NSW is Revving Up the Non-Res Construction Engine

Tuesday, June 23rd, 2015
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There’s more to New South Wales this week than winning the battle up front to take out the second State of Origin match.

The ACI Construction Monitor, launched on Wednesday (but not deliberately to coincide with the second Origin date) places NSW as thetop-ranked state for non-residential construction activity.

Australian Construction Insights (ACI), the consultancy arm of HIA Economics, has developed Construction Monitor to provide a comprehensive analysis of conditions and activity in Australia’s non-residential construction industry. Released quarterly, the ACI Construction Monitor provides detailed analysis, commentary and forecasts regarding contemporary developments and the future outlook across the commercial building, industrial construction, and engineering sectors.

Included in the Construction Monitor is ‘Around the Grounds.’ This is a unique quarterly review of building and construction conditions in each state and territory. Taking into account 10 distinct sub-sectors of non-residential construction, the most recent performance in each state is benchmarked against the state’s own longer term average. This analysis is aggregated in a scoring system which provides a ranking that highlights the relative strength or weakness of building and construction activity in each state and territory.

Benchmarking the current level of construction activity against historic averages shows the Northern Territory remains the strongest performing jurisdiction in the country for the eighth consecutive quarter. New South Wales ranks as the strongest state, as highlighted at the outset. Victoria rounds out the top three, while at the other end of the league table, the Australian Capital Territory ranks last of all.

From a national perspective, the resource sector’s construction boom has progressed past its peak. In the NT, however, the evolution of the cycle is a little behind the other resource behemoths and activity remains very strong.

Relative to the NT’s longer term history, the current level of building activity in the territory ranks it as the second strongest jurisdiction for non-residential building, and the second strongest jurisdiction for engineering construction.

Drilling down further, within the non-residential building segment, the NT ranks strongest for both commercial and industrial building construction; and within the engineering construction segment, it ranks as the strongest jurisdiction for electricity generation, transmission, and pipelines; heavy industry; and roads, highways and subdivisions. Much of this healthy profile is attributable to the development of the Ichthys gas field which is now approaching completion, so the NT is likely to slide down the leader board in the near future.

New South Wales ranks as the second strongest jurisdiction for construction activity. Interestingly, NSW does not rank as the strongest jurisdiction in any of the sub-sectors of non-residential building or engineering construction. Rather, it achieves above-average rankings across almost all of these sub-sectors. The only point of weakness in NSW construction is in the heavy industry segment, which has continued to recede from the lofty heights of a few years ago as the state’s coal industry feels the pinch of weaker energy prices.

Victoria now ranks as the third strongest jurisdiction for construction. The state jumped two positions on the leaderboard after becoming the strongest state for non-residential building due to a healthy contribution from work on the $1.27 billion Victorian Comprehensive Cancer Project in Parkville.

Western Australia, with activity receding from the peak of the mining construction boom; Tasmania, with a revival of engineering construction; along with South Australia and Queensland make up the middle of the pack.

The ACT ranks as the weakest of the eight jurisdictions. The large amount of road works and bridges which make up the Majura Parkway project are providing the only ray of sunshine for the construction industry, although this project is now very close to completion. The pipeline of new engineering construction projects in the ACT is very light until the light rail project commences, and it is not yet certain that project will get the green light. The ACT compares very poorly in terms of non-residential building, ranking as the weakest jurisdiction for commercial building and the second weakest for industrial building.

The nation’s ‘Territory’ jurisdictions top and tail the latest rankings. However, the small size of these economies means things can change very quickly. It will only take the light rail project in the ACT to commence construction to see it move up the rankings, while the completion of the Inpex project could see the NT’s reign at the top of the table come to an abrupt halt.

A key area to watch in terms of non-residential construction activity is developments in the infrastructure space. Investment in non-mining infrastructure projects is, overall, proceeding at a slower pace than required and than was expected to be the case 18 months to two years ago. The ACI Construction Monitor analyses 20 distinct private non-residential construction sub-sectors, in addition to public sector construction, and will keep a close watch on the impacts of decisions around future investment in Australia’s infrastructure projects.


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