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AiG chief executive Innes Willox is optimistic that construction activity will be buoyed by infrastructure investment from federal and state governments.
AiG chief executive Innes Willox is optimistic that construction activity will be buoyed by infrastructure investment from federal and state governments.

Decline anticipated in construction

Despite the Federal Budget’s commitment to increasing infrastructure development, a new report has indicated that overall construction activity is likely to decline, which could result in decreased demand for quarry products.
The Construction Outlook report, which was recently released by the Australian Industry Group (AiG) and Australian Constructors Association (ACA), has forecast that total infrastructure construction will decline by 4.6 per cent per annum. 

This figure reflects an expected 3.8 per cent per annum fall in transport construction due to the completion of a number of major projects and flood reconstruction work in Queensland, as well as expected drops in sewerage, drainage and water supply projects, and a 9.7 per cent revenue decline from other civil projects. 

As a result, the total value of engineering and commercial construction is expected to decrease by 3.6 per cent in 2014 and a further 1.8 per cent in 2015. This downturn comes after more than a decade of sustained growth, and has been attributed to a drop in resource-related construction as investment in this sector slows. 

The value of mining construction and heavy industrial resource-based construction is expected to decrease by 7.7 per cent and 3.6 per cent respectively. However, the report stated that oil and gas processing project activity would likely remain at high levels due to the continued construction of major liquefied natural gas facilities. 

Commercial construction activity is also expected to experience a growth in turnover of 3.5 per cent as a result of a 5.1 per cent increase in private sector building activity, and the total value of engineering construction work is expected to remain relatively high due to a “sizeable project pipeline and a number of long-dated projects”. 

Compared to half a year ago, building materials were reportedly slightly easier to source, with 45.2 per cent of construction firms reporting major or moderate difficulty – down from 47.7 per cent six months ago. 

Firms also found it easier to hire and purchase equipment, with only 22.6 per cent reporting major or moderate difficulty compared to the 24.2 per cent that reported difficulties six months ago. However, a higher proportion – 51.6 per cent – of firms expect major or moderate difficulty in the sourcing of building materials over the six months to September 2014.

Transport infrastructure to rise
While a construction activity shortage is expected in some sectors, the report stated that a pick-up in transport infrastructure construction in 2015 and continued growth in telecommunications infrastructure would “help fill some of the gap”, along with the approval of a number of large projects.

Commenting on the report, AiG chief executive Innes Willox said, “The Construction Outlook confirms the Reserve Bank’s recent suggestion that mining investment has started its anticipated decline. While this wind-down will weigh heavily on the construction sector, there are encouraging signs in the Outlook report that growth of transport and communication projects and a gradual pick-up in commercial construction will at least ease the decline in activity and help provide employment for many released from mining-related projects.”

ACA executive director Lindsay Le Compte said that although the report showed evidence of a slowdown in resource-related construction, it was important to note that the downturn was starting from historically high levels of construction activity. 

“[The downturn] will be moderated as a result of positive activity flowing from the Federal and State Government announcements of increased investment in the infrastructure sector,” Le Compte said. “Now is a good time for the industry to devote some effort to re-skilling its workforce to ensure it has adequate access to appropriately trained workers as the industry lifts in various sectors over coming years.”

This increased government investment includes an $11.6 billion Infrastructure Growth Package that was recently announced in the Federal Budget – an initiative that Willox said was “clearly positive”. 

“With plenty of capacity for additional projects remaining, we face a unique opportunity over the next few years to address the infrastructure backlog,” he said.

Source: Australian Industry Group, Australian Constructors Association

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Monday, 16 September, 2019 6:26am
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