Australian construction growth highlights need for coordination

Record growth in Australia's engineering and commercial construction sector's has highlighted the need for closer coordination between the government, unions and materials suppliers, according to the latest Australian Constructors Association (ACA) Construction Outlook survey by the Australian Industry Group (Ai Group).

The new record high is forecast for the total value of construction by the private sector in 2009, according to the survey. It predicts the total value of engineering and commercial construction work will increase by +12.5% in 2008, with particular strength expected in infrastructure and mining based activity.

Further growth is forecast in 2009, although at a slower pace of +9.4%. This, said the survey, would bring the value of work in 2009 to more than double the level of 2004.

Commenting on the findings Wal King AO, ACA president and CEO of Leighton Holdings, said, "Although levels of activity are forecast to be near their peak, there is still a considerable backlog of work, which should ensure activity levels are kept high over the next two years.

"Nevertheless, pressures on labour procurement and the cost of inputs, especially fuel, are continuing to intensify as companies in the industry are at full stretch. This poses challenges for both the growth outlook and the delivery of the country's future infrastructure needs.

"These pressures underline the critical role that Infrastructure Australia will play in delivering a greater level of state and federal government co-ordination to improve project planning and execution," added Mr King said.

Ai Group associate director - Construction and Infrastructure, Jim Barrett said: "There is a lot of good news in this Construction Outlook survey. Activity levels in engineering and non-residential construction are expected to remain solid for the next two years.

"However, there is also some lumpiness in the infrastructure market. The pipeline of projects in many states is still uncertain. This creates logistical challenges for contractors allocating scarce labour and capital resources," added Mr Barrett.

Key findings of the Construction Outlook survey include:

• A new record high in the total value of construction work by the private sector is expected in 2009 at AU$ 92.3 billion (US$ 88.4 billion), more than double the 2004 level.

• Consistent with a sizeable project pipeline and continued efforts to alleviate infrastructure bottlenecks, engineering construction is forecast to be the major driver of growth, particularly in 2008, with total turnover (by the private sector) predicted to rise by +16.2% in 2008, and +11.7% in 2009 to a level of AU$ 59.8 billion (US$ 57.3 billion).

• Growth in engineering construction is expected to be led by the road and rail infrastructure sectors, together with power generation, water supply, mining, oil and gas processing facilities and "other" civil projected (including the construction and upgrading of freight and port facilities), which are all forecast to grow by more than +10% per annum in 2008 and 2009. Solid rises are also expected in telecommunications infrastructure and pipelines

• In line with sustained economic growth and solid property market fundamentals, non-residential building (commercial construction) is forecast to build on its current high base to generate AU$ 32.5 billion (US$ 31.14 billion) of work in 2009, although the pace of growth is expected to moderate to +6.6% in 2008 and +5.2% in 2009

• The decline in revenue derived from apartment building work is forecast to lessen in 2008 at -1.4% before resuming growth in 2009 with a rise of +9.1%.