As many as 42,000 construction jobs will be lost throughout Australia in the current financial year before a recovery takes hold from 2021/22 onward, the latest report says.

Releasing its Australian Construction Market Report, Australian Construction Industry Forum (ACIF) said it expects the overall value of construction work done to fall by 3.2 percent in 2020/21 as a 4.6 percent rise in infrastructure work is more than offset by a 7.1 percent decrease in residential building and an 8.9 percent drop in non-residential building.

This follows a 4.2 percent drop in activity during 2019/20.

As a result, ACIF expects the sector to shed 42,000 workers or 3.6 percent of its workforce of 1.177 million in 2020/21, with most of the job losses to be felt across Queensland, New South Wales and Victoria. 9637 9504.

This follows an employment decline of 0.4 percent in 2019/20.

Moreover, ACIF acknowledges that the job losses could potentially be more severe than this as the projected loss in employment appears to be smaller compared with both the fall in activity and the fall in construction employment which is implied by a special set of payroll data which has been collected by the ABS since the pandemic began.

It is possible, ACIF said, that workers who have been kept on the books during JobKeeper will be laid off once this program winds down.

In its report, ACIF says the biggest declines are expected in sectors which have been most impacted by lockdown measures

These include accommodation, entertainment and recreation, retail/wholesale trade, education and health and aged care.

Activity in these sectors is set to decline by 34 percent, 23 percent, 17 percent, 11 percent and 4 percent respectively.

As well, work on office building projects is expected to fall by 6 percent this year followed by a deeper contraction of 13.6 percent in 2021/22.

Whilst a considerable volume of work remains in the pipeline, the number of new projects coming into the Cordell database has slowed from 48 in the six months to April to 40 in the six months just passed.

On office work, ACIF notes that market conditions have weakened as vacancies have risen and rent is under downward pressure amid concern that demand for space will be impacted by a tendency to work from home.

That said, ACIF notes there are signs that employees will return to the office as lockdowns eases and points to conditions being back to normal in CBDs such as Brisbane and Perth.

On residential building, meanwhile, ACIF expects the value of work done to decline by around 7.1 percent during 2020/21 before returning to longer term growth from 2021/22 onward as employment, household income and population growth begin to recover.

That said, ACIF says there are downsides to this expectation as the post-COVID era may deliver structural changes within the community which could reshape demand for housing.

The bright spot in the forecast is engineering construction, where activity is expected to rise by 4.6 percent this year followed by 5.3 percent in 2022/23 amid a strong project pipeline in infrastructure construction.

Moreover, ACIF expects a return to growth in overall construction levels next year as total construction activity rises by 2.3 percent in 2021/22 and 2.6 percent in 2022/23 on the back of continued growth in civil construction and a modest recovery in residential building.

Bob Richardson, Chair of ACIF’s Construction Forecasting Council, said building projects had been put on hold amid uncertainty about the outlook.

“Cash is king in a time of uncertainty and many planned building projects are on hold or deferred indefinitely,” Richardson said.

“We haven’t seen much growth in new major projects to make up for the work being finished now. The pipeline of new projects in some sectors is drying up.”

Still, Kerry Barwise, ACIF Chief Forecaster from FTI Consulting, said there were signs that a recovery will take hold.

“The drop-off in residential building approvals has stabilised and its already hard to find a builder in some capital cities,” Barwise said.

“Residential building will claw its way back next year. House building will be the first out of the blocks. Apartments will take a while to rebuild in numbers and value. The fortified infrastructure spending plans advanced by governments around Australia will take a while to fully kick-in, and we will see a hefty lift when they do.”