The Australian Construction Market Report covers the national, state and territory markets for residential and non-residential building, and engineering construction, and shows that Australia is not immune from the effects of slower global economic growth, but that spending will be a $228 billion in 2014-15.
“Global economic growth has been revised downwards following lower than expected growth in the first half of 2014,” ACIF executive director Peter Barda said.
“Australia’s economic growth of 2.5% in 2013-14 was generally on par with what we had foreshadowed six months ago, however a sluggish recovery in Europe and a strong domestic currency means that interest rate rises are likely to be deferred to encourage consumption spending until at least the end of 2014-15 – a later date than thought earlier in the year,” Barda said.
In terms of total construction activity, New South Wales has had strong growth over the past six months, and is predicted to overtake Queensland as the state with the most construction spending by 2016-17.
Residential spending in NSW is projected to be particularly strong, while engineering construction declined in Queensland, leading to the shift in spending profile.
“As foreshadowed in our May forecast, construction activity in Victoria and Western Australia is already showing signs of subdued activity,” Barda said.
Total spending in 2013-14 reached $233 billion, slightly lower than the $237 billion foreshadowed in ACIF’s May estimates, however its outlook for 2014-15 remains essentially unchanged at $228 billion, although the mix of construction work has shifted.
The biggest change is in the residential sector: residential building is already spending to meet a backlog of pent-up demand, which is arising from historically low interest rates and increased foreign demand.
This is expected to lift total spending by nearly 17% to just under $90 billion by 2017-18 from $75 billion in 2013-14.
That is backed up by figures from the Australian Bureau of Statistics, which says that building approvals have risen to a 20-year high, the strongest they have been since 1994.
Most of that is for approvals for detached houses and renovations.
In October 19,032 dwelling units were approved, the third highest monthly result on record.
In seasonally adjusted terms, approvals rose by 11.4% driven by a 30.4% bounce-back in multi-unit approvals.
ACIF found bon-residential spending rose slightly in 2013-14 to $33.6 billion from $35.2 billion in 2012-13.
Spending in engineering construction recorded a peak in 2012-13 at $128 billion, falling to $123 billion in 2013-14.
Over the next few years, activity in this sector will wane to around $92.5 billion by 2017-18.
The slowdown in mining construction will lead to associated changes in related sectors such as bridges, railways and harbours, and electricity and pipelines.
Unsurprisingly, these effects will be most profound in WA, Queensland and the Northern Territory.
Strong growth is expected in detached housing especially in NSW and Queensland, but overall until 2019 commercial activity is expected to flatten out and civil contraction could decline by an average of 6.8% per annum.
That should benefit home construction, freeing up skilled workers in those areas.
A key bright spot in the outlook for engineering construction is roads spending, which is expected to see growth over the projection period.
The forecasts are produced for ACIF by ACIL Allen Consulting and the ACIF’s Construction Forecasting Council, a unique group of the industry’s leading economists and analysts.
