Editor's Desk

Will the good ships of quarrying encounter stormy weather?

Welcome back! This time last year I speculated that Australia was, based on projections, entering a phase of amplified construction activity. I wondered if quarries and their suppliers were suitably equipped to meet this phase.

My conjecture was confirmed throughout 2018 in economic forecasts, studies and surveys from BIS Oxford Economics, Deloitte Access Economics, the Australian Industry Group, and Cement Concrete Aggregates Australia (CCAA).

The CCAA announced that the industry produced more than 30 million cubic metres of concrete in 2017. Deloitte Access Economics also reported of $324 billion of infrastructure projects in 2018, almost $50 billion up on 2016-17.

As we went to press, CommSec released its quarterly State of the States report. It revealed that Victoria is enjoying 38.2 per cent more residential, commercial and engineering work than the decade average. Construction activity in other states and territories also exceeds the decade average – New South Wales (+34.5 per cent), South Australia (+19.5 per cent), the ACT (+18.9 per cent) and Tasmania (+15.9 per cent). Employment, housing and equipment investment were also consistently high in these states and territories.

“Can the construction materials industry meet the demands of pipeline projects – on time and to budget?”

Queensland (-16.5 per cent), the Northern Territory (-32.7 per cent) and Western Australia (-40.6 per cent) were below the decade average. While Tasmania and SA recorded high growth in construction on the previous year, the “boom states” of a decade ago fell well short.

The verdict of the CommSec report was that NSW and Victoria have benefitted from population growth, construction and investment activity, and strong job markets. In line with other projections, it forecasts a steady stream of engineering construction activity in NSW and Victoria will offset a softening in residential builds.

Based on the infrastructure projects in play – the Melbourne and Sydney Metros, Western Sydney Airport, Inland Rail, Western Distributor, NorthConnex, WestConnex, the Brisbane cross-river rail – there is an impressive pipeline. The hunger of such projects for construction materials should keep the extractive industry (at least in eastern Australia) busy well into the 2020s – but the pipeline has its pros and cons.

The pro is it’s all happening in spite of Federal Government under-investment; therefore, a change of government shouldn’t weaken the pipeline. The claim of a “record $75 billion over a decade” in recent government TV ads ahead of the election amounts to a paltry $7.5 billion of investment per annum – well below state government expenditures, Infrastructure Australia’s recommendations and the feds’ own pledge in the 2014 Budget ($50 billion over six years – averaging $8.3 billion of investment per annum).

The con is whether the demand of the pipeline projects can be met on time and budget. The approvals processes for new quarries and basic operational changes to existing sites will underpin how quickly these projects reach fruition. State governments are already playing “catchup” in securing the right lines of supply to cater for rapid population and urban growth.

Further, as more development applications are lodged in the regions, will jurisdictions and proponents encounter resistance from locals who resent those reserves being diverted to the big capitals rather than towards local infrastructure? What impact could “lawfare” have on the delivery of the pipeline and on the industry?

The “state of the states” is encouraging – but industry members should be wary of stormy patches against mostly blue sky. It won’t all be smooth sailing – but the weather is favourable.

Welcome to 2019!

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