Australia, and Sydney in particular, is thriving on an unprecedented program of infrastructure spend, driven by population growth and urbanisation. However, while these infrastructure projects are rolling out in front of us, it is creating further congestion, frustration and havoc.

Congestion has been the one major issue crimping growth of our major cities for many years and it’s not just annoying; it’s expensive. It is estimated that traffic delays and road congestion alone could cost the Australian economy $53 billion each year by the year 2031. By this time, the population of Sydney, Melbourne, Brisbane and Perth are projected to grow by close to 50%, with Australia’s total population expected to grow to more than 30 million people. Still relatively small on a global stage, but a big step up from where we are today.

Further to our population growth, it is expected that tourism numbers will also grow to extraordinary levels. Air passenger traffic into Sydney alone could double in only 15 years.

Solving the problem

In Sydney, this congestion had to be addressed. The surge in infrastructure spend is necessary because the long-term economic well-being of the city was being threatened by the infrastructure gap caused by years of under-investment. This infrastructure program is a long-term investment opportunity, with many positive flow on effects.

We were, however, worried that some of these projects could lead to complications and clashes with the political cycle, which often has a much shorter timeframe. Fortunately, to date, these issues have evaporated, and we have seen a longer serving government, at both State and Federal level, which has enabled them to put infrastructure spending requirements front of mind.

Initiatives such as the “City Deals”, announced in October 2016, drive a cohesive solution to urban congestion and national connectivity issues. Finally, we are seeing some common sense prevail with Australian and NSW Governments working with local governments towards an agreement that will unlock public and private investment in key infrastructure projects. We are confident that this in turn will lead to greater urban renewal benefits including:

• Better utilisation of existing and proposed infrastructure;
• Increased city production from the co-location of more intensive jobs and housing;
• Attracting visitors and additional expenditure;

and, most importantly,

• New employment opportunities.

The long game

Infrastructure investments are often multi-decade in nature and execution can be complex. The funding task extends beyond the substantial capital investments associated with new infrastructure to include sustainable design and feasibility, operational costs, maintenance, renewal and upgrades of the asset. It is critical to have a cohesive approach and with the combination of public and private capital now being allocated to these projects, we are confident we will see a better outcome for taxpayers, users and owners of these assets.

The list of significant infrastructure projects underway in Sydney is extensive and has an estimated total cost of over $70 billion. The main projects include: The Sydney Light Rail Project, Parramatta Light Rail Project, WestConnex underground motorway, NorthConnex underground motorway, Sydney Metro Northwest Railway, Sydney Metro City & Southwest Railway, Sydney Metro West Railway, The Western Harbour Tunnel and Beaches Link Motorway and Western Sydney Airport.

These projects will go a long way in creating jobs and economic growth, and help improve the liveability of Sydney, reducing congestion and the frustration and havoc that we’ve all seemed to have had to grow up with.

The WestConnex underground motorway, for example, is the largest infrastructure project in Australia, creating over 10,000 direct and in-direct jobs during construction. Once completed, the WestConnex will provide a bypass of up to 52 sets of traffic signals; reducing traffic on local streets, creating opportunities for urban renewal and improved public and active transport options.

The 9km NorthConnex underground motorway, linking the M1 and the M2, will bypass up to 21 sets of traffic lights and will save motorists up to 15 minutes of travel time per trip. The removal of up to 5,000 trucks per day off Pennant Hills Road will see town centres and villages returned to the residents of the area.

In Melbourne, the West Gate Tunnel Project will deliver an alternative to the West Gate Bridge, and provide a second river crossing. It’s estimated that the project will remove thousands of trucks from residential streets daily, with traffic flow to also be improved through to the M80 Ring Road, M1 and M2 Tullamarine freeway corridors.

Some listed companies that are directly or in-directly involved with these projects include, Transurban Group, Sydney Airports, Lendlease, CIMIC Group, Adelaide Brighton, Brickworks Limited and Boral Australia.

As these infrastructure projects gain momentum, the urban renewal and regeneration theme continues to rapidly evolve across Sydney. On top of these public/private funded infrastructure projects, there are significant investments created in housing, hospitals, aged care facilities, shopping centres, distribution and logistics parks. Some listed companies that are directly or in-directly involved with these projects include Goodman Group, Stockland Corporation, Ramsay Healthcare, Regis Healthcare, Woolworths Limited, Mirvac and QUBE Logistics.

Another way of being able to invest in this infrastructure spend and the rapidly growing urban renewal and regeneration theme may be through the recently listed LIC, URB Investments Limited.

Through the tailwinds created by infrastructure spend, there are many companies on the ASX that are in a strong position to provide long-term investors access to growing earnings and dividends. Population growth and urbanisation will continue to push Sydney, Melbourne, Brisbane and Perth closer to global city status. This will create a great place to live, and a great place for much of the world to come and visit… congestion free.

The authors have a direct interest in URB Investments, Brickworks Limited, Sydney Airports and Woolworths Limited.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.