The latest Australian Construction Industry Forum (ACIF) forecast revealed that COVID-19 and the measures that have been taken to control its spread, have sent the message to hold or defer many new building projects. The ACIF Forecasts show that work done will fall 3.2% over 2020-21. This will drive the loss of 42,000 jobs in construction mostly in Victoria, New South Wales and Queensland.
According to ACIF, sectors that have been directly affected by lockdown measures are facing the largest declines. Over 2020-1, building work completed is forecast to fall in Accommodation (down 34%), Entertainment and Recreation (down 23%), Retail/Wholesale trade (down 17%), Education (down 11%), and Health and Aged Care (down 4%).
Bob Richardson, Chair of ACIF’s Construction Forecasting Council commented: “Cash is king in a time of uncertainty and many planned building projects are on hold or deferred indefinitely. We haven’t seen much growth in new major projects to make up for the work being finished now. The pipeline of new projects in some sectors is drying up.”
The downturn that was already underway in Residential Building will also be a drag on work done in the forecasts. The down-swing in the construction of apartments in inner city Melbourne and Sydney is nearly impossible to avoid this year. This will involve a second year of double-digit decline for New Other Residential building in 2020-21.
Areas of some growth
There are some activities that are expanding to meet increased demand. The pandemic has accelerated surging e-commerce and supply chains are being reconfigured and rebuilt. Industrial and Other Commercial building activities are expected to sustain strong growth and the value of work done this year is projected to grow by 4% to 6%.
Nerida Conisbee, Deputy Chair of ACIF’s Construction Forecasting Council said: “While there are continued challenges in many sectors, industrial property is showing strong resilience and as a result construction activity remains comparatively strong. High levels of Government spending is also good news for infrastructure.”
Federal and State Governments have stepped up their infrastructure development plans, focusing on smaller, shovel-ready initiatives. Construction work on bridges, railways and harbours is expected to rise by 15%. Work done in water, sewerage and electricity pipelines are expected to surge by more than 20% this year, if governments are able to translate announcements into action.
Building and Construction Employment
Employment in building and construction fell to an estimated 1.17 million jobs over the year to June 2020. This accounts for 9.6% of total employment across the Australian economy at the end of 2019-20. The projected decline in activity will drive deeper job losses of around 3.6% of building and construction jobs, accounting for around 42,000 job losses.
Recovery is on the horizon
The revised forecasts factor a rebound in 2021-22, lifting Building and Construction work by 2.3% to AU$230 billion. An eventual upturn in Residential Building and Engineering Construction will drive the recovery.
Kerry Barwise, ACIF’s Chief Forecaster from FTI Consulting, stated: “The drop-off in residential building approvals has stabilised and it’s already hard to find a builder in some capital cities. Residential building will claw its way back next year. House building will be the first out of the blocks. Apartments will take a while to rebuild in numbers and value. The fortified infrastructure-spending plans advanced by governments around Australia will take a while to fully kick-in, and we will see a hefty lift when they do.”