Australia’s infrastructure industry suffers from the wild rides of the boom and bust cycles

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infrastructure australia, infrastructure pipeline, infrastructure projects,

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Where’s the steady incline?

I love the mining, civil engineering and construction industry. No, it’s not in my blood. My dad was a cattle farmer, as his dad was before him, as was my mother’s dad and his dad before him.

Growing up in Central Queensland, young, I got sucked into the mining industry, big operations and big kit … I loved it!

I then went to the UK to work in civils. I love the complexity of the industry, the people in the industry are my people – they think like me, got the same interests as me, my group of friends are almost exclusively from the industry: engineers, surveyors and project managers.

In fact, I’d go as far as saying I struggle to relate to people outside the industry.

Over the years I have seen the ups and downs of the industry. I watched the Celtic tiger in all its glory firsthand. I was in the UK when the building and construction industry crashed overnight in the GFC back in ’08 because of private money switching off. I was involved in recruiting for the Christchurch Rebuild and had a hand in the resources boom in Australia back in 2009-11.

One thing that has puzzled me, is why does the infrastructure industry have to suffer the wild rides of the boom and bust cycles. I understand that the private market is driven by just that – the market, and when the market is there, you have to “go” as you do in private building development and the mining resources market.

But can’t we regulate government spend on infrastructure to follow a steady incline? To take out the peaks and troughs?

We are about to head into unprecedented infrastructure spend in Australia. Over the next 5 years + we have a lot of roads, airports, tunnels and metros to build. When you’re about to embark on such a boom, I won’t say it’s too much (no one who is involved in the industry would), however is there not an argument that maybe we could regulate this spend somewhat to control the market to a reasonable extent?

Currently, the industry already doesn’t have enough people, due to demand out-stripping supply. The salaries in the industry will go through the roof over the next 5 years.

Some of the outsiders looking in would say, that they will increase by unreasonable amount. The cost of supply of construction materials will do the same, as will every other service that is part of the infrastructure industry.

I would say, the rises are not unfair or unreasonable, as in any market, that is how it works – supply is pitted against demand and vice versus. When supply can’t meet demand, the prices go up – it’s simple economics that the world markets are built on.

All this is good, isn’t it? I won’t argue with that while things are heading in the right direction, but what always comes after a boom? That’s right – a bust. Where does it lead people involved in the industry then? What does the industry look like post-boom?

Surely there are enough smart people in the government, our industry, enough external consultants, to look at a model of spend which allows for steady growth, utilising the resource that is there to build the infrastructure we need? A model which is based on quality and qualified people to do the work, where we don’t pay over the odds for whatever service or material is being used to build the infrastructure.

I’m no economist and I admit I have no concrete knowledge of how the intricacies of the funding of this market works – but I would be interested to see if there is a more viable option then the boom and bust cycle that follows infrastructure spend, to understand better, why things operate the way they do.

This cycle results in people losing their livelihoods, sometimes houses, and having to move to a new country, plus causes tremendous waste and inefficiencies in the market.

For now, though, like many others, I’m happy to ride the boom, and make hay while the sun shines.

Peter Laver
Director of ConsultANZ
peter.laver@consultanz.com.au

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