Turnaround in Construction Outlook

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Tuesday, November 3rd, 2015
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A bigger pipeline of infrastructure activity is set to drive a turnaround in construction work in Australia according to the latest Australian Industry Group/Australian Constructors Association Construction Outlook survey.

After an anticipated fall of 2.4% this financial year, the nation’s leading construction companies expect a boost in the value of work in 2016/17 of 4.7% (current dollars).

Multi-level apartment development is expected to show further strong growth in line with high apartment building approvals in recent months, particularly in Sydney, Melbourne and Brisbane.  Growth of 13.7% is expected in 2015/16, followed by a further 8.1% rise in 2016/17.

Engineering construction is expected to fall by 5.2% in 2015/16 with continued falls in resource projects. However, 2016/17 will see a boost in revenue from infrastructure work. In particular, the value of road and rail projects is forecast to grow strongly in 2016/17 pointing to an emerging growth cycle in major urban transport infrastructure.

Meanwhile the total value of commercial construction work (e.g. offices, retail and industrial premises) is expected to gradually recover over the outlook period. Following a contraction in 2014/15, the total value of commercial construction work is expected to increase by 2.3% through 2015/16 and then improve to a 4.3% rate of growth in 2016/17. Private sector building work will be the main driver of growth in both years.

Australian Industry Group Chief Executive, Innes Willox, said: “The improving outlook for Australia’s diverse construction sector and the balanced composition of that outlook are good news for the sector and for the broader economy. It’s a promising outlook  of a more rapid rebound than had previously been expected. The lift anticipated for engineering construction in 2016/17 is despite expectations of further contraction in mining and resource projects and is driven by strong expectations for a pick-up of transport and communications projects. With commercial construction anticipated to lift in 2015/16 and 2016/17 and with the apartment building boom expected to continue, the outlook is for the most balanced pattern of growth for many years,” Mr Willox said.

Australian Constructors Association (ACA) Executive Director, Lindsay Le Compte, said: “The improving trend identified through the survey reflects a growing confidence in the capacity of the industry to recover from the setbacks associated with the slowdown in the resources sector over recent years. Future growth will be further supported through the implementation of mega infrastructure projects that will act as catalysts for additional commercial and residential development associated with the urban renewal policies of the federal and state governments,” Mr Le Compte said.

forecast

  • The latest Australian Industry Group/Australian Constructors Association Construction Outlook survey reveals that following a fall of 4.1%.in financial year 2014/15 (current prices), the value of turnover from major project work is projected to decline by a further 2.4% in 2015/16, before recovering to rise by 4.7% in 2016/17.
  • Engineering construction is expected to fall by 5.2% in 2015/16 following a 5.3% decline in 2014/15. This mainly reflects continued falls in mining related engineering construction. The outlook is also negative across the heavy industrial sectors. In particular, the oil and gas processing sector is expected to significantly reduce its demand for major construction activity in 2015/16 and 2016/17 as current projects move to completion and prospects for new investment in the sector weaken.
  • Total employment in non-residential construction is also forecast to fall through to December 2015 in response to the decline in mining-related work. However, a recovery in employment is expected during the first half of 2016 as rising infrastructure work leads to an increase in labour demand.
  • For multi-level apartment developments, solid growth in turnover of 13.7% is expected in 2015/16, followed by a further 8.1% rise in 2016/17.
  • The value of commercial construction work (e.g. offices, retail and industrial premises) is expected to recover over the outlook period. Following a contraction in 2014/15, the total value of commercial construction work is expected to increase by 2.3% through 2015/16 and then accelerate to +4.3% in 2016/17. Private sector building work will be the main driver of growth in both years.
  • A key positive for the industry in 2016/17 is the boost expected from non-resources engineering work. The value of road and rail projects is forecast to grow strongly in 2016/17 in line with the emerging growth cycle in major urban transport infrastructure. Other notable increases are expected in telecommunications infrastructure work and “other” civil projects in 2016/17.
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