2018 CCF Victorian Infrastructure Outlook Report 1 | Page 44

2018 Victoria Infrastructure Report
The recent mining boom showed what could happen
when construction industry capacity and capability is
put under pressure. While civil construction projects
embarked on during this period (by both governments
and the private sector) were eventually completed,
construction costs 12 escalated rapidly as industry and
government raced to source scarce skills, materials and
equipment. The result was a well-documented blowout
in total project costs, major delays in the delivery of
projects, and various other failures across both projects
and businesses. So, in pushing ahead with an ambitious
infrastructure investment program over the next five
years, Victoria cannot afford to be complacent with
respect to capacity and capability risks. While civil
construction cost escalation is still relatively subdued,
it is anticipated to accelerate in coming years as civil
construction activity rises nationally and supply chain
risks are exposed.
Ensuring that Victoria’s construction industry has the
necessary skills and capability will remain one of the
greatest challenges through the next five years. In recent
years, total Victorian construction industry employment
has risen substantially to meet rising construction
demand. From 252,000 persons in mid-2015, construction
employment has risen to 290,000 persons as at
November 2017, an increase of around 38,000 persons
or 15%. However, maintaining this upward trend is likely
to prove challenging, particularly given the weakening
outlook for residential building (and related skills) through
the next five years which has been the key driver of the
employment upswing so far.
Figure 3.6 Victorian Construction Activity and Construction Employment
Source: BIS Oxford Economics, ABS data
As evidenced by sharp increases in cost indices such as the ABS Road and Bridge Index and the Engineering Construction implicit
price deflator during the period.
12
44