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Infrastructure boost needed for construction sector

03 November, 2014

Total non-residential building work and employment in the construction sector during 2014/15 and 2015/16 have been forecast to fall as resource-related project activity winds down from its recent historically high levels.

Surveying the nation's leading construction companies, the latest Australian Industry Group/Australian Constructors Association Construction Outlook survey suggests a marked weakening over the next couple of years in both mining and heavy industrial construction as mines and ports, roads and rail projects linked to mining are completed and as the surge in the construction of gas processing plants passes.

Nevertheless, there are a number of growth areas expected to support overall levels of activity through to the end of the 2015/16 year. These include continued growth in telecommunications investment, an upturn in the commercial construction sector and further growth in apartment building.

Also, if realised, federal and state government infrastructure plans (particularly for road and rail) will partially fill the void left by reduced mining-related construction.

"The latest Construction Outlook shows that trends set in train over the past year or so have become well established. While areas of strength are taking up some of the slack, we also need an acceleration of state-based infrastructure projects," Australian Industry Group Chief Executive, Innes Willox, said. 

"These projects could take advantage of the capacity being released from mining-related activity, help build national productivity and improve the amenity of our cities and regions."

Australian Constructors Association (ACA) Executive Director, Lindsay Le Compte said: "The survey outcomes reinforce the need for governments to get on with undertaking announced infrastructure projects.

"They should not be diverted by the impact of the forthcoming electoral cycle, especially as the pipeline of projects will provide very significant employment and economic benefits across many communities and the supply chain in general over coming years.

"There are billions of dollars available for infrastructure funding from a range of sources, particularly from superannuation funds, so governments are now in a position to proceed expeditiously with projects while maintaining a strong focus on providing essential community services."

Key Points from the Ai Group / ACA Construction Outlook survey:

  • The total value of engineering and commercial construction work is expected to fall by 3.9 per cent in 2014/15 (current dollars), followed by a slower decline of 1.2 per cent in 2015/16 (This compares with growth of 3.0 per cent in 2013/14 (current prices).
  • Total employment is forecast to turn down through the year to June 2015 in response to weaker resource-related construction and the completion of various major projects. Total employment is forecast to fall by 1.7 per cent between July and December 2014 and thereafter remain steady for the first half of 2015.
  • Engineering construction is expected to experience falls of 7.5 per cent in 2014/15, and 3.4 per cent in 2015/16.
  • Encouragingly, the commercial construction sector is forecast to recover, expanding by a solid 6.1 per cent in 2014/15 and consolidating with a further gain of 3.2 per cent in 2015/16. This largely reflects sustained growth forecast over both years in private building activity (including offices, retail premises and recreation building).
  • The apartment building sector is set to maintain solid growth, with a forecast rise of 11.1 per cent in 2014/15 after lifting by 16.4 per cent in 2013/14. The sector’s pace of growth is expected to moderate to a 6.3 per cent rate in 2015/16.

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