The May 2015 Construction Outlook report, jointly published by the Australian Industry Group (Ai Group) and the Australian Constructors Association (ACA), has forecast that the value of turnover from major construction work will decrease 4.3 per cent in 2015 – representing a steeper rate of decline than in 2014, which recorded a 3.6 per cent decrease – before falling a further 1.7 per cent in 2016.
“The winding down in mining-related construction will be the major drag on activity, although notable falls are also expected in the heavy industrial resource-based sectors,” ACA executive director Lindsay Le Compte explained. “This includes oil and gas processing which is expected to experience a marked downturn in 2016.”
The pattern of decline for overall construction was echoed in the report’s predictions for engineering construction. The value of turnover in this sub-sector was expected to decrease 7.6 per cent in 2015 at a sharper rate than the 5.4 per cent fall of the previous year, followed by a slower decline of 3.6 per cent in 2016.
Ai Group chief executive Innes Willox pointed out that despite the obvious mining-related challenges, the report identified some “bright spots”, which included infrastructure development within the engineering sub-sector. “Revenue from road and rail projects is expected to pick up solidly in 2016 in line with federal and state government plans for a number of major transport projects,” he said.
Subdued growth for commercial construction
The outlook for the commercial construction sub-sector was even more positive. After a flat 2014 with no change either way, commercial construction was expected to record “subdued growth” of 1.3 per cent in 2015. This modest improvement was projected to continue into 2016 with a 1.6 per cent increase.
“Commercial construction is expected to remain constrained by the continuation of subdued overall approvals in this sector,” Le Compte said. “However, if governments are able to resolve current constraints on the funding and financing of infrastructure projects it could be expected that from 2016 we would see the commencement of a significant lift in engineering, commercial and residential activity, especially surrounding transport corridors in metropolitan areas.”
The report also noted that the value of turnover in multi-level apartment construction work would continue to rise, reflecting the recent spate of apartment building approvals in Sydney, Melbourne and in other locations across Australia. It was anticipated that 2015 would record a 14.9 per cent spike – more than double the 7.1 per cent increase of 2014. This growth trend was expected to continue in 2016, albeit at a slower pace with a 4.1 per cent increase.
The latest edition of the Construction Outlook report was based on a survey of 100 companies that was conducted in February and March this year. The full report is available at www.aigroup.com.au.
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