Australia’s boom in road maintenance activity will continue to offer opportunities in coming years, the latest forecast suggests.

Releasing its Road Maintenance in Australia 2023-2037 report, economic forecasting firm BIS Oxford Economics says it expects the dollar value of work done on road maintenance (in constant dollar terms) to remain elevated despite easing back from post-COVID stimulus levels (see chart).

Over the five years to 2026/27, BIS expects the overall value of road maintenance activity which is conducted throughout the country to average $8.6 billion per annum.

Whilst this is only modestly higher ($131 million) compared with annual averages over the previous five years to June 2022, it still represents elevated levels of activity (see chart).

“Spending on road maintenance will fall over the next two years as work funded by COVID stimulus is completed,” said Nicholas Fearnley, Head of Infrastructure Forecasting, BIS Oxford Economics.

“Activity will nevertheless remain at historically high levels, supported by numerous federal and state road maintenance programs.”

In its report, BIS says road maintenance levels over the short term will be supported by an extension of the Commonwealth Local Roads and Community Infrastructure Program (LRCI Program)  to run through until 2025 along with the announcement and/or extension of road programs in the latest round of state budgets.

Medium term, activity will be underpinned by a large construction pipeline and a sizeable backlog of national maintenance.

There is also an upside risk in unforeseen natural disasters, BIS notes.

At a broader level, BIS says there are several ‘upside’ and ‘downside’ drivers of the longer-term outlook.

Upside factors include:

• An expansion in the overall network of roads which need to be maintained as high levels of construction activity increase the overall length of the road network.
• Greater road use as growth in population and trade have led to an increase in the number of vehicles on roads (notwithstanding temporary COVID-induced slowdowns) and an expanded maintenance requirement.
• The age of Australia’s road network. Many existing roads are now more than 40 years old (considered around their life expectancy) and were not designed to support today’s traffic volume or freight loads. These roads experience greater wear and tear and thus have a higher maintenance requirement.
• Higher levels of repair which have been driven by La Nina and recent rainfall on Australia’s east coast. (As noted above, future natural disasters present upside risks to the forecasts.)
• If implemented, moves toward a more proactive and effective policy approach regarding maintenance (potentially driven by audits into road condition and greater recognition of the value of early intervention to prevent road deterioration) could see further investment in up-front maintenance.

Against this, BIS acknowledges that road maintenance activity remains reliant upon the ability and desire of governments to commit funding.

With maintenance being less politically popular compared with new construction, this is a significant factor.

This also leaves road maintenance activity dependent upon state and national economic conditions.

At a local council level, spending on other priority areas such as environmental waste, recreation and land development has the potential to crowd out funding for road maintenance notwithstanding that local government funding has increased.

Longer term, construction of the Inland Rail Freight Route may limit potential growth in road freight volumes on the eastern seaboard notwithstanding that Infrastructure Australia expects road freight volumes to increase by 50 percent over the twenty years to 2030.

Finally, rising costs may erode the value of funds available for maintenance in real terms.

Outlook by Road Type

By type of road, according to the report:

• The most significant growth in percentage terms will come from maintenance of private toll roads. Whilst these represent only a small part of the overall road network and account for only four percent of overall maintenance activity, they are the most expensive roads to maintain as they are typified by high traffic volumes and expectations of being maintained to high quality standards. Over the five years to 2027, BIS expects the dollar value of work done to average $365 million per annum – 22 percent higher compared with the previous five-year average to FY2022. Growth will be driven by new projects and addition of new roads along with an increasing maintenance requirement on existing roads.
• By overall dollar value, meanwhile, the biggest area of maintenance activity and spend is highways and arterial roads. Whilst these cover only 27 percent (234,441 km in length) of the road network, they carry 76 percent of traffic volume and must be maintained to higher standards (at greater cost per kilometre) compared with local roads as they are the main routes for freight transport. Over the five years to FY27, Oxford expects the value of work done on these roads to amount to an average of $4.7 billion – up by 2 percent compared with the previous five-year period to 2022. Whilst activity in this segment will ease back over the next two years as COVID stimulus is withdrawn, steady growth in maintenance will resume thereon after as the asset base expands from major infrastructure projects that will be rolled out over coming years and a growing maintenance backlog drives the need for higher levels of maintenance work.
• Finally, maintenance activity on local roads is expected to ease back over the next two years from record levels of activity in FY 2022 (brought about by COVID stimulus) but remain elevated as work associated with projects such as the extension of the LRCI program and the $691 million Fixing Local Roads program in NSW prevents what would otherwise have been a sharper decline in work. Overall, average annual levels of road maintenance activity will be one percent lower over the five years to FY2027 compared with the previous five years to FY2022.