Australia’s civil construction sector is set to grow further over the next five years and be a $100 billion per year plus sector over the near term, the latest report suggests.

Releasing its latest forecast, Oxford Economics says it expects the overall dollar value of work done on civil and engineering construction projects throughout Australia to rise by 6.3 percent from $88.7 billion in 2019/20 to $94.3 billion in 202/21.

Beyond that, Oxford expects activity to rise to an annual average of $109.8 billion over the five years to 2024/25.

In its report, Oxford says activity over the near term will be driven by an upturn in mining investment along with a massive pipeline of road and rail projects.

On mining, it says activity will be driven by continued work on large iron ore projects in Western Australia.

These include BHP’s South Flank iron ore project, Stage 2 of Fortescue Metals’ Iron Bridge magnate mine and the Koodaideri iron ore project in the Pilbara.

In transport, work will ramp up following a lull over the past two years.

This will be driven by projects such as Sydney Metro City & Southwest (rail), Melbourne Metro Rail, Stage 3b of Sydney’s WestConnex road project, Melbourne’s West Gate Tunnel project and the Cross River Rail project in Brisbane.

Longer term, Oxford says activity will be driven by continued momentum in public infrastructure along with a rebound in work on oil and gas projects.

Indeed, it expects the value of work done on transport projects to surge from $30.7 billion in 2019/20 to a peak of almost $48 billion in 2022/23.

By historic standards, these numbers represent extraordinary levels of activity.

At its expected peak (almost $48 billion) in 2022/23, the annual value of work done on transport construction will be almost four times that done fifteen years earlier in 2004/05 ($13.0 billion).

Overall, the anticipated $109.8 billion annual average over the next five years will be more than two and a half times the $41.7 billion recorded fifteen years ago in that same year.

Nevertheless, Oxford cautions that risks remain in several areas.

Whilst construction has been prioritised by governments throughout COVID, any severe outbreaks could lead to restrictions in on-site work.

As the crisis impacts global manufacturing, meanwhile, project disruptions could occur if supplies of materials or imported equipment is delayed.

With migration having ground to halt, the number of projects which are pushing ahead simultaneously could challenge workforce capacity to deliver on schedule.

In sectors such as resources, trade tension with China could pose risks to investment plans and construction projects.

Snapshot by Sector

According to Oxford:

  • After slowing last year, road construction activity will surge from $19.7 billion in 2019/20 to a peak of $29.3 billion in 2022/23 before easing thanks to work on several major projects.
  • Activity on railway construction will rise from $9.0 billion in 2019/20 to peak at $14.9 billion in 2022/23 thanks to work on projects such as Sydney Metro (multiple projects), Melbourne Metro Rail, Metronet (Perth), Cross River Rail (Brisbane), Suburban Rail Link in Melbourne and Melbourne’s Airport Rail Link.
  • Work on bridge construction will increase from $1.1 billion in 2019/20 to a peak of $1.9 billion in 2022/23 thanks to a pipeline of infrastructure stimulus work.
  • Harbour construction will rise from $1.1 billion to $1.7 billion over the next five years led by a work on defence projects, port expansions, LNG import terminals and freight projects.
  • Stable to modest growth is expected in construction of water and sewerage facilities, supported by public infrastructure projects.
  • Whist the long-term future for energy construction is bright amid the need to replace aging coal plants, the volume of work in this sector is expected to ease as the rollout in renewable generation is hampered by constraints in the transmission network and uncertainty over national energy policy.
  • The value of work done on telecommunications infrastructure will continue to ease despite the recently announced NBN upgrade as the initial NBN rollout winds down.
  • Having fallen back in recent years thanks to completion of LNG export facilities, the value of work done on construction of oil and gas facilities will rebound in FY22 and average $12.7 billion per annum over the five years to FY 2025.
  • Work on pipeline construction will gradually increase over the longer term as currently delayed projects commence construction.
  • Strong activity in other mining and heavy industry will be maintained over the medium term underpinned by replacement and repair of existing assets along with new works across traditional metals, material sands and rare earths projects. Included in this are three large iron ore projects in WA and coal developments in Queensland.

Snapshot by State:

According to Oxford, NSW and Victoria will be the biggest winners from the boom in road and rail work.

Strong growth is expected in NSW whilst activity in Victoria will remain stable at elevated levels.

Elsewhere, a rebound in mining activity will support growth in the value of work done in Queensland, Western Australia and the Northern Territory.

In South Australia, the volume of work will remain stable whilst a slowdown in electricity construction will see more subdued conditions in Tasmania but higher levels of activity will be seen in the ACT over the short term because of work on Canberra Light Rail.