Work on the massive Ichthys LNG Project has propelled the Northern Territory to the top of the table in a ranking of states and territories within Australia in terms of the dollar value of construction work done against historic averages.
Published by Commonwealth Securities (ComSec), the latest State of the States report ranks the relative performance of each state and territory against long term historic averages according to eight criteria: economic growth, retail spending, equipment investment, unemployment, construction work done, population growth, housing finance and dwelling commencements.
While Western Australia was the leading state overall (followed closely by the Northern Territory), the Territory was tops in terms of construction activity, recording a dollar value of construction work done in the September quarter last year which was 79 per cent above historic averages and 18.5 per cent up on the same quarter 12 months earlier.
The Territory also topped the charts in terms of economic growth as well as (low) unemployment, and came second in housing starts and retail spending.
Surprisingly, however, it ranked last in terms of housing finance, with trend commitments in this area 19.2 per cent below long term averages.
The building industry in the Northern Territory has been undergoing significant expansion since the start of the Ichthys LNG Project – a $34 billion development which will see gas extracted in the Browse Basin off the north-west coast of Western Australia and piped 820 kilometres to onshore processing facilities in Darwin.
The Territory is also undergoing a boom in housing construction. In 2013, the Housing Industry Association expects the number of housing starts throughout the Territory came in at decade-long highs of 2,060.
Still, with little in the way of new multi-billion dollar projects in the pipeline, concerns remain that the current boom will fade once work on Ichthys starts to wind back.
Australian Construction Industry Forum, for example, expects the annual value of construction work done in the territory to peak at $4.373 billion in the current financial year and drop back to $2.435 billion by 2020-21 – below levels generally experienced prior to the GFC.
At the other end of the scale, a combination of a stagnant population and weak business investment has seen Tasmania earn the dubious honour of being the worst performing state, not just from a viewpoint of the dollar value of construction work done (down 9.9 per cent on long-term averages) but also on every other criterion except housing finance.
Commenting on the overall report, ComSec economist Savanth Sebastian said while growth over the September quarter had been below par, all states and territories would benefit from improving business and consumer sentiment, while gains associated with higher levels of home building activity would flow through to New South Wales, Western Australia, Queensland and the ACT.
“All economies should lift now that consumers and businesses are showing a sustained level of optimism,” Sebastian said. “The low interest rate environment is boosting housing construction while rising wealth levels are supporting confidence and in turn spending.”
“The slowdown in mining investment will continue to affect some regions; however this should be offset by a lift in residential building. NSW, Western Australia, Queensland and ACT are expected to benefit most from a lift in home building. In addition the lower Australian dollar should provide a boost to exports in coming months and help to alleviate the risks surrounding the rebalancing of the economy.”
The latest report follows last week’s ABS figures showing that the seasonally adjusted number of housing starts which took place around the country during the September quarter exceeded 40,000 for the fourth consecutive quarter.