(above image: AI generated via freepix)

Australia’s boom in civil and engineering construction is set to roll on as new projects in energy, water and mining keep activity at elevated levels even as the boom in transport construction passes its peak.

And privately funded infrastructure is expected to grow even as public capital project spending winds back.

During a recent conference held in Melbourne, Oxford Economics Australia discussed the outlook for both the broader Australian economy and the construction sector specifically.

Speaking of civil and engineering construction in particular, Oxford says that the volume of work has continued to grow strongly.

In fact, ABS data indicates that the dollar value of construction work done in civil and engineering construction increased by 10.2 percent in 2023/24 to reach $134.1 billion.

This represents the strongest activity level since the mining boom.

Going forward, Oxford expects the overall value of work done (building and civil combined) to steadily increase from current elevated levels over the next five years (see chart).

In terms of civil construction specifically, Oxford expects activity to reach an overall peak in 2025/26 before easing back but remaining at elevated levels (see chart).

However, Dr Nicholas Fearnley, Head of Global Construction Forecasting at Oxford Economics, notes that the focus of activity has shifted.

Over the first part of this decade, much of the work focused on publicly funded road and railway construction projects in major cities.

In 2023/24, however, Fearnley said that transport construction activity remained relatively flat overall (albeit at massive levels) as the volume of work increased in Queensland and Western Australia but declined in Victoria.

Instead, the rise in activity was driven by electricity, water and mining – the latter of which has been focused around oil and gas in Western Australia.

“Overall, what’s happened in 2024 is that we continued to have strong growth in engineering construction activity,” Fearnley said.

“The electricity sector did a lot of the heavy lifting along the east coast. In mining, Queensland and Western Australia are very much expected to be strong growth drivers.

“What happens next? Transport construction activity is expected to peak this year. In the utility space, we have electricity growing out, water is more of a long-term story and mining investment will be some more as well.”

Turning to specific sectors, Fearnley says that the dollar value of work done on transport projects is expected to peak in 2024/25 before easing back but remaining at historically healthy levels.

Not surprisingly, opportunities are shifting toward electricity – a sector in which Oxford expects the dollar value of work done to continue to rise from already record levels.

This will be driven by a push to decarbonise Australia’s electricity grid.

Over the next five years, Oxford expects growth in construction of wind farms, solar farms, other generation and storage (batteries etc.), transmission and pumped hydro storage.

The biggest growth will come from wind farms.

According to Fearnley, wind farms enjoy a competitive advantage over solar farms as they are able to produce electricity at any time (day or night) provided that the wind is blowing.

By contrast, solar farms produce electricity only during the day at the same time as rooftop solar is delivering cheap electricity to the grid. This is driving a greater need for new solar farm developments to also include storage solutions such as batteries.

In terms of pumped hydro, Fearnley says that activity is focused on the Snowy Hydro extension for now but will shift as new projects come through in Queensland.

Speaking about nuclear, Fearnley acknowledges that governments will of course build nuclear power plants should they wish to do so (the Opposition Liberal/National Party has promised to build nuclear plants if it wins the upcoming federal election).

Nevertheless, he suggests that there is no pressing need for this given the rate at which Australia is delivering new renewable and storage assets to decarbonise the grid.

Added to this is the lead time required to design and construct a nuclear power plant (approx. 15 years, according to the CSIRO), Australia’s lack of technical expertise in nuclear power and estimates by the CSIRO that nuclear power will be far more expensive when compared with renewables.

(If approved and constructed, the proposed 700MW Spicers Creek Wind Farm in the Central-West Orana Renewable Energy Zone in NSW by Squadron Energy will consist of 1117 turbines as well as battery storage and will generate sufficient capacity to power 395,000 homes as well as creating more than 330 jobs. Major wind farm projects are expected to be a key feature of even stronger activity in the renewable energy construction boom over the next five years. Image source: Squadron Energy)

Next, there is water.

Activity in this space is being driven a strong project flow in Queensland and New South Wales. These projects are occurring amid efforts to shore up water security as well as water facilities for growing residential developments in places such as southwestern Sydney.

Finally, Oxford expects strong levels of activity in mining and heavy industry construction.

This will be driven by healthy levels of activity on oil and gas facilities as well as in ‘other heavy industry’ (see below).

According to Oxford, construction on oil and gas facilities is likely to increase amid strong levels of exploration activity – which typically precedes new construction projects. This will be the case despite expectations of limited pressures on oil prices (subject to geopolitical shocks) as supply is likely to exceed demand over coming years.

Regarding other heavy industry, Fearnley says that an interesting item will be hydrogen.

Despite challenges in terms of economically transporting hydrogen to places such as South Korea and Japan, Fearnley says that activity will increase once these difficulties have been ironed out.

Enjoying Sourceable articles? Subscribe for Free and receive daily updates of all articles which are published on our site

Want to grow your sales, reach more new clients and expand your client base across Australia’s design and construction sector?

Advertise on Sourceable and have your business seen by the thousands of architects, engineers, builders/construction contractors, subcontractors/trade contractors, property developers and building industry suppliers who read our stories across the civil, commercial and residential construction sector