By Stephen Lunn

Australia’s only chance of building the big infrastructure projects urgently needed to grease the wheels of national productivity is to turn to cheaper overseas workers on a contract-by-contract basis.

Governments should consider putting public projects such as ports, interstate rail and big city transport construction out to international tender, allowing the winning bidder to bring their own workers in to do the job, Australia’s leading demographer, Peter McDonald, said.

“It should only be for discrete major projects, the work quality would have to be vetted by Australian engineers and be subject to Australian occupational health and safety standards,” said Professor McDonald, director of the Australian Demographic and Social Research Institute at the Australian National University. “But otherwise these projects will never happen because of the prohibitive cost of labour here.

“The winning tenderer would have its own workforce. They come in, they build the thing, then they leave. This is commonly done in other countries. Ports would be one example. Railways another. The Chinese, for instance, are building very fast train services between their cities all over China. We will just never build them on our own.

“Sydney and Melbourne have grown in size to be past the point where they should have good urban transit systems.

“But, of course, they don’t, and they won’t because it will be far too expensive unless they’re built in the way I’ve described.”

While accepting the idea would be strongly resisted by the unions, Professor McDonald said it was up to governments as to how much they valued higher productivity when economic growth per capita was restricted in coming years by an ageing population.

Governments are currently wrestling with how to balance a public backlash against “big Australia”, with skills shortages driven by the mining boom complicated by the fact that the local labour supply is stagnating as hundreds of thousands of baby boomers move into retirement.

Construction workers are being lured away from housing and public works projects in the eastern states by bigger pay cheques in Western Australia and Queensland.

This propels wages growth, in turn increasing inflationary pressures across the economy.

Already mining and construction companies have called on the Gillard government to provide greater flexibility in issuing 457 temporary visas to skilled foreign workers or risk huge projects being deferred.

Professor McDonald said with domestic labour supply stagnating due to the ageing population, the only option to meet increasing labour demand and keep the economy ticking was migrants.

Yet net overseas migration fell 25 per cent to 241,400 in the year to March, albeit off record highs from 2008 and 2009, a decline attributed to a tightening of the rules surrounding overseas students taking up permanent residency, greater competition from the US and Britain for international students, and a change to the requirements for work visas under the general skilled migration program.

Article from The Australian, December 2010.