Costs associated with thirteen mega taxpayer funded construction projects across Australia have blown out by at least $130 billion, a new analysis shows.

In the latest quarterly edition of its Investment Monitor Report, business consulting and services firm Deloitte Access Economics analysed cost overruns at thirteen taxpayer-funded projects, each of which are valued at $10 billion or greater.

It found that combined, these projects are currently expected to cost $130 billion more than initial estimates.

For some projects, blowouts are huge.

For example:

• Estimated costs associated with the Inland Rail project that will connect Melbourne and Brisbane via freight rail have more than tripled from an initial estimate $9.3 billion in 2017 to $31.4 billion currently. A 2023 project review highlighted poor planning and inadequate risk management, with construction beginning long before key decisions about the project’s route were finalised.
• Cost estimates in relation to the CopperString 2032 transmission line project that will connect Mount Isa in Queensland to the national energy grid have blown out from an initial $1.8 billion in 2020 to almost $14 billion now. A key problem was that the previous scope included only the cost of the transmission line itself and failed to include essential connections to projects.
• Cost estimates in relation to Brisbane’s Cross River Rail project that will create a second river crossing for Brisbane’s rail network via a new tunnel under the Brisbane River and the CBD have increased from an initial $5.4 billion to around $19.04 billion.

(source: Deloitte Investment Monitor Report)

The report comes as Australia continues to work through a record pipeline of public infrastructure projects.

All up, public sector projects account for more than $415 billion worth of definite projects on Deloitte’s Investment Monitor database as well as a further $160 billion of developments which are in planning.

As a result, the pipeline is now more than double its pre-boom size and public infrastructure has accounted for around three quarters of growth in the database since 2015.

Speaking of the overruns, Deloitte Access Economics Director and lead author Sheraan Uncerwood said that the blowouts have implications for both government finances and the forward project pipeline.

Underwood said that the overruns have several causes.

These include inadequate definition of project scope and identification of risks, persistent delivery constraints, skilled labour shortages and increasing project size and complexity.

He says that the scale of projects is such that even small percentage changes can now result in large dollar value impacts.

“Cost revisions are not new in major construction,” Underwood said.

“However, the frequency and magnitude of recent upward revisions indicate that cost pressures are reshaping the project pipeline, with potential implications for already-stretched state government finances.

“Overall, the scale of Australia’s current infrastructure investment program, combined with increasingly constrained state government budgets, has heightened the fiscal consequences of cost overruns.

“When major project costs rise, governments are forced to make trade-offs across the pipeline. These can include narrowing scope, deferring lower-priority projects, or funding overruns through additional borrowing. Those choices are becoming more consequential as state balance sheets tighten.

“Western Australia is now the only state with a AAA credit rating. Aggregate state and territory net debt is projected to rise from around $660 billion in 2025-26 to almost $900 billion by 2028-29, and average state credit ratings have fallen to their lowest level since 2000, reflecting the combined pressure of large capital programs and broader spending growth.”

(The cost of the Inland Rail project linking Melbourne and Brisbane vya freight rail has more than tripled from $9.3 billion in 2017 to $31.4 billion currently. The project has been heavily criticised for poor planning, including commencing construction before major parts of the route have been finalised.)

Data centres, energy drive private investment forward

As cost overruns impact public developments, the pipeline of private sector projects continues to grow as massive levels of investment go into data centres and energy projects.

As a result, the report says that the overall value of business investment is expanding at its fastest pace in more than four years.

In terms of data centres, the report indicates that these alone account for around $28 billion worth of project additions over the past year.

However, it adds that project developers face growing challenges in competing for limited construction capacity and securing access to reliable energy.

On the latter point, the report notes that data centre requirements are likely to support further growth in energy generation, storage and distribution assets over coming years.

As things stand, the report notes that many data centre projects remain in planning and are yet to translate into a sustained lift in construction activity.

Progress will depend on continued growth in the use of AI, as well as access to reliable and cost-effective energy.

Nonetheless, the report says that data centres now represent one of the fastest-growing segments of the national project pipeline and a potentially significant source of future investment.

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