Outlook for Australian Construction is ‘Steady as she goes’

In BICSI Bytes, Newsby info@bicsi.com.au

The latest industry forecasts from Australian Construction Industry Forum (ACIF) indicate that building and construction work activity in 2018-19 will fall by 5% to AU$239 billion in Australia. This outlook will be finely balanced, with the current uptick in Non-Residential Building activity combined with surging Engineering Construction activity expected to largely offset the downturn in Residential Building activity.

“The recent upturn in Non-Residential Building has offset falls in Residential Building activity,” said Bob Richardson, Chair of ACIF’s Construction Forecasting Council. “While this has been quite important in sustaining workflow, it must be recognised that Non-Residential Building activity will not be enough by itself to offset the declines in Residential Building activity.”

Residential Building Activity

Residential Building activity is already in decline with a contraction of 1.5% is expected this year (2018-19), bringing the value of work done to $103 billion. Recent falls in house prices and deteriorating market conditions are expected to drive steeper falls in Residential Building activity with the value of building work projected to fall to $91 billion by 2020-21.

Non-Residential Building Activity

In contrast to the Residential Building market, Non-Residential Building is midway through a growth phase, with the value of work rising by 11% last year (2017-18) to reach $42 billion. Expanded investment in accommodation, offices, and other commercial buildings has buoyed Non- Residential Building activity. Government and public sector investment are also supporting growth especially in education, defence and community facility projects.

Engineering Construction Activity

Work done in Engineering Construction grew by 21% last year to reach $67 billion. Continued strong growth is forecast, raising work done to $76 billion in 2020-21. Significant and sustained increases in construction of transport infrastructure and in utilities projects is underway and gathering momentum. Heavy industry including mining is expected to see a reduction of $11 billion in the value of work done this year but is forecast to recover and grow at 6-8% per annum over the next two years.

Building and Construction Employment

Employment in building and construction activities is expected to lose 29,000 jobs this year, falling to 1.1 million jobs, accounting for 9.2% of expected employment across the Australian economy in 2018-19. Construction employment is projected to hover around 1.15 million jobs over the next three-to-four year period, reflecting expectations that workers displaced from the cyclical downturn in Residential Building activity will be largely soaked up through burgeoning Engineering Construction activity and continuation of the upturn in Non- Residential Building activity.

Industry Outlook

Although the downturn in the residential market may spill over into the rest of the economy reducing consumer confidence, eroding already fragile investment intentions, and dragging down growth – the level of total building and construction work is projected to stabilise and hover around $240 billion a year over the next two-to-three years.