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Major construction on road to recovery

29 June, 2017

The latest Australian Industry Group/Australian Constructors Association Construction Outlook survey released recently has reported some positive news for the engineering and construction industry.

After three years of declining major project work, the nation's leading construction companies are forecasting a recovery in engineering and non-residential building activity for the rest of the 2017 calendar year and in 2018.

After dropping sharply by 8.0% in 2016 (current prices), the survey forecasts that the total value of turnover from major project work will rise by 4.3% in 2017 followed by a stronger lift of 6.4% in the 2018 calendar year.

The recovery comes on the back of an upturn in non-mining infrastructure construction, highlighted by a 2.9% increase in the value of engineering construction in 2017 and a further 6.8% in 2018, turning around 2016's steep 16.5% downturn. An emerging phase of strong public sector spending on transport infrastructure will continue to boost conditions, despite the further winding down in mining-related construction.

The survey of the nation's leading construction companies also projects commercial construction (including offices, retail buildings and industrial premises) to gain some momentum, recovering from flat conditions in 2016 to increase by 1.6% in 2017 and a further 5.6% in 2018.

The growth outlook for multi-level apartment construction remains strongly positive in 2017 (+22.9%) as constructors continue to progress through a solid backlog of work, although the pace of growth will moderate in 2018 (+6.8%) as the current apartment building cycle reaches its peak.

The survey also anticipates further decline in resources-related engineering construction, particularly in the oil and gas processing sector, which is set to follow 2016's 39.0% decline with further steep drops in 2017 (-25.5%) and 2018 (-56.8%). However, the drag from other mining-related construction will slow in 2017 (-14.3%) before emerging from its downturn to record mild growth of 3.1% in 2018.

Australian Industry Group Chief Executive, Innes Willox, said: "The overall pick-up in major project work in the construction sector confirms we are leaving behind the extended period during which the industry, and indeed the national economy, was dominated by the wind-down of the historic boom in mining and energy-related projects. While apartment building continues to feature prominently, it is clearly set to scale back in the period ahead. In place of mining-related work and apartment building, over the rest of 2017 and into 2018 the construction sector is anticipating further expansion in infrastructure investment, particularly in road and rail works, and a lift in private sector commercial construction," Willox said.

Australian Constructors Association (ACA) Executive Director, Lindsay Le Compte, said: "The current wave of announcements of infrastructure projects on the country's eastern seaboard will increase pressure on the availability of key project personnel for both industry and clients. Accordingly, now is the time for action to attract a larger workforce and upskill existing workers to enable the industry to respond to the projected growth in activity over coming years.

"Action is needed to provide sufficient workforce capacity to undertake current and projected projects, as well as build the workforce of the future to deliver on the fast-paced development of innovation and technology in construction. This will require new approaches to trade-based as well as university training, but the future looks bright for those who take up the opportunities available.

"Changing the culture of the industry will also be an important responsibility for employers in developing the industry's future workforce and increasing its attractiveness as an employer of preference," Le Compte said.

Link to full report:  www.aigroup.com.au/policy-and-research/economics/constructionoutlook/

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