Around 23,800 building and construction jobs could go in the current financial year as the downturn in new home building more than offsets stronger activity in commercial building and civil infrastructure, the latest report says.
Releasing the November edition of its Construction Market Outlook report, Australian Construction Industry Forum (ACIF) said it expects the dollar value of work done on building and infrastructure projects throughout Australia to contract by 1.7 percent from $233.3 billion in 2018/19 to $229.4 billion in 2019/20.
This follows previous activity declines of 8.2 percent in 2018/19.
This will happen as a 6.2 percent rise in civil engineering construction and a 2.4 percent increase in commercial building activity are not sufficient to fully offset an 8.4 percent decline in residential building work done.
All this will drive a decline in construction industry employment – particularly as activity shifts from the labour-intensive home building sector toward a more capital intensive civil infrastructure sector.
All up, ACIF says the sector’s workforce will contract by 23,000 from 1.182 million in 2018/19 to 1.159 million in 2019/20.
Beyond that, employment levels will hover sideways at around 1.160 million over the two to three years.
In its report, ACIF says the downturn in residential building will continue into 2019/20.
Whilst the real-estate market has shown improvements, ACIF says it will take time for this impact of previously falling prices to fully play out in construction markets due to the time required to restore approval numbers, secure land and commence new projects.
Indeed, the forward pipeline is not encouraging.
The number of new -residential projects which came into the ACIF Major Projects Database prepared using information from Cordell fell from 174 in the six months to April to 166 in the six months to October – the lowest number of new projects thus far in the three-and-a-half years in which ACIF has kept records of this data.
ACIF Construction Forecasting Chair Bob Richardson says further declines in activity are thus locked in and will be difficult to avoid.
“The lowest interest rates on record have been reduced even more, despite this access to finance and credit has presented a significant hurdle to developers, builders, investors and owner occupiers,” Richardson said.
“Market adversity has encouraged builders to withdraw from development of new projects; we witnessed new dwelling approvals plummet last year and commencements have also fallen.
“A fall in residential building activity is locked into the pipeline and this will take a while for this to be put into reverse.”
Nevertheless, ACIF says the outlook is brighter in commercial/non-residential building and in civil/infrastructure construction.
The former sector is mid-way through an upcycle and will see activity peak at $45.3 billion in 2021/22 amid healthy levels of investment in hotels and accommodation, industrial, office, education and defence.
Activity in the latter, meanwhile, will rise from already elevated levels of $62 billion in 2018/19 to $66 billion in 2019/20 and $68 billion in 2020/21.
Driving this will be a surge in rail construction, ongoing elevated levels of activity in roads, higher levels of activity in water and a stabilisation in resource sector work which has been falling away in recent years as huge mining projects drew to completion.
In its report, ACIF says there are ongoing concerns about the global economy.
As well as slowing worldwide economic growth (which ACIF says is expected to slow further), these include geopolitical tensions and trade tensions.
Meanwhile, local economic conditions are likely to remain subdued as stubbornly low wage growth and the wealth effect from lower real-estate prices impacts consumption and business investment continues to lag.
Further, ACIF talks of additional downside risks to its forecasts for both work volumes and employment.
In terms of the former, these include uncertainty about the magnitude and speed of the anticipated recovery in mining activity; a lack of predictability of the degree of time lag between movements in interest rates and asset prices and investment and employment generating economic activity including construction; ongoing lending constraints, potential delays in the rollout of infrastructure investments and possible impacts upon economic growth and demand for housing arising out of any unexpected reductions in immigration.
On employment specifically, ACIF talks of risks that job losses from the decline in residential building may free up more labour than what can be absorbed through the increase in civil construction.
As well, different skill requirements in civil construction as opposed to residential could lead to ‘mismatches’ involving job shortages in some skills categories and labour shortages in other categories.