Have a glance down Infrastructure Australia’s priority project list put out in May this year and an interesting pattern emerges.

Of the 93 projects which IA considers to be our highest area of national priority, around 39 relate in some way, shape or form to light rail, freight rail or passenger rail.

That underscores an important point: Australia needs more rail capacity and policy makers know it. Not surprisingly, therefore, public sector rail projects are expected to largely underpin the next phase of Australia’s boom in transport infrastructure construction.

To be sure, aggregate numbers do not look impressive. Over the past three years, the overall dollar value of work done throughout Australia on non-road form of transport (rail, bridges, harbours and so on) has fallen by more than half to go from a peak of $15.623 billion at its peak in 2012/13 to a forecast total of just $6.731 billion in 2015/16.  Over the 12 months to March, the combined dollar value of commencements in public and private sector projects was way lower than it has been during any previous corresponding period since the fallout from the global financial crises across all three sectors of rail, bridges and harbours as the massive volumes of work being done on infrastructure for iron and coal projects has largely finished up.

Split out public and private sector work, however, and a different picture emerges. Primarily as a result of strong levels of work coming through in New South Wales and Victoria, commencements on public sector rail projects topped $30 billion for the first time ever in the twelve months to March. The value of work yet to be done, as well, sits at nearly its highest level on record for at least several years.

Moreover, forecasters are growing increasingly bullish about the sector. Speaking specifically of rail, BIS Shrapnel reckons the dollar value of work done is going to double from around $3.5 billion to $7 billion over the next five years and then stay at extremely high levels perhaps touching $8 billion in the five years following. With expectations that it will have bottomed out at roughly $6.731 billion in 2015/16, Australian Construction Industry Forum expects the dollar value of work done on all forms of non-road transport (both public and private – breakdowns of rail specifically are not provided) to reach $9.117 billion by 2020/21.

BIS senior researcher Adrian Hart said the rail sector would not experience a boom of the same magnitude as with the roads sector over the shorter term, but would remain a strong growth sector for far longer than what will be the case with roads.

“If you compare road with rail, roads have got this very strong upswing over the next few years,” Hart said. “But it’s going to peak later toward the end of this decade. The risk is that it will probably drop off pretty drastically too when some of these projects finish.

“Rail is going to be different. Rail actually has this very strong, long build period.”

Hart says the impetus behind rail is being driven by a desperate need for better transport within urban areas – especially as can be seen through the sheer number of projects which have been identified as priority projects in the report.

He says Infrastructure Australia has largely recognised that many of the gaps in our national infrastructure are in our capital cities and relate to the movement of people and freight, whilst state governments in New South Wales and Victoria are pumping money into metropolitan rail systems. The federal government, meanwhile, is largely looking at further investment in freight through the Australian Rail and Track Corporation.

“There is a strong realisation that we have been underspending on rail infrastructure over many years. Now the catch-up is underway,” he said. “It’s not all going to happen straight away but in the next five years, this is a sector that you really want to be in. It’s been identified as having problems and gaps and there is real funding out there.”

In terms of who would primarily benefit from all of this, Hart said the mechanical and electrical trades would be significant winners of all of this on the trades side whilst equipment providers especially of tunnel boring machines and other tunneling equipment would also be big winners.

Major states of opportunity

• Having dropped back from its surge of $9.2 billion in 2012/13 to just $2.598 billion in 2015/16 as resource related work largely wound back, Western Australia is perhaps surprisingly one of the biggest areas of opportunity. ACIF expects the aggregate dollar value of work done on bridges, railways and ports to rise to $3.6 billion and activity is expected to be helped along by a good number of significant dollar value projects, including the Perth Airport Rail/Tunnel Link Project and the Perth Metro Light Rail Project. A rise in public sector starts over the past 12 months appears to indicate that this part of the sector is seeing increasing levels of momentum.
• Not surprisingly, another state showing considerable levels of momentum is New South Wales, which is benefiting from a massive range of public sector projects such as the North West Rail Link and the CBD to South East Light Rail and is expected to benefit from projects such as Parramatta Light Rail and the Australian Inland Rail Expressway going forward. Whilst the private sector continues to pull back, public sector construction starts over the 12 months to June came in at their highest level in five years and were more than double their level of the previous corresponding period. Whilst ACIF reckons that the value of work done will remain roughly steady over the next couple of years before rising from $1.651 billion in 2017/18 to $2.1 billion in 2019/20, this probably understates the momentum of new projects coming through as it must be remembered that the aggregate numbers are being impacted by a massive pull-back in (mostly private) rail sector investment associated with resources and coal mines.
• Victoria is another area in which we are seeing strong volumes of new work coming in. The state will enjoy a respectable level of work coming through with projects such as an extensive level crossing removal program and will really take off in 2018 once work on the Melbourne Metro Rail project gets into full swing.