ACIF Industry Leaders Forecast a Healthy Recovery in Non-Residential Building Activity
13 November 2017
ACIF: The latest industry forecasts to be released today by the Australian Construction Industry Forum (ACIF) foreshadow that the decline in the work done in the building and construction industries will slow over the next three years, with an upswing predicted from 2019-20. After some years of decline, a recovery in Non-Residential Building activity is expected, which includes an uplift in commercial building, including offices, retail and industrial building. This reflects increased business investment as well as in building required to support the underlying transition in the economy and employment towards the provision of services, including in tourism, accommodation, education as well as in health and aged care.
The upturn in infrastructure construction in roads, rail, water, that has been in the ACIF Forecasts for some time, is now definitely gathering pace. These increases will offset the falls in mining and commodity export infrastructure that are in the construction project pipeline following the completion of a number of mega projects and the falls in Residential Building activity that have already begun.
"Australia's success in the construction sector drives employment and productivity, which in turn encourages government investment in quality infrastructure. As Australia's population continues to grow at above trend levels, now more than ever, we need quality infrastructure and buildings.” said Adrian Harrington, Chair of ACIF’s Construction Forecasting Council, which oversees the production of the ACIF Forecasts.
“The public and private sectors have a key role, often in partnership, in funding, and ultimately owning this infrastructure. In these Forecasts we see a welcome uptick in infrastructure spending following the highs of the mining and residential building boom.”
Kerry Barwise, ACIF’s Head Forecaster, stated, “This ‘two speed economy’ looks like a tightrope act. The south-eastern states are largely ‘holding the line’ while bigger declines in Western Australia and Queensland mean these states are hanging off the line, pulling it down. We do, however, predict resurgent investment in roads, rail, energy and water infrastructure will be large enough in the next few years to offset the falls in construction activity that will follow the completion of the ‘mega projects’ that drove the recent mining boom.”
Work Done in Building and Construction
The value of all of the work done in the building and construction industries fell by 4% last year to arrive at $218 billion. The November 2017 ACIF Forecasts project that total building and construction work will continue to fall over the next three years, but the decrease will become smaller each year. The fall in total building and construction activity is projected to dip by just 0.3% by 2019-20, leaving total work done at $203 billion.
Residential Building
Approvals peaked two years ago and we are now on the downside of the residential building cycle. The number of new houses built fell last year. The rate of growth in the building of New Other Residential dwellings, such as apartments and townhouses, fell last year from the extraordinary highs seen for some years in some states, particularly in Queensland, New South Wales and Victoria. All categories of Residential Building are expected to fall over the next two to three years. This will push the value of work done in this category of building down from $96 billion in 2016-17 to $84 billion by 2019-20.
Non-Residential Building
Economic accounts show that business investment in areas outside of mining is recovering. Non-Residential Building activity is already growing in the states that were less exposed to a hangover from the end of the mining boom. While there are some challenges to overcome, including the need to address competition from new technologies and lingering scars from previous periods of overbuilding and over-supply, Non-Residential Building activity is projected to see growth over the next three years, rising from $36 billion in 2016-17 to $39 billion in 2019-20.
Engineering Construction
Engineering Construction fell by 10% last year to $85 billion. A rebound in infrastructure investment in Roads and Bridges, Railways and Harbours, in Water and Sewerage and in Electricity and Pipelines is underway and expenditure is expected to increase significantly in the next three years. This will slow down and eventually halt the downturn in Engineering Construction work done. Engineering Construction is forecast to fall and then level out at around $80 billion over the next three years.
Building and Construction in the Australian States
Differences in the performance and outlook of the building and construction industries in the Australian states and territories gives some credence to concerns about the “two speed economy”. The “mining states” – Western Australia, Queensland and the Northern Territory – account for $7 billion of the $8 billion fall in building and construction activity forecast for this year. Meanwhile the south-eastern states are projected to hold on to present levels of building and construction activity over 2017-18. Increases in infrastructure investment and increases in NonResidential Building in some of the south-eastern states will fully offset the coming downturn in Residential Building activity maintaining construction activity current levels for the next three years.
Trends in Construction Employment
Employment in the building and construction industries increased to 1,111,000 jobs last year, making a helpful contribution to employment growth in the economy at large. Given the projected falls in overall building and construction activity in the next three years, and the falls in labour intensive Residential Building activity in particular, employment in building and construction activity is projected to fall to 1,041,000 jobs by 2020-21.
The ACIF Forecasts are available from Australian Construction Industry Forum from today. Available in two formats: Australian Construction Market Report, an 80+ page expert analysis on the economy and industry sectors ($250), plus the Customised Forecasts Dashboard ($200), an online portal where users can query the full ACIF Forecasts database on 20 work types, over a twenty year period. As an industry not-for-profit, ACIF produces this information to assist businesses and governments at all three levels navigate the rapidly changing marketplace and help them plan for the future. Find out more at www.acif.com.au/forecasts.
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Source: Australian Construction Industry Forum - www.acif.com.au
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