Infrastructure Investment to Help Fill Gap in Economy

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Wednesday, June 24th, 2015
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Further growth in residential building plus a resurgence in state public infrastructure spending over the next five years will go some way toward ‘filling the hole’ left by declining engineering construction in the wake of the mining boom according to the latest Master Builders Australia building and construction industry forecasts.

Latest data from the ABS supports this outlook as the building and construction industry continues to make a strong contribution to the community. The number of jobs in the sector rose by 58,000 or six per cent to 1.05 million from late 2012 to February this year.

The industry’s value to the economy should not be dismissed.

An eventual pick up in non-mining investment – currently the missing link in the Australian economy – is expected to drive recovery in non-residential building toward the end of the forecast period.

The forecasts for the building and construction industry produced in conjunction with Macromonitor, are particularly bullish on prospects for infrastructure spending in New South Wales and Victoria. The two states’ combined, cumulative spend in today’s dollars on road and rail projects from 2014-15 to 2018-19 is predicted to jump to $80.7 billion, a $20 billion improvement on the preceding five years.

High levels of state public investment will be an important source of growth and jobs over the next few years, with a number of large infrastructure projects planned for New South Wales and Victoria, including:

  • North West Rail Link (NSW)
  • West and North Connex road and tunnel (NSW)
  • CBD light rail (NSW)
  • Western Distributor Transurban (Vic)

As noted, Master Builders believes the impact on the Australian economy of the downturn in resources-related engineering construction can be offset to some extent by further strength in residential building and pockets of growth in infrastructure spending.

The ‘re-mix’ of building and construction sectors will have benefits for the wider economy. Residential building as well as infrastructure construction are traditionally more labour intensive and have stronger domestic flow-on or multiplier effects than engineering construction of large scale mining-related projects that also give away a high proportion of the value added to overseas suppliers.

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