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Tue December 11 2018

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Australian contractors predict further growth in major works

3 Dec Australia’s contractors are predicting further expansion in the value of major non-residential projects over the next two years.

There is a pipeline of major projects such as the Sydney Metro
There is a pipeline of major projects such as the Sydney Metro

The pace of growth is expected to be moderate as it is building on a base that is already high, with total infrastructure investment moving closer to peak levels.

The findings are in the latest Construction Outlook survey from Australian Industry Group and the Australian Constructors Association.

After lifting by 9.0% in 2017-18 at current prices, the total value of non-residential construction work is forecast to rise by 5.4% in 2018-19 and a further 3.8% in 2019-20.

Australian Industry Group chief executive Innes Willox said: "Major construction activity and employment levels look set to continue to grow over the next year and a half, largely off the back of the large volume of infrastructure work. This is despite sharply lower levels of engineering construction in the oil and gas sector; further easing of mining sector activity; and an accelerating slowdown in residential apartment building.

“While there are swings and roundabouts within the sector, capacity constraints at the aggregate level are intensifying. Businesses are reporting rising difficulties in sourcing skilled personnel and machinery and equipment and rising input costs. The sector would be further constrained if there were any additional restrictions to accessing temporary and permanent skilled migrants to supplement their local workforces.”

Australian Constructors Association (ACA) executive director Lindsay Le Compte said: "The pipelines of infrastructure projects projected in the Construction Outlook will assist the industry plan its future activities. The pivotal challenge for governments will be in ensuring that infrastructure projects are delivered as part of a consistent pipeline of construction activity. This will help address capacity constraints and enable major projects to be funded and developed in a timely manner.

"A clear theme from the survey is the widespread difficulties faced by businesses in the sourcing of skilled labour, building materials and equipment. These supply constraints are being reflected in increases in a range of input costs which are adding to pressures on margins and heightening the exposure of businesses and clients to project cost overruns.”

In other survey findings the value of engineering construction is expected to increase by 6.5% in 2018-19 and a further 8.0% in 2019-20, with conditions supported by a continuation of solid public-sector spending on transport infrastructure projects despite the further falls in mining and oil & gas work.

Commercial building activity (including offices, retail buildings and industrial premises) is poised for continued moderate growth over the next two years in line with rising private - and public-sector investment, increasing by 8.7% in 2018-19 and 6.3% in 2019-20 following an 8.2% increase in 2017-18.

Businesses are reporting widespread and increasing difficulties in sourcing skilled labour, with 69.2% of respondents reporting either ‘major’ or ‘moderate’ difficulty in the six months to September 2018 – up from 66.7% in the previous six months. Sourcing of subcontractors also remained a key concern, with 57.8% experiencing ‘major’ or ‘moderate’ difficulty – although this was down from 66.7% in the previous six months.

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