Australia will benefit from significant momentum in engineering construction as work on transport and resource projects gathers pace, a new report suggests.

In its latest report, Oxford Economics says it expects the overall value of work done on civil and engineering construction to increase by 11.1 percent from $85.2 billion in 2019/20 to $94.6 billion in 2020/21.

This follows a decline of 3.7 percent from $88.5 billion in 2018/19 to $85.2 billion in 2019/20.

Over the next five years, meanwhile, Oxford expects the average annual value of work done to come in at $105.6 billion.

Leading the way will be transport, where activity will be driven by a huge pipeline of work involving no fewer than 41 projects valued at $2 billion or above which are either planned, under consideration or under construction.

In particular, the value of work on roads, highways and subdivisions will rise from $20.0 billion in 2019/20 to a peak of $28.8 billion in 2022/23 as completion of projects such as the West Gate Tunnel in Victoria and WestConnex in New South Wales is offset by a new wave of developments such as the $15.8 billion North-East Link in Victoria and the $14 billion Western Harbour Tunnel & Beaches Link in New South Wales.

Likewise, activity on railway construction is expected to grow from $8.5 billion in 2019/20 to $14.2 billion by 2022/23 thanks to work on various projects associated with Sydney Metro (including the airport link), Paramatta Light Rail, Melbourne Metro, Monash Light Rail, Geelong Rail Project, Sunbury Line Upgrade, Melbourne Airport Link, Suburban Rail Loop, Geelong Faster Rail, Cross River Rail, Adani Light Rail, Gold Coast Light Rail, Forrestfield Airport Rail Link (WA), Perth Metronet and additional stages of the Canberra Light Rail project.

Beyond that, resource and mining activity is expected to recover.

In particular, work on oil and gas developments is expected to bottom out at $5.5 billion in 2019/20 and average around $12 billion per annum over the five years to 2024/25. Major projects include Gorgon 2, Pluto 2, Scarborough Gas Field, the Surat Gas Project and the Barossa Gas Field.

A rebound in activity in other mining and heavy industry will also continue over the medium term amid a strong price for gold and iron ore and both new work and the repair/replacement of existing assets across traditional metals, mineral sands, rare earths and uranium.

Utility construction, meanwhile, will ease over the current financial year but remain stable thereon after as completion of the first stage of the NBN rollout more than offsets the effect of the recently announced NBN upgrade.

In its report, Oxford says there are challenges for the global and Australian economy.

Worldwide, it expects the economy to expand by 5.4 percent in calendar 2021 following a contraction of 4.4 percent this year.

After previously banking on a COVID-19 vaccine rollout by the end of this year, Oxford is now assuming that this will not be widely available until the middle of next year.

In Australia, it expects modest growth of 2.4 percent in 2021 after a contraction of 3.5 percent this year.

Whilst stimulus measures will support sectors such as construction, business investment is facing headwinds amid a lack of confidence and limited revenues from which to fund expansion whilst consumer demand will be impacted by higher unemployment and uncertainty over employment prospects.

Moreover, Oxford acknowledges risks to its forecasts.

Globally, the economy is looking vulnerable following a 30 percent spike in new COVID cases in August.

The relationship between Australia and China, meanwhile, continues to deteriorate.

Locally, the anticipated upturn in transport projects relies upon government funding and faces risks that funding could be withheld or delayed.

At any rate, the weakened financial position of Commonwealth/state governments may detract from infrastructure funding levels over the long term.

Finally, there is a risk of cost escalation and delayed projects as the large number of resource/transport projects coming online simultaneously will lead to pressure upon resource and skill availability.