The $237 billion pipeline of major public infrastructure projects is under pressure as demand for works soars at the same time as labour shortages and sky-high material costs cripple the construction industry.
The Infrastructure Australia report said the market was at capacity and project delays and overblown budgets were inevitable.
"It is no longer a question of if a project will slip, but more likely when, by how long and at what cost," the report said.
Fast-rising input costs and dangerous levels of risk have also toppled several businesses, with the string of insolvencies making it even harder to deliver the massive body of work in the pipeline.
"This leaves fewer companies to deliver the pipeline of work, with many already operating at 90 per cent capacity and above," Infrastructure Australia's acting chief executive Adam Copp said.
Labour shortages are already severe, with 214,000 more skilled workers needed to deliver the existing pipeline of work.
Next year, labour demand is projected to swell and peak at 442,000, more than double the available supply.
While supply chains have started to normalise from the worst of the COVID-19 disruptions, construction companies are still facing material costs 24 per cent higher compared with last year.
Engineers Australia chief executive officer and former Infrastructure Australia boss, Romilly Madew, said the sector was at breaking point as exhibited by the collapse of Perth-based building and engineering company Clough Group last week.
"Implementing reforms that overcome flaws in project planning, procurement, and capability is long overdue," Ms Madew said.Â
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