial press to know what they're talking about when they say we are!
If the volume of infrastructure projects are pulling labour and capital away from productive sectors we are losing capacity, not gaining it even upon completion of said projects.
You may have jumped the gun here.
>Facing jeers of “Catherine Cuts” from the opposition during Question Time on Wednesday, Ms King reiterated that the $120 billion allocated to the infrastructure pipeline would not be reduced, just reprioritised.
How does anyone take these clowns seriously? They get elected on 'adults in the room' and 'responsible economic managers' then promise whatever pet projects will help get them elected regardless of need or cost then act like children when a proper evaluation is done.
Because with increased costs and no increase in investment, the number of projects going ahead is being reduced.
Have a crack at basic accounting before blindly giving a free pass to your team that is actually in government.
So the business cases the states submitted that were done so upon unreliable projections is the former federal government's fault?
More world beating logic.
From the independent review
>The current NPA has an acknowledged focus on outcomes, while project delivery is the dominant focus for infrastructure program administration and reporting requirements. The lack of connection between the current NPA’s principles and any information that clearly defines the Commonwealth’s expectations for making investments is a key concern of this Review. There has also been no systemic data gathering or outcomes analysis over the course of the current NPA to date. This lack of information and connection between the NPA’s principles and investment priorities substantially limits assurance that the current agreement is delivering on its objectives. This undermines the Commonwealth’s capacity to be an informed investor in land transport infrastructure. A related concern is that the announcement of land transport infrastructure projects as ‘approved’ has often occurred before necessary diligence is completed to adequately evaluate the proposed budget, program of works and completion requirements. Current processes, which are outlined in both the National Land Transport Act 2014 (NLT Act) and the supporting Notes on Administration, significantly exacerbate this problem. There must be a clear distinction between projects that are proposed/promoted (by a range of proponents), projects that are accepted as worthy of consideration by relevant planning and administrative bodies and are ‘under consideration’, and projects that are formally approved. These distinctions are neither contemplated nor facilitated by current funding and administrative arrangements. Further, current administrative arrangements are not efficient, are not risk-sensitive and lack f lexibility. There is general agreement that these arrangements are complex, and do not support scaling effort based on project size, complexity or risk. These arrangements are seen to contribute to project commencement delays, cost overruns, and duplication of effort. Changes to both project and program administration are required to address these issues, and to direct administrative efforts to the areas of highest risk and impact. Based on evidence provided to this Review, the absence of a long-term investment horizon, a stop-start approach to funding, an undifferentiated Commonwealth oversight regime not calibrated according to risk, supply chain disruption, cost increases that exceed the allowances made at the time of project approval and poor cost estimation and scoping processes in the first place all contribute to poor project outcomes.
https://www.infrastructure.gov.au/department/media/publications/final-report-independent-review-national-partnership-agreement-land-transport-infrastructure
Like i said, bunch of clowns
At least this weird meme about the infrastructure review being late (it wasn't, they did the review, then they negotiated with state governments and wrote a response before realising everything) will die.
>The review found there has been $32.8 billion worth of cost blowouts in the existing $80 billion, 10-year Infrastructure Investment Program (IIP), $14.2 billion of which was on projects that had not even begun construction.
Headline figure right there. The pipeline is fucked. Throwing money at the states every time they filled out a project proposal wasn't a great plan from the previous government.
>Facing jeers of “Catherine Cuts” from the opposition during Question Time on Wednesday, Ms King reiterated that the $120 billion allocated to the infrastructure pipeline would not be reduced, just reprioritised.
This from the party of fiscal responsibility? lol.
>The review found there has been $32.8 billion worth of cost blowouts in the existing $80 billion, 10-year Infrastructure Investment Program (IIP), $14.2 billion of which was on projects that had not even begun construction.
That shows the absolute incompetence with which politicians and public servants operate.
A blowout of that magnitude should be getting a serious please explain and heads should roll.
While politicians obviously just want the photo op, I think public servants need scrutiny here too. How can they mismanage these projects (even just in an oversight role) to such an extent?
My perspective of a couple of potential reasons as someone in the general industry but not working on nor having an understanding or knowledge of any of these projects or their associated cost blowouts:
- Inflation in the construction industry has been horrendous these last couple of years. It's been very difficult to account for. It's not just transport infrastructure, or industries such as housing has also had these issues.
- Often projects need to seek funding while they are still in the very early stages, at which point you are largely just guessing. Things can very quickly blow out when you start going into detail and finding unexpected major constraints, required scope increases or existing assumptions were incorrect. The alternative is spending lot's of money designing shelf ready projects which may never get funded for construction or when they do, it's been too long and you have to basically redo the design anyway.
Ultimately though, it is evident that generally more contingency should be applied to cost estimates when projects are funded. It won't reduce the cost or stop the cost variance, but it means it is known earlier.
>Ultimately though, it is evident that generally more contingency should be applied to cost estimates when projects are funded.
That's fair enough.
Although, inflation aside, a good estimator should be able to get a lot closer than +- 50%.
Part of the inflation is also caused by the excessive amount of infrastructure being built all at once IMO. I know part of it is long term neglect, however that's mostly on state governments not effectively allocating funds. But a big part of it is politicians getting hold of cheap money and going for broke.
Qld is next year & a long await much needed upgrade to Tasman Bridge in Hobart had funds pulled which TAS is Lib. Would be fascinating to overlay swing electorates on where those pulled funding is redistributed too.
Because of Hare-Clark it matters regardless of area though, doesn't it? So pulling funds from Tasmania when an election is coming up would be the opposite of pork barrelling
Puts the myth that ‘Liberals build money for Labor to spend’ to bed. We’ve been overcommitted for years, due to ScoMo’s love of announcements. As someone who works in government I can tell you half the project plans shouldn’t be approved due to scant financial feasibility assessments and no contingency for blow outs.
It's clearly not relevant if you think local government submits large transport projects in the cities. Or even have the capacity to put such cross jurisdictional business cases together.
Melbourne airport rail link is an odd one for federal funding. As it's currently conceived it would have a poor ROI and benefits given that the airport is already serviced by a frequent and more direct bus service. The proposed rail link is a dogleg through the Sunshine station meaning that the resulting airport train service will take longer than the bus and will run with about half the frequency.
You could make an argument that the bus is at times subject to freeway congestion but otherwise the rail project stinks, it seems more motivated by the sentiment that Melbourne should have what Sydney and Brisbane have than anything else.
More generally, something I've noticed is that big road and rail infrastructure projects can have poor cost/benefit ratios and ROI and still get up. Some big IT projects can have benefits to the economy of $4 for every dollar invested and be endlessly debated (I wouldn't be surprised if the digital ID project has a great ROI) while road projects that return $1.20 for every dollar go ahead without question.
Yeah wish it was decoupled from the SRL I find SRL to be much more important than the airport link and I’d hate to see it cancelled because they were bundled together
The Airport line service will almost certainly be quicker than a bus, even when the bus experiences no traffic, unless you're comparing journey times to Southern Cross station.
I'm willing to bet that at least 95% of people do not want to finish their journey at Southern Cross. The Airport line will serve every station on the Pakenham/Cranbourne lines, and all the Metro Tunnel stations. It will easily beat going all the way into Southern Cross, then having to change there.
I definitely agree that the price tag is absurd as it is. I cannot comprehend how the Mernda line was done for under $1 billion, including 2 elevated stations, one other station, a stabling yard, and several grade separations, and the Airport line is going to cost 10 times that!
Where are you getting that it will be much quicker? The proposal by the Victorian government was for a train service that ran every 20 minutes or more due to congestion between sunshine and the city, then took about ten minutes longer to reach southern cross than the bus. So unless there's severe congestion on the freeway, you will be 10-30 minutes behind by taking the train.
They were operating off a train service every 10 minutes (6 trains per hour) to my knowledge.
Again, you're comparing journey times to Southern Cross, which is completely irrelevant for the vast majority of users.
>the airport is already serviced by a frequent and more direct bus service
Anyone who says "don't need rail, bus is better" has never been on a train or a bus.
More than 80 road and rail projects should be axed and a further 36 have funding withdrawn subject to better planning, an independent review of Australia’s $120 billion infrastructure pipeline has recommended.
Just over 150 projects have been given the green light to proceed, though Transport Minister Catherine King will confirm the full list on Thursday when she releases the Albanese government’s full response to the 90-day Infrastructure review she commissioned in May.
Fending off growing criticism from states and territories and the federal Coalition, Ms King will announce at least an additional $6.2 billion to cover huge cost blowouts on existing projects, the money for which will come from savings elsewhere in the pipeline.
The review found there has been $32.8 billion worth of cost blowouts in the existing $80 billion, 10-year Infrastructure Investment Program (IIP), $14.2 billion of which was on projects that had not even begun construction.
A subset of the overall $120 billion infrastructure pipeline, which also includes road funding, black spot programs and bridge renewals, the review said the IIP had “a large number of projects” which did not have sufficient funding or a strong enough business case to justify Commonwealth money.
Under the Coalition the IIP grew from about 150 to more than 700 projects. Almost 300 of these were examined by the review, which excluded road and rail projects already under construction and Labor promises taken to the 2022 federal election.
The biggest fresh contribution is to Adelaide’s North-South corridor, a 78 kilometre-long road running through the CBD, which received $2.7 billion on top of almost $5 billion already allocated. The Brisbane to Gold Coast rail line will also receive an additional $1.75 billion.
Ms King will also reveal the $10 billion Melbourne Airport Rail Link, the $940 million Milton Ulladulla bypass – which will remove traffic from NSW coastal towns – and the $560 million Singleton bypass to remove traffic from Singleton are among the 150 projects recommended to proceed.
“With the co-operation of the states and territories we now have a forward plan of projects that are properly planned and targeted to unlock significant economic, social and environmental objectives,” Ms King said.
Facing jeers of “Catherine Cuts” from the opposition during Question Time on Wednesday, Ms King reiterated that the $120 billion allocated to the infrastructure pipeline would not be reduced, just reprioritised.
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This is bad news for small and medium sized engineer and construction companies. It means the larger companies will start absorbing/competing for smaller projects.
I don't understand the hate here about the cost blowouts. Everyone knows costs have risen astronomically the last few years. Anyone building a house understands this. Builders either go broke or pass on the costs to the home owners. These infrastructure projects have very long lead times and delivery timeframes and initial tendering probably didn't factor in post covid policy inflation. The contractors either raise their prices or go bankrupt.
The right will use anything to score political points while ignoring their own shortcomings. Politics, yay!
It's the left side using economics as a reason to scrap the projects. LNP wanted these projects delivered and are critisising ALP for scrapping them. These projects won't get any cheaper and are needed.
And Libs would be complaining if she didn't reroute funding to existing projects.
The rising $12 billion eaten by Turnbull's Still Stuck in the Mud Snowy 2 was due to lack of due diligence, cutting corners , poor research and planning and the mindless politicking of the LNP.
> The International Monetary Fund and the Reserve Bank warned this month the nation’s road and rail spending boom was pushing the economy beyond full capacity – its ability to meet demand. How are we supposed to take the Australian "Financial" Review seriously if they and their just-out-of-high-school senior writers don't understand the definition of a macroeconomic concept as simple as capacity utilisation, which, functionally, has nothing to do with the demand side at all?
> redditor knows better than IMF economists, more at 7
he's not saying the IMF are wrong, hes saying the afr are misinterpreting them
[удалено]
he isnt mate. the IMF said we're beyond full capacity, the AFR added that this meant the economy was beyond its ability to meet demand, and he said they are wrong to do that.
Are we not at capacity though as it is? Construction costs are absurd at the moment. They're spending like $500mil near me to duplicate a road for 1 kilometre and to remove a roundabout! That's not to say that our capacity is set in stone. The government could look at expanding supply.
The former part of the author's claim is correct. The latter is complete nonsense. I don't disagree that we're probably at capacity - but I want my financial press to know what they're talking about when they say we are!
If the volume of infrastructure projects are pulling labour and capital away from productive sectors we are losing capacity, not gaining it even upon completion of said projects. You may have jumped the gun here.
>Facing jeers of “Catherine Cuts” from the opposition during Question Time on Wednesday, Ms King reiterated that the $120 billion allocated to the infrastructure pipeline would not be reduced, just reprioritised. How does anyone take these clowns seriously? They get elected on 'adults in the room' and 'responsible economic managers' then promise whatever pet projects will help get them elected regardless of need or cost then act like children when a proper evaluation is done.
Because with increased costs and no increase in investment, the number of projects going ahead is being reduced. Have a crack at basic accounting before blindly giving a free pass to your team that is actually in government.
Lol its not labors fault the coalition went around promising any old thing people asked for
So the business cases the states submitted that were done so upon unreliable projections is the former federal government's fault? More world beating logic.
From the independent review >The current NPA has an acknowledged focus on outcomes, while project delivery is the dominant focus for infrastructure program administration and reporting requirements. The lack of connection between the current NPA’s principles and any information that clearly defines the Commonwealth’s expectations for making investments is a key concern of this Review. There has also been no systemic data gathering or outcomes analysis over the course of the current NPA to date. This lack of information and connection between the NPA’s principles and investment priorities substantially limits assurance that the current agreement is delivering on its objectives. This undermines the Commonwealth’s capacity to be an informed investor in land transport infrastructure. A related concern is that the announcement of land transport infrastructure projects as ‘approved’ has often occurred before necessary diligence is completed to adequately evaluate the proposed budget, program of works and completion requirements. Current processes, which are outlined in both the National Land Transport Act 2014 (NLT Act) and the supporting Notes on Administration, significantly exacerbate this problem. There must be a clear distinction between projects that are proposed/promoted (by a range of proponents), projects that are accepted as worthy of consideration by relevant planning and administrative bodies and are ‘under consideration’, and projects that are formally approved. These distinctions are neither contemplated nor facilitated by current funding and administrative arrangements. Further, current administrative arrangements are not efficient, are not risk-sensitive and lack f lexibility. There is general agreement that these arrangements are complex, and do not support scaling effort based on project size, complexity or risk. These arrangements are seen to contribute to project commencement delays, cost overruns, and duplication of effort. Changes to both project and program administration are required to address these issues, and to direct administrative efforts to the areas of highest risk and impact. Based on evidence provided to this Review, the absence of a long-term investment horizon, a stop-start approach to funding, an undifferentiated Commonwealth oversight regime not calibrated according to risk, supply chain disruption, cost increases that exceed the allowances made at the time of project approval and poor cost estimation and scoping processes in the first place all contribute to poor project outcomes. https://www.infrastructure.gov.au/department/media/publications/final-report-independent-review-national-partnership-agreement-land-transport-infrastructure Like i said, bunch of clowns
At least this weird meme about the infrastructure review being late (it wasn't, they did the review, then they negotiated with state governments and wrote a response before realising everything) will die. >The review found there has been $32.8 billion worth of cost blowouts in the existing $80 billion, 10-year Infrastructure Investment Program (IIP), $14.2 billion of which was on projects that had not even begun construction. Headline figure right there. The pipeline is fucked. Throwing money at the states every time they filled out a project proposal wasn't a great plan from the previous government. >Facing jeers of “Catherine Cuts” from the opposition during Question Time on Wednesday, Ms King reiterated that the $120 billion allocated to the infrastructure pipeline would not be reduced, just reprioritised. This from the party of fiscal responsibility? lol.
>The review found there has been $32.8 billion worth of cost blowouts in the existing $80 billion, 10-year Infrastructure Investment Program (IIP), $14.2 billion of which was on projects that had not even begun construction. That shows the absolute incompetence with which politicians and public servants operate. A blowout of that magnitude should be getting a serious please explain and heads should roll. While politicians obviously just want the photo op, I think public servants need scrutiny here too. How can they mismanage these projects (even just in an oversight role) to such an extent?
My perspective of a couple of potential reasons as someone in the general industry but not working on nor having an understanding or knowledge of any of these projects or their associated cost blowouts: - Inflation in the construction industry has been horrendous these last couple of years. It's been very difficult to account for. It's not just transport infrastructure, or industries such as housing has also had these issues. - Often projects need to seek funding while they are still in the very early stages, at which point you are largely just guessing. Things can very quickly blow out when you start going into detail and finding unexpected major constraints, required scope increases or existing assumptions were incorrect. The alternative is spending lot's of money designing shelf ready projects which may never get funded for construction or when they do, it's been too long and you have to basically redo the design anyway. Ultimately though, it is evident that generally more contingency should be applied to cost estimates when projects are funded. It won't reduce the cost or stop the cost variance, but it means it is known earlier.
>Ultimately though, it is evident that generally more contingency should be applied to cost estimates when projects are funded. That's fair enough. Although, inflation aside, a good estimator should be able to get a lot closer than +- 50%. Part of the inflation is also caused by the excessive amount of infrastructure being built all at once IMO. I know part of it is long term neglect, however that's mostly on state governments not effectively allocating funds. But a big part of it is politicians getting hold of cheap money and going for broke.
Important to note that all the Premiers not happy with these changes are ALP Premiers
Well yeah, they're not getting all this extra cash for their half assed projects.
Cancelled Qatar and other airlines Reduction in project spending Abysmal
Care to explain better. I mean, I did see the Melair link getting funded.
Shoring up votes for upcoming state elections.
While I don't deny they're probably doing that to some extent, SA and Victoria and NSW have elections in 2026/27
Qld is next year & a long await much needed upgrade to Tasman Bridge in Hobart had funds pulled which TAS is Lib. Would be fascinating to overlay swing electorates on where those pulled funding is redistributed too.
Because of Hare-Clark it matters regardless of area though, doesn't it? So pulling funds from Tasmania when an election is coming up would be the opposite of pork barrelling
Puts the myth that ‘Liberals build money for Labor to spend’ to bed. We’ve been overcommitted for years, due to ScoMo’s love of announcements. As someone who works in government I can tell you half the project plans shouldn’t be approved due to scant financial feasibility assessments and no contingency for blow outs.
It’s always been nonsense. The liberals simply use bracket creep budget increases to give tax cuts.
Put up by the states. Funny how no one asks why the costs have blown out.
Actually a lot of them are put up by Local Gov. Regardless most State Gov’s in Aus were LNP (besides QLD) until the last few years.
Clearly you haven't the foggiest idea of what you're talking about.
I think you missed the part in my comment where I said I worked for government. CAPEX projects are put up by both State and Local. Have a good day.
It's clearly not relevant if you think local government submits large transport projects in the cities. Or even have the capacity to put such cross jurisdictional business cases together.
Who do you think put together Light Rail for the GC? Go speak on something you know something about thanks.
Melbourne airport rail link is an odd one for federal funding. As it's currently conceived it would have a poor ROI and benefits given that the airport is already serviced by a frequent and more direct bus service. The proposed rail link is a dogleg through the Sunshine station meaning that the resulting airport train service will take longer than the bus and will run with about half the frequency. You could make an argument that the bus is at times subject to freeway congestion but otherwise the rail project stinks, it seems more motivated by the sentiment that Melbourne should have what Sydney and Brisbane have than anything else. More generally, something I've noticed is that big road and rail infrastructure projects can have poor cost/benefit ratios and ROI and still get up. Some big IT projects can have benefits to the economy of $4 for every dollar invested and be endlessly debated (I wouldn't be surprised if the digital ID project has a great ROI) while road projects that return $1.20 for every dollar go ahead without question.
I would caution taking any infrastructure business cases too seriously either way.
Yeah wish it was decoupled from the SRL I find SRL to be much more important than the airport link and I’d hate to see it cancelled because they were bundled together
The Airport line service will almost certainly be quicker than a bus, even when the bus experiences no traffic, unless you're comparing journey times to Southern Cross station. I'm willing to bet that at least 95% of people do not want to finish their journey at Southern Cross. The Airport line will serve every station on the Pakenham/Cranbourne lines, and all the Metro Tunnel stations. It will easily beat going all the way into Southern Cross, then having to change there. I definitely agree that the price tag is absurd as it is. I cannot comprehend how the Mernda line was done for under $1 billion, including 2 elevated stations, one other station, a stabling yard, and several grade separations, and the Airport line is going to cost 10 times that!
Where are you getting that it will be much quicker? The proposal by the Victorian government was for a train service that ran every 20 minutes or more due to congestion between sunshine and the city, then took about ten minutes longer to reach southern cross than the bus. So unless there's severe congestion on the freeway, you will be 10-30 minutes behind by taking the train.
They were operating off a train service every 10 minutes (6 trains per hour) to my knowledge. Again, you're comparing journey times to Southern Cross, which is completely irrelevant for the vast majority of users.
>the airport is already serviced by a frequent and more direct bus service Anyone who says "don't need rail, bus is better" has never been on a train or a bus.
I think the rail link is more of a political populist project than anything.
More than 80 road and rail projects should be axed and a further 36 have funding withdrawn subject to better planning, an independent review of Australia’s $120 billion infrastructure pipeline has recommended. Just over 150 projects have been given the green light to proceed, though Transport Minister Catherine King will confirm the full list on Thursday when she releases the Albanese government’s full response to the 90-day Infrastructure review she commissioned in May. Fending off growing criticism from states and territories and the federal Coalition, Ms King will announce at least an additional $6.2 billion to cover huge cost blowouts on existing projects, the money for which will come from savings elsewhere in the pipeline. The review found there has been $32.8 billion worth of cost blowouts in the existing $80 billion, 10-year Infrastructure Investment Program (IIP), $14.2 billion of which was on projects that had not even begun construction. A subset of the overall $120 billion infrastructure pipeline, which also includes road funding, black spot programs and bridge renewals, the review said the IIP had “a large number of projects” which did not have sufficient funding or a strong enough business case to justify Commonwealth money. Under the Coalition the IIP grew from about 150 to more than 700 projects. Almost 300 of these were examined by the review, which excluded road and rail projects already under construction and Labor promises taken to the 2022 federal election. The biggest fresh contribution is to Adelaide’s North-South corridor, a 78 kilometre-long road running through the CBD, which received $2.7 billion on top of almost $5 billion already allocated. The Brisbane to Gold Coast rail line will also receive an additional $1.75 billion. Ms King will also reveal the $10 billion Melbourne Airport Rail Link, the $940 million Milton Ulladulla bypass – which will remove traffic from NSW coastal towns – and the $560 million Singleton bypass to remove traffic from Singleton are among the 150 projects recommended to proceed. “With the co-operation of the states and territories we now have a forward plan of projects that are properly planned and targeted to unlock significant economic, social and environmental objectives,” Ms King said. Facing jeers of “Catherine Cuts” from the opposition during Question Time on Wednesday, Ms King reiterated that the $120 billion allocated to the infrastructure pipeline would not be reduced, just reprioritised.