Australia’s massive economy-boosting infrastructure pipeline is being constrained by lockdowns, skills shortages and global supply constraints, leading to a potential $25 billion underspend nationally.
Significant infrastructure spending shortfalls were common even before the COVID-19 crisis, according to S&P Global Ratings, but they have worsened over the past 12 to 18 months.
“It is hard to build infrastructure if you can’t get to the construction site or there are restrictions on activity,” S&P associate director Martin Foo said, though other more permanent issues were also hindering the project pipeline.
Analysis of state and territory purchases of non-financial assets, which refers to capital expenditure such as buildings, roads and railways, by The Australian Financial Review and the Bureau of Statistics shows how the coronavirus pandemic flowed through to government spending.
In 2019-20, the last quarter of which was spent in a nationwide lockdown, states undershot their cumulative $47 billion budgeted spending on non-financial assets by about $6 billion.
The spending gap grew to $10 billion in 2020-21, with actual spending of non-financial assets hitting $45 billion against a budgeted $55 billion, according to the latest official data from each jurisdiction.
The situation is unlikely to improve markedly this financial year, with the biggest spending states, NSW and Victoria, spending much of the first half under various stay-at-home restrictions, and restrictions on workplaces likely to remain a market of living with the virus.
Applying last year’s percentage of underspends to 2021-22 budgets on a state-by-state basis, a further $10 billion may go begging this year. That would bring the cumulative underspend on non-financial assets largely caused by pandemic-related factors since 2019-20 to more than $25 billion.
Terms such as “asset investment”, “capital investment” and “infrastructure investment” are used interchangeably to describe the purchase or construction of non-financial assets, according to the Victorian budget.
These include things like “land, buildings (e.g. new schools/hospitals or major upgrades to existing facilities), roads and bridges and rolling stock or information and communications technology infrastructure”.
Mr Foo said COVID-19-related disruptions such as the global decline in mobility and limitations on freight, as well as a lack of skilled labour, was constraining expenditure, particularly for large projects.
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