Australia faces an infrastructure gap: the McKinsey Global Institute estimates the gap between current infrastructure investment levels and needs (2017 to 2035) to be 1% of GDP. This report explores this infrastructure gap with a particular focus on prioritisation, design and productivity.

Key findings:

Governments are the ultimate funders of public infrastructure, accountable to residents for timely, effective, and affordable provision. They also set the policy, legal, and regulatory frameworks within which investors and contractors operate. To meet forthcoming infrastructure challenges, governments could lead Australia’s infrastructure agenda in a number of ways:

  • Publish an integrated vision for how technology will shape the ways that people and freight move around a city.
  • Identify and address the major policy enablers of—and adoption barriers to—infrastructure innovation.
  • Rethink the way projects are prioritised and selected.
  • Promote the development of capabilities within an “owner’s team.”
  • Build industry capability, capacity, and competition.

Disruptive technologies (such as autonomous vehicles) are rendering traditional investment cases and contracting models (for example, 30-year concessions) inadequate. Against this background of huge uncertainty, investors (in both the private and public sectors) could consider the following actions:

  • Apply design to value, using an agile approach.
  • Actively assess the impact of disruptive trends on infrastructure demand and usage.
  • Proactively evaluate investment in new asset classes created by technology.

In the face of the very real prospect of a “profitless boom” caused by high transaction costs, staff churn, industry fragmentation, productivity stagnation, increased contractual and technical risk, and challenges in accessing skilled labour, contractors that can crack the productivity challenge and act as thought partners to governments will likely come out as winners. Steps to consider include the following:

  • Champion innovations to create a step-change in productivity.
  • Invest in the required skills and competencies.
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