Construction Investment Loses Momentum: Report

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Thursday, July 30th, 2015
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Business investment has hit the wall.

That’s the story from the latest Investment Monitor, a quarterly review of the state of play in private sector capital spending from consultants Deloitte Access Economics.

“The forward agenda is littered with challenges, and the glory days of the investment boom are gone,” the report found.

Not only is total private construction work down 13 per cent in the past year alone, but engineering construction work, formerly driven by the resource investment boom, has shrunk for six quarters in a row.

And the downward trajectory in engineering construction is set to steepen, the report found.

“Commodity prices have been falling since late 2012 and a number of projects that have been sitting in the development pipeline are being tossed on the scrapheap,” it said.

“Chances are that others will follow in their footsteps, ensuring that the project graveyard expands faster than the pipeline.”

So things are expected to get worse before they get better for engineering construction like mines and ports, as the majority of LNG projects are wrapped up over the coming year.

But the report detected a light at the end of the tunnel, with the fundamentals starting to line up in support of the commercial construction sector – offices, shops, and the like.

“Higher asset prices are lifting household wealth, low interest rates mean capital is cheap, and a lower $A is providing a competitive boost to export sectors.”

Even so, that potential is yet to be seen in an upsurge in new work, according to the report.

 

By Garry Shilson-Josling
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