IBISWorld reveals how the major policies of the two main parties will positively affect industries involved in road, rail and port construction.
Residents of Victoria won’t be the only ones closely watching the state election on November 29. A number of national industries and companies are set to benefit from pledges made at election time – and many will win no matter which party takes control of the $363.8 billion Victorian economy.
“Although the two main parties claim to have very different platforms, when it comes to the big dollars, the beneficiaries will be much the same,” said IBISWorld industry analyst Ryan Kerin.
Increasing traffic congestion and poor-quality suburban and country roads have made road and train infrastructure a major talking point for the 2014 Victorian Election. In addition, the number of international container vessels that port operators handle annually has increased dramatically over the past decade, generating bipartisan agreement over the need for a new container port.
These projects are set to positively influence manufacturing industries, port operators, and participants in the heavy and civil engineering construction subdivision. The heavy industry and other non-building construction industry, worth an estimated $62.5 billion in 2014-15, is expected to be a major winner, benefiting from work across railways, ports and roads.
“The engineering consulting industry, worth an estimated $41.2 billion in 2014-15, is also expected to do particularly well from work on roads, ports and railways, as will operators involved in site preparation services,” said Mr Kerin.
Roads to victory
The contentious East West Link is a major point of difference in the two parties’ policies. The Victorian Coalition Government, which has signed the contracts for the road’s construction, says the project will cost around $6.8 billion. This will be a major revenue earner for the road and bridge construction industry, particularly larger national companies.
Meanwhile, Labor has pledged to stop work on the East West Link should they be elected – a promise that hinges on the outcome of a legal battle between the state government and local councils regarding the validity of the contracts.
However, this doesn’t necessarily mean the road and bridge construction industry will lose out entirely if Labor wins the election: Labor has promised to remove 50 level crossings at an estimated cost of between $5 billion and $6 billion.
“This will generate some work for road and bridge construction, but will be of more benefit to the heavy industry and other non-building construction industry and operators in commercial and industrial building construction, as new stations will need to be built,” said Mr Kerin. However, most engineering firms involved in this work are likely to operate across all these industries, and will enjoy the benefits of either outcome.
Labor has also pledged a further $2 billion to improve suburban and regional roads. Meanwhile, both parties have pledged to upgrade Thompsons Road in Melbourne’s south-east, though the Coalition has promised $310 million, while Labor has committed to only $175 million. Both parties are also expected to upgrade the Tullamarine Freeway, with the majority of the $250 million funding coming from the Federal Government. The Coalition will also remove every level crossing between the city and Dandenong, though this is expected to fall well short of Labor’s level crossing-removal spending commitment.
“There is a significant overlap in the major parties’ policies when it comes to roads, and operators in the road and bridge construction industry can be assured of a steady stream of work over the coming years no matter the outcome on November 29,” said Mr Kerin.
Victoria on track
Trains are proving to be a major election battleground. Along with the competing promises on level crossing removal, both parties have pledged to build more trains.
“Labor has stated that it plans to order 30 new trains for the Melbourne Metro system, as well as 20 new VLocity V/Line carriages, at a cost of between $800 million and $900 million,” said Mr Kerin.
While the Coalition initially failed to match this commitment, favouring the development of roads over rail, in early November it announced a $3.9 billion trains package. This will fund the purchase of 12 X’Trapolis trains from the Alstom plant in Ballarat, 75 high-capacity suburban trains, 24 country rail cars and 75 E-class trams.
Additionally, both parties have committed to increase the current requirement of 30% local manufacturing on new trains and carriages to at least 50% (the Coalition has promised a 70% quota on V/Line rail cars).
“Labor has also stated that they will change minimum local content rules for major projects to be based on build rather than whole life,” said Mr Kerin.
“Both policies are good news for the railway equipment manufacturing and repair industry, though the Coalition’s plan is clearly more lucrative,” said Mr Kerin.
Although the Coalition Government has committed to a Melbourne Rail Link, including a link to Melbourne Airport, only 2% of the total $8.5 billion to $11.0 billion funding for the project has been earmarked for spending over the next three years. Labor’s competing plan – which would expand the Melbourne Metro network at a cost of $9 billion – is also unlikely to move into the construction phase in Labor’s first term, should they win government.
While the railway equipment manufacturing and repair industry is expected to be the immediate beneficiary of either set of pledges, IBISWorld expects that the rail passenger transport industry will enjoy a longer term boost in revenue once the upgrades come on line.
Although roads and rail have dominated the media spotlight, one key policy area with stark differences between the Coalition and Labor is the construction of a new container port. David Hodgett, Victorian Minister for Ports, has stated that any delays in developing a new container port would cost Victoria up to $1 billion per year. IBISWorld expects that the state will need significant new port capacity by 2030, but opinion is divided on where it should be located. Regardless of the location, the port construction industry will receive an enormous boost when work commences.
The incumbent Coalition Government favours Hastings in Western Port Bay as the location for a new port. Already, $110 million is being spent on environmental studies to evaluate the suitability of the site. It is expected that significant dredging would be required to prepare the site.
“While the port operators industry would be the main beneficiary, it is also expected that the port would attract an additional 4.5 million containers to Victoria per year, which would need to be transported to Melbourne’s west and north either by road or rail. This will generate demand for some considerable development in freight infrastructure and provide a boost to freight-related industries,” said Mr Kerin.
The Labor party has nominated Bay West, located between Point Wilson and Werribee in Port Phillip, as its preferred option for Victoria’s new container port.
“Labor has stated that Bay West’s access to Avalon Airport and existing arterial roads and rail networks makes it the better option,” says Mr Kerin. It is expected that the Bay West would require 84 million cubic metres of sea floor material to prepare the site for a port – far more dredging than would be required for Hastings. This would generate a huge amount of business for the dredging services industry.
IBISWorld reports used to develop this release:
E3021 Commercial and Industrial Building Construction in Australia
E3101 Road and Bridge Construction in Australia
E3109 Heavy Industry and Other Non-Building Construction in Australia
E3212 Site Preparation Services in Australia
M6923 Engineering Consulting in Australia
M6925 Environmental Science Services in Australia
OD5081 Dredging Services in Australia
OD5523 Port Construction in Australia
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Anne Wild/Shae Courtney
IBISWorld Media Relations Representatives – Anne Wild & Associates Pty Ltd
Tel: (02) 9440 0414
Mobile: 0420 736 136
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