Australia has about half the workers it needs to complete its infrastructure backlog, leading to extensive delays and budget overruns on vital transport and clean energy projects.
While work is being done to increase the supply of labour in the construction sector, ongoing shortages mean Australia will have to get used to not being able to build everything it wants at once.
Better managing infrastructure demand will have to be a feature of coming years, says Infrastructure Australia chief executive Adam Copp.
"We are facing an issue historically of having demand exceed supply of labour by about two to one," he tells AAP.
There were less than 200,000 workers engaged in infrastructure across the nation in August 2024 - about half the 395,000 required, Infrastructure Australia estimated in a report released on Monday.
While the shortage is about 30,000 workers better than predicted a year earlier, supply is a still a long way from getting to where it needs to be.
"The simple fact of the matter is that we won't be able to bridge that gap in the time frame available, so costs will go up or timelines will blow out," Mr Copp says.
The infrastructure pipeline is shrinking after an unprecedented transport boom over the past decade, with state government mega-projects like the Sydney Metro and Melbourne's West Gate Tunnel entering their final stages.
Transport projects still make up the majority of Australia's $213 billion infrastructure pipeline at $126 billion, but that's $32 billion lower than the previous year's outlook.
As transport investment slows, demand is shifting to housing and energy projects.
The report found there will be a six-fold increase in renewable energy projects over the next five years, meaning the industry will have to upskill thousands of workers to build the generation capacity and transmission lines Australia's decarbonisation requires.
"Anecdotally, a lot of construction companies are telling me a major focus for them is reskilling their workforce to move from transport into renewable energy," Mr Copp says.
Utilities infrastructure investment is projected at $16 billion - $6 billion higher than the previous year's forecast - largely due to the massive demand for transmission lines to connect new wind and solar projects into the grid.
The federal government has committed $20 billion to build and upgrade transmission infrastructure as part of its Rewiring the Nation program, which has come under fire from the opposition for increasing spending and blowing out the budget.
Opposition Leader Peter Dutton instead wants to develop nuclear power plants, which he says would slot into the grid by replacing existing coal-fired generators.
But that plan has been ridiculed by Energy Minister Chris Bowen for assuming 40 per cent less demand for electricity by 2050 than government forecasts.
Long-term, the construction sector needs to fix stagnant productivity growth and attract more workers to keep up with demand.
Underlying cultural issues are holding productivity back and driving women away from construction, with burnout, stress, and incredibly poor mental health a reality for workers on the ground, Mr Copp says.
The sector's labour productivity - the amount of output produced per hour worked - dropped 0.4 per cent over the year to September, the Productivity Commission revealed on Thursday.
Treasurer Jim Chalmers in November established a $900 million fund to spur states and territories to implement reforms to boost productivity, including by cutting red tape and modernising construction methods.
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