Major construction on road to recovery, says industry survey

Major construction on road to recovery, says industry survey
Major construction on road to recovery, says industry survey

Australia’s leading construction companies expect a recovery in engineering and non-residential building activity for the rest of the 2017 calendar year and in 2018, according to a survey from an industry body.

The upbeat forecast comes after three years of declining major project work, the latest Australian Industry Group/Australian Constructors Association Construction Outlook said. 

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, with engineering construction rising 2.9% in value in 2017 and a further 6.8% expected 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.

Commercial construction, including offices, retail buildings and industrial premises, is also expected to gain momentum from flat conditions in 2016 to increase by 1.6% in 2017 and a further 5.6% in 2018.

The outlook for multi-level apartment construction remains strong for 2017 (+22.9%) as work continues to fill up the backlog, although the pace of growth will moderate in 2018 (+6.8%) as the current apartment building cycle reaches its peak.

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Major construction on road to recovery, says industry survey

Australian Industry Group chief executive Innes Willox said while “apartment building continues to feature prominently, it is clearly set to scale back in the period ahead”. But pointed to further expansion in infrastructure investment, particularly in road and rail works, and a lift in private sector commercial construction.

He said the overall pick-up in major project work confirmed construction had moved beyond the impact of the winding down of the boom in mining and energy-related projects. 

However, there could be an expected further decline in resources-related engineering construction, particularly in the oil and gas processing sector, which is set to follow 2016’s 39% 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 Constructors Association (ACA) executive director, Lindsay Le Compte, said the spate of infrastructure project announcements on the eastern seaboard will demand a larger workforce and action was the need of the hour to provide skilled personnel. 

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

  • After falling by 1.2% in the year to February 2017, total employment in major construction is expected to return to growth with rising infrastructure work over the reminder of 2017 (+4.5%), before registering a further increase of 1.9% in the six months to June 2018.
  • Skilled labour shortages remain a concern, with a relatively high 39.1% of respondents reporting either ‘major’ or ‘moderate’ difficulty in recruiting skilled labour in the six months to March 2017, down only slightly from 40.0% in the previous six months. Sourcing of sub-contractors also remained a key concern, with 39.1% citing major or moderate difficulty (down from 44.4% in the previous six months).
  • The sourcing of building materials was less of a concern for the industry in the six months to March 2017, with 21.7% of respondents citing major or moderate difficulty, down from 38.9% six months earlier.
  • Labour costs are expected to become a greater source of pressure for the construction of infrastructure and building projects in 2017, with 39.0% of respondents expecting major or moderate increases in both direct labour rates and sub-contractor rates. Reports of increases in construction material costs have eased off to some extent, with 21.7% of businesses reporting major cost hikes (down from 32% six months earlier). 
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