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Construction Materials Industry Conference Delivering Australia’s Pipeline 20 September 2012 Jennifer Westacott 1 Overview of presentation Key growth challenge – pipeline or pipe dream? • Australia’s investment opportunity • Australia’s project performance • Challenges and solutions • COAG and BCA reviews 2 Australia’s Investment Opportunity 3 The project pipeline Australia’s $921b Investment pipeline – projects by status Committed, $66 Committed $66b Under Under consideration $192b Under construction $384b Possible $279b Source: Deloitte Access Economics. 4 Pipeline facts Projects unprecedented in size Projects unprecedented in number Remoteness Narrow sector base 5 This matters Investment and exports as a percentage of GDP, Australia 35 Per cent of GDP 30 Per cent of GDP Investment (total) 35 30 Exports 25 25 20 20 Projections 15 15 10 10 1991-92 1996-97 2001-02 2006-07 2011-12 2016-17 2021-22 Source: Deloitte Access Economics using real investment and GDP data. 6 Risks to delivery Pipeline delivery risks • Revenue risk • Cost and time blowouts • Missed opportunities due to project deferral or abandonment 7 Australia’s Project Performance 8 Critical question How well do we deliver projects? 9 Data on project performance Cost premium 100% Cost premium 100% 80% 80% 60% 60% 90% 40% 20% 40% 26% 43% 62% 40% 20% 0% 0% Resources projects Schools Large shopping centres Hospitals Airports Note: cost premium is calculated in US dollars Source: Resources projects data by Independent Project Analysis; other data from Turner & Townsend, International Construction Costs Survey 2012. Note: Turner & Townsend sourced costs are US dollar relativities per m2. 10 How do we perform? Project performance • Lack of robust data for infrastructure projects • Need to understand cost drivers • Better measurement can help lift performance • Warnings in global project data 11 Challenges and Solutions 12 Barriers to project delivery Community concerns Capacity constraints Efficiency problems Timely funding and delivery of public infrastructure Investor confidence 13 Solutions 1. Build higher levels of community understanding and acceptance for projects 2. Expand Australia’s capacity to deliver multiple capital projects 14 Solutions 3. Improve the efficiency of project delivery in Australia 4. Adequate provision of economic and social infrastructure 15 Solutions 5. Build the confidence of investors 6. Supportive government institutions, policies and programs 16 BCA and COAG reviews 17 BCA/COAG reviews What’s next • COAG review of construction costs • BCA review of project costs 18 The four steps to recovery • Commonwealth to amend EPBC Act – give states authority to assess/approve projects • State governments to fast-track major development approvals • Amend Fair Work Act – include employer-only agreements on greenfield projects so work can start sooner • Cease tinkering with the tax system 19