2017 Major Projects Pipeline ReportAdrian Hart, Senior Manager Infrastructure & Mining

• Overview and key findings of the 2017 Pipeline Report

• The outlook for Major Project work

• The economic outlook

• Queensland’s investment challenges

• Recommendations

Major Projects Pipeline Report - 2017Presentation Outline

Major Projects Pipeline - Overview

• Major Project work reaches bottom in 2016/17

– Just under $5bn, back to pre-boom levels. Rising activity from 2017/18.

• Economic growth requires discipline in infrastructure development

– Productive projects are developed and funded in a timely manner

– Strategy is flagged to industry well in advance, and is adhered to

• Risk that Queensland will underinvest in infrastructure

– Public investment per capita and as share of GDP back at lows

• Infrastructure investment after 2017/18 needs new funding

– All funding options need to be on the table

Major Projects Pipeline Report - 2017Key messages

Stronger outlook compared to the 2016 Report – but much remains unfunded

Outside of mining projects, much depends on the public sector for funding

Mining the largest sector, but roads has the strongest growth

SE Qld the strongest region, but Northern Queensland has the strongest growth

Strong cycle ahead in major road works

Rail work could grow strongly – but remain unfunded

Water outlook also depends on funding

NBN, renewables and Townsville Stadium providing another cycle of work

Mining major project work to remain well below previous levels

Non-mining and heavy industry major project work to improve from here

Australian economy boosted by exports but domestic demand remains weak

Queensland domestic demand returning to growth following large contraction

But different investment cycles will keep total construction activity flat

Source: BIS Oxford Economics, ABS data

Large labour response to resources boom, has since fallen back…

… but labour demand set to grow as new Queensland projects rolled out

• Infrastructure gaps still exist – Infrastructure Australia

• Challenge now is funding infrastructure requirements

• All funding alternatives should be on the table– Capital recycling

– Debt financing

– City deals to coordinate and align funding

– User pays (e.g. road pricing)

– Beneficiary pays (value capture)

– Budget reforms (sustainable funding into the future)

QMCA Major Projects Report - 2017Key messages

Major project work buffeted by mining and infrastructure investment cycles

Public Investment - Queensland

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Other public investment excluding asset sales Publicly funded engineering construction

Public engineering construction per 10 million persons Total public investment as a % of Queensland GSP (RHS)

Percent$Billion

Source: BIS Oxford Economics, ABS data

Actual public investment not keeping up with budgeted investment

And longer term increases are needed just to cover depreciation of fixed assets

Population growth in Queensland will recover, adding to infrastructure demand

Insufficient investment in transport could realise higher congestion costs

NSW is now outstripping Queensland in funding transport infrastructure

Queensland is not keeping pace with NSW and Victoria in Transport projects

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2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

SA North-South Corridor

WA Hancock Roy Hill (Pilbara)

WA Fortescue Metal Group (Pilbara)

WA BHP Billiton (Pilbara)

WA Rio Tinto (Pilbara)

VIC Inland Rail (VIC component)

VIC Melbourne Metro Rail

VIC Level Crossing Removal Program

VIC Regional Rail Link

VIC Western Distributor

VIC EastLink

QLD Acacia Ridge to Port of Brisbane

QLD Brisbane Underground Bus and Train Project

QLD Inland Rail (QLD component)

QLD Warrego Highway

QLD Gateway Motorway

QLD Bruce Highway Upgrade

QLD TransApex

QLD Ipswich Motorway

NSW Sydney Metro West

NSW Inland Rail (NSW component)

NSW Sydney Metro City & Southwest

NSW Sydney Metro Northwest

NSW F6 Extension

NSW Western Harbour Tunnel

NSW Western Sydney Infrastructure Plan

NSW NorthConnex

NSW WestConnex

NSW Pacific Highway Upgrade

Notes: This chart is based on projects with over $2 bill ion in construction work done. Solid areas are road projects, dotted areas

are rail projects. Source: BIS Oxford Economics

$ Billion (in FY15 constant prices) Forecast

Year ended June Source: BIS Oxford Economics

Not enough public funding is available to meet Queensland Pipeline projects

• Reconsider long term asset leasing– $60bn+ in assets that could be recycled into new public infrastructure

• Do not rule out debt finance

– Commonwealth Government, particularly, has room to move

• Expand the number of City Deals– Townsville is a good first step, more can be done

• Improve pace of assessment and approval of MLPs– Concessional finance (NAIF) and project bonds (tapping into

superannuation and sovereign wealth funds) can also help

Major Projects Pipeline - 2017Recommendations – Need to improve short term funding mechanisms

• Genuine tax and expenditure reforms– Use debt only for productive infrastructure and tax reforms to provide

sustainable revenues for public project funding over time

• Maintain rigour with project selection

– Transparency in costs and benefits of projects is critical

• Boost construction industry efficiency and productivity– In line with PC Review (2014) recommendations

• A partnership approach between industry and government– Plan for a growing pipeline of work and how to resource it

Major Projects Pipeline - 2017Recommendations – Longer term sustainability in infrastructure funding