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Anil Wasif

May 8, 2023

As liberal-democratic cousins in the world of public policy, Australia and Canada share many common features and challenges, despite the 14,000 km that separate them. The recent announcement of a comprehensive review of hundreds of Australian infrastructure projects should serve as a cautionary tale for Canada as we embark on our own ambitious agenda.

Canada’s storied history of infrastructure development has seen many accomplishments, from the Canadian Pacific Railway in the late 19th century, which united the vast country and facilitated trade and transportation from coast to coast, to modern transit systems such as Vancouver’s SkyTrain, to innovative renewable energy projects like the Lower Churchill hydroelectric project in Newfoundland and Labrador. While these successes demonstrate Canadian ingenuity and resilience, they came with challenges such as unfavourable building conditions, financial and technical obstacles, and competing stakeholder interests. These challenges serve as a reminder that good infrastructure projects require careful planning, strategic coordination, and a willingness to learn from similar experiences both in the past and elsewhere.

The decision to put Australia’s infrastructure plan under review has exposed the vulnerability of an overburdened and overcommitted pipeline of infrastructure projects. While headlines blame it on rapidly rising labor and raw material costs, a closer look reveals a tapestry of issues that led to the review. Global supply chain disruptions coupled with a relentless demand for construction materials led to soaring costs that severely strained infrastructure budgets. At the same time, an ambitious infrastructure agenda unintentionally overburdened the system, leaving Australian jurisdictions ill-equipped to handle the sheer scale and scope of their collective commitments. Amid this challenging landscape, concerns emerged over the prioritization of projects and the strategic allocation of investments as decision-makers grappled with the task of ensuring that the long-term value and potential for economic and social benefits are maximized. Moreover, the need for efficient coordination and collaboration among federal, state, and local governments became even more pronounced, as competing interests and misaligned objectives hindered the delivery of existing projects in the infrastructure-project pipeline. Finally, the ability to adapt to changing circumstances, exemplified by the pandemic-induced changes to travel, commerce, and energy consumption behaviours, also surfaced as a critical factor in determining the relevance and effectiveness of planned investments. As a result, decision-makers agreed to a more judicious approach to building infrastructure in Australia, starting with an independent review.

Canada faces similar pressures on its infrastructure pipeline due to various factors, such as a shortage of care facilities for an aging population, increased immigration announcements to maintain an active working class and the energy transition needed to meet climate targets. To further complicate the situation, there are the fiscal demands of: a housing crisis; pressure to amp-up defence spending and a race with Washington to expedite a green economy. But our first ministers are anxious to build, and the cumulative number of projects between the public and private sectors and across every level of government, combined with skill shortages and material cost increases, is exerting pressure on our own infrastructure pipeline, leading to provinces and territories competing with each other for the same skills and materials.

In Canada’s case, it’s a good thing that prioritization has yet to enter discussions on infrastructure policy. To keep it that way, it is mission critical to continue aligning investments with the diverse needs of our society – a difficult task for members of a federation. It is also true that infrastructure announcements have already gone out and many existing projects are already in procurement, which means Canada has less control over the demand and supply equation for both labour and raw materials in the near term. To ensure existing investments continue to yield maximum benefits for Canadians there are two things policy makers do have control over: coordination and innovation. Indeed, by working together and working better, governments can ensure our plans help us meet our long-term needs, while leaving room for adjusting to the changing realities of today’s global economy.

Canadian public infrastructure is mostly owned by provinces and/or municipalities, limiting Ottawa’s role to be that of an arm’s-length financier. As such, seamless collaboration and alignment of objectives across multiple levels of government will be paramount for delivering on our infrastructure plans.

When thinking of tools that bring our policies closer, continued expansion of incentive-based approaches can help redress the imbalance between costs and impacts, turning likely outcomes into success stories. The Investing in Canada Plan, for example, includes a variety of funding streams that incentivize provinces and territories to deliver on specific national priorities, such as public transit, green infrastructure, and rural and northern communities. Likewise, the Smart Cities Challenge provides funding incentives for municipalities that develop innovative solutions to urban infrastructure challenges. Among winning ideas was a bid to reduce energy poverty by the Town of Bridgewater, Nova Scotia through energy-monitoring installations in over 1000 low-income homes. Today, residents of Bridgewater can shop for affordable energy updates for their homes online. While it’s too soon to measure the impact of these initiatives, they promise better planning and execution, potentially reducing timing and budgeting risks through efficient use of resources.

To ensure Canada remains prepared to adapt to changing consumer behaviors and economic priorities, embracing innovation and new technologies is another essential component of delivering our infrastructure plans.

Another avenue for efficiency would involve establishing or promoting forums to increase dialogue among infrastructure agencies across the country. This would bring together thought leaders from academic institutions, industry associations, government partners and community organizations can enhance information sharing to help identify and address regional infrastructure needs, reduce duplication of efforts, and maximize the impact of investments. While this work is usually undertaken by government departments responsible for infrastructure planning, in recent years, organizations like the Canadian Infrastructure Bank and even Infrastructure Australia have created capacity to gather and disseminate knowledge between diverse audiences involved in the delivery of critical infrastructure projects.

Finally, coordination must continue to involve the private sector, through the widely lauded Canadian public-private-partnerships (P3) model. The benefits of combining the strength of both sectors are well-documented, including fostering innovation, facilitating risk-sharing, and improving project outcomes. At the same time, the Australian experience also suggests our agencies need to work hard to ensure we continue to maximize value-for-tax-dollars.

Just as Australia has had to contend with the impacts of COVID-19 on travel, commerce, and energy consumption, Canada, too, must remain nimble and responsive to shifts in demand and new policy directions, and the infrastructural changes implied by them. To ensure Canada remains prepared to adapt to changing consumer behaviors and economic priorities, embracing innovation and new technologies is another essential component of delivering our infrastructure plans.

Investing in smart infrastructure and the adoption of digital technologies can revolutionize the way infrastructure projects are planned, built and operated. By investing in cutting-edge solutions and leveraging the expertise of local and global partners, Canada can create more resilient, efficient, and sustainable infrastructure that will stand the test of time. Deloitte, for instance, suggests that artificial intelligence (AI) and automation provide real-time insights that help when negotiating with suppliers, organizing tasks, and predicting risks. The use of AI can also be extended to the construction phase for security purposes and reducing and automating administrative processes, potentially saving as much as 10-15% of total construction costs through data analytics and related technologies. In line with the Pan-Canadian Artificial Intelligence Strategy, governments can incentivize the use of digital tools by offering grants, tax incentives, or preferential procurement processes for projects that employ such technologies.

Canada’s low-carbon, high-growth plan is a key component of the nation’s economic and environmental strategy, and it requires a responsive and adaptive infrastructure system that can accommodate shifts in demand and policy directions. Promoting the integration of sustainable and resilient design principles in infrastructure projects is essential to address climate change and other environmental challenges. Initiatives such as the Green and Inclusive Community Buildings program are encouraging the adoption of green building standards and certifications to reduce energy consumption, greenhouse gas emissions, and operating costs for municipalities. Such incentives are a classic example of spurring innovation through better coordination.

Incorporating innovation in Canada’s infrastructure sector calls for mainstreaming sustainable finance, which integrates environmental, social, and governance (ESG) criteria into financial decision-making. This will ensure resources are allocated towards projects that yield long-term environmental and social benefits while fostering economic growth. Green bonds, designed to raise capital for eco-friendly projects (e.g. green transit, renewable energy projects) have become a popular way to get this done. Continued investment in such bonds will help Canada meet its climate targets and stimulate innovation in infrastructure. To complement this, governments can collaborate with the private sector and financial institutions to create innovative financing structures that incentivize sustainable investments, such as P3s that incorporate ESG criteria into procurement and selection processes for the sector. This has been done by organizations such as the Canada Infrastructure Bank (CIB) and they must continue to do so. To build on the work being done, governments can look to the UK’s Social Value Act, which requires public authorities to consider the social, economic, and environmental impact of procurement activities. Maintaining openness to newer practices can help spur innovation while maintaining our resilience in the face of unforeseen events.

In conclusion, the Australian experience serves as a valuable lesson for Canada as shovels hit the ground to build out our infrastructure agenda. The key to success lies in reflecting on past experiences, both domestic and international, and adapting to the ever-evolving global landscape. Embracing innovation and new technologies can help Canada build more resilient, efficient, and sustainable infrastructure that is also adaptable to changing demand and policy directions. As seen in Australia, a lack of coordination can lead to inefficient allocation of resources, duplication of efforts, and an inability to effectively address regional infrastructure needs. Through increased coordination and adaptation of new tools and technologies, Canada can further encourage the private sector’s participation in infrastructure development while ensuring long-term environmental and social benefits.

The bottom line: By fostering collaboration and embracing innovation, our first ministers can avoid reaching a stage where we’re reviewing our mistakes rather than building the future.

Anil Wasif is a Senior Economist with the Ontario Government, a member of the Advisory Board for the Max Bell School of Public Policy, McGill University and the Founding Director of Strategy for BacharLorai, a Canadian Social Impact Agency. Views and opinions expressed are his own, and should not be affiliated with the organizations he is associated with.