Billions Wiped from Australia’s Construction Outlook 3

Tuesday, December 1st, 2015
liked this article
Allegion – 300 x 250 (expire Feb 28)
FavoriteLoadingsave article

Almost $10 billion has been wiped off a key construction sector forecast over the next four years amid growing signs that the slowdown in engineering construction will be deeper than expected.

In its latest forecast, Australian Construction Industry Forum (ACIF) has slashed almost $2 billion of its previous forecast issued in July for 2015/16 and as much as $9.5 billion from its longer range forecast out to 2018/19. The organisation said previously anticipated further growth in the residential sector was now unlikely to materialise and the downturn in civil construction would be deeper than expected.

In addition, ACIF says around 20,000 jobs would be lost in 2015/16.

ACIF construction forecasting council chair Adrian Harrington said the revised forecasts represent a ‘substantial change in prospects’ for workers and businesses across the sector from designers through to builders, tradespeople and young people trying to enter the construction workforce. Harrington added the changed outlook also applies to an overall economy which is attempting to transition from an over-reliance on resource related work.

The Forum’s lead forecaster, Kerry Barwise, said the revised estimates reflect broader changes at the macro level.

“The big shift in the outlook largely reflects the dip we are experiencing from a recent peak in spending in residential building, plus the continuing decline from the peak in engineering construction we enjoyed with the mining and resources boom,” Barwise said.

“Australia’s macro story is changing, and this affects requirements in building and construction. Population growth rates have been revised downwards, reflecting falls in immigration from recent peaks. The reduction in growth in the working age population also has profound implications for future employment, unemployment and economic growth.”

While part of the change surrounding 2015/16 reflects higher levels of construction falling into the 2014/15 financial year than had been previously forecast, the downgrades also reflect a more pessimistic view about the forward outlook.

In particular, whereas further growth in the dollar value of spending within the booming residential sector had previously been anticipated, activity within this sector is now believed to have almost reached its peak. It is expected to increase only very modestly in 2015/16 before flatlining.

These more modest expectations are being driven by a recent pullback in building approvals, increasing signs of caution among investors and a growing expectation from within the construction sector that current red-hot conditions will eventually cool toward more normal predictions.

The fall in engineering construction activity resulting from the resource sector pull-back is now expected to be deeper and longer-lasting than anticipated.

On the plus side, a previously anticipated easing in non-residential building is now expected to be less deep than originally thought.

There are also some bright spots in the sector with activity in sectors such as health and aged care, retail and offices expected to reverse previous downward trends to a degree.

In terms of states:

  • New South Wales leads the way and is expected to be the top performer over the next two years. Modest declines in engineering (which are occurring despite robust activity on civil works programs) will be more than offset by growth in residential and non-residential building to create a modest increase in overall construction spending.
  • Growth is also on the cards for the ACT, where further modest levels of expansion in residential building are likely. A jump is also expected in engineering amid announcements of major infrastructure projects in the federal budget.
  • On the flip side, the aggregate value of work is expected to continue to fall in Queensland and Western Australia as civil construction work drops back and the impact of the resource slowdown feeds through into other sectors such as office building.
  • Activity in Victoria is expected to ease as the apartment building boom peaks and engineering construction work continues to contract.
  • Further contraction is anticipated on an aggregate basis in South Australia over the short term, although a return to modest growth is anticipated over the medium term.
  • In Tasmania, further levels of modest growth are in stall in residential building in 2015/16 but a decline is anticipated in residential building.
  • Aggregate levels of activity in the Northern Territory are expected to continue to come back to earth as work on the Ichthys project draws toward completion. There will, however, be growth in some areas of the residential sector and commercial building activity will remain stable.
FavoriteLoadingsave article


 characters available
*Please refer to our comment policy before submitting
  1. Dave from ConX

    Hi Andrew,

    What will this mean for the construction labour market? Can the skillsets of the 20,000 jobs lost be immersed in the still performing residential market in NSW?

  2. Barry

    Profoundly troubling stuff, belying the widespread assumption that population growth and related housing demand will be one of the saviours of the Australia economy.

  3. R Pavel

    Very Informative post! Thanks!