Tue 01 May 2018

2018 State Budget – “Getting things Done” … impact on the Civil Construction Sector:

The Civil Contractors Federation Victoria CEO, John Kilgour, was invited today for a special briefing session conducted by the State Government, facilitated by the Minister for Training & Skills, Gayle Tierney MP and a keynote address by the Premier, the Hon Daniel Andrews.

In the lead up to the State election later this year, the Premier announced a “big spending” budget focused on creating jobs by building Victoria, with the right skills for the job under the key theme –  “Getting things Done”. The Premier was keen to emphasise that with investment in key infrastructure projects, we need to invest in the people to deliver them.

In 2018/19, a total of $78.9bn of state capital projects are either commenced or underway. The cornerstone of the budget is record investment of $13.7bn in major infrastructure projects with a forecast average of $10.1bn per annum over the next 4-year period reported in the forward estimates.

Underpinning this investment is creating the right skills for the job, which will see record funding for the TAFE sector and also in apprenticeships.  $644m for training initiatives and $184m for the skills program in schools were announced. The civil sector will benefit from a strategic focus that will see our Certificate III in Civil Construction, one of 30 priority courses which will be made available “free of charge”, together with 18 pre-apprenticeship courses under the “Head Start” program. Three new TAFE’s will be built and $109m will be invested to boost careers education.

In last year’s budget, we saw a cut to regional payroll tax by 25%. A further reduction has been made from 3.64% to 2.425% with the threshold increasing to $650,000. An estimated 4,000 regional businesses will benefit from this payroll tax cut across Regional Victoria.

Financial Metrics

Victoria’s economy grew by 3.35 in 2016/17, well above the national average, one of the strongest in Australia, (having experienced a 3.3% growth in 2015/16), which is significantly above the national economic growth average of 2.0% for the same period.

More than 117,000 jobs were created last year, the highest of any state and equivalent to 70% more than the new jobs created across Australia.

The 2018/19 operating surplus is estimated to be $1.4bn, with surpluses averaging $2.5bn over the forward estimates. Net debt as a percentage of GDP is expected to be 4.6% at June 2018 and increase to 6% by June 2021.

A record $13.7bn in government infrastructure projects will continue to build our state, create jobs and build a stronger economy.

Key Infrastructure Sector Investment Announcements

While announcements have been progressively made by the State Government in recent weeks, with more to be divulged in the lead up to the State election in November, the following key sector announcements were made today that will have a significant impact on the forward works programs and projects within the Civil Construction Industry.

  1. Roads Sector

The 2018/19 Victorian Budget announced $4.3bn to be invested in roads around the state and $1.9bn to continue the overhaul of Victoria’s public transport network. With a focus on fixing suburban roads, a $2.2bn package to upgrade 13 arterial roads across northern and south-eastern suburbs was announced.

More than $1bn will be spent to widen northern roads including Sunbury Road, Craigieburn Road, Epping Road, Childs Road and the Chandler Hwy. Bridge Inn Road in Doreen will also be upgraded as the Northern Roads Upgrade delivers stage 2 of the Yan Yean Road duplication.

Melbourne’s growing South East suburbs will also receive funding with improvement to the Healesville-Koo Wee Rup Road in Pakenham, Lathams Road in Carrum Downs, Narre Warren – Cranbourne Road in Cranbourne, and Pound Road in Dandenong South, key priorities.

With a further investment of $941m on top of last year’s $500m allocated to rebuilding Victoria’s regional roads, led by the Chief Regional Roads Office based in Ballarat, the following investment announcements were made in this sector in regards to Regional Victoria:

  • $333m boost to road maintenance with more than 1000kms of roads to be repaired, resurfaced or rebuilt across the State;
  • $100m Fixing Country Roads fund will be established to provide grants to rural & regional councils to fix their roads;
  • $229m to be invested in road safety with new overtaking lanes, rumble strips and intersection upgrades;
  • $98m in pre-planning and pre-construction of new by-passes on the Western Highway at Beaufort and Ararat, as well as $40m to upgrade to the Princes Highway West between Colac and the South Australian Border;
  • Key sections of the Calder Highway ($19m), Hamilton Highway ($9.9m), Forest – Apollo Bay Road ($9.8m) and Kiewa Valley Highway ($7.9m) will be upgraded to improve safety and travel times;
  • Ballarat’s iconic Sturt Street will receive a series of intersection upgrades between Pleasant Street and Dyson Drive;
  • A new roundabout will be constructed on the Shepparton Alternate Route o improve safety and access for Heavy Vehicles as part of a $20m investment to cater for future growth.

Projects in development include the North East Link, Suburban Roads upgrade projects with the West Gate tunnel and Western Roads Upgrade currently under construction.

  1. Rail Sector

The Victorian budget makes provision for up to $1.9bn for public transport. Key announcements impacting on the rail sector include:

  • $704m for regional areas including $313m to upgrade the Shepparton line;
  • $572m to enable to plan for the duplication of the Cranbourne line, deliver power and signalling upgrade to Cranbourne and Pakenham and undertake detailed design work to enable new high capacity trains to run to Sunbury;
  • $89.4m to extend and add more services on the South Morang line to Mernda and additional services on the Hurstbridge and Dandenong lines;
  • $60m to build more than 2000 extra car parks at metropolitan stations.

Planning for the Airport Rail Link will continue in 2018/19 in collaboration with the Commonwealth Government. Detailed technical investigations and planning will determine how best to integrate a future Airport Rail Link with the rail network, to unlock network capacity in the west and deliver a fast rail to Geelong and other regional centres.

The Melbourne Metro Tunnel project is the biggest rail project in Victoria’s history.  In December 2017, the State Government entered into a 25-year PPP contract with Cross Yarra Partnership to design, construct finance and maintain, twin 9 km tunnels under the CBD, 5 underground stations and commercial opportunities.  The net present cost of the PPP package is $5.24bn as at 2017 with completion due end of 2025.

  1. Water Sector

The 2018/19 Victorian State Budget remains relatively silent following our initial glance of the budget papers and this will be subject to further review.  Last year we saw an investment of $116m over 3 years to improve water security for local communities, support farmers, and improve the health of our waterways across the State.  Key announcements included:

  • $60.6m contributed towards sustainable water planning, providing security and creating confidence in water entitlements for farmers and other users,
  • $13.8m directed to help more efficient uses of the water grid,
  • $7m to drought proof the Royal Botanic Gardens in both Melbourne and Cranbourne,
  • $5.2m to the Murray Darling Basin Authority to deliver environmental programs in Northern Victoria.
Conclusion and Next Steps for CCF Victoria

As the peak industry body representing the Civil Construction industry, CCF Victoria welcomes the continued focus by the State Government on funding for major infrastructure projects announced and the renewed focus on Skills Development. That said, we are concerned at the accelerated pace of this investment and our ability to recruit, train and deliver the skills necessary to meet the social and economic growth agenda being set by Government.

As a starting point, we have identified seven priority areas to work with the State Government and the Opposition in the lead up the State election that will deliver benefits for our civil industry through further reform. These include:

  1. Optimising the management and renewal of the state’s public civil infrastructure assets.
  2. Reforming public infrastructure procurement processes so there is consistency and standardisation of procurement systems, processes and their application across all levels of government.
  3. Ensuring that civil infrastructure project designs are to a standard that will allow tendering outcomes and construction to deliver value for money.
  4. Develop and implement procurement training programs for public and private sector professionals to ensure adequate skills and capability levels for all civil infrastructure procurement staff.
  5. Ensuring a sustainable and competitive supply of quarried construction materials to underpin the delivery of affordable civil infrastructure.
  6. Addressing red-tape issues which impede the efficient delivery of civil infrastructure projects.
  7. Building “capacity and capability” in civil construction to meet and deliver the critical major infrastructure needs in this State.

John Kilgour
CEO – Victoria Branch

1 May, 2018