Challenges

Infrastructure is vulnerable to climate change and other risks

Since we released Victoria’s infrastructure strategy 2021–2051, Victorians have continued to live with the health and economic impacts of a global pandemic. Geopolitical tension and instability have affected Victoria, as have global economic challenges. Catastrophic events can happen suddenly and have devastating impacts.

Victorians have recently faced the challenges of bushfires, storms and floods. Climate change means Victoria will have more extreme weather events.2

Governments need to plan, build and maintain Victoria’s infrastructure to be resilient to climate change and other risks. The Victorian Government has a legislated target of net zero emissions by 2045.3 Infrastructure is needed to achieve this target. It supports Victoria’s transition to renewable energy generation.4

Climate change also threatens many of Victoria’s natural ecosystems. Building infrastructure can further harm the natural environment. But governments can avoid this impact by planning for and designing infrastructure that minimises disruption to the natural environment. People and wildlife receive many benefits from healthy ecosystems. For example, protecting and increasing vegetation helps improve air and water quality, reduce soil erosion and maintain biodiversity.5

A growing population places more demand on infrastructure

Victoria’s population is growing faster than the national average.6 By 2055, the government projects Victoria’s population will reach up to 11.5 million.7 This means Victoria’s population will grow by about one million people each decade, for the next 3 decades.

Population growth places extra demands on Victoria’s infrastructure. But harnessing this growth can help build a more prosperous economy and society. Well-planned, efficient and targeted infrastructure can help Victoria benefit from population growth.

A growing population can make it easier for businesses to find workers with the right skills.8 Businesses also have access to more customers, helping to grow the economy and make it more productive.9 People moving here from other countries can bring new ideas, and make Victoria more culturally diverse and vibrant.10

Planning for future growth means Victoria can make the most of its unique regions.11 Well-planned population growth can help Victoria continue to compete in the global economy.12

Governments can only build so much infrastructure

The high cost of materials makes new infrastructure expensive to deliver.13 Australia also does not have enough skilled workers to build its current pipeline of housing, energy and transport infrastructure.14

The Victorian Government expects its net debt will reach $167 billion by mid-2026.15 This debt may restrict future budget spending. The government will need to carefully prioritise its infrastructure investments to deliver what Victorians need most.

But the government can take actions other than building more infrastructure. For example, it can better plan for the infrastructure Victorians need and investigate ways to improve the use of existing infrastructure. The government can also use more digital technologies, including artificial intelligence.16 This can make Victoria’s infrastructure more productive and has other benefits for Victoria’s people, businesses and economy.17

Over time, the government can work with industries to help workers develop the skills needed to tackle future challenges. This includes skills to build infrastructure and housing, deliver healthcare, and transition to renewable energy and a circular economy.18 Improving access to vocational education and training will help address skill shortages.19

The current shape of Victoria’s cities makes it more expensive to deliver infrastructure

The shape of Victoria's cities influences Victorians’ quality of life.20 More compact cities, in which people live and work closer together, are better for the economy, people and the environment.

Victoria's cities have historically expanded outwards. Landowners built new homes in new suburbs on city edges. But these places do not always have good access to infrastructure until many years after the homes are built. Spread out cities affect the ease with which Victorians can access health and social services.21 They limit people’s options to travel for work and study and restrict where they can rent or buy an affordable home.

Spread out cities cost the Victorian Government more.22 Building infrastructure in new suburbs on a city's fringes can be up to 4 times more expensive than adapting existing infrastructure in established suburbs.23 It also produces worse social outcomes, fewer economic benefits and negatively impacts the natural environment.24

People live closer to jobs and services in cities that are more compact. Compact cities can give Victorians the best chance of living close to family and friends, jobs, education, shops and services.25 It can also mean businesses have more opportunities to find skilled workers and be closer to their markets and customers.26

Achieving compact cities in Victoria will require a sustained and coordinated effort in many infrastructure sectors, but the benefits will be substantial. By 2056, we estimate a more compact city can generate $9 billion more in economic activity, and Victorians can earn an extra $5 billion in wages and profits, compared to a spread out city.27

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