2018 CCF Victorian Infrastructure Outlook Report 1 | Page 5

Executive
Summary
This is the first Victoria Infrastructure Outlook Report
authored by BIS Oxford Economics and commissioned
by the Civil Contractors Federation – Victoria. The
civil construction industry continues to face multi-
dimensional challenges as the Victorian economy
continues its transition from the (negative) impacts
of the mining boom – including the downturn in the
manufacturing sector – to a new economy powered by
non-mining investment delivering sustainable, robust
growth.
The Victorian economy has been amongst the strongest
of all the states and territories in recent years, with the
end of the mining investment boom driving a fall in the
Australian dollar that has boosted the competitiveness
of Victoria’s heavily trade-exposed economy. In turn,
rising economic activity in the state has seen a return to
stronger population growth as Victorians have returned
from Western Australia, Queensland, and other states
and brought with them many others in search of new
employment and business opportunities. Stronger
population growth coupled with positive economic
policies, ranging from housing incentives to new public
infrastructure investment initiatives (some financed by
asset sales), has in turn ignited activity in the Victorian
construction industry. While residential building activity
has led the charge in new construction work in recent
years, the Victorian economy is also benefiting from
new investment in non-residential buildings (hotels,
retail, offices, schools and hospitals) as well as civil
infrastructure across transport and utilities – and it is in
these subsectors where investment and construction work
is expected to grow further in coming years, offsetting
an expected correction in residential building work. In
turn, increasing construction work is reinforcing the
state’s economic performance, given the sector’s strong
economic multipliers.
a sustainable footing so that governments (at all levels)
can continue to meet Victoria’s public infrastructure
needs well into the future. The second challenge is
arguably more difficult, and requires sensible policies
being put into place to ensure sufficient skilled labour,
materials and equipment are supplied timely to meet
future investment demands. 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 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. In this regard,
Victoria cannot afford to be complacent with respect to
future capacity and capability risks.
Given this environment, there is no better time to have
an open and transparent discussion on the long term
economic strategy for Victoria. This should concentrate
on leveraging from (or improving) Victoria’s core (or
potential) strengths compared to eastern state rivals such
as its relatively lower cost of doing business, excellence
in research and development, iconic tourism destinations
and lifestyle benefits. State Government strategy has
focused on boosting programs to bring new businesses
to Victoria including the $90 million investment to help
create and retain jobs in priority industry sectors including
manufacturing and aviation. While the core aim of the
economic strategy should be to continue to attract
businesses and people to Victoria, attention also needs to
focus on how best to accommodate this growth.
The main challenges for Victoria from here are two-fold:
firstly, sustaining stronger rates of growth in the economy
and employment beyond the current cycle, and, secondly
(though just as importantly), planning to ensure that
the construction industry – and the broader economy –
avoid capacity and capability constraints that are likely to
emerge as non-mining investment continues to grow.
The former challenge requires good public policy that
not only encourages private enterprise and investment
(including for assets that may be traditionally thought of
as ‘public infrastructure’) but also puts public finances on
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