Budget 2020 disappoints many experts and builders with its lack of big infrastructure projects
Massive infrastructure projects, such as building Sydney’s now world-famous Harbour Bridge in the 1920s and the Snowy Mountains Scheme, which started in 1949, were central to Australia’s post-war economic recoveries.
Infrastructure was again tipped to help rebuild Australia out of the COVID-19 recession.
But Tuesday’s budget did not include any big-ticket building announcements.
The Government has boosted the $100 billion over 10 years it committed last year with a string of smaller announcements, increasing funding by another $10 billion.
“There were increases, sure, and in normal years that would have been a big number, but in the current environment and given what they’ve done elsewhere, it’s relatively small,” BIS Oxford Economics chief economist Sarah Hunter told The Business.
Included in that extra $10 billion, is $2 billion for state and territory roads, but Treasurer Josh Frydenberg has set the timer.
“If a state drags its feet, another state will get the money. We need works to start, not stall,” he said while handing down the Budget.
Former New England MP Tony Windsor was quick to point out that not everything the Government announced in the budget was new.
He tweeted that the Bolivia Hill New England Highway, the first road project singled out by the Treasurer in his speech, was first funded under the Gillard government eight years ago.
Ms Hunter said working out what was genuinely new in the budget, versus funding that had been brought forward or previously announced, was not easy.
“But if the federal money frees up money that the states had already allocated and they’re able to use it elsewhere to drive the recovery, then that can be positive,” she added.
Smaller projects mean a quicker hit
The former Business Council of Australia president and now chairman of Infrastructure South Australia, Tony Shepherd, said there did not need to be a big, headline announcement like those of economic crises past.
“The problem with big infrastructure projects is they take two or three years from when you hit the go button to when you actually get people employed in the field,” he told The Business.
“It’s not as instant as the Government would be looking for.”
Ms Hunter agrees.
“You also have to think about capacity constraints, particularly for some of the most specialist workers and the technical specialist equipment that’s needed for some of these big projects, she said.
“There is a limit, to some extent, to how much you can do at any given point in time.”
Social housing missing from the budget
The Government has been criticised by welfare groups and economists alike for not announcing more social infrastructure in the Budget.
Hundreds of thousands of people remain without a job and hundreds of thousands more are struggling on reduced JobKeeper payments, which are being phased out.
“There’s was a real opportunity to make social infrastructure more of a centrepiece,” said Committee for Economic Development of Australia chief executive Melinda Cilento.
“Social infrastructure, spending on health, on aged care, on early childcare — these are the things that really matter to the community.”
Ms Cilento was disappointed the Government did not commit to building more social housing.
“More direct spending there I think would have delivered both against the objectives of getting the economy going, but also really helping to support those most in need in our community.”
Ms Hunter agrees there is both a demand for, and economic benefit from, the construction of more social housing.
“Social housing was one of the areas where we thought there might be some additional direct spending,” she said.
“It is a potential area if they were looking to do more down the track, in next year’s budget or before then, that is a potential area where there is clearly a demand for that kind of infrastructure.”
Construction already struggling
The Government is banking on tax incentives and $1.2 billion for 100,000 new apprenticeships and traineeships to bolster the construction industry.
It is a move Sydney electrician Ray Sherriff welcomes.
“Keep the young kids on, keep them coming through, because that’s very important for our industry, we’ve got to keep those quality tradesmen.”
Mr Shepherd also welcomed the emphasis in the Budget on young people.
“It’s quite sad that we find ourselves in a situation where we have young people unemployed and we don’t have enough skilled tradespeople,” he lamented.
“That is an absolute travesty so it’s great to see this renewed focus on apprenticeships.”
Mr Sherriff was forced to lay off about a third of his staff when COVID-19 hit.
While he will now be able to hire more junior workers, there might not be enough sustained demand to justify it.
“It’s starting really to slow down now,” Mr Sherriff said.
“It’s difficult to get projects in the door. It’s one or two a month we might see coming across to price now, whereas before it was every week we were putting them through.”
Construction has been lagging for years.
The latest figures from the Australian Industry Group’s Performance of Construction Index show new engineering orders are at the staggeringly low level of 38.6 points.
Anything less than 50 means that work is shrinking, the further below, the steeper the decline.
The index has now been below 50 almost every month since 2018.
The pandemic has made matters worse for builders such as Badge Construction.
“In the construction sector in Australia, since March to August, we’ve already lost 70,000 jobs,” said the company’s chief executive, Roger Zammit.
“That’s while most builders in Australia still had a reasonable pipeline of work in the field being constructed.”
He fears the worst is yet to come.
“What’s being reported is that there’ll be a contraction of about 17 per cent in the commercial building sector in 2020/21 and a further contraction of 6 per cent in 2021/22 — that’s really significant,” he said.
It begs the question, will Australia be able to build itself out of recession?