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Solid forecast made for the Aussie construction industry

26 November, 2007

Engineering and commercial construction activity by the private sector is set to build on its current strong base to reach a new record high of $82 billion in 2008/2009 - more than double the 2003/2004 level.

The Australian Industry Group (Ai Group) – Australian Constructors Association (ACA) Construction Outlook survey for November 2007 released released shows Australia’s leading construction companies are forecasting a 10.8% increase in the total value of construction work in 2007/2008, followed by a more moderate lift of 7.4% in 2008/2009.  This builds on the 12.1% increase in 2006/2007

ACA President, Wal King AO, said: "The survey confirms that engineering and commercial construction remains strong, with activity set to build on its current high base.

“It is also clear, however that supply constraints and rises in construction costs pose a risk to growth prospects, with many firms continuing to face intense pressure from both scarce resources and tight profit margins,” King said.

Ai Group Chief Executive, Heather Ridout, said the continued growth of the engineering construction industry is positive news with the sector making a great contribution to the national economy.

“The construction industry continues to demonstrate its capacity to respond to the demands of the market but it will take much greater collaboration between clients and contractors if we are to maximise the benefits of the current surge in activity.

“We can no longer burden industry with the costs of tendering that are diverting valuable industry resources. The growth of private investment in public infrastructure through a range of PPPs has been welcomed but as the size of individual projects grows, the financing challenge escalates and tender costs increase. Inevitably, tender lists will get shorter as the financial capability of the construction market is stretched.

“We need new, collaborative procurement models that improve coordination between public sector agencies, both state and federal. Ideally the industry needs three to five year visible project horizons to allow resource planning and better coordination,” Ridout said.

Key Findings:

  • The total value of construction by the private sector (excluding overseas construction work), is set to build on its current high base to reach a new record high of $82 billion in 2008/2009 more than double the 2003/2004 level.
  • Reflecting a sizeable backlog of work and further infrastructure investment plans, engineering construction is forecast to be the major driver of growth, with total turnover (by the private sector) predicted to rise by 14.2% in 2007/2008 and 9.7% in 2008/2009.
  • Non-residential building (commercial construction) is forecast to expand further to generate $30 billion of work in 2008/2009.  However as key sectors reach a peak in activity; the pace of growth is expected to moderate to 7.1% in 2007/2008 and 3.5% in 2008/2009.
  • Apartment building sector work is expected to decline by 12.8% in 2007/2008, before regaining some ground in 2008/2009 with a rise of 2.1%.
  • Growth in engineering construction is expected to be broadly based, although key contributors to the strong two-year outlook include transport infrastructure, mining construction and heavy industry.
  • Solid rises are also expected in telecommunications infrastructure, water supply projects, power generation, and “other” civil projects such as the construction and upgrading of freight and port facilities to ease export bottlenecks.

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