Construction to fall; telecoms remains robust

The value of total construction activity is expected to fall in the next few years, a new report shows. However, the NBN rollout will mean plenty of construction work in the telecommunications sector.

The latest Australian Industry Group (Ai Group)/Australian Constructors Association ‘Construction Outlook’ survey shows that, after solid growth of 10.6% in 2012-13, the total value of engineering and commercial construction work is expected to rise by just 2% pa in 2013-14 and by 1% pa in 2014-15.

Growth in the value of engineering construction work is set to significantly drop from 12.9% pa in 2012-13 to 1.9% pa in 2013-14 before plateauing in 2014-15, the report shows. This reflects weaker conditions across a range of infrastructure categories and resource-based heavy industrial sectors.

However, telecommunications work is forecast to remain robust in line with the NBN rollout and related investment. Levels of construction activity are also expected to hold up reasonably well in the oil and gas sector (despite a slower growth outlook), while civil projects (such as terminals and ports) are expected to still generate solid work in 2013-14 before weakening the following year.

Prospects for commercial construction remain subdued, consistent with the soft and patchy nature of project activity within the sector. The survey points to growth in commercial work of 1.0% pa in 2013-14 followed by a mild pick-up in 2014-15 with growth of 4.4% pa anticipated.

“The Ai Group/Australian Constructors Association ‘Construction Outlook Report’ highlights a central question facing the Australian economy: what will drive economic growth and increased living standards as mining investment eases?” said Innes Willox, Ai Group Chief Executive.

“While some areas of engineering and commercial construction - notably telecommunications work and construction related to oil and gas projects - are expected to expand, these bright spots are not anticipated to compensate for the reduction in mining work over the next couple of years.

“With the flat outlook for other key parts of the economy on the back of weak non-mining investment in recent years, the dampening impacts of a strong domestic currency and a legacy of an extended period of low productivity growth, there is no hiding from the extent of the challenges to be faced over the next couple of years.”

“The projected drop in the value of work highlights the need for public and private sector clients to engage with the industry to identify more effective strategies to support greater reliability of the construction pipeline,” said Lindsay Le Compte, Australian Constructors Association Executive Director.

“Issues such as the financing of projects, the cost of construction - including the cost of tendering - and how projects are incorporated within an overall sustainability framework, are important discussions that need to occur.”