Government policy must deal with risk of infrastructure investment for long-term gains

By Melissa Coade

May 12, 2021

infrastructure
(Image: Adobe/kasto)

Speaking on infrastructure investment measures totalling more than $10 billion in the federal budget, the executive of a construction project management company with experience across all levels of government has flagged the need for infrastructure projects to be adequately assessed for risk.

InEight Asia Pacific executive vice-president Rob Bryant believes that more work must be done to reduce the overall riskiness associated with infrastructure investment. This predominantly includes the risk of budget blowouts and project delays, which are common features of government infrastructure projects at both a state and federal level, leading to low cost-benefit ratios for projects and low-profit margins for the contractors.

One of the best ways to deal with this issue is to foster an appropriate sharing of risk between the public and private investors, Bryant says.

“Government and the construction industry must work together to ensure proper risk analysis is built in from the concept phase to delivery, based on a long-term investment view and shared risk procurement model.” 

By finding ways to address the risk of these mega projects, Bryant argues the works will be attractive to external sources of financing, and therefore serve as a way to reduce debt incurred by major spending in this federal budget.

“There are alternative models and public disclosure of investment funds seeking good projects,” Bryant said. 

“One source of finance is the superannuation funds. There are Australian funds keen to identify opportunities and invest billions.”

“The NSW government has already revealed a renewed focus on privatisation, setting an example for other states to follow,” he added.

According to the executive, labour availability for the lineup of shovel-ready infrastructure projects the federal government has touted in its 2021 budget will also be an issue to address.

“But achieving economic success with infrastructure-led spending will largely be determined by having projects and people available to work on them. 

Rising job vacancies in the sector presents a significant challenge.”

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