Queensland Major Projects Pipeline

2018 Queensland Ma jor Pro jects Pi peline

A JOINT INITIATIVE OF THE QMCA, CSQ AND IAQ $M Total Pipeline 39,800,000,000 Annual Ave 7,960,000,000 Weekly Ave 153,000,000 Daily Ave 21,860,000 Hourly Ave 910,833

AT A GLANCE $7.9b per year

Scale of $21m per day Recurring Expenditure Unfunded split Total Pipeline Major project Value activity $39.9b $2.1m Major $152m per Projects working per week hour Jobs Funding split The funded pipeline will support $8.2b 12,700 workers $20.2b North Queensland each year on average $39.9b Public Projects $13.6b Total $19.7b Fully-funding the pipeline South East Queensland will support an extra Private Projects $3.8b 4,700 workers Surat Basin each year on average 14.3b Various

Major Projects Pipeline – Breakdown illion total (over 5 years)

Credibly Under Under Unlikely Prospective proposed Announced procurement construction projects valued at projects valued at projects valued at projects valued at projects valued at projects valued at

Unfunded $16.1 billion Funded $23.8 billion $M Total Pipeline 39,800,000,000 Annual Ave 7,960,000,000 Weekly Ave 153,000,000 Daily Ave 21,860,000 Hourly Ave 910,833

$7.9b per year

Major Projects Pipeline – Breakdown $39.9 billion total (over 5 years)

Credibly Under Under Unlikely Prospective proposed Announced procurement construction 33 43 22 22 12 58 projects valued at projects valued at projects valued at projects valued at projects valued at projects valued at $6.9b $5.1b $4.1b $5.3b $4.1b $14.4b

Unfunded $16.1 billion Funded $23.8 billion CONTENTS

Foreword 1 Executive Summary 2 Long-term Challenges and Recommendations 5 Economic Outlook 10 Long-term Queensland Major Projects Pipeline 24 Workforce and Employment Outlook 38 Implications, Challenges and Risks 46 Conclusion and Recommendations 60 2018 Major Projects List 64

This report has been produced by the QMCA, CSQ and IAQ (“the Industry Bodies”) with the assistance of BIS Oxford Economics. The report is based on information available as at end March 2018 from public and private sources including Project Sponsors and the Industry Bodies, Project Sponsors and BIS Oxford Economics provide no warranty as to its accuracy, reliability or completeness. To the extent permitted by law, neither the Industry Bodies, Project Sponsors or BIS Oxford Economics or any of their related entities accept liability to any person for loss or damage arising from the use of the information contained in this report. FOREWORD

We are proud to introduce the 2018 Queensland Major Projects Pipeline Report to you – an initiative of the Queensland Major Contractors Association (QMCA), Construction Skills Queensland (CSQ) and the Infrastructure Association of Queensland (IAQ).

Nowhere else in Australia do industry For governments, the consolidated Queensland is a decentralised and peak bodies consult so closely with picture of state wide major project vast Australian state which requires governments, government-owned activity in the next four years can help continued investment in infrastructure corporations and private sector guide policy formation, unlock the by both public and private sectors proponents to accurately chart potential for private sector partnerships to meet demands of a growing the status of all major projects in and leverage capital works investment. population and increase our global their home state. The fruit of this competitiveness. Experience from The greatest threats to a sustainable approach is an authoritative report successful countries and jurisdictions pipeline of projects are the which describes the scale, timing around the world show that when identification of investable projects, and location of all major engineering public and private sectors face availability of funds and timely projects being considered or infrastructure challenges together, investment decisions. This year’s developed in Queensland. the public and economy are the big report highlights much lower levels winners. Perhaps the real worth of our Sincere thanks to our partner of private sector investment than report is that it sends a strong signal BIS-Oxford Economics for their expert previous years, with $9.4 billion of to potential infrastructure investors guidance, compilation of the project projects classified as only prospective that a highly motivated engineering listings and the detailed independent or considered unlikely to receive sector exists, with contractors and analysis that underpins the report. funding. Until positive business cases service providers eminently capable This year, we have increased our and investment decisions are made, of preparing for and delivering world investment in the report format to mining and industrial projects such class major projects. enhance reading experience and as those in the undeveloped Galilee improve access to key report data Basin remain at risk. The value of As industry peak bodies we are through a dedicated website. The public sector projects which have committed to promoting Queensland new design and look of this report is positive funding announcements as a world leading destination for a statement of confidence in the future or are currently under procurement economic development and new of our partnership and the continued outstrips the private sector. The report infrastructure investment. We look relevance of our report to industry for also forecasts a significant 72% forward to working with all our years to come. reduction in private sector mining and stakeholders in 2018 to grow the heavy industry projects in the next pipeline of major projects in our For infrastructure designers, five years compared to the last. The great State. contractors and other project ability of governments to identify and participants, this report is an deliver on their planned infrastructure indispensable business planning has therefore assumed even greater tool, capable of guiding well-informed importance to the continued short- decisions to participate in chosen term sustainability of the major projects market sectors and geographic contracting sector. regions.

Peter Anusas Brett Schimming Steve Abson President Chief Executive Officer Chief Executive Officer Queensland Major Construction Skills Infrastructure Association Contractors Association Queensland of Queensland

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 1 EXECUTIVE SUMMARY

Welcome to the second Queensland Major Projects Pipeline Report (the Report) developed by the Queensland Major Contractors Association (QMCA), Construction Skills Queensland (CSQ) and the Infrastructure Association of Queensland (IAQ). During this period, Queensland experienced a substantial boom and bust cycle in construction activity and major project work.

The key finding of this Report is Industry can feel more confident that major project work has risen about investing in new equipment, Given rising major by 58% in 2017/2018 to $6.9 billion productivity enhancing initiatives and project activity in after two successive years of low skills development if they are given activity. Subject to level of funding reasonable lead times to prepare in other states and the commitments for 22 credibly proposed the form of a clear, long-term major need to meet growing projects, activity in 2018/2019 is projects pipeline – and if governments demand in Queensland, forecast to be retained at a similar and procuring agencies implement governments need to level. However, recovery in activity may supportive policies. consider how they can be short-lived and decline again in This year’s Report provides a raise additional funding 2019/2020 due to an identified lack comprehensive list of major project of viable replacement projects. for infrastructure work, together with analysis on the projects, accelerate Maintaining recent momentum is corresponding level of construction existing projects or therefore the core challenge facing activity this entails and the subsequent the state, requiring a range of demand for skilled construction labour. stimulate private initiatives to improve levels of funding This analysis is based on both the investment for infrastructure, ensure capability completion of existing projects and and capacity to manage a growing the likelihood of potential projects pipeline and, fundamentally, provide proceeding. A complete list of major positive conditions and frameworks projects considered for this analysis, that support the economy’s growth and the explicit assumptions for each engines: public and private investment. project regarding work done and Given rising major project activity construction workforces employed in other states, and the need to each year, are provided in the provide infrastructure to meet Appendix at the end of this report. growing demand in Queensland, As well as presenting the pipeline, the governments need to consider how Report discusses the key economic they can raise additional funding for settings where major project activity infrastructure projects, accelerate is taking place, for Queensland and existing projects or stimulate private Australia, together with global trends. investment. Maintaining a stable and mildly growing pipeline of major project work from here will not only support economic growth and the sustainability of the major projects industry, but importantly will likely cost the government much less than if the projects were undertaken later in the cycle or in a more heated environment.

2 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook KEY FINDINGS

—— The total value of 190 projects —— Northern Queensland has the identified in the 2018 pipeline is strongest growth prospects in the $39.9 billion (Engineering Value), pipeline for all regions (including funded compared to 166 projects valued and unfunded work) compared to at $39.1 billion in the 2017 pipeline. the past five years, but South East However, the value of funded work in Queensland still commands the largest the pipeline is only $23.8 billion, with share of major projects activity 98 public and private projects still (Figure 3). awaiting funding commitments.

—— New public and private investment —— Queensland still lags New South – including projects in the Major Wales and Victoria in terms of Projects Pipeline – is having a funding and delivering infrastructure. broader, stimulatory effect on As New South Wales and Victoria the Queensland economy. further ramp up infrastructure investment over the remainder of this decade, challenges may re-emerge —— Public and private sector in procuring construction services investment – focused in roads, rail, in Queensland. This is a challenge telecoms and electricity – is driving the that will be compounded not only by current recovery in major project work. digital disruption but by Queensland’s and Australia’s changing —— While major project activity has demographics – and in particular the risen from the 2016-2017 trough – ageing of the workforce, as identified the main challenge will be keeping in the workforce implications section activity at sustainable levels into the of the Report. future given the weak outlook for currently funded work (Figure 1).

—— The value of public sector projects that have funds committed or are currently under procurement now outstrip the private sector by a factor of 6 to 1. The ability of governments to identify and deliver on their 17% planned infrastructure has therefore of the overall assumed even greater importance project pipeline to the continued short-term ($6.9B) is unlikely sustainability of the major projects contracting sector. to proceed

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 3 Figure 1

Major Projects Work Done: All Segments

$ Billions 20 60%

18 50% 16

14 40% 12

10 30%

8 20% 6

4 10% The total value 2 of 190 projects 0 0% identified in the 2020/21 2021/22 2010/11 2016/17 2017/18 2018/19 2019/20 2011/12 2012/13 2013/14 2014/15 2015/16 2018 pipeline is Funded Total Credibly Proposed Total Prospective Total Unlikely % of Public Funding (RHS) $39.9b

Figure 2 – Outlook by Sector

Total Pipeline of Work Over the Next Five Years

Defence

Water Sewerage

Non-Water Utilities

Rail Habours

Roads Bridges

Mining heavy Industry

0 2,000 4,000 6,000 8,000 10,000 12,000

Funded Unfunded Compared to Previous Five Years (% Change)

Figure 3

Outlook by Region Over the Next Five Years

Gladstone

Bowen

Galilee

Northern Queensland

Surat

South East Queensland

0 3,000 6,000 9,000 12,000 15,000

Funded Not Funded Compared to Previous Five Years (% Change)

4 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 4

Major Project Work Done and Queensland State Economic Performance 20,000 10

18,000 8 16,000

6 14,000

12,000 4

10,000

2 8,000

6,000 0

4,000 -2 2,000

0 -4 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Funded Not Funded SFD A%ch GSP A%ch

LONG-TERM CHALLENGES AND RECOMMENDATIONS

While investment in major It’s unsurprising that there is a Apart from the short-term impacts, engineering projects has improved in correlation between major project investment in critical infrastructure Queensland, the general outlook for work done and Queensland’s major projects can also boost long- growth in investment, employment economic performance – with the run economic growth by improving and the broader economy is not latter represented by growth in productivity (e.g. reducing transport exactly spectacular. Rather than SFD and GSP. Major project work times and costs). This boosts the the high growth rates experienced has strong multiplier impacts on economy’s “speed limit” before it during much of the 1990s and the economy, particularly when it runs back into capacity constraints. 2000s, economic growth (as uses local labour and resources. Overall, sustaining growth in the captured by Gross State Product Essentially, additional major project Queensland economy requires or GSP) is expected to average work requires other industries to putting into place plans and policies around 2.8% per annum through boost their outputs also – both that will encourage and sustain both the next five years, with Queensland directly to service the initial increase public and private investment in the State Final Demand (SFD) growth in construction output, and then state over the long-term. This means averaging a slightly better 3.3% per indirectly to satisfy the subsequent addressing funding issues highlighted annum. Historically, Queensland expansion in the other industries. in the 2017 Major Projects Pipeline has significantly outperformed The overall gross multiplier (or total Report, continuing to develop the Australian economy, however direct requirement) for heavy and civil new productive infrastructure the next five years only sees very engineering construction is over two, projects, and providing a supportive marginal outperformance overall. suggesting that every dollar increase environment for privately funded in major project work “requires” an projects to proceed. overall boost of over two dollars across the broader economy.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 5 Port Drive upgrade

There has been a 64% reduction Meeting the infrastructure challenge in credibly proposed projects from requires all levels of government $11.5 billion identified in our 2017 to develop policies that align their Report to just $4.1billion in this year’s infrastructure priorities and streamline Report, which indicates challenges approval of their project funding to sustaining major project work at co-contributions. This is particularly Encourage the 2017/2018 levels over the next two important in Queensland as the split adoption of new years. In the short-term, funding in policy between Commonwealth for $4.1 billion of credibly proposed and State on long-term asset leasing technologies projects is required and detailed and capital recycling means using this that increase the business cases are needed to further option to raise infrastructure funding productivity of the support $5 billion of prospective is not possible in the medium term, construction industry project investment decisions. unlike the high-growth states of New South Wales and Victoria. Policies are Over half of the private sector projects also required that encourage private identified in the Pipeline are either sector proponents to invest in their Prospective or unlikely to receive existing infrastructure while attracting funding approval in the medium new investment to Queensland. term. This is leading to a distinct lack of replacement projects for those currently under construction and is skewing the investable project ratio towards public sector projects. The challenge is to understand the barriers that are preventing greater private investment in existing or new private infrastructure – be that regulation, approvals, risk on financial return, perception of sovereign risk or confidence in the long-term outlook for the region.

6 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook There are initiatives that governments can undertake to boost their funding capability and deliver the infrastructure Queensland requires, including:

——Continue to mature the development of ——Improve identification of specific markets, independently prepared business cases and networks or regions where privately-led ensure that public infrastructure projects are infrastructure proposals can provide critical selected through transparent cost benefit infrastructure. For different reasons, the analysis (CBA). To ensure continued regional State-sponsored Market-led Proposal investment, regional projects in existing areas initiative and the Commonwealth-sponsored or networks with low populations or relatively Northern Australia Infrastructure Facility low initial demand may require more careful initiative have yet to stimulate substantial consideration of business case benefit-cost- increased economic investment and major ratios of less than 1, taking a longer term and project activity. Rather than await proposals, wider view of the project benefits. the formulation of specific prospectus by government that invite interest in developing desirable infrastructure may assist both international and domestic private investors to actively participate.

——Provide increased certainty of long-term ——Research, identify and work to remove Commonwealth funding streams through barriers to private sector infrastructure expanding the number of City Deals. The investment. The current value of funded Townsville City Deal struck in December 2016 private sector projects announced or being was the first in Australia and an important start. procured is less than 20% than those A South East Queensland (SEQ) Regional City funded by the public sector. This indicates a Deal has the potential to be the foremost City significant skew from the historical average Deal in the nation involving eleven separate of 50-50 public-private investment in major Councils. This second generation City Deal can engineering projects. provide a structured, coordinated plan for the long-term funding of SEQ infrastructure by all ——Do not rule out infrastructure debt for tiers of government. capital investment. In the right circumstance where productive economic infrastructure is identified through an independent business case, increased debt funding can have a powerful impact on economic growth.

——Provide increased certainty of Commonwealth ——Maintain strong oversight and monitoring of and State contributions to funding of transport government capital works expenditure and projects on the National Land Transport breaking the underspend pattern on planned Network. Since last year’s Report, there have infrastructure investment. As highlighted in been further public disagreements by the the previous Report, there continues to be respective governments on major contributions sharp differences in planned public investment towards funding major projects on the M1 (measured as ‘purchases of non-financial motorway and Cross River Rail. This decreases assets’ in various Budgets) and actual spending confidence and leads to uncertainty of the outcomes. The 2016/17 State Budget, for transport projects in the Pipeline. example, planned for $8.3 billion in such investment, which the recent 2017 Mid-Year Fiscal and Economic Review (MYFER) confirmed to be $7.3 billion – around a $1 billion shortfall.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 7 Logan Enhancement Project

The existence of a highly skilled and efficient engineering and contracting market in Queensland can help to stretch tax-payer funds and attract private sector proponents looking to develop low-cost infrastructure and exploit global markets. For these reasons governments, private sector proponents and major project participants could collectively explore how to drive out waste, improve productivity and improve project risk allocation through the following:

——Utilise accurate capital planning, state ——Develop and maintain a plan for construction infrastructure plans and long-term project materials so that the demand and supply pipelines such as in this Report to give industry balance for scarce products can be quantified, the best possible chance of participating mapped and emerging gaps identified early in in major projects. the process. Similarly, attention needs to be focused on the development and maintenance of a construction transport and logistics plan to ——Increase collaboration between infrastructure avoid bottlenecks, delays and rising costs for developers and the construction industry, construction materials as a result of congested through the use of contract forms that seek road transport networks. to maximise value through reduction in waste, reward innovation, lead to genuine improvements in productivity and best allocate risk.

——Increase efficiency in procurement of ——Encourage the adoption of new technologies infrastructure projects through use of more that increase the productivity of the construction selective and collaborative tender processes that industry. These can include offsite modular recognise the significant cost involved in bidding construction, automation, digitisation, use of for large infrastructure projects (costs that Building Information Modelling (BIM) to enhance ultimately need to be recovered either through supply chain collaboration and investigate better direct reimbursement or mark-up). forms of knowledge transfer.

——Strengthen the focus on workforce planning ——Encourage the development of formal dispute and skills development initiatives so that avoidance strategies that include the use of demand for key onsite skills can meet the effective collaboration to develop construction infrastructure activity. price certainty and allocate project risk using best practice.

8 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 9 ECONOMIC OUTLOOK

Population growth is among the highest of the developed economies, which has helped underpin household consumption and demand for dwelling and infrastructure construction

Differences in the timing and magnitude of investment cycles by region are creating large differences in economic performance (and construction activity) by state

Further declines in bulk commodity prices are anticipated, before a longer term recovery, affecting Queensland royalty revenues

10 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Pulic ector Pipeline oer ears

Credibly Under Under Unlikely Prospective proposed Announced procurement construction projects valued at projects valued at projects valued at projects valued at projects valued at projects valued at

Unfunded $4.7 billion Funded $15.5 billion

Priate Pipeline oer ears

Credibly Under Under Unlikely Prospective proposed Announced procurement construction projects valued at projects valued at projects valued at projects valued at projects valued at projects valued at

Unfunded $11.4 billion Funded $8.3 billion

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 11 ECONOMIC OUTLOOK

The Queensland economy has traditionally been one of the stronger state performers in Australia but has been suffering the effects of a prolonged downturn in public and private investment.

While one of Australia’s key ‘resources’ states – and one of the largest exporters of coal (and now gas) – the State economy remains highly diversified and increasingly linked into global trade networks through tourism, agriculture and education industries. Mining investment is at a trough and rising non-mining investment and service credits will help offset expected falls in private dwelling investment. Key points:

——Global economic growth is predicted to strengthen in ——Queensland State Final Demand (SFD) rose in 2016/17 2018, before moderating in the longer run. World Gross after two years of decline. Over the past year, growth Domestic Product (GDP) growth has risen from 3.2% in in SFD has been underpinned by modest growth and calendar 2016 to 3.7% in 2017 and is forecast to rise to contributions from household spending, business 3.9% in 2018. From 2019, the world economy will begin equipment purchases, government recurrent expenditure to show gradually slower growth, linked to long-term and dwelling investment, although growth in dwelling fundamentals, with growth forecast to average 3.3% investment has slowed sharply over recent quarters after over the five years to 2027. strong growth over the previous four years.

——Global prices for a number of commodities are expected ——Employment growth gained momentum, pushing the to retreat over 2018, before slowly recovering over unemployment rate down to 5.2%. Annual employment subsequent years as the global oversupply in a number growth is now over 4%, on-trend with the bumper jobs of commodities dissipates. Bulk commodity (coking coal growth seen at the national level over the same period. and iron ore) prices rebounded in 2016/17 but have The employment participation rate has also gradually come down from recent peaks – though they are still improved, reaching over 65.5% for the first time since well above the trough in early 2016. Prices are set to February 2016, significantly improving the health of the consolidate in the near term for most other commodities labour market. but rise in the medium to longer term supporting Australian producers.

——Australia’s annual GDP growth is forecast to remain ——The worst of the mining investment slump has now around 2.5% for the next three years. GDP will be past and Queensland’s economy is forecast to slowly boosted by net exports, with solid growth in export pick up over the next two to three years despite a volumes forecast. Underpinning this will be healthy global downturn in residential construction. Growth in SFD, growth (which will drive demand for services exports), GSP and employment are all forecast to be similar to new Liquefied Natural Gas (LNG) capacity, and moderate the national average over the next few years, although growth in capacity in other key commodities. Rural and state economic growth will remain well below historical manufacturing exports are also expected to contribute, averages of over 4% per annum (for SFD and GSP). with both sectors taking advantage of Australia’s comparative advantage in high quality, high value-added output.

——Queensland’s economic growth (as measured by Gross State Product or GSP) slowed marginally in 2016/17 to 1.8% following 2.6% growth in 2015/16. This mild deceleration was driven by a slowdown in housing investment combined with the continued fall in non- dwelling mining construction. Yet these declines were offset by growth in exports as LNG production ramped up in conjunction with rising service credits (tourism).

12 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 5

Economic Growth by Region and Country

Real GDP/GNP# Year OECD US Japan Euro China India Other World Ended (1)(4) area East GDP(4) December Asia(3)(4)

Despite the rising risks, 2008 0.2 -0.3 -1.1 0.4 9.6 6.2 7.7 3.0 the global economy 2009 -3.5 -2.8 -5.4 -4.3 9.5 5.1 4.4 -0.5 is still positive for 2010 3.0 2.5 4.2 2.1 10.6 10.9 4.8 5.3 Queensland 2011 2.0 1.6 -0.1 1.7 9.5 6.9 4.3 4.1 2012 1.4 2.2 1.5 -0.4 7.8 5.5 4.2 3.3

While there is no shortage of 2013 1.5 1.7 2.0 0.3 7.8 6.2 3.8 3.4 commentary surrounding the risks 2014 2.2 2.6 0.3 1.8 7.3 7.1 4.0 3.5 inherent in global economic growth 2015 2.5 2.9 1.4 2.2 6.9 7.5 4.5 3.2 – ranging from the sustainability of Chinese growth and resilience of its 2016 1.8 1.5 0.9 1.9 6.7 7.9 4.3 3.2 financial system to the effect and 2017 2.5 2.3 1.8 2.4 6.9 6.2 4.2 3.7 impact of new trade sanctions – the Forecast fact remains that economic conditions 2018 2.5 2.8 1.7 2.2 6.4 7.5 4.1 3.9 on the ground have improved in the US and across Queensland’s major 2019 2.0 2.0 0.9 1.8 6.0 7.0 4.0 3.6 trading partners. 2020 1.6 1.5 0.0 1.6 5.7 6.9 4.0 3.5 World GDP growth was robust in 2021 1.6 1.5 0.9 1.5 5.4 6.6 3.9 3.4 calendar 2016 (reaching 3.2%) and 2022 1.6 1.5 0.9 1.4 5.2 6.4 3.8 3.3 growth accelerated to 3.7% through calendar 2017. Growth is being Average Growth Rates supported by rising manufacturing 2003–2007 2.8 2.9 1.7 2.5 11.7 8.6 4.5 4.9 activity and global trade flows. 2008–2012 0.6 0.7 -0.2 -0.1 9.4 6.9 5.1 3.0 Developed economies are leading the 2013–2017 2.1 2.2 1.3 1.7 7.1 7.0 4.2 3.4 way for the first time in a decade. From 2019 onwards, the world economy is Forecast expected to slow somewhat, linking 2018–2022 1.9 1.9 0.9 1.7 5.7 6.9 4.0 3.5 once again to long-term fundamentals 2023–2027 1.5 1.6 0.5 1.2 4.7 6.2 3.6 3.3 (falling population growth and structurally slower productive gains), (1) Organisation for Economic Co-operation and Development: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the but it is still expected to average 3.5% Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom, per annum over the five years to 2022. United States. (2) Euro area: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Australia’s trading partner growth Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Spain. (weighted by export proportions) will (3) Other East Asia: Indonesia, South Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand, Vietnam. grow at a faster rate of 3.8% over (4) 2017 is an estimate. the next five years, due to the high (5) Trading partner countries include: China, Japan, Hong Kong, United States, New Zealand, India, Europe and Other East Asia. weights of China, East Asia and India # Annual Per Cent Change. in Australia’s export mix. Although these economies will experience slower growth going forward, they are still expected to outpace the global average. In the US, business investment is forecast to accelerate, driven by improving domestic demand and export gains from a more competitive US dollar and a stronger global climate, rebounding energy sector activity and corporate tax cuts.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 13 Figure 6 – Commodity Prices ($US)

Quarterly Average Prices (Log Scale)

320 Forecast

160

10 un 90 un 92 un 94 un 96 un 98 un 00 un 02 un 04 un 06 un 08 un 10 un 12 un 14 un 16 un 18 un 20

Coking Coal (US$/t) Thermal Coal 9US$/t) Crude Oil (US$/t) Iron Ore (US$/t) Source: BIS Oxford Economics, BREE data

The combination of solid increases in Further declines in employment and improved (although bulk commodity prices Queensland – and still moderate) wage growth should are anticipated, before Australia more broadly drive higher household incomes, a longer term recovery, – continues to be well consumer spending and residential affecting Queensland positioned to supply investment. royalty revenues (and commodities Meanwhile, the Eurozone is expanding impacting on the at the fastest pace in a decade. Australian dollar) A combination of geographical Firming domestic demand is driving proximity to Asian demand centres, the economy, with investment favourable policies, supporting recovering and weaker inflation, strong After recording strong gains from infrastructure, being at the lower consumer confidence and employment supply side concerns, coking coal end of the cost curve for several supporting household spending. The prices are forecast to fall over the next commodities, and high quality / overall Eurozone unemployment rate two years driven by both increased low impurity content of mineral is at a nine-year low. coking coal production in China and endowments will all support future Japan is expected to benefit from a return to average (normal) production exports from Australia. This will help ongoing monetary and fiscal stimulus, levels in Australia. A sustained recovery counter the negative effects of several including a delay in a sales tax hike is forecast from early next decade mines reaching their end-of-life and the in response to ongoing weakness in as global growth builds momentum possibility of discovering lower quality private demand growth. Meanwhile, against constrained supply, and as ore body during exploration. However, China, while gradually slowing, is the path of development in emerging lower prices for coal, if realised, still the world’s largest economy economies becomes more steel present a risk to state government and will continue to make significant intensive. For thermal coal, prices are royalties. To some extent however, the contributions to global growth. India still elevated, although a correction fall in commodity prices (combined and ASEAN-5 (Indonesia, Philippines, is expected over 2018 and 2019 as with rising interest rates in the US) is Malaysia, Thailand and Vietnam) GDP ‘one-off’ recent price drivers dissipate also likely to keep the Australian dollar growth is expected to pick up pace and markets come back to balance. A below recent highs, which will help over the next two years while Russia modest price recovery is forecast from offset lower US-dollar commodity and Brazil – currently in recession – are next decade as demand is expected to prices – and also provide expected to recover from 2017 adding outweigh supply. a boost to Queensland’s to world growth. trade exposed industries.

14 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 7 – Commodity Prices ($US)

Quarterly Average Prices (Log Scale)

Forecast

32,000

16,000

8,000

4,000

2,000

1,000

0 un 90 un 92 un 94 un 96 un 98 un 00 un 02 un 04 un 06 un 08 un 10 un 12 un 14 un 16 un 18 un 20

Nickel Lead (x10) Gold (x10) (US$/oz) Copper inc Aluminium Source: BIS Oxford Economics, BREE data

Offsetting investment The main factor dragging down growth Overall, however, the Australian cycles keep the Australian has been a major decline in mining economy has been unable to sustain economy subdued investment, which has coincided (and economic growth above 3% since the contributed to) weakness in non- peaking of the resources investment mining business investment. The Australian economy has strong cycle in 2012/13. Much of this weaker fundamentals, now enjoying 27 years The shift in the Australian economy economic performance is due to very of uninterrupted growth since the back to broad-based growth following weak growth in domestic demand 1990/91 recession. Population growth the mining boom continues to during the period, which has been is among the highest of the developed progress slowly. Growth is still below negatively impacted by the ongoing economies, which has helped trend–GDP growth has averaged decline in resources investment. underpin household consumption and around 2.5% annually over the last While partially cushioned by a boom in demand for dwelling and infrastructure five years, with FY2017 coming residential investment since 2013/14 construction. Government debt is in below that, at 2.1%. There are and, more recently, by a recovery comparatively low by global standards, some positive signs. Net exports are in public infrastructure investment, with the Federal Government and the contributing positively to demand, with economic growth has also been larger state economies of New South the global upswing and a competitive hampered by record low growth in Wales and Victoria maintaining AAA Australian dollar (albeit recently flirting wage incomes, with households credit ratings. Overall economic risks with US$0.80) helping to drive export spending more of what they earn are low and the Australian economy is volumes growth. But despite stronger well situated in the fast growing Asia and reducing savings to maintain just profitability, non-mining business Pacific region. moderate household expenditure investment remains patchy, and with growth. Weak wage growth has also Nevertheless, growth in GDP and spare capacity still to absorb in the driven weaker than budgeted tax particularly domestic demand has labour market, household income revenues for governments, lengthening been lower over the past five years and consumer spending growth is the time horizon required to return to than the previous two decades. forecast to remain below trend this sustainable budget surpluses, and year and next. limiting the firepower of governments to counter weak private investment with higher public investment without further increasing public debt.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 15 Unlike many other resources- Low interest rates in this environment There remain challenges ahead for exporting economies, Australia did not have had relatively little impact. While the Australian economy that are likely experience a recession in the wake of there have been plenty of funds to keep business confidence and the resources investment bust. Strong available, this just hasn’t been the investment on a weak plane over growth in mining production and business environment for strong the next one to two years. Wage exports from world class, competitive private investment. growth, except for skilled professions deposits, and supercharged by and trades in some sectors and The next growth phase in the a much lower dollar – which also states, is likely to remain relatively Australian economy will be driven stimulated other exports of goods and weak, affecting retail trade and by non-mining business investment. services, such as tourism, education household expenditures. Politics is When it does recover, it will be to services, agriculture, manufacturing highly adversarial, with major political service growing demand, driven and business services – has helped parties unable to forge a workable by a growth logic (evidenced by offset some of the pain from weaker consensus on many important policy rising profits) and augmented by a demand growth. Economic growth areas surrounding taxation, energy technology catch-up. In turn, this (which includes net exports) has security, and the environment. But, will have a strong multiplier through generally been higher than growth more importantly, investment cycles business services into the rest of the in domestic demand. across Australia are likely to remain economy. While non-mining business highly unsynchronised over the next The challenge for Australia is that profits have increased, it is still too two years – keeping overall economic mining exports, particularly, are highly early to say that businesses are growth constrained to around 2.5% capital – rather than labour – intensive. confident in the path of future demand per annum on average over 2017/18 Stronger, sustainable growth in and profits, and are willing to make the and 2018/19. employment requires stronger growth psychological shift from caution to a in local expenditures; and in domestic ‘go for growth’ investment mentality. demand. In turn, this requires the Part of the reason for this is that return of growth in non-mining nationally, by region and industry, business investment, which growth and profitability is highly has remained stalled since the GFC. fragmented. Very strong economic The problem for non-mining industry growth has returned to New South sectors has generally been weak Wales and Victoria, after spending growth in demand, weak profits and much of the mining boom years excess capacity. In that environment, suppressed. But growth in demand is it is foolhardy for businesses to invest still very weak in many other regions. ahead of requirements, straining cash Some states such as Western Australia flows and locking in additional costs and Queensland saw outright declines before they had the revenue to support in State Final Demand in recent years. them. Most businesses are still in cost-cutting mode, preserving cash and deferring investment until demand recovers.

Mining construction will decline around % from the 2013/1478 peak to the trough

16 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 8 These unsynchronised investment Major Project Work Done by Segment cycles include: Per cent Forecast ——Residential investment, a 8 key driver of growth over the three years to 2015/16, which 6 is expected to peak and then decline over the next three years,

4 with particularly large declines expected in the volatile high density apartment market. 2 ——Mining investment nationally, 0 which is in the final stages of decline as the LNG investment boom finally runs its course -2 in Western Australia and the Northern Territory (having already -4 wound down in Queensland). 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Overall, mining construction Year Ended une Real GNE Real GDP External Contribution will decline around 78% from the 2013/14 peak to the trough, although mining equipment Contribution to Domestic Demand – Percent purchases and exploration have started to recover across most Per cent Forecast 4 commodities (indicating the initial stages of the next upturn).

3 ——Public investment, which has finally started to recover after five 2 years of decline, surging 16% in 2016/17 alone. Growth in public

1 investment is being supported by new transport infrastructure

0 but will be offset in part after 2018/19 by sharply falling investment in Australia’s largest -1 public infrastructure project – the NBN. Even considering a strong -2 phase of growth in transport 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Year Ended une infrastructure, growth in total Private Consumption Government Expenditure public investment is expected to New Business Investment Dwelling Investment be either flat or falling (and hence be a drag on Australia’s economic growth) by the end of the decade.

——Non-mining business investment, which is currently showing only modest growth but is expected to strengthen from last decade as higher profitability, demand and capacity utilisation (in turn supported by a slightly weaker Australian dollar) drive a change in business confidence and investment.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 17 Domestic demand is predicted to Queensland’s Yet in one important sense, the improve late this decade as the economic challenge Queensland economy has been expected declines in mining and The end of the mining boom was partially sheltered from the severity residential investment bottom out always going to be a trying time for of the downturn in mining investment. and start showing signs of recovery. the Queensland economy. Economic Significant components of mining Capacity constraints and expected growth weakened markedly from and mining-related investment improvements in business confidence 2011/12 driven by falling mining and and equipment were sourced from are predicted to drive an acceleration public investment. Growth in GSP overseas, and were therefore classed in non-mining business investment. averaged 4.4% per annum over the as imports, detracting from GSP. But until that time, economic growth 10 years to 2009/10 then fell to As mining investment retreated, so and inflation is expected to remain average 2.5% per annum over the did these imports. So, although the relatively subdued, with the Reserve five years to 2014/15. local economy did not receive all the Bank unlikely to be in a strong position benefits of the resources construction to raise interest rates until 2019/20. Meanwhile, growth in SFD – a measure boom during the upswing, it of domestic demand or spending in conversely did not suffer the whole Differences in the timing and the local economy which is highly negative magnitude of the downturn. magnitude of investment cycles by correlated with employment – slowed region are creating large differences to just 0.9% in 2013/14 (compared Mining now accounts for a falling in economic performance (and to growth rates of between 5% to share of total engineering construction. construction activity) by state. Strong 9% during the boom years), and then At the 2013/14 peak, mining and pipelines of infrastructure projects, fell 3.6% in 2014/15 and a further heavy industry construction, pipelines relative undersupply in housing, 1.2% in 2015/16. Employment construction and railways construction higher population growth and growth weakened in unison, with accounted for around 90% private sector confidence to invest the unemployment rate averaging (or $35.9 billion of the total is driving a construction upswing in 5.9% over the five years to 2014/15 $39.2 billion) of privately funded New South Wales and Victoria, which (compared to 4.5% over the five years engineering construction. Since in turn is spilling over into broader to 2009/10). This weakness continued then, resources-related engineering industry growth. into 2015/16, and the first half of construction has simply plummeted. The void left by retreating mining- By contrast, total investment and 2016/17, with monthly employment related engineering construction is construction activity remains relatively falling consecutively on more than being partially offset by a recovery in flat (or falling) in the former resources three occasions over the period. More public investment. After little growth in boom states of Queensland and recently, however, the labour market the previous three years, Government Western Australia. These states are has shown some strength with the Consumption Expenditure (GCE) now generating strong growth in annual employment growth rate rising jumped over 5% in 2015/16 and mining production and exports as a above 4%. 2016/17. Strong rises in education direct consequence of the previous Private engineering construction, and health-related employment is resources investment boom, boosting which is dominated by resources- contributing to the rise in GCE and the Gross State Product (GSP). However, related construction, peaked at $39 healthier total employment figures. growth in State Final Demand (SFD), billion in 2013/14 and then plunged the sum of household consumption, 68% over the next two years. There Higher levels of private dwelling government consumption and were also large declines in equipment investment helped offset declines in investment – (both public and private) purchases and exploration by the private engineering construction. The has been very weak or negative in Queensland mining industry over the recent upswing in residential building recent years. This is important, as 2013/14 to 2015/16 period. Although followed a six-year decline (2007/08 growth in SFD tends to be a greater mining and heavy industry construction to 2012/13), which occured at the driver of growth in employment and decreased a further 10% in 2016/17, same time that the mining boom incomes than growth in (capital- the smaller decline off a much smaller was stimulating robust population intensive) mining exports. base of investment has delivered a growth from both interstate and smaller negative contribution to SFD. overseas, resulting in an undersupply Meanwhile, the jump in coal prices of housing. This undersupply has now and higher base metals prices over been eliminated, with private dwelling There are vast 2016/17 has seen coal mines in investment growing at an average of differences in Queensland re-opened and increases 12% per annum over the three years economic performance in mining equipment purchases. to 2015/16 and peaking in 2016/17. by state

18 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 9

Total Construction Work Done by State (2015/16 Constant prices) 70,000 Forecast

60,000

50,000 Queensland economy 40,000 to pick from here, but growth likely to 30,000 be constrained

20,000

10,000 The Queensland economy is showing signs of recovery. The lower, post- 0 boom Australian dollar has helped 1990 1994 1998 2002 2006 2010 2014 2018 2022 Year Ended June boost tradeables such as tourism and educational exports, with NSW VIC QLD WA NT ACT TAS SA manufacturing also likely to benefit Source: BIS Oxford Economics, BREE data over the forecast horizon. Meanwhile, Figure 10 public investment has returned after a number of years of weakness. Comparisons of State (SFD) and National (GNE) Growth in Final Demand Public investment had been a drag Forecast 20% on the Queensland economy for several years, having fallen by over 15% a third over the six years to 2015/16 from the 2009/10 peak. Public non- 10% dwelling building had fallen to its lowest level since 1993/94 (in real terms). However, it is now bouncing 5% back, led by education-related and other social and institutional buildings. 0% Public engineering construction also picked up strongly over 2016/17 and -5% further strong growth is predicted for 2017/18 and 2018/19, driven

-10% by roads, harbours, defence, water 1987 1993 1999 2005 2011 2017 and telecommunications-related Year Ended June infrastructure. Further modest rises AUS GNE WA SFD QLD SFD SA SFD are expected thereafter, with falling 10% Forecast telecommunication construction – as the NBN roll-out winds down – 8% moderating the overall increases.

-2%

-4%

-6% 1987 1993 1999 2005 2011 2017 Year Ended June AUS GNE NSW SFD VIC SFD

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 19 Figure 11

Queensland Economy – Components of State Final Demand

400,000 Forecast

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Year Ended une

Public Investment Private Investment Private Consumption Expenditure Government Consumption Expenditure

Source: BIS Oxford Economics, BREE data

A sizeable chunk of the funding for A key challenge facing the Queensland Office building work has declined this pick-up in activity is coming economy is the expected decline in sharply in recent years, with only weak from Commonwealth infrastructure residential building, following strong growth in prospect, largely due to allocations. Without increased income, growth over the past four years. With oversupply related to the decline in State Government finances are the level of dwelling building now mining investment-related business unable to support major increases in well above demand, an oversupply services which were a key component infrastructure spending. Public sector is manifesting, particularly in the of office demand. Retail building is debt has continued to escalate and apartment heavy inner Brisbane also expected to be relatively flat the Queensland Government has lost market. Private dwelling investment over the next few years in line with its AAA credit rating. The fall in coal slowed to 2.8% in 2016/17 and is consumer spending, but strong and minerals prices over the three expected to contract over the three growth is anticipated in hotel and years to 2015/16 also weakened years to 2019/20 inclusive. accommodation construction. royalty revenues. On the other hand, State Government revenues have benefitted from the residential property … with non-residential A competitive Australian recovery and corresponding increases building investment a dollar will continue to in stamp duties. Generally higher coal mixed bag support service exports prices (since the trough in early 2016) and rising LNG production should Private non-residential building The ‘X factor’ for the Queensland help boost government revenues and declined over 2016/17, after six years economy remains the value of the underwrite healthier increases in public of solid growth, but further growth is Australian dollar and the improved investment as well as modest rises expected over the next three years. attractiveness of Queensland’s key in GCE. Over the next year, higher activity service exports. in the hotels segment (boosted by the lower dollar), warehouses and Falling residential building private schools building should more activity will dampen than offset declines in other sectors, overall growth… particularly in the health sector as work winds down on the (mainly privately funded) $1.2 billion first stage of the Sunshine Coast University Hospital.

20 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Townsville Ring Road

The Queensland tourism industry While rising interest rates in the United After negligible growth through has been buffeted for almost a States and a near term correction in 2016/17, employment growth has decade – first by the GFC and then some key commodity prices (e.g. coal ramped up significantly through by the high Australian dollar which and iron ore) would suggest that the 2017/18 to date, with annual growth made holidaying in Australia more Australian dollar may depreciate further over the year to February 2018 just expensive relative to other destinations against the US dollar in coming years, shy of 4%. Strengthening public and in the region (for both domestic and there is the risk that the Australian business investment and renewed international visitors). However, after dollar will remain stubbornly around tourism growth have been key drivers. a decade of constraint, non-mining the US$0.75 mark for some time, and However, overall employment growth trade-exposed industries are beginning may even appreciate, particularly as will likely weaken over the next two to recover. At the national level, tourism the Australian economy improves later years, keeping household spending related service exports grew 15% this decade. Consequently, it will be growth muted, similar to the last four over 2016/17. The low dollar has also important for Queensland businesses years. Previous employment growth supported growth and employment in to take advantage of the competitive was spurred by much higher rates Queensland’s education sector. These gains already rendered by the fall in of population growth. Queensland’s sectors will need to refurbish and the dollar now – and not wait or rely on population growth has come back to then expand to meet demand. Other further falls in the currency as part of a the pack and, at 1.6% annual growth, dollar-exposed industries are benefiting longer-term growth strategy. is around the national average – after from the improved competitiveness of decades of population growth well a lower dollar, showing initial signs of above the national average. recovery. That will broaden to growth Employment improving, and, eventually, investment in the non- yet recent growth to mining sectors. But it is expected moderate GSP boosted by stronger to be a long process. SFD growth over the medium term

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 21 Figure 12

Queensland Annual Population Increase by Source

120

Forecast

100

0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Year Ended une Interstate Migration Overseas Migration Natural Increase

Source: BIS Oxford Economics, BREE data

Figure 13

5 Year Compound Annual Growth by Industry Sector, Queensland

Construction Agriculture Rental, Hiring RealEstate Electricity, Gas, Water Waste Services Ownership of Dwellings Manufacturing Retail Trade Wholesale Trade Public Administration Safety Administation Support Other Services All Inudstries Average Education Training Transport, Postal Warehousing Property Business Services Arts Recreational Mining Finance Insurance Accommodation Food Services Professional, Scientific Technical Information, Media Telecommunications Health

-4 -2 0 2 4 6 8

2012-17 2018-22

Source: BIS Oxford Economics, BREE data

22 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Export growth remained strong in Over the past five years, mining, rental 2016/17 (around 7%) as capacity and and hiring, health and information, Private engineering production ramped up further at the media and telecommunications (ICT) construction, which is Gladstone LNG plants. But as these were standout growth industries in plants hit capacity, export growth over Queensland, with all industries growth dominated by resources 2017/18 and particularly 2018/19 will averaging a relatively weak 1.8% per related construction, decelerate. GSP growth is forecast to annum growth between 2011/12 and peaked at $39 billion in remain subdued at around 2.5% over 2016/17. By contrast, construction, 2013/14 and then plunged this year and next, before gradually agriculture, manufacturing, accelerating towards the end of the trade (wholesale and retail) and decade and into the early 2020s. accommodation performed relatively poorly. However, over the next five Longer term, Queensland economic years, the performance of all of these growth is expected to be sustained in 68% ‘low growth’ sectors will be stronger over the next two years the 3-4% per annum range as growth as investment recovers and the lower becomes more broadly based, and dollar stimulates trade-exposed its benefits more evenly distributed. industries. Technological development Queensland has a diversified economy, and demographic change should and the competitive realignment of keep growth in health strong through its key trade-exposed industries – the next five years, while other ‘high including agriculture, manufacturing, growth’ sectors in activity terms will tourism, education and mining- is be finance and insurance, mining, expected to be the main spur to accommodation, professional scientific economic growth. and technical services and ICT.

However, developments in Technical change, lower automation will affect employment dollar, and investment growth differently for each sector. cycles to drive differences BIS Oxford Economics expects the in outlook industry strongest growth sectors in terms of employment over the next five Over the next five years, the lower years will be accommodation and Australian dollar should continue to food services, arts and recreational encourage growth in trade-exposed services, transport, administration and industry sectors in the Queensland support and education. By contrast, economy – but technological the weakest sectors in terms of change, changing demographics employment growth will likely be ICT and differences in the stage of long (despite growing strongly in terms run investment cycles will also play a of Gross Value Added, and hence significant role, as shown in Figure 13. producing large productivity gains), manufacturing, finance and insurance and construction – with the latter affected, particularly by a downturn in residential building which comprises the bulk of construction trades. A more detailed discussion of the outlook for the construction workforce is provided later in this Report.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 23 LONG-TERM QUEENSLAND MAJOR PROJECTS PIPELINE

Non-water utilities and rail offer the strongest prospects for activity across the five- year forecast period

By region, Northern Queensland has the strongest major Major project project growth work for roads prospects and bridges has risen strongly in 2016/17 and will remain on a growth path over 2017/18 There are significant and 2018/19 risks with the water and sewerage major projects outlook. Many major projects,

Some sectors simply do such as the Nullinga not have enough projects Dam and the Paradise in the pipeline – whether Dam Primary Spillway funded or unfunded – to Improvement Project, sustain major project work are subject to future through the next five years business cases

24 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Non-water utilities and rail offer the strongest prospects for activity across the five- year forecast period

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 25 LONG-TERM QUEENSLAND MAJOR PROJECTS PIPELINE

The 2018 Major Projects List is presented in the Appendix of this Report. The Major Projects List includes engineering projects in excess of $50 million and was developed by BIS Oxford Economics in coordination with QMCA and IAQ members and CSQ input throughout January and February 2018.

Figure 14

Definition of Project Value and Engineering Value

Engineering Value

Construction Principal’s Cost Contractor’s Cost

Base Estimate

Risk & Contingency

Total Project Cost (current $)

Escalation

Total Project Cost Project Value (outturn $ for completion in 2xxx)

26 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook The Appendix provides both the Project Value and Engineering Value of each project. The figures and Australian dollar amounts stated throughout this Report are derived from aggregation of the Engineering Values, which typically exclude Project Owner’s costs such as land acquisition.

Total Major Projects Outlook Figures 15 and 16 highlight the current activity and projections for major project work for the period 2017/18 to 2021/22 based on the 2018 Major Projects List, as well as historical data to 2011/12. Key points from this analysis are:

——As forecast in last year’s Report, there was a decline ——Furthermore, some sectors simply do not have in total major project work done over 2016/17. enough projects in the pipeline – whether funded or Queensland engineering construction for major unfunded – to sustain major project work through projects fell to $3.9 billion in 2016/17, down over the next five years. Roads activity is expected to 75% from the 2012/13 peak. Despite the continued decline 44% over three years following the peak fall in mining and heavy industry construction work, in 2018/19. Non-water utilities activity, comprising non-mining major project activity rose substantially mostly electricity and telecommunications work, over 2016/17, with electricity, telecommunications, is forecast to decline 65% over the same period. defence and roads activity rising throughout the year. Accordingly, the mining and heavy industry ——Non-water utilities and rail offer the strongest share of total major project work decreased again prospects for activity across the five-year forecast in 2016/17, falling to just 20% of major project work period, notwithstanding a collapse in work done done, from a peak of 85% in 2014/15. forecast for non-water utilities during the early 2020s Major project engineering work completed has as telecommunications (particularly the NBN) and risen by 58% in 2017/18 to $6.9 billion after two renewable energy projects wind down. Compared successive years of low activity. Subject to funding to the previous five-year period, the value of projects commitments for credibly proposed projects, in the pipeline for the next five years are 129% and activity in 2018/19 will be retained at a similar level. 85% higher for non-water utilities and rail segments respectively.

——With a drop in funding commitments for numerous ——By region, Northern Queensland has the strongest private mining and industrial projects, the value of major project growth prospects over the next five public sector projects that have funds committed years, with the value of projects in the pipeline worth or are currently under procurement now outstrip $8.2 billion – 361% higher than the previous five the private sector by a factor of 6 to 1. The ability of years. At $13.6 billion, South East Queensland still governments to identify and deliver on their planned commands the largest share of major project work infrastructure has therefore assumed even greater listed in the pipeline, and is itself 167% higher than importance to the continued short-term sustainability the actual work done over the past five years, albeit of the major projects contracting sector. not all of this is currently funded.

——There are substantial risks to the sustainability of the major projects pipeline, however. Work done on currently funded projects is still expected to decline in 2018/19 before falling back to recent trough levels More projects need to at the turn of the decade as work on large, existing projects moves to completion. As highlighted in last move from the unfunded year’s Report, more projects need to move from the to funded category if the unfunded to funded category if the recovery in major recovery in major project project work in 2017/18 proves to be more than a work in 2017/18 proves to one-year phenomenon highlighting the need to work be more than a one-year on funding strategies. phenomenon, highlighting the need to work on funding strategies

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 27 Figure 15 Funded versus Major Project Work Done: All Segments Unfunded Projects

20 $ BIllion This projection is based on a

18 considered view of both funded and unfunded projects. Consequently, 16 it is likely to provide a more realistic 14 outlook of major projects activity 12 in Queensland. 10 “Funded” project categories include: 8 ——Announced: projects which have 6 funding support but have not yet 4 entered the procurement stage 2 (as at March 2018). 0 ——Under procurement: projects in a procurement stage but have

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 not yet started construction Funded Not Funded (as at March 2018). ——Under construction: projects Figure 16 in flight / under construction.

Major Project Work Done by Segment “Unfunded” project categories include: 20,000 — 18,000 —Unlikely: projects considered not 16,000 to occur in the next five years, 14,000 even if announced. 12,000 ——Prospective: projects considered 10,000 likely to occur over next five years 8,000 but not yet formally proposed. 6,000 ——Credibly Proposed: projects that 4,000 are supported by governments 2,000 and/or the private sector but still 0 in prefeasibility / business case mode and so do not have funding 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 committed. Roads & Bridges Rail & Harbours Non-Water Utilities Figure 18 illustrates the outlook Water & Sewerage Defence Mining & Heavy Industry for major project activity based on the subcategories of funded and Figure 17 unfunded work. While total major Major Project Work Done by Segment (Excluding Mining and Heavy Industry) project activity is expected to rise through much of the forecast 8,000 period, the outlook for funded 7,000 work (incorporating those projects 6,000 announced, under procurement or

5,000 under construction) is much different, peaking in aggregate during 2017/18. 4,000 The funded forecast view is similar 3,000 to that of a “worst case scenario”

2,000 outlook, should international developments or public sector 1,000 finances deteriorate significantly 0 further, or the combination of threats to the Queensland construction 2020/21 2011/12 2012/13 2015/16 2019/20 2010/11 2013/14 2014/15 2016/17 2017/18 2018/19 2021/22 industry remain unaddressed.

Roads & Bridges Rail & Harbours Non-Water Utilities Water & Sewerage Defence

28 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook To have a growing pipeline of major Figure 18 project work beyond this requires Major Project Work Done by Funding Status shifting currently unfunded projects 20,000 80% into the funded category. In our view, 18,000 the most likely scenario for major 70% project work excludes “unlikely” 16,000 projects, but these are included 60% 14,000 here to show their potential impact 50% on major project work, particularly 12,000 later in the forecast. 10,000 40%

8,000 The Addressable Market 30% 6,000 for Local Contractors 20% Given the high level of imported 4,000 10% materials, equipment, and buildings 2,000 and structures attached to LNG 0 0% projects, as well as the use of direct labour employment contracts 2020/21 2021/22 2010/11 2016/17 2017/18 2018/19 2019/20 2011/12 2012/13 2013/14 2014/15 2015/16 in assembling downstream LNG Funded Total Credibly Proposed Total Prospective components on site, an alternative Total Unlikely % of Public Funding (RHS) measure of major projects work for Source: BIS Oxford Economics, BREE data this Report, which better captures the market for which local contractors can Figure 19 effectively compete, has also been Local Major Projects Work Done produced. This analysis is based on discussions with major contractors 25,000 regarding the approximate percentage of LNG major project value year by 20,000 year (both upstream and downstream) that tends to be imported, offered through direct labour employment 15,000 contracts or tendered as packages of work to local contractors. 10,000 Figure 19 shows this Report’s estimates of local contractor work 5,000 done versus offshore (imported) LNG construction elements. In 2011/12, the expansion of the contractor market 0 was likely not as steep as indicated by

the total value of major project work 2011/12 2012/13 2010/11 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 alone (and official ABS engineering Local Major Projects Work Done (exc.Offshore LNG) Offshore LNG construction data, which includes the value of imported LNG components).

During this period, the three major By contrast, with the completion of the Gladstone-based LNG projects began downstream LNG processing facilities, to ramp up construction considerably, a much greater proportion of major but this period also coincided with project work after 2015/16 is assumed a large increase in imports. The to be won by local contractors (being analysis shows, however, that the local more upstream related LNG work, contract market continued to grow into other inland resources projects and 2012–2013, corresponding well with public infrastructure). the data on construction employment that also rose during the same year. A downturn in local contractor work occurred from 2013/14, with declines continuing into 2015/16.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 29 Roads Since our previous Report, the Cross Water and and Bridges River Rail project has become fully Sewerage Major project work for roads and funded, and this will be a key major Water and sewerage work done on bridges has risen strongly in 2016/17 project driving railways activity into major projects spiked in 2012/13, and will remain on a growth path the future. While early preparation largely underpinned by new water over 2017/18 and 2018/19. Growth works have already commenced, treatment facilities and pipeline is being driven by the current round the majority of work for this project construction projects supporting of funding under the Commonwealth will commence from 2020/21 onwards. upstream CSG field development in Government’s Infrastructure Adding to this will be works on the the Surat Basin. However, as these Investment Program (IIP) – focusing Inland Rail from the Queensland border projects moved to completion, work heavily on the Bruce Highway – and to Acacia Ridge. This project has done weakened substantially, falling the addition of the Toowoomba secured Commonwealth funding and under $50 million in 2015/16. Second Range Crossing, Gateway construction is expected to commence Activity rose marginally in 2016/17, Upgrade North (GUN), the Ipswich from 2018/19. Work on Inland Rail will and should do so again this financial and Pacific Motorways and the compromise a significant proportion year, but stronger growth is forecast Kingsford Smith Drive and Caloundra of total activity over the subsequent ahead, initially driven by an expanding to Sunshine Motorway upgrades. years, although it is noted that the exact timing of work is subject to risk. pipeline of sewerage upgrade works. As shown in Figure 20, major project The Commonwealth Water road and bridge construction work In the nearer term, work in this Infrastructure Ministerial Working done contracted around 70% between segment will be supported by the Group has identified key water the peak of 2010/11 and the trough of RG Tanna Coal Terminal upgrade as infrastructure projects across 2015/16. However, major project work part of the Port of Gladstone and the Queensland that have the potential more than tripled in 2016/17, driven North Coast freight line upgrade, as for Commonwealth Government by the current round of IIP projects. well as privately funded port facilities for the Amrun Project (bauxite). involvement. Commonwealth funding Given the project pipeline, Queensland Other publicly funded harbour works has already been allocated to the roads and bridge major projects expected to underpin activity are the Rookwood Weir and the Haughton work is expected to reach a new Port of Gladstone – Second Shipping Channel Capacity Upgrade. peak of over $2.3 billion by 2018/19. Lane (Gatcombe and Golding Cutting Furthermore, the Northern Australia However, major project work in this Channel Duplication Project) and the Infrastructure Facility (NAIF) could help segment is also projected to be highly Port of Townsville – Outer Harbour prospective private projects across cyclical, with work falling away again Expansion (Berths 14+15). Queensland, particularly agricultural significantly after the 2018/19 peak, food bowl opportunities, such as the particularly over 2019/20 and 2020/21 Work on Adani-related projects, which Three Rivers Irrigation Project. as the next round of projects reach includes upgrading Abbot Point and completion. Reducing the degree of building further rail infrastructure, is still cyclicality will entail increasing the unfunded. Other unfunded rail projects in the pipeline include the Townsville number of funded projects later Cross River Rail and this decade. Eastern Access Rail Corridor (requiring private funding) and the Beerburrum to Inland Rail will drive Railways Nambour, Landsborough to Nambour railway activity from and Harbours upgrades, as well the Ipswich Rail Line 2020/21 onwards – Darra-Redbank 3rd track (requiring Major project work across the railways funding from the public sector to and harbours segments in Queensland proceed). If these projects secure moved to a higher plane in the early funding, construction is expected to 2010s, peaking at over $1.6 billion in commence post 2019/20, supporting 2013/14, before falling to just $320 activity later in the forecast period. million in 2016/17 with the completion of the Moreton Bay Rail Link. Harbours In the long-term, another $4 billion will major project construction work has likely be needed to complete the rail been driven predominantly by the line from Acacia Ridge and the Port of demands of the resources sector, Brisbane itself. However, the timing of but across railways there are also construction is likely to fall outside the significant contributions from the scope of this report (>2021/22) with public sector for passenger and substantial planning required given the freight projects. urban nature of this project.

30 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 20 There are significant risks with the water and sewerage major projects Roads and Bridges Major Project Work Done by Funding Status outlook. Many major projects, 2,500 such as the Nullinga Dam and the Paradise Dam Primary Spillway Improvement Project, are subject to 2,000 future business cases. Also, as many of the projects driving work done and 1,500 workforce demand are coal or oil and gas related pipeline work that are 1,000 not yet funded, they retain significant start date flexibility. If conditions do 500 not prove ideal for these projects, they could be further delayed or pushed out beyond the forecast 0 horizon, considerably weakening 2018/19 2016/17 2019/20 2020/21 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2021/22 the industry growth profile. 2017/18

Taken together, these projects have Funded Total Credibly Proposed Total Prospective Total Unlikely the potential to substantially boost Figure 21 activity into 2019/20 and 2020/21. Railways and Harbours Major Project Work Done by Funding Status Work done could reach a new 4,500 cyclical peak of just over $1.4 billion by 2020/21 if all unfunded projects 4,000 in the pipeline were to proceed, 3,500 before pulling back into 2021/22. 3,000 Electricity, Pipelines 2,500 and Telecoms 2,000 1,500 Electricity, pipelines, and telecoms major project work done peaked 1000 at a record $1.6 billion in 2012/13 500 driven mainly by booming LNG- 0 related gas pipeline construction. In the electricity sector, a host of 2010/11 2012/13 2013/14 2014/15 2018/19 new Powerlink distribution and 2011/12 2015/16 2016/17 2017/18 2019/20 2020/21 2021/22 supply projects were a key driver. Funded Total Credibly Proposed Total Prospective Total Unlikely The completion of these major Figure 22 projects saw work done decline sharply over 2013/14 and 2014/15. Water and Sewerage Major Project Work Done by Funding Status 1,600 During 2016/17, electricity, pipelines and telecoms major project 1,400 work done jumped back above 1,200 $1.2 billion, driven heavily by surging NBN activity and a host of smaller 1,000 electricity projects getting underway. 800 For 2017/18, activity is expected to more than double, rising above 600 $2.8 billion – a new record. While a 400 ramp-up in the NBN and the North East Gas Interconnector (Queensland 200 Section) is partially responsible, a 0 large part of the increase is driven by a boom in renewable energy projects. 2020/21 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2021/22 2019/20 Funded Total Credibly Proposed Total Prospective Total Unlikely

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 31 Figure 23 Progress is being made to reach Electricity, Pipelines and Telecoms Major Project Work Done by Funding Status the 2020 Renewable energy target 3,000 (RET) as Queensland, suitably nicknamed the ‘sunshine’ state, enters 2,500 a renewable energy construction boom. This boom is being led by 2,000 the construction of solar farms, but also includes some wind and hydro 1,500 projects. Over twenty solar and wind projects are included in the Pipeline as 1,000 under construction in 2017/18 and a similar number of projects are forecast 500 for 2018/19. Large-scale solar projects include Kidston Solar Project - Stage 0 2 (270 MW), Daydream Solar Farm (150 MW) and the Clare Solar Farm 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 Project (100MW), while wind and hydro Funded Total Credibly Proposed Total Prospective Total Unlikely projects include the Kidston Hydro Project, the Kennedy Energy Park and the Mt Emerald Wind Farm (180 MW). Figure 24 Beyond 2019/20, activity is expected Defence Major Project Work Done to drop as renewable energy 350 construction boom tapers off and the NBN rollout winds down. The 300 ongoing development of the coal seam gas fields to feed Queensland’s 250 LNG processing facilities will require

200 continual upstream investment in pipelines (and other infrastructure) 150 over the long term. The Arrow Bowen Pipeline has been identified as a 100 potential major project in this space. There are also several significant 50 announced projects that remain unfunded which could keep activity 0 2017/18 2018/19 2019/20 2020/21 2021/22 at a relatively high level. These are focused in the electricity sector and include further renewables

Figure 25 projects such as the Burdekin Dam Hydro Project, the proposed North Mining and Heavy Industry Major Project Work Done by Funding Status Queensland power station and 16,000 potential transmission works to

14,000 mining regions.

12,000 10,000 Defence 8,000 Queensland is benefiting from the

6,000 latest round of Commonwealth-funded defence initiatives. Projects include 4,000 maintenance infrastructure upgrades 2,000 and the construction of the new

0 Growler Airborne Attack Capability facilities at South East Queensland’s RAAF Base Amberley. Activity should 2021/22 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2020/21 2019/20 also be boosted by the Australia – Funded Total Credibly Proposed Total Prospective Total Unlikely Singapore Military Training Initiative.

32 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook The Initiative will provide increased The completion of the “once in a In particular, Adani’s $16 billion access to Australian military training generation” large LNG projects in Carmichael coal project is still areas for the Singapore Armed Forces, Queensland saw mining and heavy categorised as ‘unlikely’ and the building on Australia and Singapore’s industry major project work collapse outcome of this project has the existing defence cooperation. Training to just $700 million in 2016/17, a mere potential to significantly change the facilities will be redeveloped at the shadow of the previous peak. Major outlook for the category. Substantial Fitzroy’s Shoalwater Bay, which will first downstream LNG project construction risks surround the outlook for this be remediated, as well as a training has now ceased and activity in project (and related infrastructure facility further north in Townsville. 2016/17 was solely supported by LNG works elsewhere in the list) given sustaining work and upstream field uncertainties over future coal prices Combined, the aforementioned developments, estimates of which have and the risks surrounding finance for projects account for $1.1 billion in the been revised downwards given lower Adani’s very large Galilee Basin railway Pipeline over the forecast horizon. This than expected activity in this area, both line that would stimulate development value has downside and upside risk. historically and in the forecast. of its Carmichael mine. Even if the On the downside, there may not be as Adani mine were not to proceed, much engineering construction in the However, GLNG’s new Roma East some coal projects (currently slated to defence projects listed in the Pipeline Project, which aims to increase commence in the 2020s) may still be than anticipated here. However, on domestic gas supply, will see LNG pulled forward if coal prices were to the upside, a Queensland-based activity rise over the short-term. remain relatively high. contractor has won a $5 billion Outside of gas-related projects, major tender in March 2018 to build the project activity will continue to be In terms of LNG, it has been assumed next generation of light armoured supported in the near term by the that no new downstream train vehicles. While the contract includes development of the Amrun Project and expansions will take place over the the building of an Excellence Centre in the Dugald River Zinc Project. Moving next five years given the outlook Redbank, only a small amount of the forward, total activity is expected to for energy prices and the supply / vehicle contract value is expected to pick up but remain modest relative to demand balance in the LNG market. involve engineering construction. the previous peak. Projects supporting Nonetheless, ongoing development this uptick include new coal projects of Coal Seam Gas (CSG) fields over Mining and such Byerwen and Styx, the re- the operational life of LNG facilities Heavy Industry opening of existing mines such as will require continual investment in Wilkie Creek and potential expansions related field infrastructure, including Mining and heavy industry major at Caval Ridge and Peak Downs. roads, water, and pipelines and gas project work boomed between facilities. Again, while not as significant 2010/11 to 2012/13, increasing Other resource projects include as downstream processing and collectively by over 200% to reach copper and gold projects in Northern infrastructure projects, in aggregate a new peak of $13.6 billion. This Queensland. While activity is expected they will keep the volume of activity represented a second, LNG-focused to rise into the future, it is important to high compared to pre-boom times phase of the resources boom in note that the majority of the projects and offer a higher share of work for Queensland, but there was also in the list still remain unfunded, and domestic contractors compared to substantial coal developments during subject to movements in global the LNG trains. this time including the construction commodity prices and demand. of the Broadmeadow, Caval Ridge, Consequently, there is still a high Daunia and Grosvenor coking coal degree of uncertainty surrounding mines, which also sustained a high the pace and scale of the recovery. level of work.

Adani’s $16 billion Carmichael coal project is still categorised as ‘unlikely’ and the outcome of this project has the potential to significantly change the outlook for the category

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 33 Figure 26

Funding & Engineering construction value (next 5 years) by location

EC Value (next 5 yrs) 0 500 1,000 1,500 Cairns >2,000

Townsville Funding F NF

Queensland Null

Brisbane Gold Coast

Queensland The outlook for resources investment, The Bowen region, meanwhile, is more Regional Focus coupled with rising transport heavily dependent on major project Significant shifts in major project infrastructure and renewable work related to coal mine development work are projected at the regional investment, will be the key driver and will be supported by Byerwen level in Queensland over the forecast of differences in regional activity and the expansion and reopening of period. While major project activity and is expected to see South East existing mines. There are also other will be rising in aggregate terms, a Queensland’s overall share of activity projects getting underway including much greater share of this work is shift to a higher plane through the the Peak Downs Highway Upgrade expected to be focused in the South forecast period. Much of this recovery and a significant number of solar East Queensland region, but also the is dependent on public investment projects. This will see Bowen’s share of Northern Queensland region. While decisions by State and Federal total major project activity rise over the South East Queensland is expected Governments, with much of the forecast horizon. Pipeline remaining unfunded. to see the largest volumes of major While the pace of the shift in work will project work over the next five years, Northern Queensland has already be slower than that which occured the strongest growth in work is benefited from mining projects in in Gladstone during the LNG boom, expected in Northern Queensland. recent years (Amrun and Dugald River) remote regions such as Northern An interesting feature of the outlook but activity will broaden if the Northern Queensland and the Bowen Basin by region is the differences in the size Australia Infrastructure Facility (NAIF) will have their own challenges to and status of projects and hence the begins to award concessional finance overcome. The regional towns and certainty of projects proceeding. As to proposed private sector projects. cities that will inevitably service our maps demonstrate, most of the Northern Queensland already has projects in these regions will face larger, more securely funded major a stronger pipeline of funded work a number of social and economic projects are located in the South including several large sections of the changes and will be competing against East corner, with a greater proportion Bruce Highway (including the Mackay South East Queensland (as well as of unfunded (and generally smaller) Ring Road Stage 1 and the Cairns interstate) for skills. projects located in Queensland’s Southern Access Corridor Stages central and northern regions 3 and 4) and Cape York Regional Roads Package, the North Coast Rail Capacity Upgrade, as well as a plethora of renewable energy projects.

34 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 27

Major Project Work Done by Region

20,000

18,000

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

South East Queensland Northern Queensland Bowen Gladstone Sturat Other Galilee

This will require detailed planning by However, the current forecast Federal, State and Local Governments upswing will occur at a time when in conjunction with project other Australian states and cities Most of the larger, proponents in order to keep the (particularly Sydney and Melbourne), more securely project pipeline intact in these regions as well as other global cities, will also funded projects are whilst maintaining harmonious and be undergoing increasing levels of located in the South sustainable communities. major project investment. This will likely see competition for skilled labour East corner, with a As history has proven, the South East and plant and equipment intensify, greater proportion Queensland region has considerable which will create a challenging period experience in handling significant shifts of unfunded (and for procurement. in major project work and employment generally smaller) such as those forecasts in this Report. projects located in Queensland’s central and northern regions

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 35 Strengths, Weaknesses, Bowen Basin Surat Basin Threats by Region Coal-related major projects shape Ongoing upstream coal seam gas the Bowen Basin region, but it is also work is currently driving activity South East Queensland becoming a focus for solar energy levels in the Surat Basin. This Report Publicly funded infrastructure works projects. While many proposed coal forecasts relatively stable levels of are the key driver in South East projects remain unfunded, there are activity in this region going forward, Queensland, with roads and railways some notable exceptions that will but the need to replace ageing wells work to remain the principal source support activity in the short term whilst simultaneously increasing of major project activity, notably the including the new Byerwen mine, and upstream capacity for the LNG large Cross River Rail. In this sense, potential expansions at Caval Ridge processing facilities could see a the projection of increasing levels of and Kestral. Activity in the Bowen more significant increase in CSG and public investment and major project Basin is increasingly underpinned related infrastructure activity. The works in this region will give local by investment in renewables energy. new Roma East project is one such contractors many new opportunities Notable renewable projects include the project. Outside of CSG, there is also over the forecast horizon (generally Moranbah Solar Farm (170MW) and expected to be a substantial number $2-3 billion per annum in major project the Daydream Solar Farm (150 MW). of renewable energy investments, work through the forecast period Roads work (Peak Downs Highway), including Bulli Creek Solar Farm and progressively increasing). Much as well as water and port works will Stage 1 (100 MW) and the Darling will depend on the willingness of the also support major projects activity. Downs Solar Farm (106.8 MW). Queensland and Commonwealth Overall, it is expected to be a relatively Governments to fund these projects. stronger growth region and could see Northern Queensland Given the plethora of rail projects upside if coal prices were to remain at Northern Queensland has benefited occurring in New South Wales and higher levels. recently from multiple major resources, Victoria, there may also be risks to yet the Pipeline suggests many future the timing of signature rail projects Galilee Basin resources projects currently remain in South East Queensland. While several very large Galilee Basin unfunded, the outcome and timing projects remain proposed, only one of which is dependent on the state Gladstone project, Adani’s Carmichael project, of the global economy and demand The strengths, weaknesses and features on the 2018 Major Projects for metals and minerals. Apart from threats to the Gladstone region are List, albeit as an unlikely starter. minerals development, Northern shaped by the outlook for LNG and There remains a very high risk that Queensland is benefiting from coal development. Major project this project will not occur at all given measures to boost regional economic demands peaked in 2013/14 and the long-term price outlook for coal, growth through infrastructure have since declined sharply given the as well as issues regarding project investment. These measures include completion of various LNG projects finance, costs, remoteness and upgrades to the Bruce Highway and the Wiggins Island Coal Export environmental issues. Together, Galilee (Sarina to Cairns) and the Cape Terminal (WICET). A recovery in Basin projects in the list account for York regional package. Northern Gladstone major project work depends nearly $7.5 billion dollars of major Queensland is also at the forefront heavily on whether further stages project work, but these are classified of a large round of renewable energy to existing LNG projects, or new as unlikely to proceed. The absence of investment. These include the Ross LNG projects commence during the these projects sees major project work River Solar Farm (142 MW), Mt forecast period or are delayed by high effectively flatline from 2018/19, as Emerald Wind Farm (180 MW) and the cost pressures and the emergence of shown in Figure 27. Kidston Solar Project – Stage 2 (270 competitive threats (such as from US MW). This is expected to see North shale gas). The current pipeline does Queensland emerge as the strongest not expect another major downstream regional growth centre for major LNG development occurring until project work. beyond 2021/22. Higher than anticipated coal prices, however, may see currently unfunded coal- related developments proceed earlier than expected, which presents an upside risk to the current (very low) outlook for work in the region.

36 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Northern Gas Pipeline

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 37 WORKFORCE AND EMPLOYMENT OUTLOOK

It has been estimated that

200 of construction costs are waste: wasteful spending, wasteful delays and wasteful communication

Subject to project funding decisions, the amount of work forecast for the next two years will hold employment around the levels that prevailed prior to the mining boom Currently there are ustralians of working-age for every person over 65 By 2040, that ratio will be to to one

Tthe industry needs to take a longer-term approach to planning for the future workforce in a way that links infrastructure planning to business capacity building, workforce planning and skills development

38 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook It has been estimated that

200 of construction costs are waste: wasteful spending, wasteful delays and wasteful communication

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 39 WORKFORCE AND EMPLOYMENT OUTLOOK

The pipeline of work forecast in this Report demands a strong labour response. The industry has embarked on an upswing in activity that is more modest in scale than the mining boom, but which is also more stable and sustainable for Queensland’s workforce.

The Pipeline of projects captured in Occupational Profile The Training Policy is one element in this Report represents a significant The engineering construction a longstanding partnership between engine of job creation for Queensland’s workforce is made up of more than the building and construction industry engineering construction workers. 75 occupations. Yet 20 of these and the Queensland Government occupations account for almost 80% to develop the industry’s skills base Subject to project funding decisions, of the total workforce, while half of and future workforce capability. CSQ the amount of work forecast for the the entire workforce is concentrated administers contractor compliance next two years will hold employment in just 10 occupations. Concreters, data on behalf of the Queensland around the levels that prevailed prior labourers, construction managers and Government through the Training to the mining boom. drivers of plant are the most populous Policy Administration System, which The extent to which the increased engineering construction occupations. enables contractors to electronically activity in 2018/19 can be sustained report their compliance with the will depend on how much of the Queensland Government Training Policy. unfunded portion of the Pipeline can Building and It is estimated that approximately be converted into live projects. Overall, 94 projects captured in this Report are it is probably reasonable to expect Construction likely to be required to comply with the levels of employment on major projects Training Policy Training Policy. This is anticipated to in the range of circa 12,000 jobs. The Queensland Government’s generate around 17 million in training Building and Construction Training . hours over the life of this pipeline of Policy (Training Policy) requires work. As a result, if all Queensland contractors to employ apprentices Government projects listed in this and trainees and undertake other Pipeline are fully realised, around workforce training as a condition 10,000 new apprenticeship and of being awarded work on eligible traineeship places will be created from Queensland Government projects. public investment in infrastructure.1 In addition to these new jobs created, existing workers in the industry will be able to take advantage of skilling opportunities made available through this pipeline of work assisting them in gaining new skills and knowledge and to help support their career progression in the industry.

1 These figures have been calculated with the assistance of the Department of Employment, Small Business and Training and reflect the total project cost for all government-procured projects captured in this Report, both funded and unfunded. The realised figures will vary depending on the proportion of unfunded projects that do not proceed, any variations to the contract value from current estimates, and how the work is procured (the stages) which could affect eligibility and deemed hour calculations. The figures do not include private projects that are required to, or are choosing to comply with the Training Policy.

40 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 28

Major Project Jobs Outlook The engineering construction workforce 25,000 is made up of more than 75 occupations. 20,000 Yet, 20 of these occupations account 15,000 for almost 80% of the total workforce, while

10,000 half of the workforce is concentrated in just 10 occupations 5,000

0 2016 2017 2018 2019 2020 Jun 2016 Jun 2017 Jun 2018 Jun 2019 Jun 2020 Jun 2021 Mar 2017 Mar 2018 Mar 2019 Mar 2020 Mar 2021 Sep 2016 Dec Sep 2017 Dec Sep 2018 Dec Sep 2019 Dec Sep 2020 Dec

Funded Not Funded

As has been advocated in

Figure 29 previous years in this Report, the industry needs to take a longer- Major Projects Occupational Profile term approach to planning for the future workforce in a way that links Concreters infrastructure planning to business Building and Plumbing Labourers capacity building, workforce planning and skills development. Construction Managers This is a challenge that will be Earthmoving Plant Operators compounded not only by digital

Structural Steel and Welding Traders Workers disruption but by Queensland’s and Australia’s changing demographics. Truck Drivers Australia’s population continues to Plumbers grow relentlessly – we will be two- thirds larger by 2050. This in turn Electricians demands year-on-year increases in Structural Steel Construction Workers construction activity. Yet it is not the growing population, per se, that is so Contract, Program and Project Administration disruptive. It is the ageing profile of 0% 1% 2% 3% 4% 5% 6% 7% 8% that population.

Australia’s ageing population means that workers won’t just be older; they will be fewer. While the population expands, the proportion of the population available to work is shrinking. Currently there are 4.4 Australians of working-age for every person over 65. By 2040, that ratio will be two-to-one.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 41 Figure 30

Annual growth in over 65’s, Australia

250,000

200,000

150,000

100,000

50,000

0 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 2028 2032 2036 2040 2044 2048 2052 2056 2060

There are two paths to meeting Offsite Construction Materials handling is also the activity expanding demand with an ageing (Prefabrication) that causes the most accidents and 3 and shrinking workforce. The first is for Moving the construction process from injuries on construction sites. people to work longer. The second is the construction site to the factory is Offsite fabrication promises to to produce more per hour. an accelerating trend that will catalyse reduce this source of waste and risk, Whilst the construction industry would other technologies. Robotics and 3D delivering significant productivity and seem ripe for disruption there remains printing, for example, are very difficult workplace health and safety benefits. significant barriers for any new entrant to implement in the ever-changing and Workers will be able to keep working into the market looking to provide uncertain conditions of a construction longer as their manual burden will be alternative delivery solutions. site, but become far more feasible in reduced. It is also likely that a shift to a controlled environment. Similarly, a production in an offsite environment It is therefore more likely that disruption world of digitisation and the ‘internet of will encourage more women to enter will take the form of new technologies things’ is far easier to achieve offsite. the industry. being adopted by existing contractors either at the behest of major clients Another advantage of offsite The move to offsite construction also or in order to gain a competitive construction is that it dramatically involves a productive cultural shift. The advantage. Some of these key reduces materials handling. Materials manufacturing ethic that takes over technologies are detailed in the handling represents the single biggest once inside a factory means that all of following pages. opportunity for productivity gains in the discipline and rigour of operations the construction process – studies management can be applied – such have found that more than a third of as standardisation, lean production, construction workers’ time is spent process optimisation, continuous idle or non-productive while waiting improvement and total quality 2 for materials and tools. management.

2 Jenkins, J, and Orth, D. (2004) ‘Mechanical and General Construction Productivity Results,’ Cost Engineering, 46(3): 33-36 3 Perttula, P. et al (2003) ‘Accidents in materials handling at construction sites,’ Construction Management and Economics, 21(7): 729-36

42 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook It is worth noting that China, India and A notable exception to this rule is Today, widespread adoption of Indonesia now dominate prefabrication the large multinational contractor, labour-saving technologies means the globally, accounting for more than 67% Lendlease, who has made a significant industry accounts for less than 3% of of global revenue. The main barrier investment in a prefabrication plant the workforce, even while the volume to offsite construction is the limited in Western Sydney. There are also of output is far greater. This industrial ability of construction companies to a range of smaller players in the revolution glanced off the construction raise the capital needed to bring a prefabricated ‘modular’ and ‘kit home’ industry without so much as a flesh solution to market. There are only market, such as Happy Haus and wound – construction employs roughly a handful of players in a financial ArchiBlox, but this remains a largely the same proportion of the workforce position for such an undertaking. cottage industry. Mainstream adoption today as it did a century ago.5 There is also significant regulatory and will be led by the big players. industrial uncertainty in this space, with the prevailing industry structures Automation entrenched in traditional on-site Industries such as agriculture and methods. manufacturing realised significant For this reason, the emerging productivity improvements over the last century through automation. In players in offsite construction are not A shift to offsite contractors but firms from other parts the 1920s, the agricultural industry of the supply chain. The leaders in this employed almost one third of the construction will space are the likes of CSR (a building entire labour force. have significant products company), Stoddarts (a steel consequences as it fabrication business) and Hyne Timber implies a structural (a timber mill). rebalancing away from construction toward manufacturing

4 www.technavio.com/report/global-construction-prefabricated-market 5 www.abs.gov.au/AUSSTATS/[email protected]/Previousproducts/1301.0Feature%20Article142001

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 43 There are some prominent signals ——Prefabricated components are Building Information Modelling that the construction industry will not increasingly used throughout (BIM) software systems provide be able to avoid the next industrial the commercial and engineering a collaborative environment for revolution. Many technologies are sectors, including structural information to be shared, coordinated starting to appear and enter into steel elements, roofing systems, and disseminated between the project common use that promise to deliver bathroom pods, wall and floor participants, reducing the incidence labour productivity gains on a scale cassettes, and other structural and of clashes between the different similar to that seen in other industries: finish materials. This componentry disciplines as design evolves and ——Civil construction operations are is produced in factory conditions encouraging design innovation and increasingly combining the power with equipment employing varying value engineering. Whilst this results in of satellite positioning with 3D degrees of automation, including significant cost / time savings during modelling to direct earthmoving 3D printing. These methods are the construction of the project, even tasks. Where civil contractors delivering productivity benefits greater savings can be achieved over once relied on a labour-intensive combined with installation the life cycle of the asset if the use of process of placing and replacing processes that do not expose BIM is maximised to include recording survey stakes to guide cut/fill workers to adverse ergonomic of project data such as equipment operations, technology is now impacts. specifications and warranties. This available that allows machine ——Site inspectors and surveyors allows an asset owner to readily call up operators to work from digital site are increasingly making use of details of a faulty piece of equipment plans in a manner not unlike in-car high resolution drone technology such as maintenance history, supplier navigation. These sophisticated to undertake site surveys and details and warranty information. machines are transforming a once building inspections. Drone It is probably because the majority of highly specialised task into one that technology enables rapid mapping savings are realised post construction, requires no more than a few hours’ of sites for engineering design with that BIM has been slow to be adopted training to perform proficiently. The unparalleled accuracy. Building by contractors and there needs to Japanese company, Komatsu, is inspectors are now able to inspect be increased incentivisation for its taking the next logical step, pairing areas of buildings that were adoption or mandating of its use fully autonomous, driverless plant previously inaccessible or only at by owner organisations in order to with surveying and inspection great expense. realise the significant benefits that it drones to measure, doze and These innovations have, to date, can deliver. grade a site without any human been used primarily by large intervention. Digitisation, of course, goes beyond contractors completing large just BIM. Under the right conditions, ——Concrete and masonry work engineering and industrial projects. a raft of related technologies can is traditionally the most labour The coming decades are likely to see improve productivity of construction, intensive and back-breaking of all these technologies penetrate the bulk including: construction tasks. This domain has of smaller contractors as the costs to ——augmented reality, which will already seen some labour-saving access automated equipment falls, help construction workers complete technologies enter the mainstream, and as the supply chain continues tasks with greater precision and such as concrete pumps, finishing to re-tool around these capabilities. machines and precast concrete clarity by overlaying onto the physical world digital information panels. More ambitious and Digitisation and BIM experimental, but well-funded, about the task at hand, such as It has been estimated that 20-40% robotic solutions such as the Semi workflows, quality parameters, of construction costs are waste: Automated Mason (SAM) and work instructions, etc. wasteful spending, wasteful delays and Hadrian X provide accurate and ——the internet of things, where wasteful communication.6 Information efficient placement of masonry all elements of the construction breakdowns are often the root units. These solutions are claimed process–people, plant and cause: information that’s outdated, to at least triple the productivity material–are embedded with inaccurate, undocumented, or just of the typical bricklayer, while sensors and networked, producing uncommunicated. significantly reducing the manual oceans of data that can be burden on the worker. leveraged to improve the efficiency of construction processes

6 Flyvbjerg, B., Holm, M. S., and Buhl, S. (2003) ‘How common and how large are cost overruns in transport infrastructure projects?’ Transport Review, 23(1): 71–88

44 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 31

Change in share of work, Europe, 1933–2006 Technological change is amplifying a trend towards a more High Income Jobs polarised workforce. The Construction Industry has so far not Middle Income Jobs been impacted by this change but as use of offsite fabrication and technology increases Low Income Jobs the construction industry will experience a similar -30% -20% -10% 0% 10% 20% 30% decline in Middle Income jobs

——artificial intelligence, which Workforce Implications The construction industry is one digests the data produced by the The disruptive trends we have of the few industries maintaining internet of things to quickly and identified imply significant change a high proportion of mid-skilled accurately make decisions about for the workforce. A shift to offsite trade workers, with two thirds of things like the most optimal flow construction, in particular, will have its workforce falling into the middle of trades and material throughout significant consequences as it implies income ‘trade worker’ category. a site. a structural rebalancing away from As offsite fabrication and automation construction toward manufacturing. These digital technologies, while takes hold, we will see a bifurcation This means that employment in technically feasible, are unlikely to of construction jobs along similar the ‘construction’ industry will fall, make significant headway in isolation. lines to that seen in agriculture offset by increasing employment in Much of the promise of digital and manufacturing. A cohort of ‘manufacturing.’ technology in construction relies highly skilled technical, design and on it being integrated with digital These disruptions are also likely to engineering professionals will form plans and schedules. Their potential deliver a more polarised workforce. the engine room of the construction can therefore only be realised in an This will bring the construction industry workforce. At the lower end of the environment of mature and widespread into line with patterns playing-out skills spectrum, a small army of BIM adoption. across other countries and industries. construction labourers will perform At one end of the skill spectrum, a range of unskilled installation and Lean Construction there has been an increase in the handling tasks both on- and off-site. Lean construction refers to tools and proportion of highly-educated, well- At the same time, as we move processes that have been developed, paid knowledge professionals, while toward a more flexible and polarised based in part on lean manufacturing at the other, there has been growth in workforce, individual workers techniques pioneered by Toyota after low-skilled manual jobs. The middle will exercise a stronger voice in the Second World War, with the aim sector has seen a corresponding determining what collection of skills of reducing waste and improving decline (Figure 31). All indications are they wish to cultivate to achieve productivity in the construction that technological change is amplifying their career goals. Regulators will set industry. rather than attentuating this trend the boundaries, but individuals will across advanced economies. When fully implemented, lean demand far more scope to craft unique construction tools and processes have skilling and career pathways. been demonstrated to result in cost savings of up to 30% of budget and schedule savings of up to 20%.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 45 IMPLICATIONS, CHALLENGES AND RISKS

Around two-thirds of the currently unfunded pipeline of work over the next two years Major project work is needs to be funded just to recovering now sustain 2017/18 levels of major but, subject to funding and feasibility, project activity in those years may fall back again in coming years

Breaking the underspend pattern on planned infrastructure investment which in 2016/17 amounted to $1 billion

Sustaining growth in the Queensland economy requires putting into place plans and policies that will encourage and sustain both private and public The availability of funding for investment in the state sustainable productive infrastructure investment should not derail over the long term Meeting the infrastructure investment itself – exploring innovative challenge ahead will also mean funding mechanisms remain critical to budgeting for larger increases the outlook for the pipeline and the in the maintenance to sustain Queensland economy the existing capital stock

46 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Around two-thirds of the currently unfunded pipeline of work over the next two years Major project work is needs to be funded just to recovering now sustain 2017/18 levels of major but, subject to funding and feasibility, project activity in those years may fall back again in coming years

Breaking the underspend pattern on planned infrastructure investment which in 2016/17 amounted to $1 billion

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 47 IMPLICATIONS, CHALLENGES AND RISKS

Figure 32 compares last year’s Major ——Major project activity is now ——Public and private sector Projects Pipeline five-year outlook to rising from the 2016/17 trough investment is driving the current the present forecast (note 2016/17 is – but the main challenge will be recovery in major project work. now historical rather than forecast). keeping activity at sustainable New public investment is As per the 2017 Major Projects levels into the future. 2017/18 currently centred on roads and Pipeline, we include all major represents a better year for major telecommunications (the NBN), engineering construction projects project activity, both in terms of but is anticipated to broaden into above $50 million (previous Reports comparison to activity the previous rail and water projects in coming only considered projects above year, and against the expectation years. By contrast, privately funded $100 million in value).7 Several key for 2017/18 in last year’s Report. major project work is focused points are worth emphasising: Keeping this momentum going on electricity, airport upgrades ——As forecast in the previous Report, in subsequent years is the key and resource-related projects. major project work fell again in message from the pipeline. Despite Sustaining positive conditions for 2016/17. While the decline was funding commitments for Cross public and private investment from small, 2016/17 represented the River Rail and Inland Rail, many here will be important in keeping trough in major project work in other projects remain unfunded major project work on an upward the State. from both the public and private trajectory. ——The total value of projects in the sectors. Meanwhile, some sectors ——Queensland still lags New South 2018 pipeline is $39.9 billion, such as roads, electricity and Wales and Victoria in terms of compared to $39.1 billion in the telecommunications simply do not funding and delivering infrastructure 2017 pipeline. However, the value have enough projects – funded or investment. As New South Wales of funded work in the pipeline is unfunded – to prevent declining and Victoria further ramp up only $23.7 billion, with both public levels of work in future. infrastructure investment over and private projects still awaiting ——New public and private investment the remainder of this decade, funding commitments. – including projects in the Major challenges are likely to re-emerge Projects Pipeline – is having in procuring construction services. a broader, stimulatory effect To minimise risks of project delays, Sustaining positive on the Queensland economy. failures and rising construction From a position of falling State costs, Queensland needs to apply conditions for Final Demand (SFD) and weak a longer-term approach to planning private and public employment growth over 2014/15 for capacity and capability in the investment from here and 2015/16, SFD grew 2.6% construction industry. Such a plan will be important in through 2016/17, with public should cover future workforce investment (+4.1%) and positive requirements and skills, as well as keeping major project growth in private investment planning for required construction work on an upward (+1.2%) for the first time since materials andmeeting critical trajectory 2012/13 the key drivers. Annual transport and logistics challenges employment growth has recovered as major projects reach the to around 4% — the strongest rate construction phase. since 2006/07.

7 In providing a more consistent comparison with last year’s outlook we have also revised down previous optimistic forecasts for upstream oil and gas sustaining capital expenditures, and also removed the new Townsville Stadium development, which is more correctly classified as a non-residential building project.

48 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Figure 32 2016/2017 represented Major Project Work Done Forecast: 2018 versus 2017 16,000 the trough in major project work in the State 14,000 but the challenge will 12,000 be keeping activity at

10,000 a sustainable level into the future given how 8,000 much of the pipeline 6,000 is currently unfunded

4,000

2,000

0 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22

Funded Funded Current Unfunded Previous Unfunded Current

Implications and While it is sometimes convenient to Queensland was already experiencing Challenges slate economic success or failure to strong, balanced growth prior to the The key finding of this Report is that particular governments, politicians and 2000s resources boom, with State major project work is recovering now policies, the volatile performance of the Final Demand (SFD) growth averaging but, subject to funding and feasibility, major projects market in Queensland 7% per annum over the five years may fall back again in coming years. and the broader Queensland economy to 2005/06. Renewed business Major project activity – mirroring can perhaps be more accurately put confidence following the global the broader Queensland economy down to the impact of large, long economic downturn in the early 2000s, – has been through a rollercoaster investment cycles – with both the a recovery in housing following the over the past decade. However, public and private sectors playing introduction of the GST, accelerating 8 the 2017/18 year has seen a 58% important roles. population growth (boosting both recovery in major project work from consumer spending and housing the trough in 2016/17. Maintaining activity) and a low Australian dollar this momentum is the core challenge supercharged private investment facing the state, requiring a range of during this time. initiatives to improve levels of funding for infrastructure, ensure capability and capacity to manage a growing pipeline and, fundamentally, provide positive conditions and frameworks that support the economy’s growth engines: public and private investment. 93% of unlikely projects are privately funded

8 Investment in economics represents the addition to capital stock or productive capacity. It mostly consists of the construction of buildings and structures and purchases of plant and equipment, but also includes growth in livestock, minerals exploration and intellectual property. This is a very different meaning from finance, where investment refers to the purchase or creation of an asset with the expectation of generating financial returns.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 49 Amrun Export Facility

With investment This funding challenge would be For Queensland, the second phase of and major project solved in two ways. Firstly, the the resources boom between 2008/09 work now positive, introduction of the GST combined and 2012/13 ushered in a new wave of so too is growth with steeply increasing company gas (particularly LNG), coal and related profits and stamp duties eventually infrastructure investment spanning in the Queensland provided governments at the State pipelines, jetties and harbours, economy… and Commonwealth level with railways, electricity, water and roads. greater revenues that could be put Total privately funded engineering towards infrastructure investment construction activity more than tripled – although there was a significant between 2008/09 to a peak of By contrast, public investment took delay between the improvement in $39.2 billion by 2012/13, and much a back seat during first half of the underlying government finances and of this was reflected in the strong 2000s, following very strong growth new investment. Between 2004/05 profile of major project work at the by delivering Year 2000 infrastructure and 2007/08, public investment in time, as evidenced in this Report. projects the previous decade. While Queensland doubled in value (from The strong economic boost provided the Queensland economy rumbled around $10 billion per annum to by the resources boom also helped along without growth in public $20 billion) and SFD growth oscillated sustain government revenues and investment – and particularly public between 7-8% per annum. funding for public investment projects infrastructure investment – its absence that had also been boosted in the But the second, and arguably more inevitably led to the emergence wake of the GFC. While the GFC saw significant development, was the of infrastructure gaps, constraints Queensland SFD decline slightly in second phase of the resources and bottlenecks later in the 2000s, 2009/10, it simply surged again over investment boom following the global particularly given Queensland’s rate the following two years, peaking at financial crisis (GFC) in 2008 – and of economic growth, the strong over 9% growth in 2011/12 alone. very much driven by GFC-related global economy (and particularly the stimulus policies around the world, Between 2012/13 and 2015/16, emergence of China and its demand and particularly China. both public and private investment for metals and minerals), as well as in Queensland collapsed, driving robust increases in population. sharp falls in major project work. As the need for greater infrastructure While the resources investment bust investment became increasingly was the main contributor, its impact apparent, the challenge was how was amplified by a significant reduction this would be funded and financed. in public investment over the same period.

50 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook In turn, falling major project work Whereas Queensland used to for the $5.4 billion Cross River impacted heavily on the Queensland significantly outperform the Rail project as its largest single economy, and especially those Australian economy, the next five infrastructure initiative, there businesses operated by Queensland years only sees very marginal are still challenges regarding construction contractors and outperformance overall. the extent to which the State suppliers. Double digit declines Government can fund broader Key challenges facing Queensland in investment over 2014/15 and infrastructure plans and programs major project work, investment, and 2015/16 (despite the strong pickup across the state given its high the broader state economy include: in housing) were the primary level of debt, combined with the ——Imminent downturn in architect of shrinking Queensland potential for weaker revenue residential investment. Thus SFD and relatively sluggish growth growth from royalties and stamp far, the transition (at the national in employment and incomes. Over duties if commodity and house and state level) to more balanced this period, the state of Queensland prices cool. economic growth has been was effectively in a historically ——Competing for scarcer assisted by new residential deep demand recession, despite construction resources as investment, in turn spurred by accelerating mining exports keeping Queensland gradually turns the lower Australian dollar and overall economic growth (as the infrastructure taps on loose monetary policy from the measured by GSP) mildly positive. again. New South Wales and Reserve Bank. However, there is Victoria, particularly, have taken Given this history, the positive only so much lower interest rates full advantage of excess capacity growth in both public and private can do to spur private investment, which emerged in the national investment in Queensland through particularly if sectors are already major projects industry in the 2016/17 is welcome news. Major oversupplied, demand growth wake of the downturn in resources project work still eased over 2016/17, is weak and there is a general investment in recent years (as well but has lifted in 2017/18, and so lack in business confidence. The as public investment, nationally). too has growth in the broader residential building boom is near With public investment finance economy. Importantly, this year’s the peak at a national level, and is supercharged by long-term asset Pipeline shows there are many now falling back in Queensland. leases, these two states have projects coming through which, if We expect residential investment embarked on a massive program funded, could drive further growth to undergo a substantial of infrastructure investment which in investment, employment and correction in the short term while still has many years left to run economic growth in coming years. future demand will be impacted by (Figure 33), absorbing capacity Finding sustainable mechanisms for an “oversupplied” housing market effectively idled in Queensland funding these projects remains the (particularly in the Brisbane area and Western Australia. challenge. where the high density apartment Consequently, the national major boom was the most intense), high projects market – and demand for house prices, rising household … but Queensland still skills and construction materials debt, tighter lending restrictions has a substantial growth – has tightened considerably and foreign capital controls, and over the past year, and this is challenge ahead weak income growth. evidenced by rising prices for ——Funding and financing major construction work as captured While investment is finally turning project activity remains a by known price indices such as around in Queensland, the critical issue. Queensland is the Road and Bridge Price Index outlook for growth in investment, currently relying heavily on new and the Engineering Construction employment and the broader Commonwealth and private Implicit Price Deflator (Figure 34). economy is not exactly spectacular. sector funding to drive the Recent data shows that prices Rather than the high growth rates upswing in major project work. for construction work are now experienced during much of the Through the remainder of the rising at the fastest rate since the 1990s and 2000s, economic growth decade, the majority of proposed end of the resources boom. If (as captured by Gross State Product major project work remains Queensland is to realise growth in or GSP) is expected to average unfunded, presenting risks to major projects work as outlined in around 2.8% per annum through the sustainability of the project this Report, it will need to address the next five years, with SFD growth pipeline, while the magnitude of a range of challenges across averaging a slightly better 3.3% per the increases may not be enough procurement to minimise risks annum. to alleviate existing and emerging to construction industry capacity infrastructure deficits. While the and capability. Queensland Government has recently announced full funding

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 51 Figure 33

Work Done on Major Transport Projects (above $2 Billion)

12,000 Forecast SA North-South Corridor WA Forrestfield Airport Rail Link & Metronet WA Hancock Roy Hill (Pilbara) WA Fortescue Metal Group (Pilbara) WA BHP Billiton (Pilbara) 10,000 WA Rio Tinto (Pilbara) VIC Melbourne Airport Link VIC Inland Rail (VIC component) VIC Melbourne Metro Rail VIC Level Crossing Removal Program 8,000 VIC Regional Rail Link VIC North East Link VIC Western Distributor VIC EastLink QLD Acacia Ridge to Port of Brisbane QLD Cross River Rail 6,000 QLD Inland Rail (QLD component) QLD Warrego Highway QLD Gateway Motorway QLD Bruce Highway Upgrade QLD TransApex 4,000 QLD Ipswich Motorway NSW Inland Rail (NSW component) NSW Sydney Metro West NSW Sydney Metro City & Southwest NSW Sydney Metro Northwest NSW F6 Extension 2,000 NSW Western Harbour Tunnel & Beaches Link NSW Western Sydney Infrastructure Plan NSW North Connex NSW WestConnex NSW Pacific Highway Upgrade 0 2006 2010 2014 2018 2022 2028 Source: BIS Oxford Economics

Figure 34

Growth in Construction Price Indices - Queensland

% 14

-2

-4 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 11 Dec 13 Dec 15 Dec 17

RBI A% ch RBI q/q% ch EC IPD q/q%ch Source: BIS Oxford Economics, ABS Data

52 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook ——Breaking the underspend The 2017/18 Budget refers to a ——Exposure to global pattern on planned $38 billion infrastructure program developments and the infrastructure investment. over four years to 2020/21, a figure Australian dollar. Queensland’s Even with 100% funding secured drawn from gross investment data. increasing integration into the global (including rising cost escalation), In net terms, allowing for the fact economy also presents challenges major projects can still be affected that depreciating infrastructure and opportunities for Queensland by underspending compared to needs to be refurbished or businesses and the broader what was planned in Budgets. replaced, infrastructure expenditure economy. Since the 2017 Report, As highlighted in the previous is substantially lower and, after there continues to be substantial Pipeline report, there continues peaking in 2018/19, declines again risks to global growth, although to be differences in planned over the remainder of the forward the underlying global growth story public investment (measured as estimates. Under the 2017 MYFER, remains positive and beneficial to ‘purchases of non-financial assets’ net acquisitions of non-financial the Queensland economy. Moves in various Budgets) and actual assets are expected to be just to rationalise China’s coal and spending outcomes. The 2016/17 $3.1 billion by 2020/21, compared steel industries amid concerns State Budget, for example, planned to over $8 billion during the over the sustainability of Chinese for $8.3 billion in such investment, peak years at the turn of the economic growth, further interest which the subsequent Mid Year previous decade. This is at least rate increases in the United States Fiscal and Economic Review an improvement on the 2016/17 and their impacts on currencies (MYFER) confirmed to be Budget, which provided and asset prices, and recent moves $7.3 billion – around a $1 billion $2.2 billion in net public in the US and China to implement shortfall. While the 2017/18 spend investment by 2019/20. trade sanctions all represent a is projected to be on the rise, it ——Relatively weak population clear and present danger to the will still be $1.5 billion below that growth in Queensland expected Queensland economy. projected in the 2016/17 Budget compared to the ‘boom years’. Against this, the Australian dollar and marginally lower than that Population growth has slowed will continue to act as a stabiliser planned in the 2017/18 Budget. sharply in Queensland in recent and ‘X factor’ for the Queensland The better news is that projected years, from typically 2–3% per economy. The associated rise in spend here is forecast to rise annum during much of the 1990s the Australian dollar during the significantly over the next few years, and 2000s, to between 1.3–1.7% resources boom drove a structural but realising this outcome means in recent years. This, in turn, change away from dollar-exposed breaking the pattern of underspend reflects the lagged impact of industries and thereby weakened which accrued over successive weaker economic activity and job the rest of the state economy. Now, Budgets between 2012/13 and opportunities in the state relative to following the investment bust, the 2016/17 (Figure 35). other regions of Australia (e.g. New lower Australian dollar is reversing ——Managing the assets already in South Wales and Victoria) as well as that structural change away from place. Tight government finances the rest of the world. As economic mining industries and regions and can often make it challenging conditions improve in Queensland rebuilding activity in dollar-exposed to provide adequate sustaining vis-à-vis the rest of Australia and services regions such as tourism, capital and maintenance to the and globally, an acceleration in agriculture, manufacturing, education public assets – across transport population growth is expected, and other exports. Irrespective of and utilities – that are already in but it is not projected to return the benefits or otherwise of currency place, particularly when building to the pace previously set. That fluctuation, being exposed to trade new projects offers greater political said, weaker population growth exposed industries will inevitably open visibility and prestige. However, is coming from a higher base, so Queensland’s economy to challenges. meeting the infrastructure challenge this still translates to approximately ahead will also mean budgeting for 80,000–90,000 persons a year that larger increases in maintenance to need to be accommodated, which sustain the existing capital stock. is roughly the level experienced in the early to mid-2000s, but lower than during the boom years.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 53 Figure 35 – Purchases of Non-Financial Assets $Billion Non-Financial Public Sector, Queensland Overall, sustaining 14,000 growth in the Queensland economy requires putting 12,000 into place plans and 10,000 policies that will encourage 8,000 and sustain both public and private investment 6,000 in the state over the 4,000 long-term

2,000 Queensland’s long-term economic 0 strategy should concentrate on leveraging from (or improving) FY2021 FY2011 FY2017 FY2018 FY2019 FY2014 FY2020 FY2016 FY2012 FY2013 FY2015 2011/12 Budget 2012/13 Budget 2013/14 Budget 2014/15 Budget core (or potential) strengths. For 2015/16 Budget 2016/17 Budget 2017/18 Budget 2017 MYFER Queensland, this includes its vast Source: Queensland Budget Papers, Various natural resource wealth, its close Figure 36 – Purchases of Non-Financial Assets proximity to Australia’s largest trading partners, its iconic Australian tourism Non-Financial Public Sector, Queensland destinations and enviable lifestyle 14,000 benefits. State Government strategy should continue to focus on boosting 12,000 programs to create more jobs and attract businesses and enable 10,000 Queensland’s economy to transition

8,000 to be more balanced, innovative and productive. 6,000 Sustainable growth in public 4,000 investment will be important. While the share of public sector investment 2,000 in total engineering construction is lower in Queensland than in 0 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 other states such as Victoria and Gross Purchases of Non-Financial Assets Net Acquisitions of non-financial Assets New South Wales due to higher Depreciation and Other Adjustments private sector funded mining- Source: Queensland Budget Papers, Various related activities, publicly funded Figure 37 projects play a major role in driving the State’s economic growth. The Share of Major Project Work Done by Funding Source: Sectors and Total challenge remains achieving these 12,000 longer-term economic goals under a tighter budgetary environment 10,000 through well thought out policies that provides sustainable funding for 8,000 public investment whilst encouraging collaborative private investment. 6,000 Sustained investment in productive infrastructure will remain a critical

4,000 component of a broader economic strategy of Queensland to ensure

2,000 cities and regional centres offer competitive benefits and help keep cost of living (and cost of business) 0 Road & Rail & Defence Water & Electricity, Mining & Bridge Harbours Sewerage Pipeline, Heavy pressures contained. Telecoms Industry Public Private

54 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook It also means investing in critical And there are other funding options According to the Pipeline, the following infrastructure for new growth regions too, as detailed in last year’s Report, (currently unfunded) public sector – which are benefiting from the lower including expanding the number of City projects are due to commence in the post-boom Australian dollar – Deals (bringing all levels of government next two years. Decisions to fund, or to ‘crowd in’ private business to the table for a region), value capture, accelerate, the development of these investment decisions. and implementing genuine tax and projects will likely assist in sustaining expenditure reforms. current levels of major project work According to the Pipeline, the public over the next two years: sector will continue to play a significant Queensland has been able to extract role in funding and developing many greater value from the Commonwealth According to the pipeline the following categories of infrastructure over the Government in recent years in helping public sector projects are capable coming five years, particularly in roads to fund major public sector projects. of sustaining levels of major project and bridges, railways, and water and Furthermore, the prospects of a activity if ways can be found to sewerage. Over the next five years, tight Federal election ahead will no resolve their funding impasse and public sector funded major project doubt see many promises of further advance their procurement to take work (whether currently funded or not) Commonwealth funding assistance for advantage of current market capacity makes up 50% of the total Pipeline, Queensland infrastructure in coming in Queensland: but the share is much higher in months, particularly if there is evidence non-mining segments of activity. that these projects are productive M1 Varsity Lakes to Tugan and have a positive net benefit under Beerurrum to Nambour Rail Upgrade rigorous analysis. At the time of writing, Gold Coast Light Rail Stage 3 The availability of the Federal Opposition has already Paradise Dam Spillway Improvement funding for sustainable promised over $2 billion in funding for productive infrastructure the Cross River Rail project, which Townsville Port Expansion Project would allow the State Government investment should not There is also an opportunity to some flexibility to accelerate other derail investment itself accelerate the delivery of projects major projects in the Pipeline. While it – exploring innovative which are close to being ‘shovel ready’ is wise, politically, for Queensland to funding mechanisms such as those Bruce Highway projects maximise benefits in this way, at the that fall within the “announced” remain critical to the end of the day it is no substitute for category (ie Section D of Conroy to outlook for the Pipeline real tax and expenditure reform that Curra). Conversely, if these projects can offer sustainable, lasting funding and the Queensland slip they could well find themselves streams for infrastructure investment. economy caught up in the competition for Interestingly, the Pipeline does provide resource in the inevitable up-cycle Despite its weakened post-boom some indication of the level of new to come. financial position, the Queensland funding commitments required to keep Government still has other, important annual activity on major projects on an funding levers available to it. Crucially, upward trajectory (or at least to keep asset recycling has not been used to it from falling back towards recent the same degree in Queensland as it lows). According to the Pipeline, a has in other states and this remains a further $681 million in activity on major potential source of finance for future projects is required on top of currently infrastructure projects, so long as funded work to sustain 2017/18 levels there is effective post-sale regulation of activity into 2018/19. By 2019/20, of privatised assets to ensure prices this additional funding requirement remain competitive. Introducing tolling grows to $2.04 billion. The challenge on major roads (possibly in the form is that there is only $909 million in of, or introducing time-of-use tolling unfunded major project work in the to manage peak demands) or more pipeline in 2018/19 and $3.06 billion fundamental reform such as a broad- in unfunded work in 2019/20. In based road user charge, could also other words, around two-thirds of the help fund future infrastructure projects currently unfunded pipeline of work – as well as potentially pushing out over the next two years needs to be the timing for reinvesting in crowded funded just to sustain 2017/18 levels roads networks. of major project activity in those years. Failing that, new projects may need to be found and funded to help reduce this gap.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 55 Figure 38

Future Unfunded Work Done Profile: Public versus Private Sector Encouraging currently 7,000 unfunded private sector projects to proceed 6,000 will be vital to avoid a future slump in major 5,000 project work as the bulk of currently unfunded 4,000 activity in the Pipeline is related to private 3,000 sector projects

2,000

1,000

0 2018/19 2019/20 2020/21 2021/22

Private Unfunded Public Unfunded

Therefore, avoiding a future slump While supporting market-led proposals Harnessing new private in major project work means is an important plank here, the overall investment will also governments either doing whatever record of success for getting these be critical possible to provide the right conditions projects to the construction phase is for these projects to proceed (while not strong. Meanwhile, the Northern recognising that there may also be Australia Infrastructure Facility (NAIF) While public infrastructure investment broader constraints, such as the state was also supposed to encourage is very important, it is not an of global commodity markets) or private sector projects but no projects end in itself. A core aim of public being prepared to develop and have yet materialised. infrastructure investment – and fund other productive public Queensland’s broader economic Boosting private sector investment can infrastructure projects. strategy – should be to attract also be achieved through good public businesses and people back to The public sector only makes up a investment choices which ‘crowd in’ the State by encouraging private very small part of the total Queensland private investment (e.g. building better investment. From a Pipeline view, also, economy (around 26 per cent in transport links which encourage broad encouraging currently unfunded private expenditure terms), however, and this regional investment by the private sector projects will be vital to avoiding is not expected to change substantially sector, or investing in lower cost a slump in major project work in the in the future. Consequently, achieving energy to attract industry and other coming years. As shown in Figure 38 long-term economic goals will depend business). Perhaps more importantly, above, the bulk of currently unfunded crucially on how the public sector can governments should also set clearer activity, year by year, is actually related develop policies to stimulate private messages about future policy to give to private sector projects. decisions on where to invest and live. the private sector confidence to invest. Beyond public investment itself, State Unfortunately, the record here has not and Federal Governments should also been consistent, with arguments over be looking at ways to encourage the energy policy, mining, financing, return of private investment (by far and tax and spend policies likely the bigger part of the investment to have had a deleterious impact ‘pie’) and re-establish the positive on business confidence. growth mindset.

56 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Kingsford Smith Drive Upgrade Project

Meeting emerging Capability means the ability and Finally, given the capacity and capability quality of those resources (including importance of the major challenges workforce skills and business capability) to achieve maximum project projects construction This Report shows that, subject to benefits. Capacity and capability can industry in building new funding, major project activity could be affected by several factors including infrastructure assets, there rise in Queensland over the next few logistical (having reliable access to years. Another key challenge here is is also a particular need to essential inputs (skills and materials) by that Queensland will be re-entering ensure that the industry producers)), technological (the ability to a major projects market which has has the capacity and use an optimal combination of inputs become significantly tighter given to produce outputs) and institutional capability to deliver demands from the large infrastructure (full participation by industry in tenders programs being rolled out by other and legacy programs).9 states (New South Wales and This means: Victoria in particular – as per ——it has the appropriate level of skills Figure 33). The sheer size and scale now and is developing the skills of the infrastructure construction task required for the future, is likely to create potential risks to the ——it has affordable access to capacity and capability of industry to construction materials and deliver, and is already having an impact other key inputs, on construction costs (Figure 34). In ——its services are procured in a way this context, capacity refers to the which provides true long-term value quantity of resources available. for asset owners and asset users, rather than simply aiming to minimise costs.

9 BIS Oxford Economics (2017) NSW Construction Delivery Assessment: Capacity and Capability, North Sydney, NSW.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 57 For Queensland, these challenges While industry generally has a high ——Be aware of other demands should be very familiar, given the confidence in meeting the challenge on the industry, whether in the capacity and capability challenges ahead – particularly if they are given private sector, regionally, interstate experienced by the State’s long lead times to address these or across different levels of construction industry during the challenges in the form of a clear, government – and be prepared to resources boom. The pressures of the industry-wide long-term project retain flexibility in the pipeline to boom introduced “transformational” pipeline as shown in this Report – avoid excessive pressures on key thinking and solutions to meet much will also depend on getting materials and labour inputs. extremely tight development and industry settings and engagement right ——Effectively plan for and manage construction timeframes, including and putting policies in place so that the regional nature of major the increased use of Fly In Fly Out construction is delivered in a timely project work. While South East (FIFO) workforces and construction and ‘value for money’ way. Queensland will continue to be a camps, regional development The lessons from the resources boom regional hotspot for activity, the initiatives to service key construction are clear: strongest growth in activity will be in hotspots, the offshoring of significant other regions, particularly Northern ——Develop a clear and credible long- volumes of engineering, design and Queensland. Ensuring essential term pipeline of major projects – fabrication work, and the intensive use skills and access to construction both publicly and privately funded – of prefabrication and modularisation materials will be vital for these so that industry can transform and particularly in the LNG construction regions. invest in capacity and skills. This market. Having been trialled during remains a core aim of the Report. If these challenges are managed well, the resources boom, these ——Provide room in the procurement not only will infrastructure projects approaches are expected to remain process for innovation and industry be delivered on time, but also on a part of the construction industry’s investment in capacity and budget and to a high quality, providing “response kit” to future investment capability. Allow the construction long-term value for money. Getting it and construction cycles. industry to use their knowledge and wrong will likely result in project delays, Resource boom solutions enabled skills to come up with innovative potential project and business failures a lot of construction activity to be solutions that boost productivity. (including costly litigation, rectification delivered in a short space of time, Furthermore, the procurement works as well as social costs) and, but did not prevent significant model adopted should allow for an overall, higher industry cost escalation. increases in construction costs. In optimal sharing of risks to those While cost escalation was not an issue part, this was because the resources parties who are most able to deal in Queensland when major project boom coincided with a tremendous with them. Industry needs to be activity was much lower, recent data investment cycle globally, affecting part of the new investment culture, shows it is accelerating once again prices for key imported inputs such but it is less likely to participate in at the fastest pace since the as steel and oil products. However, major projects – let alone invest in resources boom. much was also self-inflicted with expanding capacity and capability strong demand pressure also – if it wears a disproportionate brought to bear on local supplies of share of risks (and consequently skills and materials. In retrospect, unsustainably low industry margins). pursuing aggressive increases in public infrastructure investment in Queensland (following several years of weakness) to coincide with the demands of the resources investment boom, likely affected the timeliness and value-for-money delivery of state infrastructure projects.

The availability of funding for sustainable productive infrastructure investment should not derail investment itself – exploring innovative funding mechanisms remain critical for the outlook of the pipeline and the Queensland economy

58 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Recent research on capacity and ——Operations and maintenance capability risks in New South Wales risks: procurement models, such prepared by BIS Oxford Economics for as Integrated Project Delivery, Infrastructure NSW indicate that there which provide scope for industry are currently challenges at every phase innovation in design, the use of of construction. It is highly likely that high quality materials and new Queensland (amongst other states) processes or products are likely will be facing similar issues:10 to impact on the ultimate operations ——Pre-construction risks: significant and maintenance requirements pressure has been placed on the of the built asset. Ideally, the procuring agencies in the public procurement model chosen sector, resulting in a substantial incentivises both government recruitment drive to take skills from agencies and contractors to choose the private sector, limiting their own approaches which minimise ‘life capability to respond. Furthermore, cycle’ costs of the asset (including the form of procurement and risk operations and maintenance) rather allocation models used can heavily than focusing just on the cost of impact on resources required for construction itself. In other words, this stage. “value for money” should be a long-run, not a short-run, concept. ——Construction risks: industry has reported risks surrounding the availability of core ‘onsite’ construction skills, particularly foremen and site managers as well as crucial infrastructure trades and professions ranging from onsite engineers to form workers, tunnellers and mechanical and electrical trades as well as the To minimise risks of project availability and cost of materials, delays, failures and rising with the greatest challenge likely to be in sourcing natural sand for use construction costs, Queensland in cement. Transport and logistical needs to apply a longer-term risks are also highly significant, with approach to planning for the heavy concentration of work capacity and capability in the targeted in the metropolitan region construction industry necessitating even more intensive use of the urban road network to haul construction materials from primary sources, distribution and manufacturing locations to construction sites, as well as managing the removal of spoil. Finally, and most topically, the risk of working around existing utilities continues to be a major challenge particularly in brown field locations.

10 Ibid, pp119-125.

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 59 CONCLUSION AND RECOMMENDATIONS

This Report shows that, for the first time in several years, major project activity in Queensland is rising. The appropriate identification of infrastructure gaps, choosing the most productive projects, and coming up with funding and financing solutions will remain critical if growth in major project activity is to be sustained into the future, meeting Queensland’s infrastructure needs in a timely and cost-effective way.

Here, the conclusions and recommendations from previous Reports are still valid, particularly:

—— Ensure that the best infrastructure —— Ensure there is appropriate funding and projects are picked. This means that the financing solutions in place. As noted business cases for short and long-term previously, Queensland’s current funding public investment programs are based on arrangements will not cover the Major maximising economic benefits through Projects List, let alone other projects that will transparent cost benefit analysis (CBA). be required to meet broader infrastructure For Queensland, the creation of Building challenges. Sustaining growth in major project Queensland (BQ) has been a very positive work means moving more projects from development. A key function of BQ is to ‘unfunded’ to ‘funded’ categories in coming develop independent, rigorous business years – or accelerating developments. The cases for projects using transparent and high cyclicality of State government revenues disciplined frameworks including cost create challenges here for publicly funded benefit analysis on projects where potential work as it encourages more spending on government investment is between infrastructure in the good economic times $50–$100 million and lead the preparation (at a time when industry capacity to deliver of business cases where investment infrastructure is more stretched and costs are exceeds $100 million11 – in conjunction with higher) and then pull back on infrastructure Infrastructure Australia – which is responsible spending in the bad economic times (when the for evaluating business cases submitted for broader economy could do with the spending Commonwealth funding as well as publishing boost and costs can be lower). Because of national infrastructure priority lists – there is this, governments should continue to look for now far more rigorous analysis undertaken ways to smooth and increase project finance in project evaluation and selection in such as through City Deals, asset leases, Queensland than in the past. market-led proposals, value capture and the judicious use of debt finance. Inevitably, sustainable financing of infrastructure over the long-term will require genuine tax and expenditure reforms.

11 http://buildingqueensland.qld.gov.au/about-us/

60 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook This Report also highlights, however, growing risks to capability and capacity in the major projects industry, given large infrastructure programs already being rolled out in New South Wales and Victoria, as well as rising infrastructure spending overseas. As Queensland major projects activity rises, plans and policies should be put into place to minimise risks to industry capability and capacity, which in turn will limit the risk of project delays, failures and excessive construction cost escalation in coming years, with all the social challenges that it also brings (e.g. litigation, disruption).

To some degree, capacity and capability risks are driven by external factors, ranging from demographic change – affecting the availability of skills – to the state of global demand for materials and resources and trade policies – affecting the price and availability of imported materials and skills. However, there is much that is within the control of government and planning agencies to minimise capacity and capability risks. The current challenge provides an opportunity to innovate, to come up with better ways of doing things, and in so doing, to provide a long-term positive legacy that will assist in managing future investment cycles.

This includes:

——The provision of a clear and coherent long-term ——Continue to focus on workforce development project pipeline to give industry the best possible initiatives so that demand for key onsite skills chance of responding, rather than separate pipelines can be met. Here, there have been positive by governments and the private sector. Maintaining developments with the Queensland Government a sustainable, strong pipeline for work (and avoiding Building and Construction Training Policy (Training booms and busts where possible) will also assist in Policy) requiring that a minimum of 10% of the total leaving a legacy in that it encourages the retention labour hours on eligible projects be undertaken of skills, training of the next generation of staff, and by apprentices and/or trainees and through other increasing productivity. Ideally, this pipeline will have workforce training. From 1 September 2017, this bipartisan political support to avoid situations such core requirement increased to a minimum of as the cancellation of contracted major projects by 15% for major building and/or civil construction incoming administrations (e.g. East West Link in projects over $100 million in value. The Training Victoria and the Roe 8 / Perth Freight Link project Policy supports employment opportunities and in Western Australia) which increased sovereign skills development in Queensland’s building and risk. The pipeline should also identify gaps in major civil construction industry. The Training Policy also project activity in regional areas that could present focuses on increasing the economic independence a risk to retaining skills in those regions. for Aboriginal and Torres Strait Islander Queenslanders. This policy now also extends to Government Owned Corporations (GOCs) and ——Develop and maintain a plan for construction Public Private Partnerships (PPPs). materials, so that the demand and supply balance Over the longer term, given changes in technology for scarce quarry products can be quantified, and construction techniques, a more strategic mapped, emerging gaps identified quickly, approach to workforce planning and skilling will and strategies put into place to accelerate the be required to ensure that the supply of skills into development of new supply sources and related the future match the likely demand by industry. logistics where appropriate. This is particularly Here, research undertaken by Construction Skills important for quarry products given the very Queensland for this Report, as well as perspectives long lead times required to develop and approve of Queensland construction jobs for the future new quarries, affecting the supply of hard rock, remain vital.12 aggregates and sand, and limited sources of supply. With the addition of each project to the long-term project pipeline, account should be taken of that projects call on natural material resources, how these resources are sourced and transported, and how this call could be reduced through other initiatives, such as recycling or utilising new or substitute materials (e.g. structural steel-focused engineering solutions rather than concrete) if critical input constraints emerge.

12 For example, Quezada G, Bratanova A, Boughen N and Hajkowics S (2016) Farsight for construction: Exploratory scenarios for Queensland’s construction industry to 2036, CSIRO, Australia

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 61 ——Similarly, attention needs to be focused on the ——Engage with industry for improvements in development and maintenance of a construction procurement that encourage industry participation, transport and logistics plan to avoid bottlenecks, innovation and investment in capacity and capability. delays and rising costs for construction materials In particular, processes should be reformed if they: as a result of congested road transport networks, ——create long-term risks to industry sustainability particularly in metropolitan regions where and costs by inadvertently encouraging construction activity may be most focused contractors to take risks on quality (e.g. during the construction of the Cross River Rail ——take up scarce resources through the project). This may include demand management tendering process tools, such as putting a price on road use in the ——do not provide a sustainable risk/margin balance CBD and nearby construction zones, but also taking that will encourage firms to invest in skilled staff more advantage of non-road transport options and new technology such as rail and water as used in other global ——do not encourage innovation or the use of new capitals such as London (for its own £14.8 billion technologies and tools, ranging from Building Crossrail project). Information Modelling (BIM), new resource- saving materials or construction techniques, productivity improving (lean) tools and techniques or appropriate skills development.

While engagement between Risks to the Outlook Over 2017, global oil and gas prices government agencies and the A key conclusion of this Report is continued to rise and, while there construction industry can often be that major project activity is now was also some reversal in prices for competitive and at times adversarial, expanding following several years of thermal and coking coal (as well as the looming capacity and capability (significant) decline. However, this iron ore) following a spike in prices challenge will likely require a greater outlook is subject to significant upside in 2016, prices still remain at higher partnership approach that maximises and downside risks; that despite the levels compared to where they the legacy of the infrastructure mildly cyclical profile of work projected, were a few years ago. Not only is program. Rather than being there is still the potential for further, this boosting royalty revenue for the incentivised to secure the lowest more volatile, cycles ahead given Queensland government (which can priced work on each and every project, Queensland’s natural strengths and assist in funding public infrastructure procurement will increasingly need advantages: increasing connections works), but it also has the potential to encourage industry investment with the fast growing economies to put more coal mining projects in capacity and capability, reward of Asia, strong population growth, back into consideration. While there innovation (and hence productivity), and access to high quality natural are ‘high growth’ and ‘low growth’ and consider value for money in a resources. global economic scenarios that we “long-term” sense which results in a have considered in preparing this As in previous Reports, the biggest sustainable industry delivering quality, Report, overall we believe that this global risk still relates to the economic long-lived infrastructure. Report represents a reasonable outlook for key trading partners, the balance between these scenarios. strategic decisions they make in Consequently, there is both upside achieving sustainable growth, and how and downside risk to the projection The provision of a clear this will impact on the global trade of of major project activity. and coherent long- resources for which Queensland has term pipeline rather a strong supply position, particularly than separate pipelines coking coal, thermal coal, and gas. by governments and Much of this remains outside of the control of the Queensland government the private sector will and industry. greatly assist industry to manage future investment cycles

62 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Our outlook for global economic This outlook is slightly pessimistic On the upside, a “high growth” growth is detailed in the Economic compared to the housing investment global scenario could see better Outlook section of this Report, which is forecasts presented in both the than expected budgetary outcomes, our baseline forecast. However, there Commonwealth and State Budgets. providing scope for stronger increases are upside and downside risks to this However, stronger than anticipated in public investment. outlook. Both upside and downside population growth (for example, in a Finally, the future direction of energy scenarios are heavily influenced by “high growth” global scenario which policy in Australia also presents a how US and Chinese policy decisions drives high investment and population risk factor for this Report. Its most play out on their economies. Upside inflows into Queensland) could see direct impact is on the timing and risks include a more stimulatory higher housing investment and stamp magnitude of many renewable energy than expected stance of US fiscal duty revenue than in the baseline case projects in Queensland, spanning policy and, particularly, the impact of presented here. This, in turn, could wind, solar and hydro. Indirect corporate tax cuts and higher public drive higher major project activity than impacts may also include aggregate infrastructure investment, which modelled here. generation investment, the path of in turn could feed into demand for The forecasts presented in this report energy prices and confidence to invest commodities and commodity prices. also assume that governments – both in energy-intensive industry which Downside risks include the distinct State and Commonwealth – seek affects broader construction activity. possibility of higher trade barriers and a balanced path between debt Current policies incorporate a national controls imposed by the United States consolidation/deficit reduction on renewable energy target (RET) of and China, and possible retaliation in the one hand and sustaining public 33,000 GWh of large scale generation the rest of the world. On the domestic investment on the other. Over the by 2020, and a separate 50% RET by front, the key risk factors which may next few years, it is assumed that 2030 for Queensland. These policies influence the projections in this Report public investment will rise in line with have encouraged a substantial wave are (i) projected housing investment the Queensland and Commonwealth of investment in renewable generation activity in Queensland as well as (ii) 2017/18 Budgets. Meanwhile, minor projects in Queensland, as evidenced government approaches to debt adjustments to recurrent tax and in the Pipeline. While the national RET consolidation and public investment transfer policies, as well as stronger expires in 2020, the Commonwealth via fiscal policy and (iii) the impact of nominal economic growth, are Government is undertaking further current and future energy policies. expected to contribute to a gradual analysis of a proposed National With regards to housing investment, improvement in the underlying Electricity Guarantee (NEG) to it is expected that the current recovery budget and net public debt position. encourage new investment in clean in housing activity peaked in 2016/17 However, there remains risk on both and low emissions technologies while and will decline in subsequent years, the upside and downside to this allowing the electricity system to mainly as a result of overbuilding position. On the downside, failure to continue to operate reliably.13 Overall, high density apartments in Brisbane. achieve improvements in the financial the impact of the shift from a national This, in turn, is expected to drive a positions of governments, both State RET to NEG is still to be determined weakening in stamp duty revenues and Commonwealth, could see more and presents a risk to the outlook. from 2017/18 that may threaten significant cuts to public expenditure Furthermore, given the relatively high public funding for major infrastructure in future Budgets, including that slated state-based RET, more renewables projects. for capital works. projects may emerge in coming years which could be added to the Pipeline.

Over the longer term, given changes in technology an construction techniques, a more strategic approach to workforce planning and skilling will be required to ensure the supply of skills in the future match the likely demand of the industry

13 www.coagenergycouncil.gov.au/publications/energy-security-board-update

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 63 2018 MAJOR PROJECTS LIST As at February 2018

Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

ROADS, BRIDGES and RUNWAYS Brisbane City Region Kingsford Smith Drive Upgrade Brisbane City Council 650 440 Under 2015/16 2018/19 175 106 30 Construction Brisbane Metro Busway System Brisbane City Council 944 700 Announced 2019/20 2021/22 1 33 105 275 208

Brisbane Airport / Port Brisbane New Parellel Runway Phase 2 Brisbane Airport 830 380 Under 2017/18 2019/20 20 200 160 Construction Dryandra Drive Brisbane Airport 120 108 Under 2016/17 2018/19 38 35 Construction Port of Brisbane Motorway – Port Connect Stage 3 Port of Brisbane 110 88 Under 2016/17 2017/18 50 Construction

Greater Brisbane Logan Motorway Enhancement Project Transurban 512 420 Under 2016/17 2018/19 240 170 Construction Yamanto to Ebenezer Upgrade Qld Government 340 263 Prospective 2020/21 >2021/22 38 98 Centenary Hwy Bus Lanes – Ipswich Mwy to Toowong Qld Government 400 240 Prospective 2020/21 2023/24 18 Jabiru Island Bridges (Hope Island Road (Oxley Drive) Qld Government 136 102 Prospective 2020/21 2023/24 10 20 road duplication – stage 4) Eastern Busway – Stage 3 - Buranda to Coorparoo: Qld Government 480 182 Unlikely 2021/22 2025/26 53 Mains Avenue to Bennetts Road

Ipswich Motorway Rocklea to Darra Stage 1 – Between Suscatand Street and Oxley Qld Government & 400 200 Under 2017/18 2020/21 20 50 130 Road Inc. Bridge Federal Government Construction Rocklea to Darra – Further Stages Qld Government 1442 750 Unlikely >2021/22 50

Gateway Motorway Upgrade North (GUN) Gateway Motorway Upgrade North (GUN) – Single Package Qld Government & 1142 700 Under 2015/16 2018/19 250 80 (Updated timing) Federal Government Construction

Pacific Motorway Section (C) Daisy Hill to Logan Motorway at Loganholme Qld Government & 250 188 Prospective 2019/20 2022/23 20 100 Federal Government Miles Platting Road to Rochedale Road (Gateway Merge) Qld Government & 196 160 Under 2018/19 2020/21 30 80 50 Federal Government Construction Mudgeeraba to Varsity Lakes Capacity Upgrade Qld Government & 180 165 Under 2018/19 2020/21 10 58 58 9 Federal Government Construction

Sunshine Coast Region Sunshine Coast Airport – New East-West Runway Queensland Airports 297 240 Under 2018/19 2020/21 50 150 40 Limited Procurement Sunshine Motorway Mooloolah River Interchange Qld Government 430 200 Prospective 2018/19 2020/21 50 100 50

Gold Coast Region Gold Coast Runway Upgrades Queensland Airports 150 100 Under 2016/17 2017/18 50 Limited Construction M1 - Varsity Lakes to Tugun Qld Government & 1030 450 Prospective 2020/21 2023/24 50 100 100 Federal Government

Rockhampton Region Rockhampton Ring Road Qld Government & 950 750 Unlikely >2023/24 Federal Government

64 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook 2018 MAJOR PROJECTS LIST As at February 2018 Funded Unfunded

Gateway Motorway Upgrade North (GUN) Gateway Motorway Upgrade North (GUN) – Single Package Qld Government & 1142 700 Under 2015/16 2018/19 250 80 (Updated timing) Federal Government Construction

Rockhampton Region Rockhampton Ring Road Qld Government & 950 750 Unlikely >2023/24 Federal Government

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 65 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

ROADS, BRIDGES and RUNWAYS Toowoomba Region Toowoomba Range Second Crossing Qld Government & 1606 1250 Under 2015/16 2018/19 450 185 Federal Government Construction

Warrego Highway Upgrade Program (WHUP) Warrego Highway Upgrade Program Qld Government & 635 404 Under 2016/17 2019/20 150 150 33 Federal Government Construction

Bruce Highway Caloundra Road to Sunshine Motorway Qld Government & 929 442 Under 2016/17 2020/21 60 125 150 92 Federal Government Construction Pine River to Caloundra Interchange Qld Government & 671 350 Announced 2018/19 2022/23 10 50 150 102 Federal Government Deception Bay Road Upgrades Qld Government & 150 65 Announced 2019/20 2022/23 10 50 5 Federal Government Maroochydore Road Interchange Upgrade Qld Government & 187 80 Announced 2019/20 >2021/22 10 50 20 Federal Government Cooroy to Curra – (Section D) – Qld Government & 1000 500 Announced 2018/19 2023/24 100 100 100 200 Keefton Road to Curra (Gympie bypass) Federal Government Curra to Sarina – Yeppoon Road to the North of Boundary Road Federal Government 121 91 Announced 2018/19 2022/23 30 31 30 (east) – Rockhampton Northern Access Upgrade Stage 1 Sarina to Cairns – Cairns Southern Access Corridor Stage 3 – Federal Government 481 120 Announced 2018/19 2021/22 25 75 20 Edmonton to Gordonvale Sarina to Cairns – Cairns Southern Access Corridor Stage 4 – Federal Government 135 60 Announced 2018/19 2021/22 15 30 15 Kate Street to Aumuller Street Sarina to Cairns – Haughton River & Pink Lily Lagoon Upgrade Qld Government & 515 240 Under 2017/18 2021/22 60 100 80 Federal Government Procurement Sarina to Cairns – Mackay Ring Road / Bypass – Stage 1 Qld Government & 497 215 Under 2017/18 2019/20 50 120 45 Federal Government Construction Sarina to Cairns – Cattle Creek and Frances Creek Upgrades Qld Government & 119 55 Under 2017/18 2018/19 50 5 Federal Government Construction Sarina to Cairns – Mackay Northern Access Upgrade Federal Government 80 60 Credibly 2018/19 2020/21 15 35 10 Proposed Sarina to Cairns – Inhgam to Cardwell Range Deviation Federal Government 460 280 Prospective 2023/24 2025/26 Sarina to Cairns – Saltwater Creek Upgrade Federal Government 103 77 Credibly 2020/21 2022/23 19 38 Proposed Sarina to Cairns – Tiaro Flood Immunity Upgrade Federal Government 107 80 Credibly 2022/21 2022/23 40 Proposed

Northern Queensland Peak Downs Highway Improvements – Eton Range Qld Government & 189 120 Under 2016/17 2018/19 65 0 Federal Government Construction Peak Downs Highway – Walkerston Bypass Qld Government & 150 113 Prospective 2019/20 2020/21 65 48 Federal Government

Far North Queensland Smithfield Transport Corridor Upgrade Qld Government & 150 75 Under 2018/19 2020/21 25 25 25 Federal Government Procurement

Roads and Bridges Major Projects Work Done 19,274 11,503 1,759 1,877 1,482 1,190 1,051 Funded 60% 1,759 1,812 1,232 896 535 Not Funded 0 65 250 294 516

66 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded

ROADS, BRIDGES and RUNWAYS Toowoomba Region Toowoomba Range Second Crossing Qld Government & 1606 1250 Under 2015/16 2018/19 450 185 Federal Government Construction

Warrego Highway Upgrade Program (WHUP) Warrego Highway Upgrade Program Qld Government & 635 404 Under 2016/17 2019/20 150 150 33 Federal Government Construction

Far North Queensland Smithfield Transport Corridor Upgrade Qld Government & 150 75 Under 2018/19 2020/21 25 25 25 Federal Government Procurement

Roads and Bridges Major Projects Work Done 19,274 11,503 1,759 1,877 1,482 1,190 1,051 Funded 60% 1,759 1,812 1,232 896 535 Not Funded 0 65 250 294 516

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 67 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

RAIL (Passenger) Beerburrum to Namboor Rail Upgrade Qld Government / QR 780 500 Prospective 2019/20 2021/22 75 150 150 Varsity Lakes to Elanora Extension Qld Government / QR 859 600 Prospective >2022/23 Ipswich Rail Line – Darra-Redbank 3rd track Qld Government 218 153 Prospective 2019/20 2022/23 57 56 Cross River Rail Brisbane Early Works – Site Preperation + Demolition Qld Government 100 100 Under 2017/18 2018/19 50 50 Construction Northen & Southern Surface Works, Twin 5.9km Tunnel Qld Government 4500 3500 Under 2020/21 2023/24 150 450 1400 and 5 Underground Stations (TSD) Procurement Rail, Integration and Systems package (RIS) Qld Government 900 700 Under 100 200 Procurement Thr ee new stations (Pimpama, Helensvale North Qld Government / BCC 120 80 Credibly <2024/24 and Worongary-Merrimac) Proposed Gold Coast Light Rail Stage 3 Qld Government / Private 500 300 Credibly 2019/20 2021/22 50 200 50 Proposed Sunshine Coast Light Rail Sunshine Coast Council 500 300 Unlikely 2022/23 2024/25 50

(Coal / Freight) North Coast Line Capacity (Brisbane to Cairns) Qld Government 116 70 Unlikely 2018/19 2020/21 10 40 20 Townsville Eastern Access Rail Corridor QR 250 200 Unlikely 2018/19 2021/22 40 100 60 Townsville Port Related Rail Private Developer 90 63 Unlikely Inland Mainline Freight Upgrade – Queensland Border to Acacia Ridge —— NSW/QLD Border to Gowrie ARTC 1600 1350 Announced 2021/22 2024/25 80 —— Gowrie to Kagaru ARTC 3500 3000 Announced 2019/20 2023/24 200 400 1000 —— Kagaru to Acacia Ridge & Bromelton ARTC 150 100 Announced 2019/20 2023/24 20 60 20 Brisbane Freight Corridor (POB Connection) Port Of Brisbane / 4000 3250 Unlikely >2022/23 Government North Galilee Basin Rail Adani 2200 1800 Unlikely 250 750 300

Rail Major Projects Work Done 19,583 16,066 50 60 825 2,287 3,366 Funded 82% 50 50 370 1,010 2,700 Not Funded 0 10 455 1,277 666 HARBOURS / PORTS Port of Cairns – Cruise Terminal Expansion – Trinity Inlet Dredging Far North Queensland 120 80 Credibly 2019/20 2020+ 40 40 Ports Corporation Ltd Proposed (trading as Ports North) Brisbane International Cruise Terminal (including dredging) Port of Brisbane 150 120 Under 2018/19 2020/21 30 50 40 Procurement Gold Coast Cruise Ship Terminal (Broadwater) GCCC/TBA 120 90 Unlikely 2020/21 2022/23 60 30 Port of Gladstone – Clinton Vessel Interaction Gladstone Ports 100 75 Credibly 2020/21 2021/22 75 Corporation Proposed Port of Gladstone – Second Shipping Lane Gladstone Ports 280 196 Credibly 2018/19 2020/21 35 100 61 (Gatcombe and Golding Cutting Channel Duplication Project) Corporation Proposed Amrun (South of Embly) Port upgrade Rio Tinto 150 120 Under 2015/16 2017/18 30 Construction Townsville Port Expansion Project – Qld Government 200 150 Prospective 2019/20 2021/22 75 75 Outer Harbour Expansion (berths 14+15) Townsville Port Expansion Project – Channel Capacity Upgrade Qld Government 193 150 Credibly 2019/20 2020/21 75 75 Proposed Townsville Port Expansion Project – RG Tanner Coal Terminal Qld Government 225 200 Announced 2018/19 2020/21 60 80 60

68 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 69 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

HARBOURS / PORTS Abbot Point Coal Terminal Expansion (35mt) Adani 2500 2000 Unlikely 2020/21 2023/24 250 750

Harbours Major Projects Work Done 4,038 3,181 30 125 420 736 780 Funded 79% 30 90 130 100 0 Not Funded 0 35 290 636 780 DEFENCE RAAF Amberley – C17 Maintenance Facility (Air 8000) Qld Government 180 150 Under 2017/18 2020/21 60 10 0 Construction RAAF Amberley – Growler Project Qld Government 180 150 Under 2017/18 2020/21 0 60 60 30 Construction RAAF Amberley – C17 project Qld Government 200 180 Under 2017/18 2020/22 80 20 Construction Shoalwater Bay – Remediation Qld Government 140 120 Under 2018/19 2020/21 50 50 20 Procurement Singapore – Shoalwater Bay Qld Government 800 600 Under 2019/2020 2022/23 150 150 150 Procurement Singapore – Townsville Qld Government 800 600 Under 2019/2020 2022/23 30 30 20 Procurement

Defence Major Projects 2,300 1,800 140 140 290 230 170 78% 140 140 290 230 170 0 0 0 0 0 WATER Lower Fitzroy River Infrastructure Project – Gladstone Area Water 352 195 Credibly 2019/20 2020/21 35 65 95 New Weir at Rookwood on the Fitzroy River Stage 2 Board (GAWB) Proposed Gladstone to Fitzroy River Pipeline Gladstone Area Water 250 120 Unlikely <2022/23 2019/20 Board (GAWB) Three Rivers Irrigation Project Stanbroke 250 120 Prospective 2020/21 2021/22 60 60 Shell / Arrow Water Treatment Facilities Bowen Shell/Arrow/Bow 250 175 Prospective 2021/22 2022/21 88 Wyaralong Dam WTP Stage 1 SEQ Water 200 150 Prospective 2019/20 2020/21 50 20 Cedar Grove Connector (was Southern Regional Pipeline extension) Qld Gov 100 70 Unlikely 2019/20 2019/20 15 55 Nullinga Dam Federal/Qld Governemnt 323 250 Prospective 2019/20 2020/21 50 100 100 Somerset Dam Upgrade SEQWater 600 450 Credibly 2019/20 2020/21 150 150 150 Proposed Brisbane Flood Plain Management Qld Government 200 150 Credibly 2018/19 2020/21 50 50 50 Proposed Haughton Channel Capacity Upgrade Townsville Council 90 70 Announced 2019/20 2021/22 20 50 Urannah Dam Bowen Collinsville 250 200 Credibly 2019/20 2020/21 100 100 Enterprises Proposed Burdekin Falls Dam – Saddle Dam and Monolith Improvement Sunwater 330 210 Announced 2018/19 2022/23 3 7 40 95 Gorge Weir to Byerwen Coal Project Pipeline project (110km) Sunwater for QCoal 240 180 Unlikely 2018/19 2020/21 100 80 Hells Gate Dam – Upper Burdekin Townsville Enterprise 313 250 Unlikely <2020/21 Further CSG water treatment plants 250 188 Prospective <2020/21 Hells Gate Diversion Canal – 240km from Townsville Enterprise 490 400 Unlikely <2020/21 Hells Gates to a Delineated Area Hervey Bay and Maryborough Water Networks Interconnection Local Councils / Qld Prospective Government New Surface Water Storages (Galilee Basin, Local Councils / Qld Prospective Gilbert and Flinders Catchments) Government Paradise Dam Spillway Improvement Project Sunwater 600 400 Prospective 2019/20 2023/2024 5 30 110

70 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded

HARBOURS / PORTS Abbot Point Coal Terminal Expansion (35mt) Adani 2500 2000 Unlikely 2020/21 2023/24 250 750

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 71 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

WATER Connors River Dam Sunwater 500 400 Unlikely Connors River Dam Pipeline to Moranbah Sunwater 400 300 Unlikely Galilee Basin Flood Mitigation and Water Supply Dam Adani 300 225 Unlikely 2019/20 2021/22 50 100 75 Galilee Basin Flood Mitigation and Water Supply Pipeline Adani 600 450 Unlikely 2019/20 2021/22 100 200 150

Water Major Projects Work Done 6,888 4,953 0 88 612 1180 928 Funded 72% 0 53 327 490 395 Not Funded 0 35 285 690 533 SEWERAGE S1 Sewer Upgrade – Brisbane Queensland Urban Utilities 160 120 Under 2014/15 2018/19 68 30 (QUU) Construction NTPW Queensland Urban Utilities 226 226 Under 2018/19 2021/22 60 80 86 (QUU) Procurement STPW Queensland Urban Utilities 198 198 Credibly 2018/19 2021/22 50 90 58 (QUU) Proposed Gold Coast Council Long Term Water Recycled GCCC 75 60 Under 2015/16 2017/18 40 20 Water Release Stage 1 Construction Gold Coast Council Long Term Water Recycled GCCC 250 188 Announced 2019/20 2020/21 60 128 Water Release Stage 2 – South Stradbroke Pipeline Kawana Sewage Treatment Plant Upgrade Sunshine Coast Council 74 59 Under 2017/18 2018/19 30 30 Construction

Sewerage Major Projects Work Done 983 851 98 210 250 272 0 Funded 87% 98 210 250 272 0 Not Funded 0 0 0 0 0 ELECTRICITY North Queensland Power Station Private / Qld Government 800 600 Credibly 2019/20 2020/21 100 250 250 / Federal Government Proposed Ross River Solar Farm (142 MW) ESCO Pacific / Palisade 225 135 Under 117 Construction Mt Emerald Wind Farm (180 MW) Ratch-Australia Port 380 228 Under 2016/17 2018/19 123 45 Bajool JV Construction Cooper’s Gap Wind Farm – Stage 1 (175 MW) AGL 300 150 Under 2017/18 2018/19 80 70 Construction Kennedy Energy Park Stage 1 (Wind 40MW) Windlab / Eurus Energy 88 53 Under 2017/18 2017/18 26 26 Construction Wandoan South Solar Farm Stage 1 Equis Energy 300 150 Prospective 2017/18 2018/19 150 Kennedy Energy Park Stage 2 (Wind 150MW) Windlab / Eurus Energy 260 156 Credibly 2018/19 2019/20 100 56 Proposed Bulli Creek Solar Farm Stage 1 (100 MW) Solar Choice 200 120 Under 2017/18 2018/19 40 80 Procurement Bulli Creek Solar Farm Stage 2 (100 MW) Solar Choice 200 120 Credibly 2018/19 2019/20 40 80 Proposed Bulli Creek Solar Farm Stage 3 (100 MW) Solar Choice 200 120 Credibly 2019/20 2020/21 40 80 Proposed Clarke Creek Solar Farm (350 MW) Energy Pacific Vic Pty Ltd 310 190 Prospective 100 90 Raglan Solar (350MW) Eco Energy Group 310 190 Prospective 100 90 Columboolan Solar farm (Miles) (310MW) Luminous Energy 300 180 Credibly 140 40 Proposed Bouldercombe Solar Farm (250MW) Eco Energy Group 240 120 Prospective 60 60 Darling Downs Solar Farm (106.8 MW) APA 210 126 Under 2016/17 2017/18 84 22 Construction

72 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 73 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

ELECTRICITY Kidston Solar Project – Stage 1 (50 MW) Genex Power 110 66 Under 2017/18 2018/19 16 50 Construction Kidston Solar Project – Stage 2 (270 MW) Genex Power 400 300 Under 2017/18 2018/19 150 150 Construction Munna Creek Solar Farm project (120 MW) Renewable Energy 150 100 Announced 2019/20 2020/21 50 50 System Technologies Kidston Hydro Project – Stage 2 300MW Genex Power 500 400 Under 2018/19 2019/20 200 200 Procurement Moranbah Solar Farm (170MW) Adani 200 100 Announced 2018/19 2018/19 100 Clare Solar Farm Project (100MW) FRV 200 120 Under 2018/19 2017/18 102 Construction Collinsville Solar Farm (42 MW) RATCH Australia 100 60 Under 2017/18 2018/19 60 Construction Oakey Solar Farm Stage 2 (55 MW) Oakey 1 AssetCo Pty Ltd 106 64 Prospective 30 34 Lilyvale Solar Farm (100 MW) FRV 200 120 Under 2017/18 2018/19 96 24 Construction Childers Solar Farm (80 MW) ESCO Pacific 125 75 Announced 18 57 Stanwell Power Station Works Qld Government 131 100 Under 2015/16 2018/19 40 8 Construction Rollingstone Solar Farm (110 MW) ESCO Pacific 210 126 Prospective 36 90 Emerald Solar Farm (70 MW) RES Australia 100 60 Under 2017/18 2018/19 36 24 Construction Whitsunday Solar Farm (57.5 MW) Edify Energy / Wirsol 112 67 Under 2016/17 2018/19 45 Construction Hamilton Solar Farm (57.5 MW) Edify Energy / Wirsol 112 67 Under 2016/17 2017/18 45 Construction Daydream Solar Farm (150 MW) Edify Energy / BlackRock 300 180 Under 2017/18 2018/19 150 30 Real Assets Construction Hayman Solar Farm (50 MW) Edify Energy / BlackRock 100 60 Under 2017/18 2018/19 48 12 Real Assets Construction Sun Metals Solar Farm (125MW) Sun Metals (Korea) 267 160 Under 2017/18 2018/19 60 100 Construction Ingham Bio-Energy Project (110MW) North Queensland Bio- 640 110 Announced 30 80 Energy Corporation Aramara Solar Farm (140 MW) Eco Energy World (EEW) 280 168 Prospective 84 84 Australia Powering North Queensland: Transmission Line Powerlink 150 128 Under 2018/19 2020/21 0 50 50 28 Procurement Burdekin Falls – hydro-electric power station (50MW) Stanwell 200 120 Prospective <2020/21 60 60 Substation Upgrades at Various SEQ Locations Qld Government 110 80 Under 2013/14 2018/19 35 35 Construction SunCoast Powerline Project – Palmwoods to Maroochydore Qld Government 89 69 Under 2015/16 2018/19 53 9 Construction Lockyear Valley gas Power Station Quin Brook 100 80 Under 2018/19 2019/20 50 30 Procurement Galilee Basin Transmission Project Adani 300 200 Unlikely >2020/21 50 100 50

Electricity Major Projects Work Done 9,615 5,818 1,436 1,813 1,271 758 310 Funded 61% 1436 1,183 387 78 0 Not Funded 0 630 884 680 310

74 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded

Electricity Major Projects Work Done 9,615 5,818 1,436 1,813 1,271 758 310 Funded 61% 1436 1,183 387 78 0 Not Funded 0 630 884 680 310

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 75 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

PIPELINES North East Gas Interconnector (Queensland Section) Jemena 1000 350 Under 2016/17 2017/18 280 Construction Arrow Bowen Pipeline Shell/Arrow/Bow 450 360 Unlikely >2020/21 160

Pipelines Major Projects Work Done 1,450 710 280 0 0 0 160 Funded 49% 280 0 0 0 0 Not Funded 0 0 0 0 160 TELECOMMUNICATIONS National Broadband Network – Qld component NBN Co. 6928 4850 Under 2010/11 >2020/21 848 830 453 400 400 Construction Public Safety Regional Radio Communication Qld Government 500 300 Credibly 2018/19 2020/21 75 75 75 75 Proposed

Telecommunications Major Projects Work Done 7,428 5,150 848 905 528 475 475 Funded 69% 848 830 453 400 400 Not Funded 0 75 75 75 75 OIL & GAS Queensland Curtis LNG Upstream Field Development (Sustaining) QGC & Shell 700 650 Under 2009/10 >2019/20 150 50 150 150 150 Construction Gladstone LNG Upstream Field Development (Sustaining) Santos & Petronas 550 500 Under 2009/10 >2021/22 100 100 100 100 100 Construction GLNG Roma East Project Santos & Petronas 750 400 Under 2017/18 >2021/22 120 120 80 40 40 Construction Australia Pacific LNG Upstream Field Development (Sustaining) Origin/Conoco Phillips 700 650 Under 2009/10 >2024/25 150 50 150 150 150 Construction Arrow – Upstream Field Development (Sustaining) Arrow/Shell 1500 1000 Prospective 2019/10 >2024/25 150 150 150

Oil & Gas Major Projects Work Done 4,200 3,200 520 320 630 590 590 Funded 76% 520 320 480 440 440 Not Funded 0 0 150 150 150 BAUXITE, ALUMINA & ALUMINIUM Amrun (South of Embly) Rio Tinto Alcan 1900 1125 Under 2016/17 2018/19 450 338 Construction Bauxite Hills Metro Mining 100 70 Under 2016/17 2017/18 63 Construction

Bauxite, Alumina & Aluminum Major Projects Work Done 2,000 1,195 513 338 0 0 0 Funded 60% 513 338 0 0 0 Not Funded 0 0 0 0 0 OTHER HEAVY INDUSTRY North Queensland Bio Energy – Ethanol Plant North Queensland Bio 640 200 Prospective 2018/19 2020/21 75 75 50 Energy Phosphate Hill Incitec Pivot, Dyno Nobel, 100 70 Under 2016/17 2018/19 40 10 UGL, Lendlease and Construction GRACosway

Other Heavy Industry Major Projects Work Done 740 270 40 10 75 75 50 Funded 36% 40 10 0 0 0 Not Funded 0 0 75 75 50

76 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded

PIPELINES North East Gas Interconnector (Queensland Section) Jemena 1000 350 Under 2016/17 2017/18 280 Construction Arrow Bowen Pipeline Shell/Arrow/Bow 450 360 Unlikely >2020/21 160

Other Heavy Industry Major Projects Work Done 740 270 40 10 75 75 50 Funded 36% 40 10 0 0 0 Not Funded 0 0 75 75 50

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 77 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

COAL Eagle Downs Coking Coal Aquila / Vale 1250 600 Prospective 2020/21 2022/23 158 228 Byerwen Qcoal 300 250 Under 2017/18 2019/20 50 50 50 50 Constuction Overland Conveyor System Caval Ridge BHP Billiton / Mitsubishi 265 160 Under 2017/18 2019/20 30 90 40 Alliance (BMA) Construction Red Hill hard coking deposit (Formally Goonyella riverside). BHP Billiton / Mitsubishi 1500 750 Prospective <2020/20 163 Alliance (BMA) Ensham Central Project Ensham Resources 1200 720 Prospective <2020/21 240 Maryborough (Colton) Northern Energy (Owned 300 180 Prospective <2020/21 66 By New Hope) New Acland Stage 3 Expansion New Hope Corporation 350 210 Unlikely 2020/21 2022/23 60 90 Caval Ridge Expansion (part of the gazetted Bowen Basin Coal BHP Billiton / Mitsubishi 200 160 Under 2017/18 2018/19 80 80 Growth Project) Alliance (BMA) Construction Peak Downs Expansion BHP Billiton / Mitsubishi 460 345 Credibly 2020/21 2022/23 80 160 Alliance (BMA) Proposed South Walker Creek BHP / Mitsui 150 100 Credibly 2019/20 2020/21 20 40 40 Proposed Grosvenor Underground Stage 2 Anglo Coal 500 350 Credibly 2020/21 2021/22 70 105 Proposed Styx’s Coal project Waratah Coal / 300 270 Announced 2017/19 2018/20 50 220 Queensland Nickel Middlemount coking coal mine stage 2 Peabody / Yancoal 325 284 Prospective >2019/20 65 Hail Creek Extension – Underground Rio Tinto 1100 660 Unlikely >2020/21 150 Rolleston expansion Xstrata / Glencore 400 120 Prospective >2020/21 70 Alpha Coal Project Hancock 6500 Unlikely >2020/22 Yarrabee Yancoal 260 150 Prospective >2019/20 Boundry Hill South Mine Extension Anglo Coal 100 70 Prospective >2019/20 Ellensfield coking coal Vale 400 280 Prospective >2019/20 Belvedere Coal Project Aqulla Resources 1100 500 Unlikely Olive Downs Pembroke Resources 500 250 Unlikely Kevins Corner Hancock 3000 1000 Unlikely South Burnett Coal Project (Tarong) MRV Tarong Basin Coal 250 200 Prospective >2019/20 South Burnett Coal Project – Transport corridor (Road or Rail ?) MRV Tarong Basin Coal 500 300 Prospective >2019/20 Curragh Mine – Next stage Expansion Wesfarmers 200 160 Prospective >2019/20 Baralaba Coal Mine Expansion Cockatoo Coal 313 150 Under 2016/17 2018/19 50 50 Construction Jellinbah 110 90 Under 2017/18 2018/19 20 70 Procurement Kestral Expansion 120 80 Under 2017/18 2018/19 10 70 Procurement Wilkie Creek New Black Energy 250 200 Prospective 2018/19 2020/21 50 100 50 Carmichael Coal Mine Project (Stage 1) Adani 4000 3500 Unlikely >2019/20 250 750 1000

Coal Major Projects Work Done Work Done 26,203 12,089 160 460 590 1,478 2,376 Funded 46% 160 460 320 320 0 Not Funded 0 0 270 1,158 2,376

78 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

Coal Major Projects Work Done Work Done 26,203 12,089 160 460 590 1,478 2,376 Funded 46% 160 460 320 320 0 Not Funded 0 0 270 1,158 2,376

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 79 2018 MAJOR PROJECTS LIST As at February 2018 Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

OTHER MINERALS Dugald River MMG 1456 874 Under 2015/16 2017/18 260 Construction Cannington Expansion BHP Billiton 400 120 Unlikely 2016/17 2018/19 30 60 30 Capricorn Copper Project Lighthouse Minerals 152 83 Under 2016/17 2017/18 42 Construction Merlin Project Molybdenum Chinova Resources 345 250 Unlikely 2020/21 2021/22 100 150 Roseby Copper (Little Eva) Altona Resources 320 96 Unlikely 2018/19 2020/21 21 45 30 Red Dome Mungana Mungana gold mines 330 215 Credibly 2019/20 2021/22 65 85 65 Proposed Ravenswood Extension Project Resolute Mining 167 92 Unlikely 2018/19 2019/10 38 54 Charters Towers Citigold Corporation 246 135 Prospective >2019/20 35 80 20 SCONI Scandium Project (Phase 1) Metallica Minerals 247 148.2 Prospective >2020/21 2021/22 Sarsfield Resolute Mining 250 100 Prospective >2020/21 Paradise Phosphate South project Legand International 400 300 Unlikely >2020/21 Holdings

Other Minerals Major Projects Work Done 4,313 2412 302 59 229 355 265 Funded 56% 302 0 0 0 0 Not Funded 0 59 229 355 265

TOTAL MAJOR PROJECTS Work Done 109,015 69,196 6,176 6,404 7,201 9,625 10,521 Funded 63% 6,176 5,495 4,239 4,236 4,640 Not Funded 0 909 2963 5389 5881

80 2018 Queensland Major Projects Pipeline | Queensland Major Project Outlook Funded Unfunded Total Project Engineering Commencement Completion 2017/18 2018/19 2019/20 2020/21 2021/22 Queensland Project Description Sponsor Value ($m) Value ($m) Project Status Date Date ($m) ($m) ($m) ($m) ($m)

Other Minerals Major Projects Work Done 4,313 2412 302 59 229 355 265 Funded 56% 302 0 0 0 0 Not Funded 0 59 229 355 265

TOTAL MAJOR PROJECTS Work Done 109,015 69,196 6,176 6,404 7,201 9,625 10,521 Funded 63% 6,176 5,495 4,239 4,236 4,640 Not Funded 0 909 2963 5389 5881

Queensland Major Projects Outlook | 2018 Queensland Major Projects Pipeline 81

2018 Queensland Ma jor Pro jects Pi peline

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