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A Happy New Year for Construction with Growth Predictions of 7.1%

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After three years of reported construction declines. However, the outlook for the next 12 months is looking much brighter. According to the latest Construction Outlook Survey, there will be a 7.1 per cent increase in construction (2017/18) thanks to commercial building and non-mining infrastructure growth. 

The Survey, carried out by Australian Industry Group (AI Group) in association with Australian Constructors  Association, also forecasts an additional overall jump of 6.8 per cent in 2018/19.

The Construction Outlook Report was conducted in September and October, and it covers the responses of 100 major construction companies, employing more than 50,000 people, with a combined turnover of around $20 bn.

The growth in activity is a boon for the non-mining construction sector and tradespeople. 

The growth in activity is a boon for the non-mining construction sector and tradespeople. On the other hand, there are some concerns about labour shortages, rising labour costs, and increasing building material costs, along with difficulty sourcing materials.

Respondents predicted a recovery in major project work through to mid-2019 with significant growth anticipated in public sector spending on transport infrastructure projects. They also forecast an increase in commercial buildings such as offices, retail buildings, and industrial premises.

The report noted that engineering construction was on track to record a 10.6 per cent increase in 2018/19 due to infrastructure-related engineering projects with the expected growth of over 20 per cent in roads, while rail projects are estimated to grow by 19 per cent, mainly due to projects in the Eastern States.

The report noted that engineering construction was on track to record a 10.6 per cent increase. 

It was also good news for pipelines constructions, predicted to grow by 17.4 per cent, and telecommunications projects (NBN) anticipated to increase by 13.3 per cent. Other civil projects were also forecast to increase by 13.1 per cent.

The news was not so great for the mining sector, specifically oil and gas projects expected to decline by up to 53 per cent in the coming year, but set to stabilise in the 2018/19 financial year. 

Commercial Construction is also set to see an uptake with private sector building activity predicted to drive the expansion, up 12.7 per cent, while public building activity is also in line to grow by 7 per cent, with several scheduled government and health building projects in the pipeline.

The report found that more than half of all respondents (54.6%) reported busy or very busy activity levels to June 2017, which was up from 48.5 per cent in the previous six months. This increase in activity was the highest reported in the last five years.

The next six months is anticipated to get even busier with almost 60 per cent of respondents reporting expected "busy or very busy" conditions. 

The next six months is anticipated to get even busier with almost 60 per cent of respondents reporting expected "busy or very busy" conditions as new projects advance through the pipeline stage towards construction. That figure will rise again in the second half of 2018 with 68.2 percent anticipating "busy or very busy" activity. 

The increase in construction and anticipation of further work in the coming 12 months has been good news for employment within the construction sector with an upturn of construction employment of 3.1 per cent already reported to July 2017, following a decline of 2.7 per cent in the previous 12 months. A further increase of 2.2 per cent is expected to December 2017, with yet another growth of 3.1 per cent expected to June 2018.

In terms of roles most in demand, sub-contract tradespeople topped the list up 5.4 per cent in the first half of 2017, with growth to December estimated to be 2.8 per cent and another 4 per cent to June 2018. While this is excellent news for sub-contractors, it is not so good for businesses. The latter reported worsening labour skill shortages, with 63.6 per cent of respondents citing difficulty in recruiting skilled labour.

Another good news for tradespeople but bad news for business is the sharp increase in labour costs. 

Another good news for tradespeople but bad news for business is the sharp increase in labour costs as 45.5 per cent of companies report "moderate to major" increases in direct labour costs as they compete for skilled labour.

Almost half of businesses surveyed reported experiencing difficulty sourcing building materials (45.5%) up from 21.7 per cent in the prior six months attributed to higher commodity prices and a lift in demand requirements in line with increased infrastructure activity.

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