It might not be enough to pick up the slack from the drop in resource investment, but as Tony Abbott tries to fulfil his pledge about being an ‘infrastructure prime minister’, the transport sector is shaping up as one of the most promising growth sectors in the construction industry in Australia.
Projects such as the North West Rail Link and the M4 East Expressway Duplication project in Sydney are propelling activity forward in the short term, and will be joined later by stage 1 of Melbourne’s East West Link, Sydney’s WestConnex and the whopping $114 billion East Coast of Australia High Speed Rail Network.
Certainly, expectations for this sector are buoyant. Participants in the Australian Industry Group/Australian Constructors Association October Outlook Survey, for example, expect the value of work done in this sector to increase by 4.7 per cent in 2013/14 and 12.5 percent in 2014-15.
Meanwhile, Australian Construction Industry Forum (ACIF) expects the dollar value of work done in the sector to jump from $31.990 billion in 2012/13 to $35.568 billion in 2013/14 before levelling off as continued growth in public transport infrastructure offsets an easing of activity on roads following a peak in the second quarter in 2014.
To be sure, the sector faces headwinds as fiscal constraints restrict the amount of public money available for public investment and the slowdown in mining construction impacts the volume of new rail and port capacity needed to support new resource infrastructure.
This, however, is being offset by a number of positives as most federal/state budgets show steady or modestly increasing levels of infrastructure investment in the immediate future.
Despite fiscal constraints, resistance to private sector involvement through vehicles such as PPPs seems to be diminishing (the East-West Link will be delivered through a PPP, as will the North West Rail Link in Sydney) and recognition of the need to boost productivity and reduce congestion as the need to cater for long-term population growth appears to be increasing. The business case for the East-West Link, for instance, is largely based on the notion that Melbourne has welcomed 650,000 new residents over the past decade and is expected to be home to six million people in 30 years’ time.
According to ACIF, on a state by state basis (major states only):
- Queensland will lead the way, with work on roads set to almost triple this year before tapering off at high levels, whilst projects such as the Cross River Rail Link, Brisbane Underground Bus and Train Project, the Central Queensland Integrated Rail Project and more immediately the Moreton Bay Rail Link and the Gateway Upgrade North Project propel the value of activity on non-road transport projects from $4.73 billion in 2012/13 to $5.73 billion this year and more than $8 billion by 2018/19.
- Victoria will experience strong growth in roads (and modest growth in non-road transport) as activity jumps from $2.471 billion to just over $3 billion in 2013/14 and reaches $4 billion by 2017/18 as East West Link gets going toward the end of next year.
- Having almost doubled over the past three years, activity in road construction in New South Wales is set to remain flat at historically high levels of $6.590 billion in 2013/14 before growing steadily to reach $$8.4378 billion in 2017/18. Meanwhile, a good range of projects such as the North West Rail Link and WestConnex are set to keep activity in non-road transport construction at historically high levels of just above $3 billion over coming years before output levels shoot up to above $5 billion in 2002/21 as the East Coast of Australia High Speed Rail Network gets into full swing.
- Activity in roads in Western Australia will continue to drop back from its peak, while non-road infrastructure investment will increase from $2.207 billion in 2012/13 to $3.748 billion in 2015/16 as work on the Gateway WA Project and the Perth Public Transport Hub (Northside Rail Link) Project spurs activity.
- South Australia can expect growth in roads but contraction in non-road transport in 2013/14 before roads activity levels off and non-road transport returns to modest levels of growth.