1

Construction Materials Industry ConferenceDelivering Australia’s Pipeline

Jennifer Westacott

20 September 2012

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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

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Australia’s Investment Opportunity

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The project pipeline

Source: Deloitte Access Economics.

Australia’s $921b Investment pipeline – projects by status

Under

Committed, $66

Under consideration

$192b

Possible $279b

Under construction

$384b

Committed $66b

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Pipeline facts

Projects unprecedented in size

Projects unprecedented in number

Remoteness

Narrow sector base

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This matters

Source: Deloitte Access Economics using real investment and GDP data.

Investment and exports as a percentage of GDP, Australia

10

15

20

25

30

35

10

15

20

25

30

35

1991-92 1996-97 2001-02 2006-07 2011-12 2016-17 2021-22

Investment (total)Exports

Per cent of GDPPer cent of GDP

Projections

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Risks to delivery

Pipeline delivery risks

• Revenue risk

• Cost and time blowouts

• Missed opportunities due to project deferral or abandonment

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Australia’s Project Performance

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Critical question

How well do we deliver projects?

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Data on project performance

Note: cost premium is calculated in US dollarsSource: 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.

40% 26% 43%62%

90%

0%

20%

40%

60%

80%

100%

0%

20%

40%

60%

80%

100%

Resources projects

Schools Large shoppingcentres

Hospitals Airports

Cost premium Cost premium

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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

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Challenges and Solutions

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Barriers to project delivery

Community concerns

Capacity constraints

Efficiency problems

Timely funding and delivery of public infrastructure

Investor confidence

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Solutions

1. Build higher levels of community understanding and acceptance for projects

2. Expand Australia’s capacity to deliver multiple capital projects

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Solutions

3. Improve the efficiency of project delivery in Australia

4. Adequate provision of economic and social infrastructure

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Solutions

5. Build the confidence of investors

6. Supportive government institutions, policies and programs

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BCA and COAG reviews

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BCA/COAG reviews

What’s next

• COAG review of construction costs

• BCA review of project costs

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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