Engineering Construction Slump Expected to Worsen 1

Friday, May 2nd, 2014
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The pronounced slowdown in Australian engineering construction activity is expected to worsen, as planned work fails to keep up with the pipeline of projects.

A new report released by Deloitte Access Economics warns that the mild slowdown in Australia’s engineering construction activity is set to accelerate in the enduring absence of new projects which could pick up the slack left by the end of the mining investment boom.

According to Deloitte’s figures, engineering activity has been at a standstill for almost two years, a situation which is expected to soon take a turn for the worse.

“That is unlikely to be true for much longer,” said Deloitte partner Stephen Smith. “The modest fall in engineering is set to accelerate.”

Deloitte’s conclusions are based on its Investment Monitor database of 955 investment projects, each of which is valued at $20 million or more. The total recorded value of projects in the database is $878.8 billion, marking a decline of 5.4 per cent compared to just a year ago.

The prominent economic forecaster pointed out that while the number of projects currently in the pipeline is a sign of promise, planned work has failed to maintain pace.

“The pipeline of proposed work remains impressive, but the lack of new plans is becoming apparent,” said the report. “Planned work has dropped by more than 13 per cent since 2013.”

Deloitte said non-residential spending, which will play a pivotal role in the transition away from dependence upon resource sector investment, “is yet to stir.”

“Given the current decline in engineering construction, the question remains as to whether non-residential building activity can sufficiently fill the void,” said the report.  “There has been some lift in the value of planned non-residential projects…but it pales in comparison to the value of engineering work, which is expected to fall away.”

According to the report, non-mining investment intentions also remain “particularly bleak” for the 2014-15 period.

While NSW and Victoria are responsible for over half of the country’s economic output, they account for only around 17.3 of the value of projects currently under construction.

Western Australia and Queensland continue to dominate projects in terms of value, accounting for 56 per cent in total. The two states also account for 58 per cent of projects currently under construction.

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  1. Peter Rheece

    I'm a little surprised to hear that non-mining investment intentions are so bleak, given positive sentiments expressed recently in surveys by groups such as the Property Council and the Master Builders Association.

    Whilst it is no surprise activity is dropping back in some mining states, New South Wales is undergoing a massive upturn in housing and an unprecedented program of road and rail infrastructure building, whilst Victoria has just unveiled a record budget infrastructure spend.

    I would think the most likely scenario is for declining activity in mining states but stronger activity in New South Wales, Victoria and South-East Queensland.